GGG Resources (LON:GGG) is now closer to taking its Bullabulling gold project in Australia to production after raising £7.5 million in an oversubscribed placing.
The company’s corporate broker Collins Stewart placed 63.8 million GGG shares at a price of 11.75 pence with institutional and other investors.
Apart from progressing Bullabulling to production, the funds will enable the company to finance future exploration drilling outside of the 2 kilometre (km) mining feasibility study area.
Production at GGG’s 50% owned Bullabulling gold project is expected to commence in the first quarter of 2013. The company acquired the stake in the project from Auzex Resources (ASX:AZX) in May.
“We are delighted with the interest shown in the placing, which was oversubscribed, and has resulted in us adding an impressive list of new institutional shareholders to the register," said chairman of GGG Peter Ruxton.
“The fund raising puts the company on a firm financial footing as it looks to take Bullabulling through to anticipated gold production in early 2013.”
In late October, Collins Stewart attributed a net present value (NPV) of US$178 million to Bullabulling with US$89 million, or £57 million, attributable to GGG, compared to its current market cap of £29.5 million.
Within 3 months of acquisition, the JORC compliant resource at Bullabulling increased from 432,000 ounces (oz) to just under 2 million ounces (Moz) of gold at 1.5 grammes per tonne (g/t).
According to Collins Stewart, the exploration upside is significant with the overall mineralized structure over 14 kilometres in length, while the infrastructure is “excellent” with the deposit being located just 5 kilometres (km) from the town of Coolgardie, meaning availability of cheap power.
The broker said that the targeted commencement of gold production in Q1 2013 is achievable, referring to the Edna May gold project, which has been successfully commissioned this year by Catalpa Resources (ASX:CAH).
The key input assumptions were capital costs of US$157 million, a 15 year life of mine, an annual steady state production of 130,000 oz, cash costs of just under US$600/oz and a long term gold price of US$1,100/oz, which is significantly below the current US$1,340/oz.
GGG will soon secure an additional source of funding as it prepares to list on the Australian Stock Exchange (ASX).
The company has appointed Morgan Stanley Smith Barney as broker for its listing on the ASX.