FOCUS MINERALS LIMITED (ASX: FML)
|
ASX/MEDIA
RELEASE
7
MARCH 2008
FOCUS UNVEILS $64M STRATEGY “TWO GOALS – ONE FOCUS” TO
BUYOUT COOLGARDIE GOLD JV, AND ACCELERATE PRODUCTION IN BOTH GOLD AND NICKEL
KEY
POINTS
·
Focus moves to 100% ownership of
Coolgardie Gold Project by acquiring Committee Bay’s
50% interest for $22.0M in cash, and 140 million fully paid shares in FML at
5.5 cents.
·
A$36.6M debt and equity funding
package announced, including a Share Purchase Plan.
·
Transaction to deliver 100%
ownership of the 1.8Moz Coolgardie Gold Project (WA), including the 1.2Mtpa
Three Mile Hill gold plant – significantly increasing FML’s
exposure to the gold price.
·
Initial gold production commencing
in Q2 2008, targeting by 2011 100,000oz pa gold production through
accelerated development program.
·
Along with the balance of the debt
and equity package, a portion of the cash flow generated from mining the
Perseverance deposit to be used to:
- Refurbish the Three Mile Hill
treatment plant and bring on stream in 2009.
- Develop the Company’s
well-stocked pipeline of exploration & development opportunities.
- Accelerate the development
programme planned to bring Nepean
Nickel mine into production.
- Implement a deep –
1100m - drilling programme to search for high grade ore below 500m at
the Nepean
Nickel mine.
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Focus Minerals Ltd (ASX: FML – “Focus”) is set to accelerate
its development as an Australian gold and nickel producer after today releasing
a landmark announcement for a A$64 million
acquisition, development and funding Strategy which will result in the
consolidation of the ownership of the historic Coolgardie Gold Field in Western
Australia and an expanded development program in both gold and nickel.
Further to a previous
announcement regarding an Exclusivity Agreement with its 50% Joint Venture
Partner, Committee Bay Resources (TSXV: CBR – “Committee Bay”),
key elements of today’s announcement comprise:
·
an agreement with Committee Bay to acquire its 50%
interest in the 1.6Moz Coolgardie Gold Project for $22.0 million in cash
– A$1.0M already paid via the Exclusivity Agreement, A$19.0M paid
immediately after shareholder approval, A$2.0M deferred until 30 April 2009 as
an 8.25% Convertible Note and 140 million shares issued at 5.5 cents per share;
·
the appointment of Perth-based investment bank, Azure
Capital - to manage a A$14 million share placement at 5.5 cents per
share, together with a Share Purchase Plan to raise a minimum of A$4.0M; to underpin the
acquisition and fast-track the Coolgardie development program; and
·
an A$18.6 million debt facility to be provided
by Investec Bank (Australia) Ltd to support the acquisition and provide
additional working capital to underpin the Company’s accelerated
development strategy in both gold and nickel.
The Committee Bay
transaction, which will be subject to shareholder approval and the raising of
the necessary finance, will give Focus 100% ownership of the former Redemption
Joint Venture assets at Coolgardie, including an extensive resource inventory
within multiple deposits totalling 20.6
million tonnes at 2.48g/t Au for 1.65 million ounces, the fully
permitted 1.2mtpa Three Mile Hill
gold processing facility (currently on care and maintenance), and a highly
prospective 210km2 tenement package offering an outstanding pipeline
of exploration and development opportunities.
The Company’s
objective is to become a 100,000 ounce per
annum producer at Coolgardie within the next three years.
The combined $36.6
million debt and equity funding package, together with a portion of the strong
cash flow generated by the Perseverance gold deposit, will in addition to the RJV
acquisition, be utilised for a planned refurbishment of the Three Mile Hill
plant as a new centrally located treatment facility at Coolgardie, plus
development and exploration funds for adjacent gold prospects, so that the
pipeline of prospective ground is developed with continuous production in mind.
In addition, the Company will fast track the evaluation and development of its
100% owned Nepean Nickel mine,
located 25km south of Coolgardie, together with funds for a deep drilling
programme at Nepean – well below the 500 metre level – to further
define the prospectivity of areas where no work has previously been carried
out, with a view to diversifying the company’s nickel production profile
as well.
Committee Bay has agreed to accept approximately 32%
of the consideration being 140 million shares in Focus Minerals at 5.5 cents
per share, giving it continued exposure to the future upside arising from Focus
Minerals’ transition to gold production and the broader development of
the Coolgardie Project through being a significant shareholder in the Company.
Acquisition
Terms
The total
consideration for the acquisition of Committee Bay’s 50% interest in the
Redemption Joint Venture is A$29.7 million, comprising A$20.0 million in cash
(inclusive of the $1 million already advanced in relation to the Exclusivity
Agreement), A$2.0 million as an 8.25% Convertible Note convertible/repayable
end April 2009 and the issue of 140 million fully-paid ordinary Focus Minerals
shares at an issue price of 5.5 cents each (A$7.7 million).
The consideration
translates to a competitive Enterprise Value per resource ounce (EV/oz) of
A$36/oz, which compares with the average gold project acquisition multiples in
Australia of A$51/oz. This represents an attractive opportunity for Focus to
secure 100% ownership of a well-established and high quality gold project at
Coolgardie, close to established infrastructure and the regional mining centre
of Kalgoorlie
and at a time of strong, positive gold price movements.
$64M
Development Strategy
Focus today announced an
A$18 million equity funding package, comprising a share placement of
327.27 million shares at 5.5 cents each to sophisticated investors to
raise A$14 million and a Share Purchase Plan to raise a minimum of A$4 million from existing
shareholders. Perth-based merchant bank Azure Capital is acting as Corporate
Advisor and Lead Manager to the capital raising.
In addition, the Company
is in advanced negotiations for a debt facility of A$18.6 million Senior and
Mezzanine debt with specialist international banking group, Investec Bank (Australia) Ltd. Investec has also agreed to look
at providing a further debt funding package to support further development of
the Nepean
nickel project if required.
The balance of funds to
complete the “Two Goals – One Focus” strategy, will be
generated from a portion of the cash flow from the Perseverance mine, where
mobilisation of mining crews and equipment is complete and mining has begun to
deliver the Company’s maiden gold pour in April 2008.
The share placement and
debt funding package will require shareholder approval at a meeting to be
convened in April 2008. Meeting documents are to be mailed to shareholders
shortly.
Use
of Funds
Of the funds raised (A$36.6
million) and generated (A$19.7 million), which only represents a portion of
Perseverance’s revenues, just over 46% of the funds will be used to
fund the acquisition of Committee Bay’s 50% interest in the Redemption
Joint Venture, with the remaining A$34.3 million to be used in the following
key areas:
–
Three Mile Hill plant refurbishment
A$16.0
million
–
Coolgardie Gold Project development and exploration
A$13.6
million
–
Stamp duty and raising
costs
A$ 3.2
million
–
Nepean nickel deep drilling
A$ 1.5 million
A$34.3
million
–
Committee Bay acquisition – cash and convertible
note
consideration
A$22.0
million
Total
A$56.3
million
Development
Strategy
Focus is gearing up to
commence initial gold production at Coolgardie in April at the high-grade
Perseverance Project (recently announced upgrade for an Indicated Resource of
118,500 oz at an average grade of 7.5g/t Au) after completing a positive
Feasibility Study in December 2007. This Project is forecast to yield production
of 76,500 ounces over 21 months with upside to more ounces and a higher gold
price. Estimated cash operating costs are A$473 per gold oz.
Ore from Perseverance
will be treated through a third party mill, the nearby Greenfields gold plant,
however Focus’ broader development strategy is to refurbish the 100%
owned Three Mile Hill plant as a centrally located gold treatment facility to
provide long-term cost effective processing capability in the region. It is
expected that refurbishment will commence in October 2008 and be finished six
months later.
The Milling Agreement
with the Greenfields Plant has recently been signed (refer ASX release 4 March
2008) and is based upon a priority processing position for up to 480,000 tonnes
at favourable milling charges until 2010, followed by a further 7 year
extension to the Agreement should Focus wish to continue to use the Greenfields
plant.
Other key deposits at
Coolgardie will be progressively developed with ore treated at Three Mile Hill
plant, commencing with the broader Tindals Mining Centre surrounding the
Perseverance deposit. Work is continuing at Tindals at the Countess, Empress
and Cyanide (Tindals East) deposits, in order to fast-track further delineation
and development of the broader area.
Gold production is
targeted to deliver approximately 5,300 ounces in FY2008 (reflecting start-up
production from Perseverance from April 2008), increasing to ~65,000 ounces in
FY2009, ~75,000 ounces in FY2010 and then ramping up to a sustainable level of
100,000 ounces per annum from FY2011 onwards from projects currently within the
development pipeline.
Nickel
Development
Focus is also planning to
commence an accelerated deep drilling program to test the area below the
existing Nepean Nickel Mine workings, with the objective of confirming the
potential to develop the mine below the 14th level (500 metres). The Company is
aiming to re-commission the Nepean Project towards the end of the second
Quarter of 2008, extracting remnant mineralized ore. A bankable feasibility
study on this project will be completed by the end of March 2008, when the
trial mining will commence and be self funding. This will allow the
Company to acquire more information about mining conditions, before embarking
upon the development of a planned decline to access previously untapped ore and
provide for much deeper mining.
Gold
Exploration
The Redemption Joint
Venture acquisition will give Focus 100% ownership of a highly attractive 210km2
tenement package covering the prolific Coolgardie Gold Belt. More than 2.6
million ounces of gold has been produced from this belt alone since 1892.
The Company plans to
continue an aggressive exploration program, both within known deposits and
mineralized systems such as the Tindals Mining Centre, and within the broader
Redemption Fault Corridor. An extensive ground EM survey is currently being
conducted over the area to develop additional exploration targets and follow up
previous targets delineated by VTEM, particularly for high-grade
Perseverance-style mineralization.
Exploration drilling is
also continuing at Perseverance itself, with down hole EM conductors
immediately along strike and down-dip of existing mineralization.
Commenting on the announcement,
Focus Minerals’ Chairman, Mr Don Taig, said: “We are very pleased
to be in a position to announce the conclusion of an agreement with Committee Bay to acquire their interest in the
Coolgardie assets, together with a comprehensive funding and development
strategy that will underpin the future of this Company.”
“The combined debt
and equity funding package announced today will underpin the Committee Bay
acquisition while at the same time giving us the capacity to fast-track our
transition to gold and nickel production, while also developing our near term
projects to deliver on our goal of becoming a 100,000 oz producer with in-house
gold processing capability as soon as possible.”
Mr Taig said he was very
pleased to retain Committee
Bay as a major shareholder
in the company as part of the acquisition terms.
“I’m very
pleased that Committee
Bay has made the decision
to retain significant exposure to the project through the direct equity stake
they will have in Focus. This demonstrates their commitment to the ongoing
success of the Coolgardie Project and their faith in the upcoming Nepean nickel development
activities,” he said.
“The accelerated
gold development program and treatment plant refurbishment, combined with our
plans to commence nickel production from the Nepean mine in the short term, amounts to a
comprehensive strategy designed to transform Focus into a significant mining
company,” he added.
ENDS
Released
by:
|
On
behalf of:
|
Nicholas Read/Jason
Cunningham
|
Don
Taig, Chairman
Peter
Williams, Managing Director
|
Read Corporate
|
Focus Minerals Ltd
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Telephone: (+61-8) 9388-1474
|
Telephone:
(+61-8) 9215-7888
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www.readcorporate.com.au
|
Web: www.focusminerals.com.au
|
COMPETENT PERSON’S STATEMENT
The
information in this report relating to Resources and Reserves are based on work
supervised by Mr Chuck McCormick who
is a Fellow of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr
McCormick has the relevant experience as a “Competent Person” as
defined in the 2004 edition of the Australasian Code for Reporting of Mineral
Resources and Ore
Reserves in relation to the mineralisation reported on. Mr McCormick is
Exploration Manager of Focus Minerals Ltd and consents to the inclusion of the
material in the form and content in which it appears.
BACKGROUND
INFORMATION – FOCUS MINERALS LTD
Focus Minerals Ltd (ASX: FML) is an Australian-based exploration and
development group whose focus is to become a significant gold and nickel
producer in the Coolgardie-Kalgoorlie-Widgiemooltha region of Western Australia.
Focus Minerals is the
largest landholder in the Coolgardie Gold Belt located in Western Australia,
560km east of Perth and 35km west of the ‘Super Pit’ in
Kalgoorlie-Boulder. More than 2.6 million ounces of gold has been produced from
the Coolgardie gold belt alone since 1892. Focus holds the mineral rights to
more than 210sq km of tenements including Measured, Indicated and Inferred
Resources exceeding 1.65 million ounces of gold as well as the 1.2mtpa Three
Mile Hill processing plant.
Focus Minerals is also
fast tracking development of its wholly-owned Nepean Nickel Project (current
estimated resource totalling 591,300t @ 2.2% Ni) located 25km south of
Coolgardie. Focus has a view of recommencing mining operations from the
historic production centre in 2008.
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