Goldstar finalises second tranche $2.9m capital raising

West Perth-based gold explorer Goldstar Resources NL has finalised its tranche two placement to raise $2.9 million, following on from its recently completed $5.1 million tranche one share placement.

The total fund raising of $8 million will be used to expedite ongoing exploration and work programs at Walhalla gold project in Victoria and will provide the company with a cash position, together with existing cash reserves, in excess of $11 million.

The capital raising will include the placement of approximately 7.25 million shares at 40 cents largely to existing shareholders and institutional and sophisticated investors.

Kingsgate Consolidated Ltd has confirmed its commitment to subscribe for 3.943 million shares in the placement to maintain its existing interest at 19.72 per cent in the company.

Below is the full ASX announcement:

Following its recently completed $5.1 million share placement, Goldstar Resources NL (ASX: GDR) today announced that it had finalised the allocations for the placement of approximately 7.25 million shares at 40 cents largely to existing shareholders and institutional and sophisticated investors, raising a further approximately $A2.9 million.

While fully allocated, with requests for shares strongly exceeding availability, the allotment of this second Tranche remains subject to shareholder approval.

The first Tranche, comprising 12.75 million shares at 40 cents to raise $5.1 million, under GDR's 15% placement facility, will be placed with high net worth clients of Zurich Trust Ltd through its nominee, Z Nominees Ltd (Zurich Trust Ltd is a subsidiary of Zurich Financial Services).

Goldstar has convened a general meeting of shareholders to be held on 3rd April 2006 to approve the placement of the second Tranche of shares, as required under the ASX Listing Rules. The shares, under the tranche 2 placement, will be issued following this meeting.

The Tranche 2 placement, comprising approximately 7.25 million shares at 40 cents, has been supported by Goldstar's major shareholder, Kingsgate Consolidated Limited, which has confirmed its commitment to subscribe for 3.943 million shares in the placement to maintain its existing interest in the Company. The placement has also been well supported by investor clients of Sydney-based Southern Cross Equities Ltd and Melbourne-based Cygnet Capital Pty Ltd.

Subject to shareholder approval for the second tranche, the proceeds of the overall share placements will amount to $8.0 million. Together with Goldstar's existing cash reserves, this will increase the Company's cash position to in excess of $11 million, providing a strong platform for its ongoing aggressive exploration programmes and growth objectives at the Walhalla Gold Project in Victoria.

All the placement shares will rank pari passu with the Company's existing ordinary shares. Following allotment of the all the shares pursuant to both the placements, Goldstar will have a total of approximately 105.4 million shares on issue. As previously advised, the funds raised through the placements will be applied to expedite ongoing exploration and work programmes at Walhalla.

Goldstar recently announced that it had moved to accelerate the Eureka Bulk Sampling Scoping Study in light of the positive outcome of the geological model, which quantified an estimated 430,000 tonnes of potentially high-grade quartz reef material and a further 900,000 tonnes of mineralised material in the surrounding dyke and sediments within the Eureka Dyke Bulge.

Goldstar would like to take the opportunity to welcome the new shareholders. We would also like to thank Southern Cross Equities and Cygnet Capital together with both new and current shareholders for their support in the current capital raising and look forward to them sharing in the future development of the company.