(MENAFN- ProactiveInvestors)
() has shown that quality assets such as the company's Batangas Gold Project in the Philippines can still attract significant financing in difficult capital markets.
Red Mountain has reached an agreement on strategic joint venture financing for two stage funding of Definitive Feasibility Study (DFS) and final permitting then development financing.
The terms were agreed with a private company backed by London based investors for a two stage transaction totalling A$6.7 million (US$5.5 million) to convert to a 50% stake in Red Mountain’s wholly-owned subsidiary Singapore (RMMS).
RMMS is the 100% owner of the Philippines subsidiary company that holds the Batangas Gold Project assets.
- Stage 1: US$1 million to fund DFS and permitting completion converting to 15% of Batangas project beneficial owner subsidiary Singapore (RMMS); and
- Stage 2: additional US$4.5 million development finance converting to additional 35% of RMMS.
Jon Dugdale managing director commented:
“This strategic investment partnership is a very important milestone for the Company as it is anticipated to provide funding to complete the DFS and mine permitting for the low cost Batangas Gold Project then provide a further contribution to project development costs.”
Settlement of the Stage 1 Convertible Note of US$1 million will occur as soon as practicable following completion of due diligence which is to be completed before the end of 2014.
London Co. has already satisfactorily completed technical due diligence and is awaiting legal and financial sign off to complete the entire due diligence process by which time the parties expect to have signed the final binding agreement with respect to the Transaction.
Full funding details
Stage 1:
A Convertible Note totalling US$1 million which is convertible to a 15% stake in Red Mountain 100% owned subsidiary RMMS the 100% owner of the Philippines subsidiary company that holds the Batangas Gold Project assets.
If not converted previously the Convertible Note shall be redeemed on 31 December 2015.
However if final mine permitting is not completed by 31 December 2015 the Convertible Note may be extended under certain conditions.
Stage 2:
US$4.5 million for an additional 35% (for a total 50%) stake in RMMS on satisfaction (or waiver by London Co.) of certain conditions precedent:
- Completion of DFS satisfactory to London Co demonstrating internal rate of return of >25%;
- Receipt of the Declaration of Mining Feasibility (DMF) and Environmental Compliance Certificate (ECC) issued by the Philippines MGB and DENR respectively to allow commencement of development of the Batangas Gold Project; and
- Definition of Proved and Probable Ore Reserves to support a production schedule recovering at least 100000 Oz of gold equivalent.
Batangas Gold Project
has recently delivered robust initial results for its Definitive Feasibility Study at the Batangas Gold Project which is located 120 kilometres south of Manila.
Key metrics are:
- Mining Inventory for 5.2 years totalling 1.03 million tonnes at 3.3g/t gold 10.3 g/t silver;
- Production target of 100000oz gold and 250000oz silver from processing of 1.03 million ore tonnes;
- Pre tax operating costs of US$753/oz gold (A$865/oz gold);
- Sustaining operating costs (including all taxes and charges) of US$811/oz gold (A$933/oz gold);
- Pre-production capital of A$18.4 million including A$15.4 million installed;
- Total all-in costs including pre-production and sustaining capital of US$998/oz gold (A$1147/oz gold);
- Cash flows of A$52 million at a US$1250 an ounce gold price;
- Assuming approximately 50% debt financing and repayment in 3 years IRR is 46% and NPV (8% discount rate) is A$17.6 million.
The first phase of the DFS focussed on mining metallurgy and processing cost and recovery inputs for the initial 5.2 years production target of 100000oz of gold and 250000oz of silver.
The second 3.25 year production phase will mine transport and process 854000 tonnes at 2.6g/t gold 12g/t silver (diluted) from Kay Tanda West (KTW) orebody at Archangel 15 kilometres by road to the east of the Lobo plant.
Updated capital cost inputs are preliminary at this stage and will be the main focus of the second detailed engineering phase of the DFS.
The production target is underpinned by current JORC 2012 Indicated Resources totalling 2.97 million tonnes at 2.4g/t gold containing 227000 ounces of gold.
Analysis
Jon Dugdale managing director has delivered for Red Mountain a funding package that can rapidly advance the Batangas Gold Project in the Philippines.
The funding represents a “see-through” valuation for 100% of Batangas of around A$13.4 million more than three times the current market cap. of Red Mountain.
The terms were agreed with a private company backed by London based investors for a two stage transaction totalling A$6.7 million (US$5.5 million).
This will convert to a 50% stake in Red Mountain’s wholly-owned subsidiary Singapore (RMMS).
RMMS is the 100% owner of the Philippines subsidiary company that holds the Batangas Gold Project assets.
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