(MENAFN- ProactiveInvestors)
() is continuing its march towards becoming a gold producer after securing approval for the Mining Proposal and Mine Closure Plan for the Nicolsons Mine near Halls Creek Westen Australia.
The approval from the Department of Minerals and Petroleum paves the way for recommencement of gold production from the high grade underground mine.
This follows the company securing in December 2014 a gold prepay facility of up to $11.5 million with to refurbish and develop the Nicolsons Project.
As part of the financing package the company will raise up to $3.93 million through a 1 for 4 rights issue priced at $0.05 per share.
It also reached a Heads of Agreement with () to acquire a further 15% interest in the Nicolsons Project from Bulletin (taking PNR up to 80%) by securing 100% of the financing agreements.
If the rights issue is successfully completed it is expected that site works will commence in the February/March 2015 period.
The company could pour the first gold from the Nicolsons mine in 2015 with total pre-production Capex estimated at just A$10.7 million.
“We now have a clear path to commencing site works with key project personnel in place” managing director Paul Cmrlec said.
“We have a high-grade underground gold mine with a rising gold price environment and are excited for our shareholders with the value that this development presents.
“We await the successful completion of our rights issue and the start-up of what we believe will be a rewarding and transitioning step for the company as we enter the ranks of a gold producer.”
Financing
The financing agreement with CBA includes a Gold Prepay Facility with fixed repayments in physical gold and a mandatory Hedging Facility to provide cashflow certainty over the life of the Prepay Facility.
The number of ounces re-payable is dependent on the Australian dollar gold price at the date of financial close.
This will be varied up or down dependent on the spot gold price at the time of execution.
The facility is to be repaid monthly over twenty three months commencing nine months from the date of financial close.
The Hedging Facility is for scheduled deliveries over the same period as the Gold Prepay Facility.
Hedged ounces are to be finalised at the time of execution and are expected to be approximately 20% of forecast production at current gold prices.
This requires quarterly gold deliveries commencing nine months after the execution of loan documents.
As part of the financing package PNR will complete the rights issue as part of its requirement to fund an amount of equity normal for secured facilities of this nature.
While the issue is not underwritten the company reserves to right to place any shortfall and pay usual brokerage fees to any party assisting in placement of any shortfall.
The rights issue will close on 28 January.
Nicolsons Project
The Nicolsons Project near Halls Creek Western Australia offers robust economics with total pre-production Capex of just A$10.7 million and total sustaining costs estimated at A$854 per ounce.
Other key takeaways include:
- Net Profit (after-tax) of A$50 million (at an assumed gold price of A$1400 per ounce);
- NPV (8%) of A$42 million;
- IRR of 162%; and
- Initial mine life of 4.5 years including 6 months of pre-production activities.
The mine estimate includes Indicated and Inferred Resources with about 79% of the mine plan (86600 ounces) coming from Probable Reserves.
The company’s re-start estimate targets 130000 tonnes per annum.
This is focused on restoring the existing on-site processing plant at its current capacity.
is moving to take a further 15% interest – to 80% - in the Nicolsons Project under a Heads of Agreement with partner Bulletin.
The company has undertaken to assist Bulletin by seeking to secure 100% of the financing requirements for the project and to extend the same financing terms to Bulletin.
BNR will contribute to the project in accordance with the agreement from 1st January 2015.
Analysis
The pieces are falling into place for with the Department of Minerals and Petroleum approval following the financing agreement with CBA giving it a clear path to commencing site works as early as February/March 2015.
Its rights issue priced at $0.05 offers shareholders the opportunity to build up their stakes in the company at a discount to the current price of $0.056.
Shares in the company could rise further as it advances towards the start of production later this year.
Adding to the interest its march towards production is aided by the strong U.S. dollar with the exchange currently at US$0.82 per Australian dollar. This has increased the Australian gold price to A$1506 an ounce.
With Capex a bite sized A$10.7 million and Opex at A$854 per ounce the Nicolsons Project looks set to be one of the success stories in the gold sector in 2015.
Taken together the company appears significantly undervalued with a Capex of circa A$22 million.
Proactive Investors has calculated a share price target for of $0.25 - $0.30 per share within 12 months based on gold production forecast profits and EPS estimates.
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