Lachlan Star (ASX: LSA) has entered into an agreement with Dundee Securities regarding the private placement of 16 million special warrants at A$0.82 to raise A$13.12 million.
Dundee is acting on the behalf of a syndicate of investment dealers including Salman Partners Inc.
Each warrant can be exercised into one share, with a second component a one-half purchase warrant for an additional share at A$1.20.
Mick McMullen, executive chairman of Lachlan Star, commented “This is a great result for the company as it locks in financing and brings a broad range of new North American institutional shareholders to the company’s share register.
"The strong appetite for the issue in the current volatile equity markets is a strong endorsement of our view that the North American equity markets would be receptive to the investment in gold offered by Lachlan Star.”
Lachlan Star plans to use the net proceeds from the capital raising for the continued development of the company’s gold producing CMD Gold Mine.
CMD currently hosts a JORC Probable Reserve of; 5.8 million tonnes at 0.8g/t gold for 157,000 ounces, with the total JORC Resource 1.4 million gold ounces.
McMullen told Proactive Investors today that the current gold price and lower strip ratio should see the operation making a decent amount of cash the rest of the year.
McMullen added that Lachlan Star is not considering selling any gold forward, as the company believes the yellow metal price will continue higher.
June quarter gold sales of US$15.3 million
In the June 2011 quarter the company delivered a 20% boost in gold production to 10,134 ounces with an average sale price of US$1510 per ounce - providing gross revenues of US$15.3 million.
The month of June produced 4250 ounces - the most for a month since acquisition.
The C1 cash cost was US$841 per ounce.
A major plus to the June quarter production was 55% of the ore was sourced from outside of the JORC Resource.
The company said there is another plus 682 ounces of gold in inventory, with 10,559 ounces of gold stacked onto the leach pad.
The company has an unhedged production of around 45,000 gold ounces annually.
CMD is an open pit heap leach gold mine that commenced production in 1995 and has historically produced around 830,000 gold ounces.
Copper hits add spice to CMD
There is not just gold at CMD, but also copper, with the mine strategically located adjacent to Teck Resources (NYSE: TCK) massive Andacollo mine.
Andacollo hosts resources of; 535 million tonnes at 0.37% copper and 0.12 grams per tonne (g/t) gold, highlighting the copper potential upside at the project.
Recently Lachlan Star reported some highlights from the first copper drill program which included:
- 30 metres at 0.53% copper from 35 metres;
- 29 metres at 0.48% copper from 76 metres; and
- 10 metres at 0.37% copper from 30 metres.
Importantly for the company is the continuation of copper mineralisation into the CMD tenements at grades similar to those mined next door by Teck.
Boosting the project credentials is the presence of copper and gold mineralisation located between adjoining open pits, which potentially could be extracted with very low waste/ore ratios given that the majority of the waste on either side of the mineralisation has been cut back already.