The family that owns about half of Kern County’s unprofitable gold and silver mine near Mojave has offered to buy the other half from the Canadian company running the operation.
Golden Queen Mining Co. Ltd. said this week it has tentatively agreed to the Clay family's offer of $4.25 million for the company's 50 percent share of the heap-leaching mine at Soledad Mountain.
Tuesday’s announcement came less than a week after the family agreed to a extend the deadline for a loan payment from the publicly traded company based in Vancouver, British Columbia. The extension to Feb. 8 from Feb. 1 added $75,000 to the loan's principal.
Golden Queen’s losses deepened to $2.4 million during the third quarter of last year. That was more than a quarter more money than the company reported losing a year earlier. More recent performance figures have not yet been made available.
The Clay family's proposal comes with a pledge that if by June 20, 2020, it is able to sell Golden Queen's share for at least $55 million — 12 times the purchase offer first disclosed Jan. 4 — then the family would refund the company 20 percent of the new sale price.
As part of the proposed purchase agreement, the Clay family, which is among the company's top shareholders, has offered to forgive the $26.5 million it is owed by the company.
A committee of independent company directors was formed to negotiate a purchase deal with the family. The company has until April 1 to see if it can find a better price for its share of the mine.
The Clay family, through its fully owned company Auvergne LLC, has contributed equity and debt capital since the 1980s to fund development of the Soledad Mountain mine. Auvergne's manager, Thomas M. Clay, who filings say is based in Peterborough, N.H., has served on Golden Queen's board since 2009, and currently serves as its chairman and CEO.
It wasn’t immediately clear who would operate the mine if the Clay family took full ownership of Golden Queen’s primary asset.
Golden Queen has applied for permission from the County of Kern to add infrastructure and operations it says might extend the life of the mine beyond the 11 years anticipated when a feasibility study was conducted in 2015.
Company records show production of gold and silver at the mine has increased but it’s still not enough to turn a profit.
According to Golden Queen's third-quarter earnings statement, revenue from operations rose by 2 percent from the same period a year before as the mine increased gold production by 4.4 percent to hit 12,255 ounces. Silver production increased 109 percent over the same period to reach 100,408 ounces.
As of Sept. 30, Golden Queen has continued to develop the mine's East Pit, which when complete was expected to provide most the operation's ore for two years or more. The company expressed hope the pit would provide higher-quality ore and less waste.
Prior to the mine's 2016 opening with 101 employees, Golden Queen spent nearly 30 years preparing to mine gold and silver at the butte a few miles outside Mojave. Records show the company's payroll had expanded to 218 by Sept. 30.
The company's stock, which trades on the OTCQX market under the symbol "GQMNF," was selling Wednesday afternoon for about 3 cents per share, down from a 12-month high of about 17 cents in June.
A representative of Golden Queen said Wednesday the company would not comment publicly until a definitive agreement on the purchase proposal has been finalized.