Gold Hawk Resources (CGK.v): There's light at the end of the tunnel (literally)

So here's the chart for Gold Hawk Resources (CGK.v) in 2009 to date...

.....and if you were smart or brave enough to get some CGK.v at between 1c and 2c in January (or even at 3c just five weeks ago) the 5.5c to 6c prices being printed these last few days have made for a very nice percentage gain. But what's news at CGK.v and its Coricancha mine?

Well, news is that the government of Peru has finally got its pulgarcito pulled out from its colita and has made progress on the relief tunnel need to be dug into the Tamboraque hill in order to relieve the water damage threat to the now infamous tailings pond. And the good news is that there are even pictures to show the progress. Click this link and you'll see a very nicely put together montage of the work in progress which has made its way 36m into the hillside. The total length needed to be tunneled is 180m and the work is now on schedule to be finished in 3q09 (probably October). But don't take it from me; click the link and see for yourself (once you get there, you need to click the first page again to set the montage rolling).

All in all I'm happy to see things moving at CGK.v and the share price crawl back to something that begins to resemble decency. As for the Peruvian Gov't, once again it has proved that its bureaucracy is a disaster (recall it took a full year to get started on the essential work), but once the ball is rolling the country knows how to do the mining thing.

Related Posts on Gold Hawk here

Gold Hawk (CGK.v) releases good news

Check out the latest press release at this link from Gold Hawk Resources (CGK.v). The company is definitely on the way back here and for the first time in months I'm happy to say that it's clearly worth more than its present share price of 3c...imho at least.

Of course it's still high risk (it's a three cents stock, let's not be silly) but there's now light at the end of the tunnel and, most importantly, movement towards the light. The new resource calculation is good because with the numbers involved (e.g. rock worth $200 on a $80 ceiling cash cost) the comapny will be able to sit down with people and say "lend us the money we need to get going and we all make a profit".

Best of luck to all at CGK.v; great to see some good guys catching a break and winning through for a change.

Gold Hawk (CGK.v), the Friday PR and some lines from the company

On Friday Gold Hawk Resources (CGK.v) issued this PR which basically said that the main financial debtor (Auramet) was calling in its $9.7m loan immediately instead of honouring the original Janaury 29th agreement between the two parties (which is an agreement in writing, as an aside). This is what's known as Very Bad News, as the company does not have the liquid assets to cover the liability and we're now staring a bankruptcy situation in the face.

There are a lot of different thing in play here, and although the word "bankruptcy" is not a good word under any circumstances there's more than one way this whole story can finish; I'm not going to try and second-guess, but suffice to say that CGK.v is not some sort of Enron or WaMu with a Himalayan mountain of debt and virtually nothing in the assets column. I personally feel there are more chapters to be played out with this story and will be watching things very carefully. The mineral and the renovated processing plant at Coricancha are, again in my persoanl view, too valuable to ignore and the combination will be used in the future to make metal.

However, I did receive the following mail from CGK.v IR guy, Jason Mercier. He has also kindly allowed me to re-print it here on the blog. So without further comment from me what follows is the hand of Jason Mercier. I currently do not hold CGK.v stock by way of full disclosure.

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1. Management firmly believes that our team would have provided the best opportunity to return the mine into production. It took a lot of hard lessons to understand this operation and that will all be lost without those people being involved.

2. No one can accuse the group at Gold Hawk and Compania Minera San Juan of lack of financial commitment or commitment to restarting the Coricancha mine. Management, Directors, Officers and employees (including me) put a total of CDN$1.2 million into Gold Hawk since the ground displacement issue arose in May 2008. That includes $150,000 the CEO personally contributed to make payroll and pay other crucial expenses at two different points. Unsecured; he just wrote personal cheques. Insiders own well over 10% of the shares. There are some employees who continued to work for the Company unpaid. We all believed and with each achievement, success got closer.

3. The biggest concern going forward is who will continue to treat the acid water from the mine as this needs to be treated before being discharged or it will contaminate the Lima water supply. Frankly, non-compliance would risk expose to liability (beyond the liability of paying to move the legacy tailings, ensuring the stopped hillside remains stopped, adequate site security, etc.). During the time when the plant was in production we got a lot of attention from inspectors due to our location close to the capital and the history of the operations there. I do not expect that to change. There are many operations on that river in non-compliance but Coricancha is in the minority because we A. have a permit B. are under the allowable discharge levels.

4. Our lenders have not advised us on next steps in the process and we cannot speculate. There is no question though that the fate of the Coricancha mine now lies with the lenders.

Chart of the day special: Gold Hawk Resources

Proof that being good can pay off in the long run.

Here's the Gold Hawk (CGK.v) one year chart with a couple of notes added.


This site has followed the trials and tribulations of CGK.v closely (see related links at the bottom of this post for some of the coverage), mainly because your caring-sharing Otto is sympathetic to its cause. The company has had a lot of problems foisted upon it by circumstances not under its control and has been suffering greatly due to the snail-like speed of Peruvian bureaucracy and foot-dragging insurance companies.

However, in all 2008 it has done right by its workforce, by the law, by social standards and by the environment. It should be remembered that way back in May when the first cracks appeared in the wall of its tailings pond, it was the company that voluntarily closed down its operations and contacted the authorities.

This isn't some bad example of a dirty and dangerous mining operation (are you listening LAMMP in Bromley?). This is an example of a good corporate citizen that deserves support and applause for its attitude.

FINALLY, YESTERDAY, THIS GOOD GUY JUNIOR MINER GOT A DOSE OF WELL-DESERVED GOOD NEWS. Underneath I've pasted out the press release (also linked here) that says the company has been granted the permits and permissions needed to get moving again. It also has a bit of breathing space on the $9.7m it owes, so hopefully it can sort out its finances this month and not go into default.

GREAT NEWS, and I'm happy for the guys at CGK.v. DYODD, dude, but expect CGK to move away from the 1c and 2c prices of the last few weeks. The company isn't out of the woods yet, but this is a big step forward no doubts.

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VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 7, 2009) - Gold Hawk Resources Inc. ("Gold Hawk" or the "Company") (TSX VENTURE:CGK - News) is pleased to announce that the Company's Peru subsidiary, Compania Minera San Juan (CMSJ) received earlier today the final permit for the construction of its new permanent tailings facility at Chinchan.

Highlights:

- Final permit received to construct permanent tailings facility at Chinchan.

- Certificate of Mining Operations (COM) for 2009 as well as the water use authorization for the new Chinchan tailings facility have now been received.

- The most recent extension of the Emergency Decree no longer requires the Coricancha processing plant to relocate once certain conditions are met.

- The Company has negotiated with lenders for an extension to January 29, 2009 of its debt repayment date.

- As a result, the Company is in a position to more effectively seek the funding required to rapidly advance its strategy to restart production at the 100%-owned Coricancha polymetallic mine.

"Final permitting of the new permanent tailings facility at Chinchan is a significant milestone for Gold Hawk and its shareholders, and a key component of our strategy to restart production at the Coricancha mine," said Mr. Kevin Drover, Gold Hawk's President and CEO. "With these permits in hand, we now have the ability to more aggressively look for financing on acceptable terms that will allow us to construct the tailings facility and get back into production as quickly as possible."

Other key permits received include the Certificate of Mining Operations (COM) for 2009, a key permit to allow mining that needs to be renewed annually, and the water use authorization for the new Chinchan tailings facility. All other permits required to operate the Coricancha mine are in place and in good standing.

The authorization to construct the new tailings facility at Chinchan is a general authorization to construct the tailings area, which will be used as the new location both for historical tailings that require relocation as well as new tailings generated when the Company resumes production in the third quarter 2009 subject to the Company obtaining additional financing.

The most recent extension of the Emergency Decree states that the requirement for the relocation of the processing plant as specified in the original Decree would be eliminated provided certain conditions are met. These conditions include:

- The third-party irrigation system must remain shut-off,

- drainage of the hillside must remain in place; and,

- the Company commit to relocate the tailings, stabilize and ensure continued safety monitoring of the hillside.

The Company is confident it can achieve these conditions and that the plant can be operated in its current location, resulting in a significant reduction in time delay and cost necessary to re-start operations.

Chinchan is located approximately 30 kms from the Company's Coricancha mine and processing plant in central Peru. The Chinchan tailings facility occupies a large land holding of more than 40 hectares and through a phased expansion of the current design produced by the Company's U.S.-based consultants Tetratech, more than 15 years of tailings capacity can be achieved. The Company expects to transport tailings via rail from Coricancha to Chinchan; both sites are easily accessible by existing railway and paved road. Chinchan was in the initial stages of geo-engineering and baseline studies prior to ground displacement being discovered in May 2008, leading to a suspension of production.

Debt repayment extension

The Company's lenders have agreed to extend the debt repayment date to January 29, 2009. The US$9.7 million total debt was scheduled for repayment on December 31, 2008. This extension will allow the company to continue discussions with current and other lenders regarding alternative financing arrangements.

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Related Posts
In Peru bureaucracy is annoying, but it can also be very dangerous
Gold Hawk Resources: Questions and Answers
Gold Hawk Resources in the News
Gold Hawk (CGK.v): Positive developments at Coricancha
Gold Hawk Resources (CGK.v) catches a break at last

Two miners in financial straits

According to Alexa today, icanhascheezburger is the world's 3,883rd most popular website.
Can somebody explain this to me in a cogent argument that does not
include the phrase "gringos will buy anything"?

When junior miners are involved in head-on collisions with the money guys, don't expect the miners to come off best. Especially in this world climate.

Gold Hawk Resources (CGK.v) dose of bad news is linked here. CGK's problems are compounded by the financial woes at Nuinsco (NWI.to), holders of 13% of stock and the source of previous financing. Negotiations are ongoing but the debt repayment date came and went yesterday, so CGK.v is now in default on $9.7m. Its problem in the short term is the lack of response from the insurance payout for the tailings dam slippage (previously documented on site). Also of note was the apparent tax loss share dump from Gordon Bub just before end December.

Minera Andes (MAI.to) dose of bad news is here. MAI.to needs to get love from its finance backers Macquarie....and soon. Presumably (though I may be wrong) MAI.to will be looking to refi/roll over its credit line with Macquarie and also raise funds for its portion of the cash call for the San José silver mine (check the numbers in the PR linked). However I have the distinct impression majority partner and operator Hochschild (HOC.L) is going to come out of this in fine style with the rump end of the deal suffered by MAI.to. This one isn't that cut'n'dried as yet and needs to be followed closely in the weeks that come.

As always, DYODD, dude.

The death of a Peruvian police officer

Early Monday morning, mineworkers at the Casapalca silver/zinc/lead/copper mine in central Peru started rolling rocks onto the main central highway (carretera central) in Peru, some 114km directly inland from the capital, Lima. When police arrived to try and break up the protest, the miners on the high ground above the highway threw more rocks at the police. Then some very large rocks were either dislodged by the stones thrown or dislodged by the miners. One rock weighing some 150kg to 200kg hit a policeman and killed him instantly. He was Captain Giuliano Villarreal Lobatón and was 32 years old. May he rest in peace.

Today, Peru's media report the arrest of 17 miners related to the killing of the police officer. It also has Peru's Minister of Work exhorting the miners to stop their strike. Less mentioned is how the miners at Casapalca came to be on strike and protesting in such a violent way.

Casapalca is run by the Peruvian Gubbins family, and has a long history of treating its workforce like slaves. In June last year this report highlighted how the workforce was made to work seven days a week for a basic monthly salary of 675 Soles. However even that low number is whittled down through various deductions and becomes 343 Soles (about U$110) in take home pay. To add insult to injury, the company then charges each of its workers between 100 and 150 soles per month for living quarters (and by that I mean 100 soles for a 2m X 2m shoebox just big enough for a bed).

The Casapalca case also made headlines last year for another round of deaths (both police and striking miners) after 35 workers were summarily dismissed by the Gubbins for having the nerve to form the first workers' union ever seen inside company gates. The protest simmered on through to May 2008 when both sides finally signed a series of negotiated agreements.

So why the strike this month that spiralled into the death of another police officer on Monday? Simply because as soon as the workforce went back to work, the company refused to comply with the terms of the agreement signed in May 2008. They got them back to work and just ignored everything agreed and signed. Think of how factory owners in developed countries used to treat workers 200 years ago and you're in the ballpark.

This is the investment grade Peru that foreign analysts line up to applaud. Total impunity for slave-drivers that are members of the Lima establishment family circles. Misery and slave labour for the common man. Monthsof inaction from governments, and then immediate clampdown on any sort of social protest that is then blamed on terrorists.

As for the mining companies that treat their workforce well? They are ignored. Gold Hawk Resources (CGK.v) are just 30km down the road from the people at Casapalca. The mine remains shut down due to government inaction on a simple permit. Meanwhile the laid off workers at CGK.v continue to support the company even though they can't earn any money. Why? This from CGK's IR department yesterday:

“Things continue to be positive locally in the San Mateo region. I think everyone would like to get back to work but hopefully remains patient as the permitting continues. On principle, we have ensured that anyone paid out was compensated as per law, no shortcuts, which had a significant cost in one way but was the right thing to do. Hopefully, the actions management has taken will be understood and have benefits in other ways down the road.”

Can you imagine what kind of stink would be caused if a foreign (read 'gringo') mining company paid its workforce U$110 per month for 336 hours of work? But as the owners of Casapalca are Peruvians and members of the Lima hoi-polloi, nothing is said for months on end. Then there's trouble...then things are negotiated...then the hoi-polloi act as if nothing happened and continue with their slave labour attitude.

Hell, if you were one of those miners you'd lose patience after a while too, I'd wager. The death of the policeman is a terrible consequence and is rightly lamented by all, but you can only push hard men like miners so far. However, don't expect the government of Alan García or the oligarchy it protects to admit responsibility to even a single drop of blood spilled on the tarmac of the Carretera Central just two days ago.

Viva investment grade. Viva viva viva

Good News: Lima's potential environmental disaster is getting airtime

This report from Reuters hit the wires last night and I'm happy to report the potential disaster due to government inertia is getting more airtime. The report included this from Environment Minister Antonio Brack-Egg:

" Brack said the mines and energy ministry is preparing another emergency measure to finance the clean-up of a potential slide in the area."

This is good for Peru, good for the Lima water supply and good for Gold Hawk Resources, too. I can also report that CGK.v has contracted a highly respected local forestry firm, "Foresta S.A.", to get expert advice on what else they can do to move the process along as quickly as possible.

I know it's very easy to lay the blame at the door of the mining company in cases such as these, but it has to be said that Gold Hawk has done everything in its power to alleviate a problem they inherited more than created. A good example from "a tiny metals company" (to quote Reuters) that would be great to see followed by miners many times their size. Kudos to CGK.v.

Related Post
In Peru bureaucracy is annoying, but it can also be very dangerous

In Peru bureaucracy is annoying, but it can also be very dangerous

We've followed the trials and tribulations of Gold Hawk Resources (CGK.v) quite closely on this blog (see below for links to previous posts), but as a very quick re-cap:

1) In May this year, CGK found it had a problem with the containing wall of its main tailings dump

2) The company immediately closed down operations (voluntarily too...it's been a good corporate citizen throughout) and told the Peru government about the problem.

3) The gov't inspected the site and found that a farmer irrigating his land above the tailings dump was the main cause of the wall weakness. The big problem is that if the tailings wall eventually collapsed it would likely pollute the nearby Rimac river, one of the main sources of water for the capital Lima and its nine million or so inhabitants.

4) An emergency decree was declared by the government and since then CGK.v has been champing at the bit (and fracturing cash while waiting impatiently) to get the alternative tailings dump approved so it can get on with the job of transferring the tailings to a new, safe site.

So guess what? Yep, no permit to use the new dump yet. Peru's bureaucratic nightmare has stopped all emergency plans in their tracks and while those concerned just want to get on with a job of work, the file has been lost in the maze of corridors known as officialdom and has stopped anybody from actually doing anything about the problem.

Fortunately, at least one person in Peru's government is awake enough to realize that this bureaucratic inefficiency isn't just a pain in the butt this time; it's now reaching the point where it's getting downright dangerous. Antonio Brack Egg (great name) is the Environment Minister in Peru and today he said the following (translated):

"...the rains are coming and there may be filtrations of the hill that provoke a disaster that would affect the Central highway, the mining installation, a hydroelectric power station and if the tailings reach the River Rimac it would be a disaster of very high contamination."

Yes indeedy folks, there's such a thing as "the rainy season" in Peru. That time is fast approaching, and if the rains arrive before the emergency tailings transfer is started the chances of a full collapse of the tailing dump will shoot skyward. Brack Egg realizes this (thank the stars). Gold Hawk has done everything in its power to get the whole thing moving, did its necessary paperwork months ago and is impatient to get on with the essential transfer of highly toxic tailings. The people of Lima will probably prefer their waters to be free of heavy metals, arsenic and suchlike too, I'd bet. So all we're waiting on is some dickhead in a suit to sign a piece of paper.

Message to Peru's government. Please extract your thumbs from your anal passages just this once. The hasta mañana attitude of Latino life is famous worldwide, but this particular case just isn't funny any more. The government of Peru has gone past "slow", left behind "lax", said adios to "ridiculously tardy" and has now reached the level of "absolutely and criminally irresponsible" on this issue.

You can't stop mother nature, and those rains are on their way. Period. I'm quite sure Peru would prefer to do just one thing now rather than do 10,000 things tomorrow, and the size of the ecological disaster staring them in the face if that dam wall collapses is not even slightly funny. Undrinkable tapwater isn't going to win friends and influence people, Twobreakfasts.

Please. Just this once. Do something.

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Gold Hawk Resources: Questions and Answers
Gold Hawk Resources in the News
Gold Hawk (CGK.v): Positive developments at Coricancha
Gold Hawk Resources (CGK.v) catches a break at last

Snippety stuff (beaten up LatAm juniors edition)

Blog sponsors Vena Resources (VEM.to) hit the airwaves with this press release update on its Pucara gold/copper project. The thing is long and deserves more than a couple of lines here, so go and read the whole thing. Suffice to say that work continues apace there and it looks like they're going to start getting some cashflow from the project soon.

Fresnillo's approach for MAG silver (MVG) (MAG.to) is now getting wider media attention. Here's Mineweb on the story, and note that they're wise enough to quote this humble corner of cyberspace as they explain to the wider world that MVG is now in play.

Farallon Resources (FAN.to) has released two significant pieces of news this week, Firstly this presser that announced it has started metals deliveries from its G-9 mine in Mexico. Secondly it reported today it has secured $7.75m in rollover and capex financing (and it's no mean feat to get such a capital injection with the wider market the way it is). The downside is yet more dilution to its share base, but at least FAN.to looks like it will be able to mine its ore competitively through this metals price slump. If this is as low as it goes, it's worth giving it some of your DD time, perhaps.........

Gold Hawk Resources (CGK.v) is still fighting the good fight and trying to get its Coricancha mine re-opened. It has paid a few shares and gotten itself an extension on its financing. Here's the press release. I shot a mail to the IR guy at CGK.v Jason Mercier and asked him whether the financing deal is dependent on collecting on its insurance policy (the insurers are dragging their heels a bit, but it looks like they'll pay soon enough). Here's the reply I got from Jason:

1. The extension of the loan repayment schedule is a show of support from our lenders and allows the Company to use its working capital to complete the permitting and approvals process and make plans for the restart instead of paying back the principal.

2. The cooperation of our lenders is a big show of support when you consider current financial markets and is another positive step towards restart.

3. The receipt of permit is absolutely key to returning to production, which is in part why we have not had much news since our submission in mid-August – saying that we are waiting on the Peruvian gov does not give much satisfaction. The expedited process has been speedy and we are being patient.

4. The insurance is a separate matter and there is not a connection to permits or loan extension.

So now you know a few more details about where CGK stands.