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GBM Resources Targets Early Gold Production At Malaysian Gold Mine

GBM Resources (ASX: GBZ) has signed a binding term sheet to acquire an interest in a Malaysian gold mine and has received firm commitments from international sophisticated investors to raise $1 million.

The company will take up a 40% stake in Malaysian company Angka Alamjaya Sendirian Berhad (AASB), which holds the Lubuk Mandi Gold Mine in Terengganu, in return for a 15% stake in GBM.

Lubuk Mandi, previously owned and operated by government body Terengganu State Economic Development, produced 108,000 ounces of gold from two shallow pits in the mid 1990s and has been on care and maintenance since 2000.

"We are delighted with having the opportunity to develop and explore the Lubuk Mandi Gold Mine with AASB," GBM managing director Peter Thompson said.

"Our strategy is well supported by our major Singaporean shareholders and is in line with our business objective of delivering shareholder value via project generation."

The Share Swap is subject to shareholder approval.

Transaction details

The Lubuk Mandi project covers 221 hectares and includes over a million tonne of tailings which has the potential for early gold production and provides development funding options.

The associated processing plant is rated at 300,000 tonnes per annum and involves single stage crushing to a stockpile and mill.

GBM and AASB plan to develop the Lubuk Mandi Gold Mine and recommence mining operations.

Initial focus of the development will be on retreatment of the tailings dam followed by recommencement of hard rock mining.

The tailings dam has an Exploration Target of between 1 million tonnes at 0.7 grams per tonne gold for 23,000 ounces and 1.4Mt at 0.9g/t containing 38,000 ounces of gold.

Other targets include the Main Zone with a Target of between 370,000 tonnes averaging 2.9 g/t gold containing 35,000 ounces and 1.1Mt averaging 3.6 g/t gold containing 127,000 ounces and the East Zone with an Exploration Target of between 1.44Mt averaging 2.5 g/t containing 116,000 ounces of gold and 2.4Mt averaging 3.6g/t gold containing 278,000 ounces.

Total Exploration Target is between 174,000 and 443,000 ounces of gold,

Both parties have agreed that following completion of the Share Swap, further exploration and development of the tailings dam on, satisfaction of any regulatory requirements and market conditions, they will complete an Initial Public Offer of AASB shares on the Singapore Stock Exchange.

Placement

Separately, GNM has received firm commitments from international sophisticated investors to raise $1 million through the placement of 50 million shares at $0.02 each.

Each share will come one attaching option exercisable at $0.035 each and expiring on 30 June 2016.
The issue of the new placement options will be subject to Shareholder approval.

Proceeds from the placement will be used to fund ongoing exploration and development of the company's exploration assets and for general working capital purposes.

GBM will also proceed with a Priority Entitlement Offer to holders of listed options over unissued shares in the company.

Under the terms of the Offer, each eligible option holder will have the right to subscribe for one Priority Offer Option for every two options held as at close of business on the record date of 30 June 2013.

The new options will have an issue price of $0.005 per option, be exercisable at $0.035 each and will expire on 30 June 2016.

If fully subscribed, the Offer will raise about $322,000 before costs. The proceeds from the Offer will be used to fund ongoing exploration programs and for general working capital purposes.

The company had $1 million in cash as of 31 March 2013.

Analysis

With existing tailings offering a ready source of material and a processing plant, the Lubuk Mandi Gold Mine offers GBM the potential to become a gold producer in the short term. We expect the transaction to be value accretive for GBM in the short to medium term.

The commitment for $1 million in funding also offers GBM funding to proceed with its exploration and development assets.

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