September 09, 2009After A $12 Million Raise In Australia Sumatra...

September 09, 2009

After A $12 Million Raise In Australia Sumatra Copper & Gold Plans Rapid Progress On The 1.6 Million Ounce Tembang Project In Indonesia.

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Jocelyn Waller’s no stranger to mining. He’s got 22 years at Anglo American on his CV for a start. After putting in those hard yards,his career took a more entrepreneurial turn, as he founded firstly Avocet Mining, and more latterly Trans-Siberian Gold. Both these companies are still going, although, as is often the way in mining, the path hasn’t always been smooth. It’s too early to say how the going will be at Jocelyn’s latest company, Sumatra Copper and Gold, though last July’s abortive Aim listing shows that the markets still have it in their gift to give Jocelyn a rocky ride.

The offer of an exploration portfolio weighted to gold in Indonesia didn’t quite fly back then, in a London that was just beginning to learn how to live in daily fear of redemptions as markets crashed all around. Never mind that this is not new territory for the City’s professional investors – aside from a familiarity with majors like Newmont and Freeport McMoRan, London already knows about gold in Indonesia through Kalimantan Gold, Avocet, and Archipelago. But London, it seems, just wasn’t quite ready to take up the challenge of hosting a listing from Sumatra. It was, as Jocelyn concedes with candour, something that left the company “a bit chastened”.

Fast forward a year or so, and Aim still hasn’t recovered its poise, and hasn’t hosted a resources listing of any real stature all year. One market that is buoyant though, is the ASX. Not only does Australia continue to look curiously immune from the impact of the global downturn, but the listed gold companies in Australia have been doing exceptionally well of late. What’s more, with regard to the more longer term copper element of Sumatra Copper’s portfolio, it’s surely of interest that investment guru George Soros has just taken a sizeable stake in Australian copper junior Marengo, which holds several promising looking projects next door to eastern Indonesia, in Papua New Guinea.

In spite of the setback of 2008, Jocelyn hasn’t got anything against the Aim market. He’s actually, he says, a great fan, and credits it with “revitalizing” London’s mining investment scene. Few would quibble with such an analysis, though how vital it will be to keeping that scene alive going forward remains to be seen. But having failed at the first pass, there was, says Jocelyn, so little room for manoeuvre when it came to setting Sumatra Copper up for a second try at listing. “We had to succeed”, says Jocelyn simply, and the hard truth is that Australia is a better place for listing a gold company right now. Even the once derided Norseman mine has now come home to the ASX, and delivered its new local investors spectacular returns. And as far as Sumatra Copper and Gold is concerned, says Jocelyn, “we had the product to suit the Australian market”.

So, on 25th August the prospectus went out offering investors the chance to buy A$12 million worth of Sumatra Copper shares, tradable in the form of CDIs or CHESS Depository Receipts, which are the recognized units for electronic settlement on the Australian market. That raise, reports Jocelyn, has gone well, though he admits that the company ended up setting its sights lower than it originally envisaged, both in terms of price and in terms of the total amount that’s coming in, in order to ensure that the listing got away this time round. In that, though, Sumatra Copper was ably assisted by chairman Warwick Morris, the only Australian on a board of directors dominated by Brits, but one, who as a former director of Macquarie can surely punch his weight.

Not all of the money raised will go into the ground. Some will go to paying back an A$4 million facility that Sumatra had with Macquarie Bank, money that was crucial, says Jocelyn, in enabling Sumatra Copper to stay operational and active on the ground when the markets were in meltdown. Subtract a further A$1 million in listing costs, and Sumatra starts life as an Aussie gold junior with around A$7 million to spend on working up its projects. The company aims to start putting that money to work rapidly.

In the lead is Tembang, which industry consultants Snowden worked up to a prefeasibility level in January this year, on the back of a reported 1.635 million measured, indicated and inferred JORC ounces of gold, and nearly 20 million ounces of silver. For a junior gold company, to start life as a listed entity with ounces like that to its name isn’t all bad, especially in light of the continuing strength in gold and silver prices. Around that resource the company has hundreds of square kilometers of exploration ground, so there’s plenty of upside too.

In addition, Sumatra Copper And Gold is also on the lookout for porphyry systems, which it reckons will occur on a lookalike basis to those in the Philippines. That’s where the “Copper” in the company’s name comes in, and the lead project in this category is Sontang. This will also soak up some of the IPO money, and no wonder, given that the best rock chip sampling to date has shown grades as high as 24.5 grammes per tonne gold, 1,000 grammes per tonne silver, 12.2% lead and 30.8% zinc. No doubt the copper will come to the fore too, sooner or later - it was, according to company literature “frequently encountered” during the last sampling programme.

All in all it looks like Sumatra Copper and Gold will shape up to be an interesting addition to Australia’s already interesting selection of gold juniors. No doubt there’ll be excitement along the way, and it’ll be interesting to see at what price the company manages to raise the next round of funds, as it pushes Tembang along towards development.

For now, Jocelyn has no plans to come back to Aim when he needs money. But that doesn’t mean he won’t come to London at all. Around one third of the current fundraising is coming out of London, and no doubt appetite will increase as City institutions turn increasingly bullish again. But it seems a sign of the times that while there are plenty of people around in London quite willing to support Sumatra in its endeavours on the Australian market, there’s no real desire for a London listing per se.