Shares in Ormonde Mining PLC plummeted 76% on Jan. 8 in midafternoon London trade after the company announced plans to exit the Barruecopardo tungsten mine in Spain.
The company said it agreed to sell its 30% stake in Barruecopardo to Oaktree Capital Management LP, which already owns 70% of the mine, for €6 million.
Ormonde flagged the mine's low initial ore grades that resulted in lower-than-expected production and the joint venture's increased debt levels, totaling €58.8 million as of Nov. 30, 2019.
The company also flagged a forecast cash shortfall in the mine's 2020 budget during the first quarter and the need for an additional €12 million to €15 million in funds to keep the mine running amid weak tungsten prices.
Ormonde needs the approval of shareholders at a Feb. 12 meeting for the deal to proceed. The company's board unanimously recommended that shareholders vote in favor of the planned sale.
Ormonde said that if the proposed disposal falls through, mine operator Saloro SLU may default on debt financing by Oaktree under a 2015 agreement. This means that the security given by Ormonde over its shares in the joint venture may be enforced.
Ormonde's board believes that in such an event, shareholders are unlikely to retain any value from the property.