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Gowest Gold announces $2.0 mln financing

Gowest Gold (CVE:GWA) announced Thursday plans for a $2.0 million private placement financing.

The Toronto-based miner said it  has engaged M Partners, on a best efforts agency basis, for the offering, which will consist of about 9.52 million flow-through units, at $0.21 each.

Each unit consists of one flow-through common share of Gowest, and one half of one common share purchase warrant. Each full warrant entitles the holder to purchase one additional common share of Gowest for $0.30 each for a period of two years from the closing date.

In connection with the offering, the company said the agent was granted an over-allotment option, exercisable prior to the closing, for the purchase of up to 2.38 million additional flow-through units on the same terms, for potential additional gross proceeds of up to $500,010.

The agent will also receive a cash commission equal to six percent of the total proceeds of the financing, which is expected to close on or about December 21, as well as compensation warrants, the company said.

Gowest said it intends to use the proceeds to advance the development of its wholly owned Frankfield project.

Located near Timmins, Ontario, the deposit is part of the company's 60 square kilometre North Timmins gold project, and comprises 42 claims on 2,444 hectares.

Released last month, the preliminary economic assessment (PEA) for the property gave a 10-year mine life for Frankfield East, producing 1,500 tonnes per day (tpd) at an average life-of-mine cash cost of $660 per ounce. The annual average gold production rate is pegged at 95,000 ounces per year, with an overall gold recovery rate of 95 percent.

Based on its June 2011 resource estimate announced of 348,000 indicated ounces (1,621,000 tonnes at 6.68 grams per tonne gold) and 838,900 inferred ounces (4,342,000 tonnes at 6.01 grams per tonne gold), Gowest said the PEA confirms a pre-tax net cash flow of $265 million, giving an internal rate of return (NYSE:IRR) of 23 percent and a 3.3 year payback period.

Initial capital costs were seen at $167 million, with life-of-mine sustaining capital projected at $86 million. The PEA is based on a gold price of $1,200 per ounce, compared to a 24-month average of $1,348 per ounce, the company said, suggesting a potential boost in project economics.

Gowest also said it continues to aggressively drill the extents of the Frankfield East gold deposit, with a view of delivering an updated resource estimate in the first half of 2012.

Gowest is currently completing its baseline environmental studies for the property, and will be in a position to make final applications for the necessary mining permits in 2012.

The private placement remains subject to regulatory approvals.