Compass points future towards struggling mine

Alison Bevege
NT News

Just over a year ago, 30 Chinese dignitaries descended on Darwin to sign an agreement injecting $72 million into Compass Resources' Browns Oxide mining project.

But last week the company revealed a $13.5 million loss - and the possibility that it is fighting for its survival.

The Rum Jungle oxides miner released its interim financial report for the six months to June las week, containing a cautionary directors' note.

The note said that if the company was not able to  raise funds or if there were further delays at the Browns Oxide project then there was uncertainty as to whether Compass could continue as a "going concern".

Chief financial officer Neil Guestsaid shareholders should not be alarmed as it was a "fairly standard" clause, and directors believe it would be able to continue funding the project.

"A lot of things have to go wrong before we have a serious problem, and it's important not to get it out of context," he said. "The clause is a fairly standard clause for a mining company at the moment due to changed market conditions."

"We satisfied the auditors we were a going concern."

Accounting firm KPMG, who reviewed the report, also stated there would be "significant uncertainty" about the company's future if there were funding problems of further project delays.

Along with other junior miners, Compass may have trouble raising cash from the stock market. But it has existing credit agreements with Cornell Capital Partners and the privately owned Coffee House Group.

Should the company one day be placed into administration, after payment of the costs of liquidation secured creditors are the first in line to retrieve funds, with priority creditors including employees heading the list.

Only after creditors are repaid can any proceeds be paid to shareholders.

The six-month loss of $13.5 million included a $12.8 million write-down of the Browns Oxide project, 100km sout of Darwin.

Mr Guest said the "impairment adjustment" was due to the Oxide project's cost blow-out.

Compass announced in July that the processing plant construction costs would rise to $175 million, more than double the $83 million flagged in May 2007.

The start of metals production, once slated for mid-2007, still hasn't begun.


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