Vatukoula Gold Mines has secured the financing it requires to fully develop its mine in Fiji.
Zhongrun International Mining Co is supplying a $40m funding package. It requires a large share issue so shareholders will have to agree to the dilution. The new shares will more than double the share capital. WH Ireland believes that this funding will enable Vatukoula to be profitable in the year to August 2015. The company is currently losing money because of falling gold prices and rising costs. This meant that it has been running out of cash.
The funding is in two tranches. The first tranche is an issue of shares at 6.89p each which will raise $20m (£13m). Earlier this year, £4.5m was raised from SCD Energy at 15p a share.
The second tranche will be raised through an issue of loan notes with a coupon of 13% a year. No interest payment will be made in the first three years of the six year life. The full fundraising should be completed by the end of the year.
China-based Zhongrun is an existing shareholder with three representatives on the board and it will end up with 66% of Vatukoula after the share issue.
At 9.5p a share, up 2.5p, Vatukoula is currently valued at £15.3m.
A profit of $9.6m is forecast for 2014-15, which equates to a multiple of less than four times.
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