Q: IS THERE HOPE THAT THIS COMPANY CAN SURVIVE FROM THE LANDSLIDE BEING A ONE TRICK PONY? iS IT WORTH RE ENTERING AT THESE LEVELS IF SO?
5i Research Answer:
The issue is uncertainty. The heap leach failure raises multiple issues: First, there is the cost to remedy the issue. This is unknown, but could be huge. Next, there is the environmental damage and the likelihood of very large penalties. The mine could be permanently shut by regulators. Then, we have potential default. The mine operations have been suspended, so no cash flow is now coming in. With more than $200M in debt, VGCX's debt covenants will likely be breached soon, and lenders will be largely in control of the company's destiny. Overall, we would consider it a very precarious situation and would not advise buying.