Angel Mining, the AIM-listed mining group focused in Greenland, saw shares take a tumble on Friday after reporting that losses widened significantly in the first half, mainly due to a hefty impairment provision.
The company recorded at loss of $14.6m in the six months to August 31st, compared with a loss of just $1.65m the year before, after taking into account a provision of $10.8m for the impairment of the value of assets at the Nalunaq Gold Mine.
"This is a conservative estimate of the total investment in Nalunaq which may not be recovered from future cash generation," the company said.
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The stock was down 22.77% at 0.39p before the close of trade.
The company is yet to generate revenue as it has not yet reached 'commercial production'. The group said that it will commence commercial production when it can consistently achieve 70% of its monthly minimum production target of 1,500-2,000 ounces of gold.
The company said: "The latest assessment of recoverable gold at Nalunaq and our best understanding of the associated income, based on an average gold price of $1,700 per ounce, and of the operating costs to extract the gold, suggests that the mine should generate at least $25,000,000 of free cash before we have to face the possibility of mine closure.
"Consequently, we have taken an impairment charge of $10,805,000 against the assets at Nalunaq, reducing the value carried forward at August 31st to $25,000,000."
Chairman Frank Chapman admitted that 2012 has been a year of "setbacks and frustrations" for the company.
However, he said: "I believe that despite the difficulties encountered in 2012, the strengthened management team will be able to take advantage of the higher grade ore at Nalunaq and hit the long established production target, which will generate the cash needed to meet all of our financial commitments."
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