South African gold-miner Eastern Goldfields (EGI) plans to raise $35-million in equity finance to fund the development of its Mpumalanga gold assets, and will then seek a listing on a senior stock exchange early in 2009, CEO Mike McChesney said in Toronto on Monday.

“We will probably look at the Amex, or we would really like to look at the TSX,” he said in an interview after an investor road show in the city.

EGI's shares currently trade on the US over-the-counter bulletin board.

The firm is closely held, with management owning 31%, Ryan Capital 12%, Morgan Stanley 8%, and high-net worth individuals holding the balance.

EGI, which has set an initial medium-term output target of 100 000 oz/y, is ramping up underground production at its flagship Lily mine, to 35 000 oz/y, and expects to add another 28 000 oz by 2012 from the newly acquired Barbrook operation.

The addition of Barbrook, which was bought earlier this year from Toronto-based Caledonia Mines, not only put an extra 2-million-odd ounces on the company's resource sheet, but also meant a saving of $15-million, said McChesney.

The company paid $10-million for the mine and processing plant, and will spend about $5-million to upgrade the plant - where it will process underground ore from Lily – instead of having to cough up an estimated $30-million for a new plant.

FINANCE

EGI plans to raise all its proposed $35-million financing, which it will use for the first phase of its capital expenditure plans, through equity, McChesney said.

“We believe that junior gold mining companies like ours should be funded by equity, and that's our preference,” McChesney said.

While the firm would prefer not to hedge any future production, it may consider the possibility “if it's prudent”.

“We believe in the gold price as a company, and we would prefer not to hedge our production...however, we recognise that in the troubled markets that we are all in at the moment, if we are to raise the $35-million we may have to consider hedging a portion of our production,” he said.

It is then also planning another $25-million fundraising next year, to fund the next phase of development, at the Barbrook mine, which it aims to put into production within 18 months.

MINE PLANS

McChesney emphasises that EGI differs from the typical South African gold-miner, in that the firm's Barberton greenstone-belt assets are shallow, low-cost mines.

EGI completed a bankable feasibility study for an underground mine at Lily earlier this year, which it has since revised to include the effects of the Barbrook acquisition.

The firm's development plans going forward will be implemented in two phases - the first phase will involve the underground development at Lilly and expansion and upgrading of the Barbrook plan, and the second phase will entail the underground development at the Barbrook mine and further expansions to the plant.

The company now expects to produce 35 000 oz/y at Lily for a mine life of 16 years, with full production expected towards the end of next year.

Openpit mining at Lilly will be phased out towards the end of this year.

Besides plans to start producing at Barbrook, where it plans to implement Biox technology to improve recoveries, EGI is also beginning a prefeasibility study on its Worcester mine, also in the Barberton area, and has a number of other prospects in the pipeline.

EGI has increased its mineral resources tenfold, from 400 000 oz to 4,2-million ounces over the last three years.

“And most importantly, we have discovered and acquired those ounces at something less than $3,50 per resource ounce,” McChesney said.

Openpit mining began at Lily in 2000, and the operation has produced some 80 000 oz since then.

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