08/11/2007 - 16:00

Monarch pays $65m for Hill 50 gold

08/11/2007 - 16:00


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Michael Kiernan's Monarch Gold Mining Co Ltd has agreed to pay $65 million for Harmony Gold's Mt Magnet gold operations, including the Hill 50 mine.

Michael Kiernan's Monarch Gold Mining Co Ltd has agreed to pay $65 million for Harmony Gold's Mt Magnet gold operations, including the Hill 50 mine.

The acquisition is part of Monarch's strategy of builing a mid-tier gold producer with annual output of 500,000 ounces by 2009.

The payment will comprise $30 million in cash, $20 million in Monarch shares and $15 million as a three-year convertible note paying five per cent interest.

Monarch will put Hill 50 on care and maintenance for up to two years while its focuses on exploration, and was targeting production of 150,000 ounces when the mine was reopened.



The full text of a company announcement is pasted below

Monarch Gold Mining Company (ASX / DIFX:MON) has boosted its golden footprint with the $65 million acquisition of the Mount Magnet Gold Operations project which includes the historic Hill 50 mine.

Monarch has acquired the project from South African based Harmony Gold Mining Company (JSE/HAR), and includes the Hill 50, Great Fingall, St George, Star and Big Bell mines.

Consideration for the acquisition is $65 million which is made up of cash, equity and convertible notes.

The asset package comprises a resource inventory of 2.7M ounces of gold, tenements covering approximately 1,100 square kilometres, along with a 2.7mtpa capacity plant.

The resource inventory of 2.7m ounces of gold are comprised as Measured Resource 1.1 million tonnes @ 3.1 g/t Au for 0.1 million ozs, Indicated Resource 16.0 million tonnes @ 3.4 g/t Au for 1.7 million ozs and Inferred Resource 9.0 million tonnes @ 3.0 g/t Au for 0.9 million ozs.

Monarch Chairman Michael Kiernan said the acquisition was a defining step for the Company and its shareholders.

"This is a world class mining project, with one of the largest landholding packages in the area," Mr Kiernan said.

"This is a significant step toward achieving our goal of becoming a 500,000 ounce per annum gold producer by 2009, and this project will provide a substantial contribution to profit for Monarch shareholders," Mr Kiernan said.

The acquisition will complement Monarch's current projects in the WA Goldfields region, where it is the largest independent landholder. Following the acquisition, Monarch will have total JORC compliant resources of 5.0m ounces.

"Monarch now has two world class gold mining projects - Davyhurst/Mt Ida and Hill 50 - and with the gold price now surpassing US$800 per ounce, we are well positioned to capitalise on the potential of these historic projects," Mr Kiernan said.

Harmony's acting Chief Executive Graham Briggs said the company had divested the project as part of a global corporate reorganisation of its assets.

"Harmony views Monarch as being the best-placed gold mining company to drive this project forward, and with a significant equity interest in the development of the project, we have confidence that there is long term value in the project under the Monarch umbrella," he said.

Mr Kiernan said Monarch intended to put the Hill 50 mine on care-and-maintenance for up to two years, while it focussed on exploration activities across landholdings.

Monarch will launch a substantial drilling program on the landholding to extend the current 2.7 million ounce gold resource base.

"We will allocate $10 million per year for the next two years into exploration on the extensive Mt Magnet tenements, with a dedicated explorative team to review and re-optimise existing resources," he said.

Mr Kiernan said the Company aimed to recommence mining within 18 - 24 months, and had an initial production target of 150,000 ounces per annum.

The acquisition would be partly funded through capital raised in Monarch's listing on the Toronto Stock Exchange (TSX) in early 2008. In preparation for the TSX listing, Monarch will consolidate its capital on a one-for-three basis.


Total consideration for the acquisition is A$65 million, including:

  • Cash A$30 million
  • Monarch shares (issued at 7 day VWAP) A$20 million
  • Convertible note A$15 million
    • 3 yr term
    • 5% per annum interest
    • 30% premium for conversion to issue price
    • Secured by the asset

A$5 million deposit on signing of contract with Harmony (50% non-refundable).
The Monarch shares to be issued will be subject to shareholder approval.


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