Lomero-Poyatos On January 2, 2014, the Regional Ministry of Economy, Innovation, Science and Employment for the province of Huelva announced that the mining permits for the Lomero-Poyatos concessions were revoked due to inactivity. A delegate of governmental body, Eduardo Manuel Muñoz García, explained that the decision to revoke the mining rights was due to repeated failures to meet the conditions of the Unified Environmental Authorization (Autorización Ambiental Unificada or AAU) issued in October 2012, along with other developmental requirements. He cited that Petaquilla s subsidiary, Iberian Resources, failed to present a complete project plan and the associated restoration plan. In addition, Iberian Resources has not provided the additional information requested by the Geological Mining Institute of Spain (Instituto Geológico y Minero de España or IGME), has only completed 10 of the 170 proposed exploratory surveys, has not constructed settling tanks and has not made the required deposit guarantee. The Ministry estimates that in recent months, Iberian Resources has not made any exploratory or construction progress since May when a rudimentary access ramp was constructed in the form of earthworks creating a channel, which the Ministry estimated to represent at most ten working days. The Ministry of Economy mentioned that Iberian Resources had requested to delay the work requirements citing lack of sufficient funds. The Ministry denied the request and is moving forward to make the mining rights available again to interested companies. Apparently, the Ministry warned the Petaquilla that the mining rights would be forfeited if certain requirements were not executed by the end of the 2013. Petaquilla Minerals had owned a 100% interest in Lomero-Poyatos through the acquisition of Iberian Resources. The most recent financial report books the value of the company s Iberian assets as $35,830,876, which predominately reflected Lomero-Poyatos. Petaquilla may appeal the decision in court.
Labor Protests On December 31, 2013, Panamanian newspapers reported that workers at the Molejón gold project were protesting in the streets of Penonomé and along the road to the Cobre Panamá copper project. The workers are demanding the payment of wages due December 15th and the 13th month payment required according to their Collective Agreement.
Deutsche Bank Liabilities Though management is committed to physically delivering the required ounces of gold and silver to Deutsche Bank pursuant to Forward Gold Purchase Agreement and Forward Silver Purchase Agreement, Petaquilla Minerals has recently failed to meet the physical delivery requirements and has settled its obligations in cash. In October 2013, Petaquilla paid $1.7 million to Deutsche Bank to settle the September delivery requirements. As of September 30, 2013, the company was in negotiations with Deutsche Bank to reschedule the October delivery requirements.
Financing On November 21, 2013, Petaquilla Minerals announced the closing of a private placement of 14,285,714 Units at C$0.35 per Unit, each of which consists of one common share and one common share warrant exercisable at C$0.45 per share. Gross proceeds were $5,000,000 from which a $200,000 finders' fee was paid. Management is actively pursuing financing alternatives to fund developmental plans, re-finance short-term liabilities and terminate the Deutsche Bank forward gold and silver purchase agreements and convertible loan. During the first fiscal quarter, the company's working capital deficiency expanded 13.7% to $97,368,564. Since the decline in gold production is contributing to the company missing gold delivery requirements to Deutsche Bank that are required under its Forward Gold and Silver Purchase Agreements, an IAS requirement stipulates that the Forward Gold Purchase Agreement and Forward Silver Purchase Agreement with Deutsche Bank (both totaling $25,860,000) be classified as a current liability. Despite Petaquilla Minerals having belatedly satisfied the delivery requirements with cash payments, the company continues to be in arrears as of the end of the first fiscal quarter.
There are concerns that the company may possibly be under pressure from a shortage of working capital. In early September 2013, Petaquilla Minerals entered into a gold prepayment facility with Auramet for $2,500,000 (under which the company was obligated to deliver 2,128 ounces of gold on the following timetable: 152 ounces per week for 14 weeks between September 20th and December 20th).
Share Repurchase During fiscal 2013, the company repurchased $257,652 worth of treasury shares. No shares have been repurchased thus far during fiscal 2014.
Miscellaneous On August 19, 2013, Petaquilla announced that the company has changed its fiscal year from May 31 to June 30. As a result, the company had a transitional 13-month financial year ending June 30, 2013 including a transitional 4-month fourth fiscal quarter.
It was disclosed in the 2013 fiscal year-end report that the spin-out of Panamanian Development of Infrastructures, S.A. can only be executed upon the repayment of all the outstanding Deutsche Bank debt. |