Noventa Provides Update on Plant Construction & Trading

TORONTO, June 2, 2011 /CNW/ - Noventa (AIM: NVTA) (TSX: NTA) (PLUS: NV) has been progressing with the development and construction of the new enhanced plant at the Company's Marropino mine (the "Mine") since late last year. In April 2011, Noventa commissioned an interim comminution circuit ("ICC"), which will eventually become an integral part of the new plant.

Although the introduction of the ICC has substantially increased the rate of production, it has not been possible to maintain the achieved and targeted rate of production of 200,000 lbs per annum for a sustained period due to mechanical difficulties. Corrective action has been taken and is expected to be completed this month.

Since commissioning the ICC it has become increasingly apparent that the capital expenditure required to bring the new plant, with a capacity of 600,000 lbs per annum, into full operation will be significantly higher than originally anticipated by the Company and envisaged by the 19 October 2010 NI 43-101 report. The experience of commissioning the ICC and subsequent operations, has also led Noventa to reassess its estimates of the timing of the ramp up in production from the new plant from commissioning until the Company becomes cash flow positive. The combination of these two factors has led Noventa to reassess its immediate funding requirements.

There are many factors which have caused this reassessment, the most important of which are:

  • As was noted in the Q1-2011 financial statement announced on 9 May 2011, the unexpected lack of rainfall in the area surrounding the Mine has led to unusually low levels in the dams that serve the processing plant and created the need to pump substantial amounts of water from the river, some 9 kilometres away, thus increasing both capital expenditure and operating costs.  This is in addition to the required upgrade and maintenance work to the Marropino mine recommended in the NI 43-101 report which has been completed.
  • Further capital expenditure, on purchasing additional earth moving equipment, spare parts, laboratory equipment and a larger crane, is now considered necessary.
  • Despite concerted efforts by the directors of Noventa, (the "Directors") it has not been possible to negotiate either a satisfactory EPC (engineering, procurement and construction) or an EPCM (engineering, procurement and construction management) contract with the proposed project manager or to find an alternative contractor for the construction of the new plant within the required time frame and on acceptable terms. This has led to increased costs of supervision of PPM and inevitable delays in procurement and construction. As a result, the Company will experience negative operating cashflow for longer than originally anticipated.
  • The necessary replacement of the civil works contractor has also led to delays in the expected commissioning date. Again the Company will experience negative operating cashflow for longer than anticipated.
  • The consumption of electricity, diesel and other consumables has been higher in practice than anticipated. In addition, a government diesel subsidy was unexpectedly reduced in May 2011 leading to 10% higher costs in diesel alone.
  • The unexpected strength of the South African Rand and the Mozambican Metical against the US Dollar has continued. The Metical is not freely tradable and trading is controlled by the Central Bank of Mozambique which has embarked on a policy of strengthening its currency against major trading partners, which has severely affected the Company's estimates of both capital and operating expenditure.

The Company currently has a cash position of approximately $17.6 million.  This is now substantially less than the Company's requirements as it seeks to bring the new processing plant project into operation over the remainder of 2011 and accordingly, the Directors are seeking to manage the Company's immediate cash outgoings albeit that this will be at the cost of delays to the project start-up process.  As such, there is an urgent fund raising requirement and the Directors, in consultation with their advisers, are considering both the final amount and how the additional funds will be raised.

The Company is making progress in its search for new management, including a new Chief Executive Officer ("CEO"). In the meantime, John Allan who was the CEO from July 2009 to May 2010 will continue to act as CEO.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information contained or incorporated by reference in this release, including any information as to the Noventa's strategy, projects, plans, prospects, future outlook, anticipated events or results or future financial or operating performance, constitutes "forward-looking statements" within the meaning of Canadian securities laws. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements can often, but not always, be identified by the use of words such as "plans", "expects", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "predicts", "potential", "continue" or "believes", or variations (including negative variations) of such words; or statements that certain actions, events or results "may", "could", "would", "should", "might", "potential to", or "will" be taken, occur or be achieved or other similar expressions concerning matters that are not historical facts. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made or incorporated in this press release are qualified by these cautionary statements.

Forward-looking statements are necessarily based on a number of factors, estimates and assumptions that, while considered reasonable by Noventa as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are also cautioned that forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Noventa to differ materially from those expressed or implied in the forward-looking statements. Certain of these risks and uncertainties are described in more detail in Noventa's Annual Information Form dated March 15, 2010, which is available on SEDAR at www.sedar.com.

Although Noventa has attempted to identify statements containing important factors that could cause actual actions, event or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking information contained herein are made as of the date of this document based on the opinions and estimates of management on the date statements containing such forward looking information are made, and Noventa disclaims any obligation to update any forward-looking information, whether as a result of new information, estimates or opinions, future events or results or otherwise. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward looking information.

SOURCE Noventa Limited

For further information:

Eric F. Kohn TD
Chairman
Noventa Limited
+41 22 8500560
+41 79 5030150
www.noventa.net 

Nick Harriss/Emily Staples
Religare Capital Markets (UK) Limited (Nominated Adviser)
+44 20 7444 0800

Andrew Chubb/Kit Stephenson
Canaccord Genuity Limited (Broker)
+44 20 7050 6500

Daniel Briggs
Religare Capital Markets plc (Broker)
+44 20 7444 0500

In Canada
Joe Racanelli
TMX Equicom Group
jracanelli@Equicomgroup.com
416 815 0700 ext. 243

Organization Profile

Noventa Limited

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890