Mutiny Gold (ASX: MYG) is raising $4.15 million to fully fund a gold drilling program over numerous high grade, drill ready gold targets at its Deflector Gold-Copper Project at Gullewa in Western Australia's Mid-West Region.
Underpinning this are the commitments it has received from investors for 92,592,593 shares priced at $0.027 each to raise $2.5 million.
This includes a $1.5 million placement to leading contractor Ausdrill Limited (ASX: ASL), which has also been appointed its preferred contractor for current mining services in Australia.
The remaining $1.65 million will be raised through an underwritten 1 for 10 pro rata non-renounceable entitlement offer to existing shareholders.
Mutiny has 7,500 metres of drilling planned in 2014, including 5,500 metres of reverse circulation and 2,000 metres of diamond drilling.
This is fully permitted and focused on near mine extensions highlighted by the Sub-Audio Magnetics (NYSE:SAM) surveys undertaken last year.
"We're delighted that the Placement has received such strong support from new sophisticated investors, and we are also pleased to be able to offer our existing shareholders the opportunity to participate via the Entitlements Offer," acting chief executive officer Rowan Johnston said.
"We particularly welcome Ausdrill to our register as a strategic shareholder and look forward to developing a long and mutually beneficial relationship. The significant investment by Ausdrill shows a strong belief that the Deflector project will go to production.
"Together with specialist EPC Company GR Engineering Services Limited, which has previously taken a strategic stake in Mutiny, we have significant operational and construction support, which we believe stems from a fundamental understanding and belief in the Deflector project."
He added that the capital raising allowed the company to move forward with its plans to expand Deflector's high grade gold resource and move towards the development of an operating mine.
"Our ultimate strategy is to establish a low cost, high margin operation at what is one of the highest grade, undeveloped gold projects in Australia."
Use of Funds
The $4.15 million in funds raised from the Placement and Entitlements Offer is intended to be applied as follows:
- $500,000 in reverse circulation drilling targeting shallow extensions within the planned Deflector pit and testing compelling SAM targets along the Deflector signature structure;
- $700,000 in diamond drilling targeting high-grade extensions within close proximity to the planned underground mine development;
- $300,000 follow up drill holes;
- $300,000 Deflector Project manning;
- $200,000 resource and reserve modelling;
- $500,000 regional exploration;
- $500,000 to fund the Deflector Project development financing programme (currently underway);
- $800,000 general working capital; and
- $350,000 issue costs.
Ausdrill Strategic Alliance
Under their strategic alliance, Mutiny and Ausdrill have undertaken to work together in good faith on a collaborative and transparent basis to explore opportunities for cost savings in connection with the provision of Ausdrill's range of specialist services.
Ausdrill's appointment for any work is subject to the negotiation of commercial and competitive contract terms on an arm's length basis. Mutiny retains the right to seek alternative third party proposals.
Ausdrill is a Perth-based contract and services group with revenue of over A$1.1 billion in FY2013. It operates in nine countries globally and is recognised as a leading provider of services in its field.
In the last quarter, Mutiny completed an updated DFS for its Deflector Gold project and also a scoping study for its Rocksteady Iron project in the Murchison region of Western Australia.
The Deflector study demonstrated that it is a high grade, low cost mine that could provide considerably high profit margin. It also started a new Structured Finance initiative for the project.
It also conducted a workshop that included an overview of its DFS for the Deflector project and studied a number of capital funding models. A key focus was risk minimisation aimed at maintaining a strong and sustainable operating margin based on Deflector's high grade gold resource of 6.4 grams per tonne gold and low all in sustaining costs at $801 per ounce gold.
The DFS is based on an initial production forecast of 498,000 gold equivalent ounces with average annual production of 80,000 gold equivalent ounces and targeted production of 150,000 gold equivalent ounces. Capital costs are estimated at about $62 million.
Deflector has an Ore Reserve of 2,344,000 tonnes at 4.9g/t gold, 0.8% copper and 5.9g/t silver for contained Reserves of 367,000 ounces of gold, 19,000 tonnes of copper and 441,000 ounces of silver.
The SAM surveys carried out in 2013 had effectively doubled the footprint of the Deflector Corridor.
While the data does not give precise information to the depth of mineralisation, it indicates a potential target that is otherwise blind and has proven successful for discovering blind gold deposits in conductive environments in the Goldfields, such as the Songvang Gold Mine near Agnew.
The strategic alliance with Ausdrill is particularly noteworthy and provides funding as well as services.
The placement and underwritten entitlement offer to raise a total of $4.15 million will fully fund Mutiny Gold's planned 2014 drilling program at Deflector, which aims to expand its current high grade gold resource at Deflector.
Deflector already hosts an Ore Reserve of 415,000 gold equivalent ounces with attractive all in sustaining costs at $801 per ounce gold and capital costs of just $62 million, figures rarely seen in "new" gold projects globally.
Drilling is likely to improve both resources and reserves, which would in turn improve the economics of the project.
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