PanTerra Gold (ASX:PGI) has fulfilled a commitment to its lenders and increased working capital by $5 million while process plant upgrades continue at its Las Lagunas gold-silver project in the Dominican Republic.
Current income from the project of around US$1 million per week is expected to increase when oxidation of the refractory ore being processed improves.
Operating costs remain steady at around US$600,000 per week.
The increase in working capital has been achieved via proceeds from settlement of claims against design engineers for project delays in 2009, and the impending placement of up to 50 million PGI shares to sophisticated investors at $0.035.
This includes 16,563,725 shares to be issued at the same price to the Central American Mezzanine Infrastructure Fund in lieu of dividend payments due from Redeemable Preference Shares.
The balance of the project loan has been reduced to US$30 million during Q2 2014, and is expected to be repaid by the end of 2015.
Following advice from the oxidation technology provider in late 2013 that gold and silver recoveries could only be achieved with increased residence time, an additional Albion reactor is being installed, due to come on line at the end of this month.
Initiatives to increase stock value
If recoveries improve sufficiently in August-September 2014, PGI intends to issue a US$40 million high yield five year Note to clients of a major U.S. Investment Bank to pay out and consolidate existing Group debt.
In the event the Las Lagunas project is refinanced with no principal repayments for five years, shareholder approval will be sought to implement a share buyback scheme that would be funded from retained earnings and assist in the restoration of share value.
The proceeds from precious metal recovered from the Las Lagunas operations since construction was completed in mid-2012, is less than expected based on pilot plant testwork for the project, and on volumes, grades, and sulphide levels of concentrate actually delivered.
PGI believes that the majority of the revenue shortfall has arisen as a consequence of deficiencies in design and equipment supplied to the oxidation circuit.
Following the implementation of the latest design change, the PGI will assess the magnitude and probability of success of potential claims on engineers and suppliers.
Encouraging discussions are continuing with the Dominican Government to allow the import of high grade refractory concentrate from identified potential sources in North America that could be processed at the Las Lagunas plant, and utilise surplus tailings dam capacity for at least 15 years.
Unique selling point
Perseverance with the world-first application of the Albion oxidation process, backed by Xstrata Technology, in precious metal extraction from refractory ores offers potentially exponential rewards.
Large numbers of refractory gold and silver deposits known to exist world-wide are unable to be developed for a variety of reasons.
Many of these deposits, including several being investigated by PanTerra, could produce concentrate with grades of around 45g/t gold or more, and then be transported in shipping containers to permitted processing locations.
Blending 50g/t gold imported concentrate with 10g/t gold Las Lagunas concentrate is what could lead to a three-fold production increase, and substantially lower processing costs.
That PanTerra has garnered funding from CAMIF (which is a private investment fund whose participants include Inter-American Development Bank, Central American Bank for Economic Integration, Dutch development bank FMO, Finnfund from Finland, and Fondo de Fondos from Mexico) - is significant.
Given ramp-up at Las Lagunas, generating $1 million per week in revenue and costs of around $600,000, the margin of $400,000 is impressive, and with gold and silver prices firming - PanTerra is certainly a stock to keep an eye on given current share price.
If PanTerra can exploit the value from additional refractory deposits like those at Las Lagunas, income could begin to multiply rapidly.
Now with increased working capital and proactive strategies in place - the company is certainly on the right track.
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