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Carbine shares crash on Mount Morgan project uncertainty

Carbine Resources Ltd. said Feb. 22 that it decided to minimize expenditure at its Mount Morgan gold-copper project in Queensland, Australia, after an economic review estimated that the all-in sustaining costs would increase.

The ASX-listed company's shares were down 56% by trading close on the day of the announcement.

The company expects all-in sustaining costs, or AISC, for Mount Morgan to increase to A$862 per ounce, from A$549/oz estimated in the December 2016 feasibility study.

Carbine attributed the increase to higher cyanide consumption and lower revenues from byproducts due to lower pyrite prices and a change in copper products removing the premium attributable to copper sulfate production.

Test results from the demonstration plant showed that even though the plant will be able to recover gold, copper and pyrite, the copper sulfate production will not be at the required market specification, and it will instead produce cemented copper concentrate and copper cathode.

Based on the revised AISC estimate and the "relatively high pre-production capital cost" of A$87 million, the Mount Morgan project is not expected to "generate the level of shareholder returns needed to justify development," the company said.

Carbine intends to hold discussions with all key stakeholders to improve terms of the project agreements before making a final decision on the project's future.

"In particular, the board believes that to secure project funding, we need to renegotiate the terms of the agreements with Norton Gold Fields Ltd. and Raging Bull Mining Pty. Ltd. in respect of Carbine's ownership and title to the Mount Morgan project," the company said.

The company secured the right in March 2017 to increase its interest in the Mount Morgan project to 100% after agreeing to an acquisition price for the remaining 25% stake.

Carbine may also need the Queensland government to reduce royalty payments, as it is an environmental cleanup project rather than a new mine development, it said.