16/07/2010 - 15:31

Merrill Lynch man heads $20m WA gold IPO

16/07/2010 - 15:31

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The former head of investment bank Merrill Lynch's metals team is spearheading one of the year's biggest resources floats, a $20 million initial public offer by Perth-based Dampier Gold.

Merrill Lynch man heads $20m WA gold IPO

The former head of investment bank Merrill Lynch's metals team is spearheading one of the year's biggest resources floats, a $20 million initial public offer by Perth-based Dampier Gold.

Dampier will be chaired by Russell Skirrow, a former senior gold executive of South African giant Gold Fields and one-time global chairman of Merrill Lynch's London-based metals and mining investment banking team.

The company will also enjoy the backing of Canadian gold giant Barrick Gold as its largest shareholder with a stake of at least 6.3 per cent and potentially as much as 23 per cent.

The float is the biggest local gold float since West Perth-based Kagara Zinc spun-off its Queensland gold assets as Mungana Gold Mines in a $53 million IPO in May.

Dampier is seeking to raise $20 million from the offer of 40 million shares at 50 cents, and will use the proceeds to complete the acquisition of a big tenement package around Barrick's big Plutonic gold mine, 180 kilometres north-east of Meekatharra.

The tenements, mostly granted mining leases, cover 700 square km and host 40 open pits that yielded over 560,000 ounces of gold from mining in the 1990s. The tenements also contain 264,000 ounces of defined resources.

The acquisition from Barrick includes an agreement to provide access to the under-utilised Plutonic processing plant and tailings dam, offices and accommodation camp, borefield, airstrip and on-site power station.

Dampier will pay Barrick $3.47 million for the assets, of which only $800,000 is cash and the rest comprises 3.4 million shares and 1 million options. Dampier is also required to replace environmental bonds worth $5.18 million over the next two years.

The company intends to spend almost $10.5 million on exploration over the first two years to rapidly build the resource base and commence early production.

The Plutonic Dome tenements being sold to Dampier include the Keillor and Triple P deposits mined as part of Resolute's rich Marymia gold mine in the early 1990s. Marymia was later sold to Plutonic's US owner Homestake, which subsequently merged with Barrick.

In its independent geologists report for Dampier, Xstract Mining Consultants said there was good potential to add to known resources, while the project's proximity to the Plutonic mine, its granted mining leases and access agreement with Barrick offered a "low risk path to future gold production".

In Dampier's prospectus, Mr Skirrow noted most mining on Dampier's tenements was undertaken when gold was trading at less than a third of current prices, underlining the opportunity created by current market conditions.

"Opportunity knocks for Dampier Gold as gold mining is very different in 2010 at close to US$1,200/oz gold," he said.

The Dampier offer is due to open on Monday and close on August 13.

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