Nick Evans, The West Australian September 21, 2012, 7:03 am Singapore-listed gold play LionGold Corp could be lifting its sights to bigger targets, despite leaving a trail of failed agreements among the Australian miners and explorers it had previously targeted.
LionGold, which is capitalised at just over $S1.05 billion ($824.5 million), made its first move in Australia late last year, offering an all-scrip deal to take control of West Africa-focused Signature Metals.
Since then the company has cut a swathe through the Australian junior gold sector, launching takeover bids for Castlemaine Goldfields and unlisted Brimstone Resources, flagging another for troubled Navigator Resources, offering deals to buy assets from Bass Metals and Republic Gold, announcing a development deal with Papua New Guinea-focused Gold Anomaly, and promising a $10 million share placement to CitiGold.
But of those, only the offers for Castlemaine and Brimstone have gone smoothly.
LionGold won only a 76 per cent stake of Signature, and withdrew its offer for Navigator only weeks after first lobbing its first non-binding proposal.
Its $13.5 million offer for parts of Bass' Hellyer ls project descended into acrimony early this month when the Singaporean company withdrew its cash offer for the project, with Bass threatening legal action over allegations - denied by LionGold - that it breached the agreement without cause. Last Friday Republic Gold told investors a June plan from LionGold to buy its Bolivian gold asset was still in limbo, pushing off the close of the share sale agreement for the fourth time, this time listing an October 31 drop dead date.
The memorandum of understanding between Gold Anomaly and LionGold over an $8.5 million investment, and partnership to develop GOA's PNG gold project, lasted only four weeks, before the two companies parted ways last Friday.
And CitiGold has issued only 75 million of the 125 million share issue subscribed to by LionGold, despite the share subscription agreement requiring payment of the full $10 million by July 31.
Industry sources say LionGold's investment targets make little collective sense.
While earlier this year the company was able to boast interests in companies with a combined JORC resource of 15 million ounces, the projects are scattered across the globe.
There are few similarities in their geographical setting and would each require very different mining and processing expertise. If there are any similarities, sources say, they are that most of the deposits would require substantial capital investments to mine to the point of profitability. LionGold has shown little signs of raising more capital.
The company held only $S20 million cash at June 30, and reported a $S7.2 million loss for the quarter. It announced a $S30 million convertible note issue in March, along with a $S12.3 million share issue, and in early September proposed a warrant issue to raise an additional $S14.3 million.
In its June quarter report, LionGold flagged a "period of consolidation in the near term".
"Having already acquired SML and with the impending acquisitions of Castlemaine and Brimstone, there needs to be a review of operations to improve efficiency and raise productivity," the report said.
If the pull back of LionGold's investment activity is a sign of a shift in strategy, a change in management may be behind it.
In August, LionGold's technical team, headed by chief operating officer Errol Smart, left the company and LionGold instead appointed Castlemaine Goldfield's boss Matthew Gill to the role.
Mr Gill is understood to be building his own technical team, with a view to rationalising LionGold's investments and mining portfolio. Unlike South African-born Mr Smart, Mr Gill has a closer working understanding of the Australian companies and projects previously targeted by LionGold, and of the problems posed during attempts to bring them to profitable production.
He is believed to favour a strategy of using LionGold's position in the Asian financial markets to make fewer, bigger investments in gold miners with a solid production record, rather than scatter its focus on difficult assets across the globe. What that will mean for the companies LionGold has already invested in is unclear.
There needs to be a review of operations to improve efficiency and raise productivity.
Nick Sas and Nick Evans, The West Australian September 21, 2012, 5:38 am China Inc has continued its raid on WA's gold sector, scooping up a majority stake in Goldfields miner Focus Minerals in a heavily dilutive $227.5 million share placement.
Focus managing director Campbell Baird defended the deal yesterday, saying it was "an investment in Focus, not a takeover". State-backed Chinese company Shandong Gold - a subsidiary of one of China's three biggest gold producers - will take 51 per cent of Focus through a 4.55 billion-share placement at 5¢ per share.
The deal, which has been brewing since January, will result in Shandong representatives taking three Focus board seats.
Speaking at his Perth office yesterday, Mr Baird said Shandong did not necessarily have a mandate to take control of the loss-making gold miner.
"The 51 per cent does give that level of control for them . . . but the board will continue to be an independent board.
"I don't see them saying: we're in control, this is what you'll do . . . because Focus will remain an Australian mining company run by Australians, employing Australians and operating in Australia."
Focus mined 176,632 ounces at its four Coolgardie and Laverton mines in the year to June 30, but struggled with costs, mining at an average cash cost of $1222/oz last financial year.
The company lost $8.3 million in the 12 months to June 30 and had $16 million in the bank.
When asked whether Focus needed the deal to survive, Mr Baird was steadfast. "It wasn't a case of, 'We're in trouble, let's get an investor in'," he said.
"We've been working on this for a long time. It hasn't been a decision due to problems in the organisation, because there aren't any - and we see it as a massive opportunity."
Focus yesterday had a market value of $185 million and 4.3 billion shares on issue.
In addition to funding "ongoing working capital needs", the cash injection would fund exploration and potentially other local acquisitions - both an effort to grow the scale of Focus' operations and reduce average cash costs.
With a shareholder voted needed to approve the placement, Mr Baird urged shareholders to give it the green light.
"It is a $225 million investment that will enable us to fund our drill rigs, well, forever," Mr Baird said.
It is the second major deal involving a Chinese company in WA's gold sector this year after Zijin Mining took control of Norton Gold Fields earlier this year.
The deal is still subject to Foreign Investment Review Board approval.
