Kentor Gold (ASX: KGL) is set to join the ranks of Australia's gold producers within days, with the Murchison Gold Project already at its design capacity of 260,000 tonnes per annum and the first gold pour expected next week.
To give investors more time to consider the imminent likely re-rating of Kentor, the company has extended its rights issue to 17 August 2012.
Simon Milroy, managing director, commented on the achievement: "Three weeks after the first ore was fed into the refurbished mill, the mill is achieving a sustained throughput at the designed production rate of 260,000 tonnes per annum.
"We expect further increases in throughput over the coming months."
Murchison is the first of Kentor's pipeline of three advanced projects to enter production, and is scheduled to come online at an initial rate of 24,000 ounces a year from the carbon in leach (NASDAQ:CIL) plant at Burnakura.
Further expansions of production are planned to follow with the construction of a heap leach and a mill expansion.
At the end of July, an estimated 300 ounces of gold was loaded on to carbon in the CIL plant with the first strip scheduled to take place during August.
The plant also has a gravity gold recovery circuit and electrowinning of the gold has begun.
Construction of the project is now complete with the exception of the delivery of the gas containers, which are required to heat the stripping circuit and gold furnace.
Higher production, lower costs
Kentor could potentially generate additional cash flow and lower operating costs from large tonnages of low grade material identified at its Murchison Gold Project which could be used as feed for the Burnakura carbon in leach (CIL) gold plant.
The company identified the low grade material adjacent to high grade resources that are being targeted as potential ore for the plant via heap leaching.
The addition of a heap leaching circuit to the Murchison gold project will increase the annual gold production, which in turn will reduce the cash costs for the site.
Construction of the heap leach operation is targeted for later in 2012 with first production of gold from the heap leach currently expected in mid-2013.
Kentor has launched a 5 for 17 non-renounceable rights issue to raise up to $20.5 million.
A substantial shareholder and long time investor in Kentor, KMP Investments, has placed its support in the company and has agreed to subscribe for shares not taken up by eligible shareholders as part of the rights issue.
Highlighting the financial strength of KMP Investments, it is a subsidiary of the Salim Group which is Indonesia's largest conglomerate, with investments spread across Southeast Asia, Hong Kong, North America and Australia.
In addition to taking up its entitlement of $4.1 million, KMP Investments has agreed to subscribe for up to 8.3 million new shares at $0.60 - amounting to around $5 million from any rights issue shortfall.
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