Shares in Australia’s Resolute Mining (ASX, LON: RSG) shot up on Wednesday on news that Ghana had restored the mining lease for the company’s Bibiani gold mine.
The company’s stock jumped as much as 20.2% to A$0.565 in early trading in Sydney, closing at A$0.54 It was 4.8% higher in London mid-afternoon, changing hands at £30.75.
Resolute was in damage control last month after receiving a letter from the Ghanaian Minerals Commission informing the company the operation’s permit had been terminated. The government also ordered the company to cease all activities and operations at the site.
The Western Australia-based miner was at the time in the midst of finalizing the sale of the asset to China’s Chifeng Jilong Gold Mining, announced in December.
Resolute acquired Bibiani in 2004 but placed the mine on care and maintenance shortly after to allow exploration activities to develop the asset into a large-scale operation.
Chifeng had said it wanted to reopen the gold mine “as soon as is possible,” but those plans may never materialize as Ghana’s reinstatement of Bibiani’s lease is subject to a number of conditions.
Among them, Resolute and its subsidiary Mensin Gold Bibiani (MGBL) must acknowledge and accept that the Ghanaian government does not recognize the sale or transfer of the mine to Chifeng.
Minister for Lands and Natural Resources, Samuel Jinapor, told Resolute that a future sale could be possible, but that it would require the prior approval of the government in accordance with the Ghanaian Mining Act. The same goes for any third party looking to acquire a stake in the Bibiani Gold mine.
Resolute Mining must submit a report detailing the full state of affairs at the mine, including the environmental, health and safety conditions within the next seven days. They also have to send a detailed plan for the redevelopment of the mine with timelines and investment requirements.
The miner told shareholders that it would comply with the conditions imposed by the government.
“We are very pleased to have come to a quick and amicable resolution which provides clarity and confirmation of MGBL’s mining lease at the Bibiani gold mine,” chief executive Stuart Gale said in the statement.
Gale added the company was looking forward to working with the government to identify a development option at Bibiani that would see the mine resume production as quickly as possible.
According to a feasibility study completed in 2018, a successful restart of mining at Bibiani — which is estimated to host around 2.5 million ounces of gold — would require a total capital cost of A$115 million ($89m).
The mine would produce about 100,000 ounces of gold a year over a ten-year mine life.