Singapore’s LionGold Corp is prowling for more acquisitions in the gold sector after its friendly takeover offer for Castlemaine Goldfields.
Castlemaine Goldfields on Monday recommended to its shareholders an all-scrip bid by LionGold, a fellow gold miner, made on the same day.
The offer, of two Singapore Stock Exchange-listed LionGold shares for every nine Castlemaine Goldfields shares held, valued the target at 18.4 cents per share or $48.6 million.
Castlemaine Goldfields, which has had disappointing production from its historic Ballarat mine in Victoria since pouring first gold in September, says LionGold seeks to do more deals in the sector.
“They’ve made it relatively clear that (Castlemaine) won’t be the last potential acquisition that they’re looking at,” managing director Matthew Gill told a teleconference on Tuesday.
“They’re quite aggressive in their growth profile and looking at what opportunities there are in the gold space.
“There are quite a few undervalued gold operations that may well come across their table and interest them.”
Mr Gill is the former manager of the Beaconsfield gold mine in Tasmania, where a 2006 rock fall killed miner Larry Knight and trapped his workmates Todd Russell and Brant Webb for a fortnight.
Mr Gill said LionGold, which also on Monday agreed to take an 11.4 per cent stake in the target via a placement to raise $3.89 million, was prepared to invest more capital into Castlemaine Goldfields.
The placement would make LionGold the miner’s third largest shareholder.
LionGold offered the financial clout needed to execute Castlemaine Goldfields’ business plan with greater certainty than the miner could currently provide, Mr Gill said.
The company in December raised only $1.3 million from a rights issue that sought to garner up to $5.4 million, and at the end of that month had $16.3 million cash on hand.
Castlemaine Goldfields is trying to ramp up production to 50,000 ounces per annum (ozpa), a target well below the 250,000 ozpa that previous owner Lihir Gold had targeted.
Mr Gill said the company should hit the 50,000 ozpa run rate in the December quarter.
“That’s still our business plan – that’s not changed,” he said.
“However getting greater financial support and a larger company and balance sheet behind you, with an extra injection of capital, would allow us to achieve that with better terms, with greater certainty, with less risk and maybe in a quicker timeframe as well.”
The company has begun accessing a higher-grade zone but is all-too aware of the “nuggety” (not consistent) nature of the deposit.
Shares in Castlemaine Goldfields were up half a cent, or 3.33 per cent, at 15.5 cents at 1427 AEST.
