Red Mountain Mining to buyback shares, ratchet up exploration
Red Mountain Mining (ASX: RMX) is tightening up its capital structure and focusing on exploration efforts to build on its current 408,000 ounce of gold resource at Batangas, Philippines.
The removal of a stock overhang and buy-back of shares should prove a turning point for the company.
Throw
in that recent drilling at the Lobo Prospect has intersected high grade
peaking at 16.8 grams per tonne and 14g/t gold at the Japanese Tunnel
and Pica targets respectively.
This increases confidence of
defining additional high grade near surface gold resources that will add
to current resource, most of which is hosted in the Archangel Prospect.
The removal of stock overhangs stemming from its acquisition of Batangas from Mindoro Resources (TSXV: MIO; ASX: MDO) has being removed, which takes away threat of shares hitting the market.
Red
Mountain had converted the 50 million Performance Shares held by
Mindoro into a single share due to applicable milestones not having been
satisfied by 30 October 2013.
Importantly, subject to
shareholder approval, Red Mountain will buyback and cancel 4 million of
the 100 million shares held by Mindoro in return for Red Mountain
relinquishing its contractual rights to the low priority Tapian San
Francisco Joint Venture exploration prospect on Mindanao Island,
Philippines.
Mindoro will retain 96 million shares and remain the major shareholder with about 20% of the company.
It has also agreed to a maximum six month Voluntary Escrow period on the shares, potentially to 30 April 2014.
It also plans not to immediately distribute the shares “in specie” to its shareholders following release from Voluntary Escrow.
This
removes from Red Mountain the obligation to issue a substantial number
of new shares for the acquisition of the gold and copper gold assets
previously owned by Mindoro.
Exploration wise, Red Mountain is
continuing exploration aimed at increasing high-grade material, and
building upon the current 408,000oz resource base.
It is also finishing a scoping study into a gold project development at Lobo, Batangas, near Manila in the Philippines.
The company had $1.65 million in cash and no debt as at 30 September 2013.
Batangas
Red
Mountain has started an independent scoping study to determine the
viability and potential of a mining and processing gold project based on
existing resources that could generate cash flow in the medium term.
This is targeted for completion in December 2013.
It had last month intersected high grade gold at its Pica epithermal target within the Lobo Prospect.
Diamond
drilling intercepted a steeply dipping epithermal
quartz-barite-sulphide vein, producing an assay of 2.5 metres at 9.2
grams per tonne gold, 28.4g/t silver and 8.6% Zinc from 97.9 metres.
This included a 1 metre zone grading 14.2g/t gold, 38.6g/t silver and 9.5% zinc.
Further
drilling along the 2 kilometre strike is expected to extend the
mineralisation prior to defining a high-grade vein resource.
Initial
drilling at the Japanese Tunnel Prospect has also confirmed that
gold-copper mineralisation remains open along strike and at depth.
This
returned a notable intersection of 8.7 metres at 4.34 g/t gold from 2.9
metres including 3.7 metres at 8.62 g/t that in turn holds the peak
0.55 metres at 16.8g/t gold.
Drilling at Lobo, which currently
has a Resource of 45,000 ounces of contained gold and 11,000 ounces of
contained silver, is designed to define additional high grade, near
surface, gold resources.
The project is one of two key projects of the Batangas Projects located about 120 kilometres south of Manila.
Analysis
These
steps are significant for Red Mountain as investors will benefit from a
tighter capital structure that will result from the removal of stock
overhang and share buy back that could restrict share price growth from
exploration successes.
These developments also put an effective
“floor” on the company’s share price, paving the way for it to rise on
the company meeting milestones such as further drilling successes and
the results of the Scoping Study.
With a market capitalisation of $2.39 million, the share tightening, exploration and newsfloor ahead provides an opportunity.
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