The company, in a statement, noted the introduction in January of a temporary travel ban which runs for at least a month but can be extended.
Nalunaq had been slated to have its first gold pour by the end of 2021, but, in the current circumstances the project timeline will be impacted.
"The board has taken the difficult but ultimately prudent decision to defer development and gold production from Nalunaq until such time as the current pandemic subsides and the company is able to make an accurate assessment of costs and schedule,” said Eldur Olafsson, AEX chief executive.
In London, AEX shares fell around 45% in Wednesday’s early deals, to trade at 30.9p.
AEX said the mine development is dependent on its teams being able to access the entire property. To deliver the project, the company’s workforce would comprise a significant number of both externally contracted and locally sourced labour.
Given the travel restrictions, there is no certainty that it will be able to deploy enough people to complete the project and meet the timeframes initially envisaged, the company added.
Additionally, it noted that the project budget has incurred very significant cost increase in a number of areas, many related to the increased cost of logistics as result of the COVID pandemic.
At the same time, it highlighted the widespread and material inflation relating to mining activities and equipment, resulting from rising commodity prices – which in the case of gold has particularly been driven by the economic disruption created by the pandemic, which elevates the ‘safe haven’ value of the yellow metal.
Budget contingencies are in place, however, and two specific areas of cost overrun will require additional external capital to resolve.
Specifically, the company highlighted that it decided to include a floatation circuit to the development as a low cost and highly value accretive secondary recovery process (on paper, it lifts recoveries to 91-97% from 65-70% without the kit) but it requires additional civil engineering.
Secondly an external consultant has advised that a concrete bulkhead close to the main mine portal is unsafe – the bulkhead supports historic tailings left by a previous operator – and this will need to be rectified. The company said this work is not considered ‘major’ in its own right, but with the travel restrictions presently it would represent a material risk to completing the project this summer.
The work would delay or impact the mine’s initial production grade which will inturn reduce the mine’s early stage revenue, it added.
AEX noted that is has C$13mln (£7.4mln) committed to long lead items to date, some of which may be recoverable, and it has around C$58mln of cash on hand.
It said that the operational risks and variability in costs is too great to warrant committing the bulk of available liquidity to a timeframe to meet the envisaged development schedule.
Management is now reviewing various scenarios and will commence a short period of consultation with shareholders, it added.
Eldur Olafsson said: "AEX's intention is unwavering in executing its objective to maximise value from its vast southern Greenland gold licences.
“The potential to add a flotation circuit is an example of adding significant value through increasing recovery rates.
“Whilst we would prefer not to defer the development schedule this is a necessary action in the context of our current circumstances. We will now engage our shareholders as part of the process in developing the forward plan and report to all shareholders in due course."