Focus Minerals reveal $64m debt and equity package

Perth-based Focus Minerals Ltd has announced a $64 million acquisition, development and funding strategy to consolidate ownership of the Coolgardie Gold Field and an expanded development program in both gold and nickel.

Focus has agreed to buy out joint-venture partner Committee Bay Ltd's 50 per cent interest in the 1.6Moz Coolgardie Gold Project for consideration of $22 million in cash and $1 million already paid via a recently announced exclusivity agreement, as well as $19 million paid immediately after shareholder approval, $2 million deferred until April 302009 as an 8.25 per cent convertible note and 140 million shares issued at 5.5 cents per share.

Focus has appointed Perth-based investment bank, Azure Capital, to manage a $14 million share placement at 5.5 cents per share, together with a share purchase plan to raise a minimum of $4 million to underpin the acquisition and fast-track the Coolgardie development program.

An $18.6 million debt facility will be provided by Investec Bank (Australia) Ltd to support the acquisition and provide additional working capital.

The share placement and debt funding package will require shareholder approval at a meeting to be convened in April 2008.

The Committee Bay deal will give Focus 100 per cent ownership of the former Redemption Joint Venture assets at Coolgardie, including an extensive resource inventory within multiple deposits totalling 20.6 million tonnes at 2.48g/t Au for 1.65 million ounces, the fully permitted 1.2mtpa Three Mile Hill gold processing facility (currently on care and maintenance), and a highly prospective 210km2 tenement package.  

Focus is aiming to become a 100,000 ounce per annum producer at Coolgardie within the next three years.

The combined $36.6 million debt and equity funding package, together with a portion of the strong cash flow generated by the Perseverance gold deposit, will in addition to the RJV acquisition, be utilised for a planned refurbishment of the Three Mile Hill plant as a new centrally located treatment facility at Coolgardie, plus development and exploration funds for adjacent gold prospects, so that the pipeline of prospective ground is developed with continuous production in mind.

In addition, the company will fast track the evaluation and development of its 100 per cent owned Nepean Nickel mine, located 25km south of Coolgardie, together with funds for a deep drilling programme at Nepean - well below the 500 metre level - to further define the prospectivity of areas where no work has previously been carried out, with a view to diversifying the company's nickel production profile as well.

Other key deposits at Coolgardie will be progressively developed with ore treated at Three Mile Hill plant, commencing with the broader Tindals Mining Centre surrounding the Perseverance deposit.

Work is continuing at Tindals at the Countess, Empress and Cyanide (Tindals East) deposits, in order to fast-track further delineation and development of the broader area.  

Focus Minerals chairman Don Taig said it was pleased to conclude the agreement with Committee Bay and the combined debt and equity funding package would underpin the Committee Bay acquisition while giving it the capacity to fast-track its transition to gold and nickel production.

Mr Taig said he was very pleased to retain Committee Bay as a major shareholder in the company as part of the acquisition terms.

"I'm very pleased that Committee Bay has made the decision to retain significant exposure to the project through the direct equity stake they will have in Focus. This demonstrates their commitment to the ongoing success of the Coolgardie Project and their faith in the upcoming Nepean nickel development activities," he said.

"The accelerated gold development program and treatment plant refurbishment, combined with our plans to commence nickel production from the Nepean mine in the short term, amounts to a comprehensive strategy designed to transform Focus into a significant mining company," he added.