Gold Exploration in West Africa

[Ed Monton]

Article on Australian Red Back:

http://www.mips1.net/mgdd03.nsf/Current/80256D7800445A6642256D7800480F33?OpenDocument

Aussie gold junior heads for North America

By: Stewart Bailey

Posted: 2003/08/04 Mon 15:01 ZE2 / © Mineweb 1997-2003

KALGOORLIE – Red Back Mining, the Australian-based gold producer, is to list in North America to raise equity finance for its Ghanaian gold project, Simon Jackson, the company secretary, said today.
Speaking at the Diggers and Dealers Mining Forum in Kalgoorlie today, Jackson said the group’s financial advisers were already arranging the $38 million needed to develop the 130,000 ounce Chirano gold project. He said at a $350/oz gold price, Chirano’s $38 million development bill was “largely debt financeable”. He said the group had already been on the receiving end of approaches from a number of banks.

The balance of the required to get the project to production by Red Back’s own 2005 deadline, would secured through an equity raising. “We would like to take it to North America to raise equity,” said Jackson. He said management was mulling a secondary float in Toronto or New York – London was also an option, he said.

The US market has been a happy hunting ground for junior gold producers the world over. South African gold producers across the size spectrum, have seen US-based retail gold investors buying gold stocks in huge volumes. Traditionally hedging-averse gold bugs will, however, be watching the debt finance mechanism carefully to see whether Red Back’s lenders insist on a forward sales programme to mitigate risk. Red Back’s largest shareholder, at 20 percent, is Australian bank and bullion dealer, Macquarie. North American shareholders, meanwhile, already hold 30 percent of the stock.

But Red Back’s capital requirements may prove lower than its initial projections. Jackson said the group was eying the proposed merger between AngloGold and Ashanti Goldfields, in the hope that non-core assets would fall off the table. Most tantalising for the Australian producer is the prospect of snapping up the plant and mill at Ashanti’s Bibiani mine, which lies close to Chirano.

He said the Bibiani mine would wind up next year, leaving a “very hungry 2.4 million ton a year plant” idle. Red Back has long coveted the plant after it failed to sell the Chirano project to Ashanti; last year the Ghanaian made an $18 million offer for Chirano, which was summarily rejected. A merged Ashanti-AngloGold could, however, decide to hang on to the plant if it decides to go ahead with an underground development at the mine.

But the group’s ambitions clearly extend beyond taking a 130,000-ounce junior to New York. Jackson again flew the consolidation kite, continuing along the same tack as Red Back’s managing director Ross Ashton, who at the Cape Town Indaba earlier this year said the company was keen to build a large African mining stock.

“We’d like to participate in the rationalisation of the gold sector and become a dual listed merged producer of up to 500,000 ounces,” said Jackson. The echoes of Ashton’s February call for a coalition of the willing’ - a group of African minnow gold producers banding together under one umbrella - is unmistakable. The lack of movement in the interim, though, is puzzling.

Resolute has operations at nearby Obotan and has recently had two of its minority shareholdings consolidated, with the merger earlier this year of Spinifex and Gallery Gold. It is likely to be one of the prime candidates to lead restructuring and rationalisation on the content.

The Chirano project looks attractive, if a little small. The project currently has grade of 2g/t, giving the project a million ounces already in the reserve category and a two million ounce resource. Jackson said 80 percent of the gold at the property lay inside a single pit, with the remaining 20 percent in a series of satellite pits.

Chirano is slated to produce 130,000 ounces of gold a year over the 6.5 year life of mine, at a cash cost of $211/oz.