As a gold mining company, the last thing you want to happen is for someone to seize your gold and threaten nonpayment. Forget having the authorities garnish your wages—imagine having them garnish your gold!
Unfortunately, this appears to be exactly what’s happening to Avocet Mining (AVM) at its Inata gold mine in the western African nation of Burkina Faso.
A shipment of roughly 1,400 troy ounces of gold leaving the Inata mine was seized in connection to an ongoing dispute between Avocet and a group of former employees over allegedly unpaid benefits.
The group of workers were terminated almost two years ago for staging an illegal strike in December of 2014. Such labor stoppages are somewhat common at precious metal mines in Africa.
The disgruntled former employees claim that Avocet owes them (collectively) $3.4 million in unpaid benefits. The company and the courts maintain that unpaid benefits are indeed owed to these workers, but no determination about the amount owed has been made. Avocet believes the total is considerably less than the number cited by the plaintiffs.
For context, the seized gold is worth about $1.8 million based on Friday afternoon’s gold spot price.
Beyond the immediate consequence of delaying the shipment in question, this development could turn out to be an enormous setback for Avocet’s financial future. The company’s stock price plummeted by almost 25% shortly after the seizure.
According to Avocet, no more gold shipments will leave the mine until this complaint is resolved in order to avoid the risk of another seizure. If this freeze of shipments drags out, the firm will be hard-pressed to find the funding to reopen the Inata mine.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.