kagara receives approaches for sale of gold as

Bloomberg article, seems to confirm earlier rumours made in West Australian as posted in th other thread.

Article:

April 17 (Bloomberg) -- Kagara Ltd., an Australian zinc and copper producer, has received approaches for its gold assets that are being readied for a A$150 million ($108 million) initial share sale in July to help reduce debt.

“We are not just confining ourselves to the IPO route,” Joe Treacy, a director with Perth-based Kagara, said today in an interview. “We’ve also had quite a lot of expressions of interests from other companies who are in the gold space looking for gold assets.”

Kagara is divesting the gold assets to help repay A$150 million of debt and is in refinancing talks with lenders, Treacy said. Rio Tinto Group and Alcoa Inc. are among global mining companies selling shares, bonds or assets to trim debt and boost cash as the global recession crimps demand, cuts metals prices and slashes earnings.

“We will be guided at the end of the day by what the market can bear,” Treacy said. “At the end of the day, we will weigh up all those options.”

Kagara jumped to a six-month high in Sydney trading, gaining 16 percent to A$1 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The stock has more than doubled this month and has a market value of A$250 million.

“We are not seeing anything unusual” on the share register, Treacy said. This month’s rebound in copper and zinc prices has also boosted the stock, he said.

Existing Plant

The new company, Mungana Goldmines Ltd., would have the rights to all the gold production from Kagara’s projects in north Queensland state. Mungana could produce as much as 80,000 ounces a year initially before increasing output to 100,000 ounces, he said. First production could start within six months at a cost of A$20 million to modify the existing plant, he added.

Kagara is due to repay a A$50 million loan from Westpac Banking Corp. by June 30 and a A$100 million loan from National Australia Bank Ltd. by October 31, he said.

“We’ve got to talk to the banks about what is an acceptable level of debt,” Treacy said. “We will reduce the debt to the level that the banks and ourselves are comfortable with and that number really hasn’t been agreed.”

Kagara may receive between A$25 million and A$50 million from the initial share sale, he said. UBS AG analyst Jo Battershill cut his rating on the stock to “sell” from “neutral” on April 3 due to uncertainty over refinancing options.

The company is unlikely to post a profit this half amid a slump in zinc and copper prices earlier this year, Treacy said. Kagara posted a net loss of A$34 million in the six months ended Dec. 31.

“With operating cashflow insufficient to meet principal debt repayments, refinancing could potentially become a stumbling block,” UBS’s Battershill said in an April 3 report.