Perth-based Eurogold Ltd aims to raise $2 million through a share float after its asset sale agreement with Oxus Gold plc was terminated early, leaving the company in need of money to provide it with short term working capital.
Perth-based Eurogold Ltd aims to raise $2 million through a share float after its asset sale agreement with Oxus Gold plc was terminated early, leaving the company in need of money to provide it with short term working capital.
Under the asset sale agreement, Eurogold was due to receive approximately $22 million on 30 June 2006. As this has not occurred the company needs to raise additional funds to provide short term working capital whilst it considers its position and to enable it to continue its work programme in the Ukraine.
The placement will seek to raise up to $2 million by issuing up to 40 million fully paid ordinary shares each at 5 cents with a free attaching option exercisable on or before 30 June 2009 at 10 cents each for each share subscribed for.
Some Eurogold directors have indicated that they will participate in the placement subject to receipt of the necessary shareholder and regulatory approval.
Eurogold has commenced discussions with other parties who have expressed interest in the project with a view to a sale or joint venture arrangement that could help provide the necessary funding to advance the project and meet the relevant project expenditure commitments.
On 9 June 2006 Oxus signed a management agreement with Eurogold and advanced US$416,000 to Eurogold (against the proceeds from the asset sale agreement) to maintain project expenditure commitments until the settlement date of 1 July 2006. Following termination, the advance and interest (at libor plus 3%) are at the election of Oxus to be repaid either by Oxus subscribing for additional shares or from funds raised from a placement specifically for the purpose of repaying the advance. Both alternatives require shareholder approval.
Funds raised from the placement will not be used to repay the advance.
Oxus alleges in its notice of termination, which was given to Eurogold one day prior to settlement, that there had been "a material adverse change" to Eurogold's assets, namely that:
As part of its AIM listing requirements, Eurogold commissioned a competent persons report from RSG Global in July 2004. RSG Global's report referred to 578,000 ounces, stating that the reserves were "... calculated by the geological expedition and approved in September 2003".
Eurogold has stated from the outset that its work programme was designed to both meet the expenditure commitments of the Ukrainian tenements and convert the Soviet categorised resources into a JORC category.
It does appear that there may be a difference of opinion between the regional and central Ukrainian authorities as to how certain ore blocks should be calculated and therefore classified. However, Eurogold contends that that, of itself, does not constitute "a material adverse change" to the assets. To the contrary, Eurogold remains confident that the central planning committee in Kiev will ultimately approve a C1/C2 ore "reserve" broadly in line with the 580,000 oz estimate of the regional expedition. Furthermore, based on preliminary modelling, Eurogold believe that a similar sized resource is likely to be able to be estimated in accordance with the JORC Code.
As to the second point, Eurogold has not sought an extension of the Saulyak licence. The licence is not due for review until November 2007 and progress under approved work programmes is regularly reviewed by the authorities. Eurogold is in the process of reconfirming the status of these commitments.
As outlined above, Eurogold is also now seeking other partners or sources of funding to enable it to meet these commitments.