Indochine Mining to raise up to $20M, fast track Mt Kare gold project
Significantly, the company has received
offers of $15 million to date and expects to receive a further $3
million to $5 million within the next 7 days to complete the
The raising is being done at a premium to the last traded price and would place up to 241 million new shares at $0.09 each.
Indochine is aiming to be funded to a key milestone of a decision to mine, enabling mine development financing discussions.
A key milestone recently – the completion of the Landowner Study on-site, which some did not think would be achieved has provided the confidence in the project being developed.
However, it is the rapid confirmation of High Grade Zones at Mt Kare, which could see a 1,000,000 ounce resource grading a massive 10g/t gold confirmed within 6-9 months that has ratcheted up confidence levels in the economics of the project.
Use of funds
The funding will take the company to the next key milestone, by close spaced drilling from an underground adit (being built to production scale) and bulk sampling to confirm and extend the high grade resource by 0.5 million ounces Moz at 10 g/t au over the next 6 months, as well as complete the feasibility study to allow for a mining lease application.
Decision to mine
The next key milestone will be a decision to mine in mid 2014, by completing the underground adit to directly access the high grade zones, completing the feasibility study and applying for a mining lease.
Then the company can complete discussions with debt and equity providers for a $100M financing of the construction of the mine aiming for production in mid-late 2015.
This will also open the company up to investors and debt providers as the company finalises the finance package for the construction of the mine through to production.
An Adit/Tunnel - with direct access to high grade ore; with high ounces per vertical metre will enables rapid low cost drilling; bulk sampling; to prove mine plan/grades for finance.
Mt Kare Project
Current resource base is 2.1 million ounces of gold.
- Gold rush 1988 (+1 Moz of gold nuggets)
- PNG is famous for large gold deposits
- Next door to the Porgera 28 million ounce gold deposit
- Same geological setting 2.5 Moz gold equiv. and growing high grade section: 0.5 Moz at 10 g/t
- Target: +1 Moz at 10 g/t in 6 mths. Confidence in reaching this target has been established from past and present drilling results
- Partnered with mining & development experts Team experienced in PNG in permitting and developing projects
- Near term production profile
Key Milestone: Landowner Study Completed
Missed by many is just how significant the recent Landowner Study which was completed in January on-site providing a major step forward for Mt Kare customary landowners.
It provided land boundaries approved and validated on-site by Landowner Clan Groups and Government Officials; Legal rights of landowners were established.
Upside: New Potential Targets Located
In December 2013, a structural study by Dr Tony Norman identified key gold mineralised structures and key mineralised horizons.
Extensions were identified to high grade zones with a new high grade target, 500 metres long and undrilled.
Importantly it confirmed a structural link to the adjoining Porgera gold mine.
Mt Kare shares many similarities to Porgera:
- Similar geology
- Similar setting
- Similar high grade gold zones; large gold systems
- Porgera: world class resource of 28 Moz Au Inc. 5 Moz at 27 g/t Au
- Mt Kare = world class 2.5 Moz Au Eq (current)
- Porgera mine started: exploration adit and high grade underground
- New structural study linked both deposits; identified deep targets and new targets at Mt Kare
- Rapidly developing wide, high grade zones at + 10 g/t Au
- Target - Rapid increase of resource from 0.5Moz to +1,000,000 oz at 10 g/t in 6 months. By close spaced drilling from a tunnel (adit)
- Major value uplift mid-2014: from increase high grade zone; feasibility study; mining lease application
- Developing high margin, low cost gold production in 2015 (18 months): circa.200,000 oz/yr. gold at 10g/t plus 15,000 oz/yr. gold equivalent (silver)
- Rapid payback forecast of c.1 year on a capex estimated at <$100M.
- Expert partners in underground mining and process plant design/build
- Growth of high grade zones expected: Adjoining world-class Porgera mine produced 17Moz in 23 years, and started similarly with 27g/t ore
There are likely to be very few new gold mines brought into production globally in the next 12-18 months; let alone a project resource likely to be circa 1,000,000 ounces grading a whopping 10 grams per tonne gold. Next door Porgera is one and the Eureka Vein Cerro Negro is another. In relative terms, this highlights the undervaluation of Indochine.
Production is targeted for 2015. There is potential to substantially increase mineable ounces and grade <$100 million CAPEX is targeted at half the cost of PFS in 2012. Indochine is on track to rapidly develop high-grade, low cost underground mine.
All-in-sustaining costs are likely to be among the lowest in the world based on the high grade, providing strong after tax cash flows.
Mine life could run 15-20 years or more based on Porgera next door's profile which has the same geological setting as Mount Kare.
CAPEX is also more likely to be
achievable based on the high grade and high margin potential of the
project. Mt Kare ticks most boxes as well as a strong management team at
Indochine and in country team in PNG.
Indochine's share price and market valuation have been held back by concerns about access to capital - this is removed with the raising. As are concerns regarding landowners with the LIS completed.
Proactive Investors has provided an initial estimate of valuation of Indochine based on our calculations of the high grade zone production and likely operating costs and projected cash flows as well as near term catalysts and milestones ahead.
Current share price is $0.068 and market cap. is circa $66 million.
Our 6 month price target is $0.10 - $0.15 and forward target is $0.32 - $0.55 within 12 - 18 months.
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