TORONTO (CP) -- Shares of Glencairn Gold Corp. [TSX:GGG] fell 28% Thursday after the company suspended operations at its Bellavista Mine in Costa Rica, citing the risk of a cyanide spill.
''We've stopped all mining and leaching,'' company CEO Peter Tagliamonte told analysts in a conference call Thursday.
The company's stock ended the day down 16 cents to 41 cents on the Toronto Stock Exchange with 2.5 million shares traded after Wednesday evening's word of ground movements - first noticed in May - that caused cracks at two corners of a leach pad which contains cyanide used to dissolve gold from crushed ore. At one point on Thursday, the company's shares fell to 37 cents - a 52 week low.
''What we're looking at is really a fairly massive ground movement,'' Tagliamonte told analysts. ''What we're concerned about is any possible breach in the liner, that it could introduce cyanide into the environment. We do not want that to happen at any cost.''
The earth movement - up to one centimetre a day, or about 30 centimetres since studies began in late June - is attributed to several years of unusually heavy rain. There has been no evidence of earthquakes in the area, Tagliamonte said.
The two-month gap between the time when the ground movement was first noticed, and this week's stoppage, triggered concern among some analysts Thursday. But Tagliamonte said it took time for the company to hire consultants to visit the site, conduct studies and make recommendations.
''Our first course of action is really to understand what's happening, and second to create a plan, and then to stop the movement,'' Taliamonte said.
Tagliamonte said the company will be asking the Costa Rican government to grant it access to an area under environmental protection, called the Montezuma Springs, to do ''remedial work.'' He said there are 17 springs in the area.
''Based on earth movement patterns in Costa Rica, the geological structure at the site and the opinions of its experts, the company does not believe that there is a risk of sudden earth movement at this time,'' Glencairn stated.
''However, continued small movements could compromise the sub-liner, liner and drain system.''
According to MiningWatch Canada, cyanide is used to leach gold from low grade deposits.
Huge amounts of rock are crushed up and piled on tarps. Then a cyanide solution is sprayed on, said Joan Kuyek, national co-ordinator of the group.
''If they're not watching it very carefully, there can be very serious problems,'' said Kuyek, who was dismayed to hear about the problems at the mine.
According to MiningWatch, serious cyanide spills at gold mines, such as a tailings dam malfunction in 2000 at Romania's Baia Mare gold mine, prompted the development of an international Cyanide Code.
''The code has been upheld by mining companies as an important mechanism to improve operations, especially in countries lacking adequate regulatory programs,'' according to the advocacy group's website.
The news sparked an analyst from Blackmont Capital to lower his rating on the company from ''buy'' to ''speculative buy.''
Richard Gray estimated it will cost the company C$10 million on items such as new leach pads, new waste piles and tarping.
''The suspension of mining activities at Glencairn's Bellavista mine is a major setback for the company,'' Gray stated in a July 26 note to investors.
''The mine was beginning to show improvement after the installation of the new rod mill last year that improved recoveries and lowered costs,'' Gray said. ''The company now faces a considerable challenge to get the mine back operation.''
''We are taking a conservative approach with our valuation and are assuming that the ground movement problems will take one year to resolve and mining will not restart until August 2008,'' wrote Gray, who lowered his target price for the stock to 70 cents, down from 90 cents.
''Our new target price provides a potential return of 63% and we recommend the shares only for risk-tolerant investors until more clarity on the situation at Bellavista is provided,'' Gray said.
''The big question for the company now becomes whether the mine can be remediated and brought back into operation, and if so, how long will it take?''
Glencairn also operates two mines in Nicaragua, Limon and Libertad. It holds a 60% interest in the Cerro Quema advanced gold project in Panama and a 100% interest in the Mestiza gold property 70 kilometres from Limon.
(c) The Canadian Press 2007