kagara and new chinese investor

G,day goatpointer
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July 29, 2009

Kagara Firms Up Its Relationship With Its New Chinese Investor, As It Moves Forward On Its Nickel And Gold Projects In Australia.

By Richard Roberts / www.minesite.com

KAGARA executive chairman Kim Robinson says the company’s new major shareholder may become a conduit to mining opportunities within China, and could help speed development of the $A1-1.5 billion Admiral Bay zinc-lead-silver project in Western Australia’s Canning Basin. While stressing it was early days in the relationship between the recently embattled small miner and Guangdong Foreign Trade Group, Robinson said at a recent function to mark GFTG’s $A57 million investment in Kagara – part of a $226 million capital restructure – that the company had “an extremely robust growth profile” underpinned by the Lounge Lizard nickel, Admiral Bay, and north-Queensland gold projects.

“With the backing of Guangdong we would see these occurring much more rapidly than might otherwise have happened”, he said in a speech in which he described Admiral Bay as potentially “one of the great base metal mines of the world”. A pre-feasibility study initiated by Kagara is examining five million tonnes per annum and 10 million tonnes per annum development routes for Admiral Bay, which has a JORC-compliant inferred resource of 72 million tonnes grading 3.1% zinc, 2.9% lead, 18 grams per tonne silver and 11% barium.

Asked later by HighGrade to elaborate, Robinson said: “Removing the indebtedness of the company is obviously a big part of that. It cleans up the balance sheet and it enables us to move forward on those developments. And I guess Lounge Lizard is an example of that. With $A150 million of debt hanging over our heads it would have been very difficult to advance the Lounge Lizard project, but now it’s all put to bed and we can move into production very quickly there with the co-operation of Western Areas.” Robinson said development ore at Lounge Lizard, adjacent to Western Areas’ Flying Fox nickel mine in WA’s Forrestania nickel belt, was expected to be mined within a month.

Meanwhile, the planned spin-off and IPO of Mungana Goldmines, containing Kagara’s Red Dome/Mungana gold assets, is “well underway and we expect Mungana Goldmines to be listed on the ASX in the not too distant future”.

Asked about a comment by GFTG chairman Ou Guang during his ceremony speech on making use of Kagara’s “mining capability and ... [aiding Kagara’s] future development, especially providing great support for Kagara into the Chinese market”, Robinson said no specific opportunities were being examined. “We haven’t developed that side of relationship too far at this stage, but there are obvious advantages in ... there are lots of assets in China that could be opened up to us,” he said. “We haven’t identified what they are, but China is a resource-rich country the same as Australia is. But bear in mind we’ve only been in this relationship for three months.”

GFTG, said to be one of the biggest foreign trading groups in southern China, is aiming to double its annual revenues of some RMB50 billion in the next five years, Guang said. “You’re [Australians] truly blessed to have such a rich landscape of mineral resources,” he said.“As the global economy rebounds demand for these products is likely to be sustained for several decades to come. Having reviewed a large number of potential partners we were pleased to place Kagara at the top of our shortlist and even more delighted when we were able to arrange a partnership. As we’re now becoming a family group we hope that the two sides will continue to develop an attitude of openness and mutual acceptance. In joining with Kagara we will strictly follow the Australian laws and regulations, listing company rules and guidelines.”

GFTG has 15 per cent of Kagara and recently gained Australian Foreign Investment Review Board approval to raise this to 19.9 per cent in future. The Chinese group secured its initial stake for A60cents a share and can subscribe for more (up to 19.9 per cent) at A80cents. Kagara has now repaid $A120 million of bank debt, leaving it with $30 million of bank loans, and had $50 million cash in the wake of its $226 million capital raising.