Focus Minerals’ Commitment to Evolving into a Significant Gold Producer is Reflected by its Capital Raising, which will Enable it to Fast Track the Growth and Development of its Coolgardie Gold Project
Focus Minerals Ltd is an exploration and development group that is committed to evolving into a significant gold producer by leveraging off its strategic position as the largest landholder in the Coolgardie Gold Belt located in Western Australia – an area that has historically produced more than 2.6 million ounces of gold since 1892.
Further strengthening the Company’s position to achieve this objective is the fact that its mineral rights cover more than 210 sq km of tenements including an extensive inventory of Measured, Indicated and Inferred gold resources as well as the 1.2mtpa Three Mile Hill processing plant.
Reflecting Focus Minerals’ commitment to utilising this strategic position to enable it to capitalise on the opportunities created by the current strength of the gold price, it has resolved to raise approximately A$28 million via a placement to sophisticated investors and a Share Purchase Plan to its existing shareholders.
This Capital Raising will allow Focus Minerals to accelerate the growth and development of the Coolgardie Gold Project, where the Company is aiming to establish a long-term sustainable production base of 100,000 ounces per annum.
Mr. Donald Taig, Focus Minerals’ Chairman informed the Australian Investor, “Essentially, we are producing more ore than our current milling facilities can process. So the funds will provide us with the capital needed to get our Three Mile Hill Plant up and running. Approximately $18 million will be used to refurbish the plant and modernise it, which will ultimately reduce our operating costs by lowering the overall costs involved in the process from mining through to milling.
“After fees associated with the placement, we should have an additional $7 to $8 million leftover that will be used on the ground to quickly develop our near term ore deposits and advance them to bankable reserve status.”
The potential represented within this landholding is reflected by Focus Minerals’ current deposit estimation of 111,000 ounces of gold in Probable Reserves (depleted basis as at 31 Dec 2008) at the Perseverance and Countes deposits and approximately 1.8 million ounces in the Measured, Indicated and Inferred JORC-compliant resource contained in several surrounding deposits, including the recently upgraded Brilliant Deposit.
The decision to fast-track the refurbishment and modernisation of the 1.2Mtpa Three Mile Hill treatment facility is supported by the current strong gold price environment, which is creating unprecedented opportunities for gold producers to make significant margins.
“Even though gold prices are subject to slight volatility, compared to 12 months ago they have risen substantially,” Mr. Taig told the Australian Investor, “Two years ago, most people would not have expected the price to be in excess of AUD$1500, but presently it is expected this price could surge even further reaching around AUD$2000 by the end of the year. Regardless, of what the future holds you can bank on a relatively strong gold price.”
As a result, Focus Minerals believes it is in the Company’s and its shareholders’ best interest to accelerate its capacity for production and the development of its near term targets.
“One of our major challenges has always been the bottle neck created during the treatment of our ore,” Mr. Taig explained to the Australian Investor, “We are removing this obstacle as quickly and sensibly as possible. We anticipate the plant will be up and running by the end of this year and on its way to full scale production. We also believe we have a number of good opportunities for both underground drilling and open pittable resources, which will potentially provide us with a solid resource base for the next five to ten years. “
According to Mr. Taig one of the Company’s key strengths is its extensive landholding of over 210 sq km, which is largely connected.
“We do not have to go outside our own area to source new targets,” Mr. Taig noted, “We have a lot of ground that can be developed, supported by historical data, electromagnetic research and VTEM surveys. To make the most of this prime position, we have created a focused exploration program that will utilise a prioritized process of bringing targets on stream.”
Mr. Taig concluded, “We are in a strong position with a solid capital base, loyalty and support from our shareholder base and the advantage of a cash flow stream. As such, we believe we will soon grow out of our junior status to become a significant gold producer that will generate value for our shareholders by capitalising on the solid demand for gold, which has been driven by the unprecedented collapse in world financial markets. Whilst paper is on the nose, gold has always been seen as a store of value. Investors seek out physical gold first and then comes the investment in the shares of gold producers. This phenomena is consistent with what Focus sees also. In addition, previously declining investment in gold exploration has lead to a physical shortage of the precious metal, not just from a jewelry perspective, but also an industrial one. Producers in today’s climate, will benefit greatly from these market dynamics.”
FML Price at posting:
2.3¢ Sentiment: Buy Disclosure: Held
(20min delay)