The financing of US$5.5 million (A$6.7 million) will be allocated to the company's Batangas Gold Project in the Philippines, with the project now funded until initial development.
Red Mountain has also received firm commitments from professional and sophisticated investors to raise A$0.25 million (before costs) at $0.004, which also has some options attached.
The company will also raise up to another $900,000 from a pro-rata, non-renounceable Entitlement Issue on the basis of one new share for every four 4, which will also receive the same option deal as the placement.
Red Mountain's chairman Neil Warburton, and managing director, Jon Dugdale, have indicated they intend to take up at least their full entitlements.
Dugdale commented: "We're very pleased that the strategic financing partnership has been signed and the Batangas Gold Project is now funded to initial development.
"This agreement is the culmination of many months work and it is very pleasing to see it come together.
"We've also been able raise additional capital at Red Mountain parent level and will offer all eligible shareholders the opportunity through the Entitlement Issue to participate in what will be a very exciting phase for the company, as we head towards becoming a gold producer."
Full funding details
A Convertible Note totalling US$1 million, which is convertible to a 15% stake in Red Mountain 100% owned subsidiary RMMS, the 100% owner of the Philippines subsidiary company that holds the Batangas Gold Project assets.
If not converted previously, the Convertible Note shall be redeemed on 31 December 2015.
However, if final mine permitting is not completed by 31 December 2015, the Convertible Note may be extended under certain conditions.
US$4.5 million for an additional 35% (for a total 50%) stake in RMMS on satisfaction (or waiver by London Co.) of certain conditions precedent:
- Completion of DFS satisfactory to London Co, demonstrating internal rate of return of >25%;
- Receipt of the Declaration of Mining Feasibility (NYSEMKT:DMF) and Environmental Compliance Certificate (NYSE:ECC) issued by the Philippines MGB and DENR respectively, to allow commencement of development of the Batangas Gold Project; and
- Definition of Proved and Probable Ore Reserves to support a production schedule recovering at least 100,000 ounces of gold equivalent.
Technical due diligence has been completed and an initial payment of US$100,000 from Stage 1 funding will be paid no later than 9 January 2015.
The balance of the Stage 1 US$1 million to be paid in monthly instalments over a maximum of 6 months or the balance on listing of BMVL on the London Stock Exchange, AIM market, whichever is earlier.
Batangas Gold Project
Red Mountain Mining has recently delivered robust initial results for its Definitive Feasibility Study at the Batangas Gold Project, which is located 120 kilometres south of Manila.
Key metrics are:
- Mining Inventory for 5.2 years totalling 1.03 million tonnes at 3.3g/t gold, 10.3 g/t silver;
- Production target of 100,000oz gold and 250,000oz silver from processing of 1.03 million ore tonnes;
- Pre tax operating costs of US$753/oz gold (A$865/oz gold);
- Sustaining operating costs (including all taxes and charges) of US$811/oz gold (A$933/oz gold);
- Pre-production capital of A$18.4 million, including A$15.4 million installed;
- Total all-in costs including pre-production and sustaining capital of US$998/oz gold (A$1147/oz gold);
- Cash flows of A$52 million at a US$1,250 an ounce gold price;
- Assuming approximately 50% debt financing and repayment in 3 years, IRR is 46% and NPV (8% discount rate) is A$17.6 million.
The first phase of the DFS focussed on mining, metallurgy and processing cost and recovery inputs for the initial 5.2 years production target of 100,000oz of gold and 250,000oz of silver.
The second, 3.25 year production phase will mine transport and process 854,000 tonnes at 2.6g/t gold, 12g/t silver (diluted) from Kay Tanda West (KTW) orebody, at Archangel, 15 kilometres by road to the east of the Lobo plant.
Updated capital cost inputs are preliminary at this stage, and will be the main focus of the second, detailed engineering phase of the DFS.
The production target is underpinned by current, JORC 2012, Indicated Resources totalling 2.97 million tonnes at 2.4g/t gold, containing 227,000 ounces of gold.
The strategic financing represents a "see-through" valuation for 100% of Batangas of around A$13.4 million, more than three times the current market cap. of Red Mountain. The economics of the Project speak for themselves; the funding is significant in a sometimes challenging capital environment.
The terms were agreed with a private company backed by London based investors for a two stage transaction totalling A$6.7 million (US$5.5 million).
This will convert to a 50% stake in Red Mountain's wholly-owned subsidiary Red Mountain Mining Singapore (RMMS).
RMMS is the 100% owner of the Philippines subsidiary company that holds the Batangas Gold Project assets.
Red Mountain has also attracted sophisticated investors through a placement and has launched a rights issue.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.