The company took the drastic step after completing an operational and financial review and said the only sustainable outcome was to place the operation on care and maintenance immediately.

The decision will result in a reduction in the workforce, which KMC said was regrettable but the most feasible option to "preserve the value of the project"

The mine is thought to employ around 50 workers.

KMC said it would assess its recapitalisation options for the project.

In its quarterly report released late last month, the company said it was making strong progress at the operation, but hinted at some trouble.

A delivery made on Boxing Day to Barrick Gold's Kanowna Belle mill was the largest to date but was below guidance due to access issues in the bottom of the mine caused by water pumping failures.

Equipment availability also led to lower productivity but the company said it had new equipment arriving this month which would allow it to meet production targets.

During the first six months of operation, the mine produced 5305 ounces of gold, generating gross revenue of $A8.94 million.

However, exploration, development, production and administration costs were $7.7 million for the six months to December 31.

The company had $2.25 million cash at the end of December, despite receiving $3.8 million from a placement during the quarter.

KMC was unavailable when contacted by MiningNews.net this morning.

The company acquired the mine early last year from Argent Minerals, which had purchased it from Barrick only months earlier.

KMC shares will remain in suspension but last traded at 4.9c.