PERTH (miningweekly.com) – ASX-listed Hillgrove Resources has announced a A$39-million institutional placement and share purchase plan (SPP) to fund the restart of the Kanmantoo copper project, in South Australia.

The company on Wednesday announced that it had successfully completed a bookbuild process to raise A$19-million in a two tranche share placement to institutional and sophisticated investors.

More than 358.4-million shares will be issued at a price of 5.3c each, with more than 293.5-million issued in the first tranche under Hillgrove’s existing placement capacity. The second tranche of more than 64.9-million shares will be subject to shareholder approval at a meeting planned for late April.

The company has furthermore entered into a binding, conditional term sheet with Freepoint Metals & Concentrate to raise a further A$17-million through an additional two tranche share placement.

Hillgrove will issue more than 324.5-million shares in total, also at a price of 5.3c each, subject to shareholder appointment and the completion of a SPP and share placement.

The second tranche placement to Freepoint, which would consist of more than 236.2-million of the shares on issue, would be subject to governmental approvals.

In addition to the placement, Hillgrove will also undertake an SPP to raise A$3-million, allowing shareholders to subscribe for up to A$30 000 of additional shares in the company, also at a price of 5.3c each.

“We are pleased to announce an equity funding package which facilitates the commencement of the Kanmantoo underground operation to generate cashflow through production, along with continued mine expansion drilling,” said Hillgrove CEO and MD Lachlan Wallace.

“The Kanmantoo underground Stage 1 presents a unique opportunity to produce copper in a Tier 1 jurisdiction, generating post-tax cash flows in excess of A$200-million in the initial stage.

“With all infrastructure and permitting in place, the project is well positioned for a fast, low capital restart, with first copper production only seven months post mobilisation. The resource potential is exciting, with 143 mineralised intersections from 122 holes, resulting in the increase in mineral resources from less than one-million tonnes in 2019, to almost seven-million tonnes in 2022. Such high exploration strike rate and resource conversion provides confidence that further drilling may increase resources and expand the mine plan and generate more value for shareholders.”

An updated economic assessment into the Kanmantoo underground copper mine estimated that the Stage 1 operation could deliver free cash flows of up to A$205-million from the restart of operations in 2023.

The economic assessment estimated that the project could be brought online at a capital cost of A$25-million and could produce 43 500 t of copper and 11 500 oz of gold over an initial 45-month mine plan.

The project’s net present value has been estimated at A$165-million and its internal rate of return at 231%, with a pay-back period of nine months.

Wallace on Wednesday said the quantum of funding provided sufficient operational contingency, as well as significant exploration budget to enable mine expansion drilling to continue concurrently with the underground development.

Concurrent with the capital raise, Hillgrove has also entered into a binding term sheet for a hedging programme with Freepoint, covering at least 16 000 t of copper in concentrate, amounting to nearly half of the first two years of production.

Hillgrove said that the hedging programme would assist the company to achieve pricing stability for its copper product and would underpin financials for the mine plan. The hedging is subject to the satisfaction of a number of conditions, including the completion of due diligence, the approval by Freepoint’s board of directors, and the copper price being greater than A$12 500/t plus hedging margin. The hedging is also subject to the completion of the placement and the second tranche placement to Freepoint.