16/04/2010 - 14:44

Kagara to raise $76m for gold spin-off

16/04/2010 - 14:44

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Kagara has today revealed details of its long-awaited initial public offer for spin-out Mungana Goldmines, which will hold the miner's gold assets.

Kagara to raise $76m for gold spin-off

Kagara has today revealed details of its long-awaited initial public offer for spin-out Mungana Goldmines, which will hold the miner's gold assets.

Kagara had first flagged the gold spin-off last year and had planned to float it on the Australian Securities Exchange in July, however adverse market conditions kept the plan on the drawing board.

Under the IPO, 80 million shares will be offered at 95 cents each to raise up to $76 million.

The IPO is being managed by Southern Cross Equities.

More than 50 per cent of Mungana's shares will be offered to existing Kagara shareholders on the basis of one Mungana share for every 16 Kagara shares held.

At the end of the IPO, Kagara will hold a 49 per cent stake while Kagara's major shareholder, China's Guangdong Foreign Trade Group, will become a cornerstone interest with 16 per cent of Mungana's total share capital.

On listing, Mungana will have 157 million shares on issue, giving it a market capitalisation of $149.2 million.

The company's key assets are the Mungana and Red Dome gold deposits, located in north Queensland, which have a combined resource of 1.85 million ounces of gold, 180,000 tonnes of copper and 13 million ounces of silver.

Funds from the IPO will be used to carry out mining studies and a drilling program, which will pave the way for a bankable feasibility study.

Under an agreement, Mungana will have access to Kagara's operational facilities in the north Queensland area, following a payment of up to $26 million to Kagara for the reimbursement of historical costs.

Mungana aims to list on the ASX on May 27.

 

 

The announcement is below:

 

Kagara Limited (ASX: KZL) is pleased to announce that the spin-off of its North Queensland gold assets is proceeding following lodgement of the Prospectus for the $76 million Initial Public Offer (IPO) of Mungana Goldmines Limited ("Mungana" proposed ASX Code: MUX).

The Mungana IPO provides Kagara shareholders and other investors with an opportunity to participate in one of the largest and most significant gold IPOs in Australia in recent years, with a large JORC compliant resource base of gold and copper, access to established mine infrastructure, a target to commencement of development within 24 months and outstanding exploration upside.

Mungana, which was formed last year to house and develop the gold interests of the Kagara Group in the richly endowed Chillagoe region of North Queensland, today lodged a Prospectus with the Australian Securities and Investments Commission (ASIC) to raise up to $76 million through an issue of 80 million shares at a price of $0.95 per share.

The Offer will be open to the public together with a priority allocation of just over 50% of shares to be offered to existing Kagara shareholders on the basis of 1 Mungana share for every 16 Kagara shares held at the record date of 27 April 2010.

Kagara will retain a 49.0% stake in Mungana (assuming full subscription), while its major shareholder, China's Guangdong Foreign Trade Group (GFTG), will acquire a cornerstone interest of 16% in Mungana by subscribing for shares in the IPO.

The IPO comprises a Retail Offer which opens on 27 April and closes on 18 May and an Institutional Offer which opens on 21 May and closes on 24 May. The Retail Offer may be closed earlier without notice. Southern Cross Equities is the sole lead manager to the IPO with Macquarie Private Wealth a broker to the IPO.

After listing Mungana will have 157 million shares on issue, giving it a market capitalisation at the issue price of $149.2 million.

Mungana's key assets are the Mungana and Red Dome gold deposits, located in the Chillagoe region of North Queensland, which have combined Measured, Indicated and Inferred Resources totalling 1.85 million ounces of gold, 180,000 tonnes of copper and 13 million ounces of silver.

Mungana will have access to existing mine infrastructure, including underground decline development at Mungana, on which Kagara has expended $130 million. This together with its strong JORC compliant resource base and outstanding exploration upside will enable Mungana to hit the ground running when it lists on the ASX in late May.

The proceeds of the raising will be used to undertake mining studies and a definition drilling program at the Mungana and Red Dome gold deposits culminating in a Bankable Feasibility Study (BFS) to assess the optimal development strategy for these deposits.

The Company is targeting a resource capable of sustaining production of 150,000 ounces of gold and 60,000 tonnes of copper concentrate annually.

Mungana will also have access to a strong pipeline of exploration targets that will be explored through one of the largest and most active gold exploration and development programs undertaken in Australia in recent times.

This program will involve over 100,000 metres of drilling over the next 12-18 months at a cost of approximately $30 million and will include in-fill drilling of known resources for conversion into reserves as well as geotechnical and metallurgical drilling for the BFS and exploration of a host of
regional targets.

Under a Gold Rights Agreement with Kagara, Mungana will have access to Kagara's operational facilities in the Chillagoe region, including its regional expertise and geological database, which dates back to the 1980s.

At completion of the IPO, Mungana will also make a payment up to $26 million to Kagara depending on subscription levels to reimburse historical costs incurred in the development of the Mungana Gold Project.

Kagara's Executive Chairman, Mr Kim Robinson, said the launch of the Mungana IPO marked a major milestone for the Group, bringing to fruition its strategy to realise value from its high quality gold assets in North Queensland and accelerate the development of these assets towards production within a targeted 24 month timeframe.

"The listing of Mungana Goldmines will realise our long-held vision for these quality gold and copper assets in North Queensland by housing them within a separate listed vehicle with a dedicated focus, corporate structure and commitment to unlock their value," Mr Robinson said.

"Kagara will retain at least 49% of the equity in Mungana and there will continue to be a close working relationship between the two groups, both at the corporate and operational level," Mr Robinson said.

"This extends to the fact that the two companies will have a common major shareholder in the Guangdong Foreign Trade Group, which has shown strong support and confidence in the future of Mungana Goldmines by committing to subscribe for shares in the IPO amounting to a 16% stake in the Company on listing.

"Kagara shareholders are being offered a priority allocation of shares in the IPO and with GFTG's support, Kagara's existing shareholders, are expected to hold up to 36% of Mungana depending on subscription levels," he continued.

"This is a fantastic opportunity for our shareholders andothers to participate in the growth and development of a major new Australian gold company." Mungana will also benefit from a proven leadership team led by the Company's Managing Director, Pat Scott, who has extensive international mining experience including previous roles developing successful, high profile gold mines such as Western Australia's Bounty Gold Mine and the Tanami Gold Mine in the Northern Territory.

Alongside Pat Scott, the board will comprise experienced mining executive Joe Treacy as nonexecutive Chairman, prominent corporate finance and resources executive John Fitzgerald and mining industry executive Ross Hutton as non-executive Directors.

 

 

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