PERTH (miningweekly.com) – Gold miner Gascoyne Resources will raise A$19-million through a share placement and a share purchase plan (SPP).

The ASX-listed company on Monday unveiled a single tranche placement of 50-million shares, priced at 30c each, to raise A$15-million under the company’s existing placement capacity.

An SPP is aimed at raising a further A$4-million, and will allow shareholders to subscribe for up to A$30 000 worth of additional shares in the company. The SPP will open on April 1 and close on April 19.

Gascoyne noted that the offer price of 30c a share represented a 15.5% discount to the company’s last closing price on March 23, and a 10.9% discount to its ten-day volume weighted average share price.

Some A$10.5-million of the funds raised will be used to repay the remaining principal amount owed on the convertible note debt held by the company’s largest shareholder, Deutsche Balaton AG, while A$3.5-million will go towards an accelerated drilling programme at the Dalgaranga gold project over the next three to four months.

A further A$5-million will be used for working capital.

“Over the last three months we have been working on a multi-faceted strategy to increase mine life and ore feed grades at the Dalgaranga gold mine and reposition Gascoyne as an investable midtier gold producer with a clear growth strategy, said Gascoyne MD and CEO Simon Lawson.

“We have streamlined our management processes and put in place an effective staff retention strategy, with zero resignations since the policy was put in place in January. We have optimised and stabilised the mine plan, delivering consistent ore feed at an elevated +1 g/t head grade, and we are now delivering record monthly and quarterly production outcomes, with increased visibility to be able to maintain this over a longer period of time through future development of the promising Gilbey’s North discovery.

“At the end of last year, we removed the restrictions of our previous debt arrangement by closing out the Investec facility, which had the effect of also removing our existing hedge book – exposing us to an increasing spot gold price. This has had the effect of delivering improved cash flows, which reflects the significant differential between the price we would have received under our previous hedging to what we are now making on spot sales.”

Lawson said that the capital raise is underpinned by Gascoyne’s existing major supportive shareholders along with significant support provided by new institutional investors located domestically and offshore.

“A$10-million of the proceeds will go to retiring the remaining convertible note debt, meaning that Gascoyne will be completely debt-free and unhedged for the first time since production began in 2018, and approximately A$4-million towards accelerated near-mine exploration. The balance will strengthen our treasury position, which stands at around A$24-million, further de-risking our balance sheet during this period of increasing Covid-19 cases in Western Australia, and putting us in a strong position to deliver organic growth through exploration and the ability to quickly capitalise on regional opportunities.

“We have made a significant shallow high-grade discovery less than 1 km from our processing plant which is still growing and has the potential to substantially add to the life-of-mine. We are working on significant updates to our existing mineral resource estimates, specifically at Plymouth and Gilbey’s, which have the potential to immediately add to the mining schedule and the life-of-mine, as well as new mineral resource estimates at Gilbey’s North and Archie Rose, that also have the real potential to make meaningful additions to the life-of-mine, all within 10 km of our processing plant.

“We will continue to consistently drill and increase our near-mine prospects and bring them into a rapidly growing pipeline of advanced resources and into an expanded mining and milling plan, including the Yalgoo assets and the 200 000 oz mineral resource at Melville,” said Lawson.

“Our goal is to create a debt-free gold producer which is able to leverage its amazing infrastructure and strong team centred around a three- to five-year low-risk, hard-outcome production runway and 10-year resource visibility.”