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BDG 23.5¢

bendigo seeks 215 million

  1. dub

    27,819 Posts.
    >Bendigo seeks A$215m for long gold gestation

    By: Peter Gonnella

    Posted: 2004/03/24 Wed 17:36 ZE8 | © Mineweb 1997-2004

    PERTH (minewebaustralia.com) – Despite the gold price going for a strong run on renewed speculative buying this week, the Aussie market greeted what is potentially one of the most significant new gold mines here in many years with a bit of a yawn.
    Bendigo Mining [ASX:BDG] today (Wednesday) revealed it was looking to raise an initial A$135 million from an institutional equity placement and share purchase plan (SPP) to get its high-grade New Bendigo gold project in Victoria into production by late next calendar year (CY).

    Subject to shareholder and mandatory approvals, Bendigo will also implement a one-for-10 capital restructure, which will see its issued capital reduced from around 930 million shares to 93 million shares, the latter figure prior to the initial new equity raising, or probably around 168 million post-initial raisings (assuming about 75 million new shares issued at about A$1.80 each).

    In addition, in 2007 it would make another placement for A$80 million that would ultimately culminate in the substantial increase in production levels.

    This is after the company has spent about A$100 million over the past decade on exhaustive interpretation of historical and geological data, as well as underground exploration decline and on-reef development, bulk sampling, drilling and metallurgical testwork.

    Following the recent completion of the New Bendigo feasibility study (FS), Bendigo today announced it had given the green light to commercial development and decided on a gradual seven-year ramp-up to forecast full production of about 570,000 ounces per annum, which would place the operation in the top five Aussie gold mines in terms of production.

    However, that didn’t seem to make an impression on the market. Bendigo stock limped to A$0.185 by the close of the day’s Aussie trading session, suggesting punters were perhaps cautious about an additional A$215 million capital investment predicated on current modest probable reserves of about 190,000 ounces – even though management was confident the old Bendigo goldfield, which produced about 22 million ounces in the 100 years to 1954, promised a far bigger endowment.

    The emerging gold miner is hoping to extract a whopping 12.7 million ounces from 33.6 million tonnes of ore at an average head grade of about 12g/t over 25 years, which includes the seven years it takes to reach the targeted ore throughput capacity of 1.6 million tonnes per annum. Latest published reserves stood at 656,000 tonnes at 9.0g/t.

    Investors may also have been digesting the significance of major Bendigo shareholder South African-based Harmony Gold Mining’s intentions not to participate in the capital raising after buying A$50 million of Bendigo stock (at A$0.17 per share) in December 2001 and not exercising A$108 million worth of options in December 2003. Harmony has indicated its support for the mine development and wasn’t planning to sell its (pre-share consolidation and pre-CY 2004 raisings) holding of 31.6 percent during the 2004/05 financial year (FY), according to Bendigo’s managing director, Doug Buerger. “But it (Harmony) reserves the right to do so (including in the event that it is required or directed to dispose of shares by the SA Reserve Bank),” he added.

    In the seven-year ramp-up to design rates, Bendigo envisages gold output of 77,000ozpa in the first two years of production, 90,000ozpa in year three, which constitute phase one, during which the proposed next A$80 million tranche of equity (and possibly some debt) funding would be arranged and result in gold output being lifted to 185,000ozpa from years four to six (phase two) and then in year seven jumping to 570,000ozpa, which will be achieved, reserves permitting, via higher mining volumes and a second larger processing plant to be built at the northern part of the goldfield. At full production, cash operating costs are projected to average about A$180 per ounce (US$135/oz) and after-tax cash flow between A$100 million and A$125 million a year. The FS summary shows that ongoing capital expenditure translates into an estimated A$82/oz (US$62/oz) recovered, while the project has an ungeared and unhedged IRR of more than 20 percent assuming a realised gold price of A$525/oz.

    Construction is slated to begin in the December 2004 quarter and CIBC World Markets and Austock Brokers are handling the global bookbuild for the A$120 million private placement, which is expected to be put to bed before the end of the current FY, with an approximate A$15 million to come from an SPP to be offered to existing shareholders shortly after.


    (not currently holding BDG)

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