We're in recovery mode, as exemplified by this morning's $215 million vote of faith by the Chinese in PanAust's flagship Phu Kham Laotian copper and gold project.
A mob called Guangdong Rising Assets Management (GRAM) has agreed to subscribe to 457 million PanAust shares -- 19.9 per cent of the capital at 39.5c. Notably, this subscription price is at par with PanAust's closing price last night and a 27 per cent premium on the three-month weighted average.
PanAust will raise $142 million more in a rights offer at 28c, underwritten by ABN Amro Morgans, with GRAM shelling out a further $35 million in a top-up placement.
All up, Pan Aust ends up with $357 million with which to repay a $US80 million facility with Goldman Sachs JBWere and/or partly repay project debt. Either way it eases the pressure on PanAust's tight balance sheet.
In junior resources terms, the deal is overshadowed only by China NonFerrous Metal Mining Group's $500 million rescue of rare-earths group Lynas Corp.
It just goes to show how the forward- looking Chinese haven't lost the 20-year perspective and how Laos lover Owen Hegarty may well be proven right with his much-lampooned “stronger for longer” outlook comment.
(Elsewhere, we note, Rio Tinto iron ore head Sam Walsh says his operations are flat out after Chinese production declines and he's talking about a V-shaped recovery).
The state-owned GRAM doesn't bob up too often, but its associate Zhongjin Lignan has a 50.1 per cent interest in lead and zinc plodder Perilya.
PanAust holds the Puthep copper-gold project in Thailand, but the more immediate attraction is the recently-commissioned Phu Kham. In the March quarter the mine produced 51,644 tonnes of copper and 16,000 ounces of gold. However grades have varied widely, with production costs ranging between $US62-$US1.23 a pound.
Management says it's on target to for full-year output of 65,000 tonnes of copper and 65,000-75,000 oz of gold.
Phu Kham has proved and probable ore reserves of 194 million tonnes, grading 0.65 per cent copper and 0.25 grams per tonne of gold.
Pre-raising, Wilson HTM had plugged in net earnings of $30.8 million, rising to $64.5 million in 2010 and $81.5 million in 2011.
Criterion had PanAust as a speculative buy at 35c on April 16. The stock looks a safe punt at the 28c raising price and up to the mid 30c level.
PanAust shares have already had a stellar run in calendar 2009 terms, having recovered from the sub 10c bargain bin level.
PNA Price at posting:
37.4¢ Sentiment: None Disclosure: Not Held
