17/03/2021 - 11:00

Red 5 in mega raising for KOTH

17/03/2021 - 11:00

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Red 5 says its King of the Hills project in WA is now fully funded, after the goldminer secured $235 million in debt and equity financing.

Red 5 in mega raising for KOTH
First gold production at King of the Hills is expected in the June quarter of 2022. Photo: Red 5

Red 5 says its King of the Hills project in Western Australia is now fully funded, after the goldminer secured $235 million in debt and equity financing.

The package comprises a $175 million loan facility with three banks and a fully underwritten rights issue to raise $60 million.

Red 5 will use most of those funds to complete the development of its 2.5-million-ounce KOTH project near Leonora, which it acquired from Saracen Mineral Holdings in 2017 for $16 million.

KOTH is a bulk mining operation, expected to produce an average 176,000oz per annum within the first seven years of its 16-year operating life, followed by 146,000oz per annum, according to a final feasibility study released in September last year.

First gold production is expected in the June quarter of 2022.

Red 5 recently named Macmahon Holdings as the preferred open-pit and underground mining contractor for KOTH under a $650 million, five-year agreement.

Work on the KOTH process plant is being undertaken by fellow Perth business MACA, under a $129 million contract.

Today, Red 5 said the funds raised would also go towards drilling and development works associated with its nearby Darlot operations.

Red 5 is planning to become a substantial mid-tier Australian gold producer, according to managing director Mark Williams.

“With multiple work streams already well under way and our EPC contractor advancing to phase two of the plant construction contract, KOTH is a busy work environment, as we have outlined in recent announcements,” Mr Williams said.

“Having received commitments for the project financing, Red 5 can move ahead with the development of one of the most significant new long-life gold projects currently under development in Australia.”

He said the company would likely make its first draw-down from the debt facility in the coming June quarter.

The facility is being provided by Macquarie Bank, HSBC and BNP Paribas (Sydney), and in includes a $15 million cost overrun and working capital facility.

Shares issued under the four-for-21 rights issue will be priced at 16 cents per share.

Red 5 said its directors had each confirmed their intention to subscribe for all their entitlements.

Petra Capital and Canaccord Genuity are acting as joint lead managers, bookrunners and underwriters to the offer.

Red 5 remains in a trading halt, expected to lift on March 19.

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