Metals Exploration (LSE:MTL) sank by more than a fifth to 0.84p on Wednesday morning after revealing that funding constraints have prevented progress at its flagship gold project in the Philippines. In its update for Q1 2019, the business said that although it has been unable to begin key maintenance programmes at the Runruno project, it has placed orders to undertake mobile equipment rebuilds in Q2 2019.

The organisation revealed that it has also encountered problems on the processing side at Runruno, with both overall plant availability and gold recoveries coming in well below original feasibility studies. Indeed, gold recoveries averaged 66pc over the three months against the feasibility forecast of 90pc. As a result, total poured gold was below budget at 14,892ozs. Meanwhile, average mine gold grades came in at 1.54g/t against a budget of 1.70g/t. Metals Exploration said it expects this deficit to continue and – as such - has accounted for it in its internal forecasts to ensure plant feed grades and forward production can be budgeted more accurately moving forward.

Runruno is found 200 miles north of Manila in a mineral-rich province called Nueva Viscaya. In 2010, a feasibility study confirmed the project’s viability, projecting average production of 96,700oz gold p.a over a mine life of 10.4 years at an average forecast operating cost $477/oz gold before molybdenum credits.  Work to date has defined a resource of 1.42Moz gold, and 25.6Mlb of molybdenum with 900,000oz gold in the measured and indicated categories and 780,000oz in the proven & probable reserve category.

On Wednesday, Metals Exploration added that maintenance issues were also a key detractor on production throughputs. The company said more than two weeks were lost at the hands of ruptures in Runruno’s tailings pipeline and low water availability. It has now identified critical areas in its pipeline for immediate repair or rotation and has arranged for access to alternative suitable process water sources.

Elsewhere, the business revealed that it sold 15,293oz of gold over the quarter at an average realised gold price of $1,309/oz. This left it with cash in the bank of $3.34m as of 31 March. The group added that discussions with its lenders are ongoing to restructure its overall debt position, with a standstill from making principal and interest payments remaining in place until 2 May.

Finally, the business highlighted the numerous changes made to its board over the period. Notably, this saw it appoint Darren Bowden as chief executive and executive director on 3 January. The outfit also appointed Guy Walker as interim chairman and Mike Langoulant as interim chief financial officer, as well as adding new managers in its processing plant division.

Author: Daniel Flynn

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