Following the announcement of a lack of external funding, Pure Gold Mining announced on Oct. 24 that it will suspend operations at its fully owned PureGold mine in Red Lake, Ontario. The company’s current cash balance sits at $2 million, with a deficit of roughly $13 million.

Pure Gold had been anticipating additional funding for 2022 that would be used towards maintaining operations, the completion of the ongoing pre-feasibility study and life-of-mine plan, but it has yet to receive any. Without an alternative source of funding, operations at the PureGold mine have been suspended, and the mine has been placed on care and maintenance.

According to Pure Gold, the decision to stop work at the mine “follows an evaluation of several potential alternative scenarios and has become necessary because the mine has not yet achieved consistent positive site-level cash flow.” If the company is unable to source external funding in the short term, it will fall into debt default. Pure Gold is working in conjunction with its lender to go over some near-time funding and strategic alternative courses of action.

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One of the key causes of the company’s lack of funds can be traced back to Pure Gold’s rough start at its Red Lake mine. The company initiated the project by unknowingly mining at the incorrect end of the deposit. According to the company management’s discussion and analysis from Q2 2022, “execution diverged from planning, with grades significantly below plan. PureGold was mining small and/or low-grade stopes, was incorporating significant dilution into stope designs, and was overly optimistic about planned rates and productivities.”

According to Northern Ontario Business, “Soon after entering production last August, the mine began falling short of meeting targets for production, grades and mill throughput. It was hemorrhaging cash with out-of-control operating costs that were rapidly depleting the treasury.”

The company took several cost-cutting measures at the operation, primary among them was terminating 20 per cent of its workforce, including several senior manager positions. Additional measures included replacing rentals and contractors with more permanent solutions, introducing a workforce camp to cut accommodation and travel costs for workers, and completing key upgrades to on-site infrastructure. These efforts were expected to equate to savings of $1 million per month by the end of this year. However, these measures did not provide sufficient funds for the project to continue its operations.

Pure Gold recently announced that it had achieved its gold production guidance for the third quarter and was on track to release its updated pre-feasibility study in Q4. However, the company says it can no longer complete the study and has pulled its guidance for the rest of the year.