Take physic, pomp

Minera Andes (MAI.to): well, this sucks

Here’s the link to the Minera Andes (MAI.to) PR this morning, but this is what it says:
Minera Andes Inc. (“MAI”) announced that following a meeting of the shareholders of Minera Santa Cruz, S.A. (“MSC”) on December 17, 2008, the shareholders of MSC can expect to receive a cash call of US$23 million to finance further expansion and development of the San José project. MSC is owned, indirectly, as to 51% by Hochschild Mining plc (“Hochschild”) and as to 49% by MAI. MSC is the registered owner of the San José gold project in Argentina. MAI’s share of the cash call is approximately US$11.3 million, payable by mid-February, 2009. Failure by MAI to pay this amount when due will result in a dilution of MAI’s interest in MSC below 49%. MAI is investigating financing alternatives available to it.
This request for additional funding is being made notwithstanding previous assurances by Hochschild that additional cash calls would not be required as the mill and plant are operating and Phase I of the initial expansion has been completed. Further plant expansion costs were therefore expected to be paid from cash flow.
So MAI.to has to come up with $11.3m to keep San José running, even though they’ve been producing for a while and the company (not HOC.L, but MAI.to) assured us all on several occasions that they’d be cash flow positive by now. Humph…can’t trust anyone these days, can you? That’s what comes of a creeping cash cost number.
MAI.to has dumped 10% on this news, and for once I agree with the sell-off in this stock. What was once an Otto favourite is now an also-ran, at least for the time being. Finally, I note with chagrin that two readers now have the right to say to me “I told you so, dumbass.” I’ll be expecting your mails…you know who you are.

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