Sovereign Mines plummets ahead of emergency cash call

Sovereign Mines of Africa has warned it needs to make an emergency discounted fundraising after the failure of long-running talks with a major mining partner.

The AIM-listed company said without raising capital, which it plans "shortly" or at least before the end of the year, it will not be able to continue operating.

SMA has received a firm commitment from one of its directors to underwrite a limited capital raise, as well as indications of support from certain shareholders, but these were made at a pricing level below the closing mid-market price of 0.175p at the time of its interim results in September and significantly below the closing market price on Monday of 0.65p.

The company has been led to this decision after directors decided to "suspend" talks about financing its Mandiana gold project in northeast Guinea with the unnamed "major third party", having begun the discussions in July and granting, and later extending, a period of exclusivity with the party in an attempt to grease the wheels of a potential deal.

SMA directors said the decision was taken "as approval by the potential partner's board has not been forthcoming in a timely manner".

Chairman David Pearl said: "We have been engaged in intensive and protracted negotiations with a substantial mining company. It is therefore very disappointing that no agreement has been signed and I would like to apologise to shareholders for the uncertainty that this has caused."

Shares in SMA were down 69% to 0.45p by 0945 GMT on Tuesday, having hit the giddy heights of 1.35p in October and hovered above 0.5p throughout November as the company released three updates where it explored different ways of saying the talks were ongoing but not yet concluded.