The company announced that it intends to acquire a 5% stake in Allied Gold, an Australian-listed explorer with interests in Papa New Guinea, for A$3.03 million (A$0.40 per share). They has also decided to underwrite a share issue, representing 17.5% of Allied’s share capital.
Gold’s existing PNG interests, a 20% stake in the Porgera mine that is operated by Placer Dome and its own Tolukuma operation, have served the company well in the past, especially over the last couple of years, when the South African operations were burning cash.
The A$7 million from the rights issue, which needs approval by shareholders before January 20, will go towards Allied’s Simberi Gold oxide project on Simberi Island in PNG. More specifically, it will be directed towards preliminary project development and earthworks as well as towards accelerating exploration programmes to expand reserves.
Initial estimates are of a 60,000oz annual production at cash costs exceeding $200/oz. The capital expenditure was estimated at $40 million by analysts.
In February, an analyst report by Patersons, an Australian stockbroker, said that first production was expected from Simberi by the middle of 2006, and that the company would be earnings and cash flow positive for the full 2007 financial year.
Last year, Gold attempted to buy out Fijian gold producer, Emperor Mines, through an all paper offer. In the end, Gold managed to acquire 45.33% of the company. Currently it has an offer on the table to inject its PNG assets into Emperor, and thereby gain control of the company.