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Pantoro Ltd Moves To 100% Ownership Of Nicolsons Producing Gold Mine

Pantoro Ltd (NYSE:PNR) has reached an agreement with Bulletin Resources Ltd (ASX:BNR) to acquire their minority 20% interest of the Halls Creek Project for a cost of $11.7 million based on last sale price of Pantoro.

Pantoro therefore becomes the 100%-owner of the project, which includes the high grade Nicolsons mine and processing plant, gaining full access to cash flows and earnings.

Pantoro took economic ownership of the project on 1st May 2016 on a walk-in walk-out basis.

With the mine having progressed through the initial capital intensive start-up phase and settling into steady operation, both parties have agreed that consolidation of ownership into one company better serves the interests of both shareholder groups.

Consideration is to be all-scrip with the majority of shares to be issued being distributed in-species to Bulletin's shareholders.

Paul Cmrlec, managing director for Pantoro, commented: "The consolidation of the asset will allow the company to operate the mine in the most effective manner possible ensuring maximum benefit to shareholders.

"We look forward to welcoming Bulletin's shareholders as new Pantoro holders when the in-specie distribution is completed, and sharing in the success of the mine."

Deal details

- PNR will issue 130 million ordinary shares to BNR (Consideration Shares);

- BNR will distribute a minimum of 90 million (70%) of the Consideration Shares to its shareholders as soon as practicable, and no later than 60 days after settlement;

- BNR will pay its 20% share of all costs incurred in relation to the project up to and including 30 April 2016;

- PNR will assume the obligations of BNR in relation to its financing facility with the Commonwealth Bank of Australia which is a 1,376 ounce gold pre-payment facility and a 3,504 ounce gold hedging facility. Both parties will be protected from gold price movements with marked to market gold price adjustments when the hedges are delivered, distributed to both parties on a 50/50 basis.

- BNR to be entitled to 20% of the bullion poured up to and including 1 May 2016.

March gold production and cash balance

During the March quarter 2016, the Nicolsons ramp-up progressed successfully with 4,583 ounces of gold produced, compared with 4,180 ounces produced in the previous quarter.

Given the cost profile at the mine, unit all in sustaining costs (AISC) are on track to reduce to feasibility guidance levels of circa A$1,000 per ounce during the coming months.

Pantoro held cash and gold of $7.19 million at the end of March, and debt of 5,776 ounces of gold.

Gold loan repayments commenced in January 2016, with a total of 787 ounces repaid during the quarter.

Analysis

With the Nicolsons operation now producing around feasibility levels, and gold trading at around A$1,700 per ounce, timing for consolidation of full project ownership provides a platform to leverage 100% of future cash flows and earnings from Nicolsons.

Less than half of the projected production is currently committed in existing hedges, providing good leverage to the rising gold price.

The project currently has a declared indicated and inferred resource of 260,000 ounces of gold.

Mine development and production to date has revealed a significant overcall to the mine reserve, with reconciled production in the first three development levels at 186% of the current reserve model.

There is also advanced planning for open pits at Wagtail and Rowdies with permitting documentation to be submitted during the ensuing quarter, and mining expected to commence in the second half of calendar year 2016.

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