(MENAFN- ProactiveInvestors)
() has received an initial instalment of US$200000 of the US$1 million Stage 1 funding from London backed BVI registered private company Bluebird Merchant Ventures Ltd.
The Stage 1 funding will be used to complete the Definitive Feasibility Study final mine permitting and exploration for additional resource/reserve delineation.
Red Mountain will receive the remaining US$800000 (A$972484.14) on admission of BMVL to the AIM market in London expected late February 2015.
Stage 2 funding of US$4.5 million is subject to conditions precedent including final mine permitting and completion of the DFS and will part fund the development of the Batangas Gold Project.
“We are very pleased to receive the initial funding under the Agreement with BMVL and will immediately commence the work program to complete permitting and the DFS for our Batangas gold project as well as further testing of high priority outcropping gold targets at Lobo that may be immediately converted to resources” managing director Jon Dugdale said.
Current Work
Red Mountain has re-commenced excavation to extend the 20 metre exposed strike length of outcropping high grade gold lode at the south western end of the South West Breccia (SWB) structure.
The SWB lode is exposed through a window surrounded by younger limestone which covers the projections of the lode in all directions.
Previous trenching results from this SWB lode exposure include Trench 32a with 2.5 metres at 14.1 grams per tonne gold including 0.5 metres at 38.9 g/t Au and Trench 13 with 2.6 metres at 28.6g/t gold.
A previous drillhole LB 105 intersected 0.65 metres at 18g/t gold from 10 metres indicating that the high grade lode plunges moderately and may extend down plunge to the southwest and/or northeast.
The next step will be excavator bulk sampling of the high grade outcropping lode material then drill testing for extensions down plunge to the southwest and northeast. This program has the potential to immediately convert the target to additional resources.
The next key step in permitting the Batangas Gold Project will be the receipt of endorsements from the Local Government Units (LGU’s) Municipal and Barangay (township) levels for the development and production plan (Declaration of Mining Project Feasibility (DMPF)).
Red Mountain has already gained LGU and regional Mines and Geosciences Bureau (MGB) endorsement for the Social Development Management Plan a government registered plan that manages community programs and benefits that flow from the future mining operation.
LGU endorsement of the DMPF is almost complete which will allow the permitting process to proceed to the central MGB for final processing and approval.
Definitive Feasibility Study
Based on the encouraging initial DFS results indicating low capital of between $18 million and $22 million and operating costs of US$753 per ounce for the initial Batangas Gold Project development the company will now proceed with the final detailed design phase of the DFS.
This is targeted to be completed during the first half of 2015.
Current high Australian dollar gold price (>A$1500/ounce) and the drop in fuel costs is expected to enhance the economics of the proposed gold project.
The DFS program will include additional geotechnical work including drilling as well as tailings residue sample testing and additional metallurgical properties testing.
Detailed design of the main capital items including the processing plant residue storage facility and additional access roads and earthworks will then be completed.
Rights Issue
The company is also carrying out a one-for-four non-renounceable rights issue to raise up to $900000.
This includes one attaching option exercisable at $0.012 each expiring on 31st March 2016 and one option exercisable at $0.006 each on or before 30th June 2016 for every two shares subscribed.
The rights issue closes on 28th January 2015.
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 ounces of gold equivalent.
Technical due diligence has been completed and an initial payment of US$100000 from Stage 1 funding will be paid no later than 9 January 2015.
The balance of the Stage 1 US$1 million to be paid in monthly instalments over a maximum of 6 months or the balance on listing of BMVL on the London Stock Exchange AIM market whichever is earlier.
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
The initial funding from Bluebird Merchant Ventures follows successful completion of due diligence and allows Red Mountain to start work on permitting and the DFS.
This funding represents a “see-through” valuation for 100% of the Batangas Gold Project of around A$13.4 million almost four times the current $3.4 million market cap. of Red Mountain.
Batangas has attractive Capex of just between $18 million and $22 million as well as operating costs of US$753 per ounce.
Red Mountain has also attracted sophisticated investors through a placement and has launched a rights issue.
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