As part of the alliance Bendigo Mining has subscribed for 32.7 million shares in Goldstone at 6.5 pence per share - a 45% premium to the company’s share price on 6 May. The placing will give Bendigo a 20% equity stake in Goldstone, and the potential to increase its stake through warrants to be issued as part of the agreement. Goldstone is issuing two tranches of warrants to Bendigo. The first tranche will entitle Bendigo to subscribe for 10.9 million shares at 8.5 pence per share between 18 and 30 months from the date of their issue. The second tranche will entitle Bendigo to subscribe for an additional 10.9 million shares at 11.5 pence between 24 and 36 months from their issue.
GoldStone will also offer Bendigo a seat on the board of the Company and has also entered into a technical services agreement to provide support to GoldStone in respect of any development and mining of assets.
"We are extremely pleased that through this transaction GoldStone has gained a mid-tier miner with a strong balance sheet as a long term investor who is prepared to make a significant investment in the Company at a material premium to the market price,” Jurie Wessels, Chief Executive of GoldStone, commented. “We believe that Bendigo shares the optimism we have for our West African assets and that the alliance will add considerable value as we endeavour to advance our exploration projects into open cast or underground mining operations."
Rod Hanson, Managing Director and Chief Executive of Bendigo commented: "We are very excited to enter into this alliance with GoldStone and believe it provides a low risk expansion into West Africa, which is one of the most attractive locations for new gold discoveries globally. We believe that GoldStone has the right people in the right place and has done an excellent job in assembling a strong portfolio of exploration assets in Ghana and Senegal. Our plan is for a long term relationship in which GoldStone and Bendigo will grow and prosper together in West Africa."
Bendigo Mining is funding the investment from its cash resources, which were A$57.4 million as at 31 March 2010. Bendigo is expected to produce 80,000 to 90,000 oz of gold in the financial year ending 30 June 2010 from its two underground gold mines, the Henty Gold Mine on the West Coast of Tasmania and the Kangaroo Flat Mine in Bendigo, Victoria.
Disclosure: The author holds no positions in the company