SANDFIRE Resources has come back to the market to raise $A102 million to accelerate development at its DeGrussa copper-gold project in Western Australia after its share purchase and offtake deal with Korean smelting giant LS-Nikko officially keeled over last month.
The funds will be raised via a 1 for 12 accelerated non-renounceable pro-rata entitlement offer at an offer price of $6.60 to raise around $72 million and will consist of an institutional component and a retail component.
The entitlement offer price represents a 15.2% discount to Sandfire’s closing price on Monday.
Sandfire will also launch an underwritten institutional placement to raise a minimum of $30 million.
The proceeds of the raising, as well as Sandfire’s existing $35 million in cash resources, will go towards completing the current pre-feasibility study, scheduled for this quarter, and the definitive feasibility study, scheduled for the end of the first quarter of calendar 2011.
Funding will also go towards other predevelopment and infrastructure activities required for DeGrussa as well as completing the approvals process.
Funds raised will also be spent on pre-stripping of the initial open pit which is targeted to begin in the second quarter of calendar 2011, as well as for deposits on key long-lead items required for the proposed 1.5Mtpa concentrator and for working capital.
Sandfire managing director Karl Simich said after considering funding alternatives with corporate advisor Goldman Sachs, the entitlement offer and placement was considered the best option for shareholders.
“Firstly, it facilitates the introduction of new Australian and international institutional investors to the company’s register while allowing existing shareholders to participate on attractive terms,” he said.
“Secondly, it enables the company to complete a DFS and enter into project funding discussions in a strong financial position and with the ability to commence development of the high-grade open pit resources at DeGrussa while construction of the plant and underground development commences. This will ensure that we are able to commence copper-gold production in a timely manner.
“Finally, it ensures that we can maintain our robust exploration activities at DeGrussa, both within the 6-kilometre long near-mine corridor and, more broadly, within our 400 square kilometre tenement position, where we consider there is potential for additional new discoveries.”
Recently, the company announced plans to increase the targeted design throughput rate for DeGrussa processing facility to 1.5Mtpa following a phase 3 resource upgrade to 10.67 million tonnes grading at 5.6% copper, 1.9 grams per tonne gold, 15gpt silver containing 600,000t copper, 660,000 ounces gold and 5.1Moz silver.
Sandfire expects to announce a further update to the resource inventory later this month after completing infill drilling and a revised resource estimate for the dispersion zone of the near-surface oxide copper.
Today’s capital raising news comes after Sandfire announced last month its share purchase and offtake deal with Korean smelting giant LS-Nikko was effectively over.
Shares in Sandfire are in a trading halt that is expected to last until the release of an announcement or the start of trading on November 18.
Prior to entering the trading halt, Sandfire was trading at $7.78.
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