Cash-constrained gold junior Pamodzi had overcome fund-raising difficulties by itself raising a second R200-million tranche in order to attain the desired R400-million needed to capitalise its survival-mode gold mines in South Africa’s Free State, North West and Gauteng provinces, Pamodzi Gold chairperson Ndaba Ntsele said on Friday.

“We resorted to DIY – do-it-yourself, and we've succeeded,” a beaming Ntsele said.

The company had earlier secured R200-million from South Africa’s State-owned Industrial Development Corporation (IDC).

Ntsele said that his Pamodzi group had had a long tradition of raising its own capital and, in an unusual deviation from its usual practice, had left it to financial institutions, which had first kept it on a string for a year, and then failed it.

“It’s only when we went back to our roots that we succeeded,” Ntsele, a World Entrepreneur of the Year, said.

Moreover, while the company was attempting to raise the funding, it was suffering strikes on its mines, which made it doubly difficult.

Acting Pamodzi Gold CFO Kobus Du Plooy said that the company had commissioned the banks to do the fund-raising exercise more than a year ago.

“Essentially what we have had to do is to go back to the basics of fund-raising, which is first get an anchor funder, and we did that in the form of the IDC,” Du Plooy said.

He said that the IDC had sent an extensive mining engineering and geological team to do a due diligence on Pamodzi Gold, and, against that background, the IDC’s pledge of the first R200-million was a great confidence booster.

The company had managed to raise the next R200-million at a time the world entered a period of unprecedented financial turmoil.

The additional R200-million now successfully raised in DIY mode would be injected into the company through the black economically empowered (BEE) entity of Pamodzi Gold, Pamodzi Resources.

Du Plooy said that it was no secret that the company bought its gold assets “very reasonably", but that the key was to capitalise them in order to unlock value.

“This will now allow our extremely loyal employee base to really get going to and put the funds to work profitably,” Du Plooy added.

The company had been operating sparsely for the past eight months and would receive a spurt as it capitalised operations.

In another encouraging development, a R103-million claim against the company would soon be converted into a shareholding via a rights issue that Pamodzi Resources would underwrite.

“We will soon announce who that shareholder is,” Du Plooy promised.

The company was also advanced in arranging a restructuring of its onerous gold hedge and had found a new CFO, who would assume office soon.

When the company embarked on the fund-raising exercise with the IDC it initially targeted R270-million, but in negotiating the IDC suggested that to give the assets sustainability and longevity, the company should rather raise R400-million.

The company would in the next 15 months reduce its cash cost of production to close to $500/oz.

The current fund-raising exercise was also poised to take Pamodzi Gold's BEE shareholding above 35%.

The R400-million would be in the company’s hands once the legal documentation had been signed.

“We believe that, in the next four to five weeks, we will physically have the money coming into the business,” Du Plooy said.

Some of it would go towards covering financial obligations that the company had accumulated in the past eight months.

“We were supported a great deal by our suppliers, who helped us through in anticipation of the money coming in from the banks six months ago.

“When that didn’t happen, they really stood by us and all suppliers will have to be brought back to normal trading terms,” he said.

The company had a slew of projects on its East Rand, Orkney and President Steyn mines that would be prioritised and then funded.

In the past eight months specific areas had been identified to capitalise.

Pamodzi Gold COO Tony Murdoch Eaton said that the company would open up face length and turn its assets to account.

Funds would be invested in providing infrastructure for President Steyn mine, where gold grade was highest.

The opencast West Rand operation would be reopened, probably at a larger level, after South Africa’s rainy season.

Du Plooy said that the company was producing 200 000 oz/y currently and believed that it could increase that to 300 000 oz/y in six months and to 360 000 oz/y in 12 months.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.