Focus Minerals Limited (ASX: FML)
ASX
RELEASE
24
February 2009
LANDMARK A$28M CAPITAL RAISING TO FUND
AGGRESSIVE GROWTH STRATEGY
KEY POINTS
�
$A25M
to be raised via the issue of 1,250M shares at an issue price of 2 cents per
share to sophisticated investors
�
Up to A$3M to be raised from existing Shareholders
under the Share Purchase Plan (SPP)
�
$A18M allocated to refurbish and modernise the
100%-owned 1.2Mtpa Three Mile Hill treatment facility to significantly
increase overall milling capacity in conjunction with existing toll treatment
agreement with nearby Greenfields mill
�
Balance of funds to be allocated to aggressive
development and exploration aimed at bringing nearby deposits into production
as quickly as possible to take advantage of high gold prices
�
Campbell Baird to assume the position of Chief
Executive Officer with Peter Williams to be based full-time in Coolgardie to
oversee the Three Mile Hill refurbishment in the role of Chief Operations
Officer
�
Capital raising and personnel changes set to usher in
a new era for Focus Minerals at a time of unprecedented opportunities within
the gold industry
Australian-based gold producer Focus Minerals Ltd
(ASX:FML) (Focus or Company) is pleased to advise that:
(a) It
has resolved to raise A$25 million through the issue of to 1,250 million
ordinary shares at an issue price of $0.02 per share to sophisticated investors
(Share Placement); and
.
(b) following
completion of the Share Placement, it plans to raise up to A$3 million through
the issue of up to 150 million shares to existing shareholders at an issue
price of $0.02 each under the Company's Share Purchase Plan (SPP Offer) using
the Company's capacity under Listing Rule 7.1,
Capital Raising
The Share Placement will occur in two tranches as
follows:
(a) 100
million Shares to be issued using the Company's existing capacity under Listing
Rule 7.1 to raise A$2 million; and
(b) subject
to Shareholder approval, the issue of up to 1,150 million Shares to raise A$23
million.
The Capital Raising will allow Focus to accelerate
growth and development of the Coolgardie Gold Project, where the Company
is aiming to establish a long-term sustainable production base of 100,000
ounces per annum.
The decision to undertake the Capital Raising to
fast-track the refurbishment and modernisation of the Company's 1.2Mtpa Three
Mile Hill treatment facility (Plant Refurbishment) follows recent
increases in the Company's gold resource base - including a significant upgrade
at the Company's Brilliant Deposit and ongoing successful exploration and
development programs.
This decision is supported by the current strong gold
price environment, which is creating unprecedented opportunities for gold
producers to make significant margins. The Board has determined that this
strategy represents the best option for the Company in terms of enhancing
shareholder wealth, rather than utilizing cash flow from existing operations -
which would effectively delay the implementation of this growth strategy by
12-14 months.
Perth-based corporate advisory firm Azure Capital Pty
Ltd has been appointed as Corporate Advisor and Lead Manager to all aspects of
the Capital Raising and Patersons Securities Limited will act as Broker to the
Capital Raising.
Capital Raising
Subject to obtaining the necessary shareholder
approval, the Capital Raising comprises of:
(a)
the placement to institutional and
"sophisticated" investors 1,250 million shares at an issue price of
$0.02 each to raise $25,000,000; and
(b)
the offer of up to 150,000,000 shares at an
issue price of $0.02 each to shareholders pursuant to the Company's Share
Purchase Plan to raise up to $3,000,000.
The issue of shares
under the SPP Offer will occur after completion of the Share Placement using
the Company's capacity under Listing Rule 7.1.
The Share Purchase Plan will be processed in priority
of receipt until the allocation has been completed. Details of the SPP Offer
and entitlement forms will be mailed to shareholders shortly. Azure Capital
have also agreed to place any shortfall arising on the SPP Offer on a best
endeavours basis.
USE OF FUNDS
A significant proportion of the funds raised
(approximately A$18 million) will be used to fund the Plant Refurbishment.
Funds raised will also be applied to ongoing
exploration across the extensive 210km� tenement holding, whereby Focus
currently has an estimated 111,000 ounces of gold in Probable Reserves
(depleted basis as at 31 December 2008) at the Perseverance and Countess
deposits and approximately 1.8 million ounces in the Measured, Indicated and
Inferred JORC-compliant resource contained in several surrounding deposits,
including the recently upgraded Brilliant Deposit.
The breakdown of the allocation of funds is as
follows:
-
Plant refurbishment
A$18.0 million
-
Resource
development
A$ 4.6 million
-
Advanced exploration and definition
A$ 3.8 million
-
Capital Raising Costs
A$ 1.6 million
Total
A$28.0
million
THREE MILE
HILL REFURBISHMENT
The
Plant Refurbishment will underpin Focus' expansion plans, giving the Company
much greater flexibility in combination with the arrangements currently in
place with Higginsville Mining's nearby Greenfields processing plant.
With recent upgrades to the Company's overall resource
base, including an increase in Probable Reserves at the Perseverance and
Countess Deposit, the Board has decided that an increase in processing capacity
is required in order to sustain greater levels of production expected in the
near future. The re-commissioning of the Three Mile Hill plant is expected to
provide an efficient and cost-effective means of ramping up production as new
deposits are brought into production.
It is expected that the Plant Refurbishment will take
between 8 and 10 months resulting in an annual milling capacity of 1.68 million
tonnes per annum in combination with the Greenfields treatment facility.
DEVELOPMENT PIPELINE
To complement the Plant Refurbishment, Focus will
immediately undertake a major resource definition and extension program to
ensure resources are brought on line to feed the 1.2Mtpa capacity of Three Mile
Hill on its re-commissioning.
Initially, priority will be given to the development
of additional resources at the currently producing Perseverance and Countess
Deposits, with a drilling programme expected to be completed shortly at
Perseverance, targeting southern extensions to the high-grade orebody.
In the medium term, Focus will step up exploration and
pre-feasibility studies at other nearby high-grade deposits including Empress
(Inferred Resource of 47,000oz at 4.68g/t Au), The Mount (Indicated Resource of
370,000oz at 5.50g/t Au) and Cyanide (Indicated Resource of 65,000oz at 5.54g/t
Au). These deposits are targeted for production by the first Quarter of 2010.
Following this, the Brilliant, Dreadnought and Lindsays Deposits will be developed to provide additional
ore to feed the Three Mile Hill Plant, which is expected to be in operation
from early 2010.
Hedging and Debt
Only a small portion of production (26,000 ounces)
remains to be delivered into existing hedge contracts, with the balance being
sold into the spot market. It is expected that the outstanding hedge position
will be fully closed out by September this year.
Additionally, the Company is expected to be entirely
debt free by December 2009, including Convertible Note obligations to Focus'
former Joint Venture partner Committee Bay Resources and repayment of an $A18.6
million debt facility held with Investec Bank (Australia) of which $A12.25
million is currently outstanding.
KEY SENIOR
MANAGEMENT APPOINTMENTS
As
part of Focus' strategic expansion plans, Managing Director Mr Peter Williams
has resolved to relocate to Coolgardie in the role
of Chief Operations Officer to oversee the Plant
Refurbishment, as well as the continuing extensive programme of
exploration and development within the various high-priority targets within the
Coolgardie Gold Project.
Mr
Williams' considerable experience in the management and development of mineral
assets, as well as his intimate knowledge of the Coolgardie operation
underpinned his decision, which was supported by the Board as an important
strategic move to oversee the smooth development of Three Mile Hill.
Mr Campbell Baird, who currently holds the position of
Chief Operating Officer, will assume the position of Chief Executive Officer in
order to oversee the company's rapid growth into a mid tier gold producer.
For additional background information on Mr Baird,
please refer to ASX release dated 14 January 2009.
SUMMARY
The Board has resolved to fast-track the development
of the Company's resource base and production profile through the
re-commissioning of the Three Mile Hill plant as a result of a number of
compelling factors, which are outlined above.
Commenting on the Capital Raising and development
plans, Focus Chairman Don Taig said: "These funds will provide Focus with
the opportunity to substantially ramp-up production at Coolgardie, elevating us
to a new level in terms of our position among gold producers in Australia.
"Our priority now is to ensure that the Three
Mile Hill plant is completed on time and within budget and, to this end, the
decision by Peter Williams to relocate full-time to Coolgardie was unanimously
supported by the Board,'" he added.
"Peter has undertaken to relinquish his role as
Managing Director to concentrate on the task of refurbishing the Three Mile
Hill plant as well as bringing near-term ground into production. Peter's vast
experience, built up over 30 years in the industry, places him in the best
position to undertake this role and I thank him for placing the interests of
Focus Minerals above his own personal interests," he said.
"I would also like to welcome Campbell Baird to
the position of Chief Executive Officer. Campbell
has a wealth of experience and I have no doubt that he will add significant
value to Focus with his commercial expertise and attention to detail."
A Notice of Meeting to seek the necessary shareholder
approval is currently being prepared and will include an explanatory
memorandum. These materials will be distributed to shareholders as soon as
practically possible.
ENDS
READ CORPORATE
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