Copper and gold explorer Kalia — which recently won historic exploration licences in Bougainville — has been questioned by the ASX over its ability to keep its doors open.

Kalia’s (ASX:KLH) September quarter cashflow report showed negative operating cash flow of $155,000, cash in the bank of $208,000 and an expected cash burn for the December quarter of $925,000.

The company, which has a market cap of about $31 million, is exploring for copper, gold and energy metals in Australia and the Mt Tore region of Bougainville Island, Papua New Guinea.

Bougainville remains largely under-explored thanks to a moratorium on mining, exploration and development.

The moratorium was lifted when Bougainville passed a new Mining Act in 2015. Kalia this month won the first two licences to be processed under the new Act.

Kalia told the ASX it expects negative cash flows to continue “for the time being”, but that it has taken steps to raise more cash.

Kalia raised $1.44 million in October and is working to complete another placement.

Kalia's share price over the past year. Source:
Kalia’s share price over the past year. Source:

“KLH has taken further steps to secure a further equity placement and is seeking to secure funds due from a minority shareholder in a subsidiary,” the company said in its response to the ASX.

“Achievement of these two objectives secures funding well past Q1 2018, by which time a further issue of equity is envisaged for which planning is underway.”

Kalia seems confident it will “continue its operations and meet its business objectives”.

However, the junior explorer is also the subject of legal action. Earlier in November, Central Exploration, Central Area and RTG Mining (ASX:RTG) launched an action in the Supreme Court of Western Australia against Kalia and its subsidiary, Kalia Holdings.

The matter relates to an alleged breach of a deed of settlement on activity relating to the 1.5-billion-tonne Panguna copper-gold mine, which lies 60km southeast of Kalia’s exploration licence areas.
Panguna was mothballed by owner Bougainville Copper in 1990 after anger over the mine led to the “Bougainville Crisis”. When operating, it was considered among the richest copper mines in the world.

There are now plans by Bougainville Copper — with the government’s support — to bring it back into production.

Bougainville Copper currently hold the rights to the mine and is undergoing a licensing renewal process.

However, RTG along with a landowner-backed consortium are bidding to redevelop the project and opposes any involvement of Bougainville Copper in rebuilding and operating the mine.

RTG claims the changes to the Mining Act in 2015 saw customary landowners taking ownership of minerals on their lands and therefore landowners own the minerals to the Panguna mine, not Bougainville Copper.

Kalia said at the time it announced the legal action that it does not fully understand why legal action has been brought against it, but will defend itself.

The company has been contacted for comment.