Sandfire Resources has announced plans to raise $102 million via a rights issue and an institutional placement to underpin development and exploration of its DeGrussa copper-gold project near Meekatharra.
Sandfire Resources has announced plans to raise $102 million via a rights issue and an institutional placement to underpin development and exploration of its DeGrussa copper-gold project near Meekatharra.
In a statement to the Australian Securities Exchange, Sandfire said the capital raising would position the company to start construction of the mine in 2011 and deliver open pit production by the end of the year.
The Entitlement Offer will comprise an underwritten 1 for 12 accelerated non-renounceable pro-rate entitlement offer to raise $72 million at an offer price of $6.60.
The $30 million underwritten share placement, to institutional and sophisticated investors, will be undertaken via an institutional bookbuild with an underwritten floor price of $7.00.
Sandfire intends to use the money, along with existing cash resources of about $35 million to fund completion of the current pre-feasibility study and a definitive feasibility study of the DeGrussa project.
The company also hopes to complete pre-development and infrastructure activities.
"After considering a range of funding alternatives in conjunction with our corporate adviser, Goldman Sachs, we decided that this was the best option for shareholders for a number of reasons," said Sandfire managing director Karl Simich.
"Firstly, it facilitates the introduction of new Australian and International institutional investors to the Company's register while allowing existing shareholders to participate on attractive terms.
"Secondly, it enables the Company to complete the DFS and enter into project funding discussions in a strong financial position and with the ability to commence development of the high-grade open pit resources at DeGrussa while construction of the plant and underground development commences.
"This will ensure that we are able to commence copper-gold production in a timely manner.
"Finally, it ensures that we can maintain our robust exploration activities at DeGrussa, both within the 6km long near-mine corridor and more broadly within our 400km2 tenement position, where we consider there is potential for additional new discoveries," Mr Simich said.
See company statement below:
Sandfire Resources NL (ASX: SFR; "Sandfire") is pleased to announce a $102 million equity raising to underpin initial development and ongoing exploration of its DeGrussa Copper-Gold Project in Western Australia, positioning it to commence construction in 2011 and deliver first open pit production by the end of that year.
The equity raising will comprise a 1 for 12 accelerated non-renounceable pro-rata entitlement offer ("Entitlement Offer") to raise approximately $72 million, and an underwritten institutional placement ("Placement", together the "Offer") to raise a minimum of $30 million.
The proceeds of the raising will be utilised, together with Sandfire's existing cash resources of approximately $35 million, to assist in funding:
- completion of the current Pre-Feasibility Study ("PFS") scheduled for this Quarter and the Definitive Feasibility Study ("DFS") of the DeGrussa Project scheduled for the end of the first Quarter of calendar 2011;
- completion of other pre-development and infrastructure activities required for the DeGrussa Project, as well as completion of the approvals process;
- pre-stripping of the initial open pit, which is targeted to commence, subject to receipt of approvals, in the second Quarter of calendar 2011 to extract the high grade near-surface oxide and chalcocite material which lies above the main ore bodies. A portion of this has been classified as direct shipping material, with first production targeted by the end of 2011;
- deposits to be placed for the acquisition of key long-lead items for the proposed 1.5Mtpa concentrator; and working capital.
Sandfire's Managing Director, Mr Karl Simich, said the proceeds of the raising would enable the Company to maintain the current development momentum at DeGrussa and move from Pre-Feasibility through Feasibility and into construction and development scheduled for the middle of next year.
"After considering a range of funding alternatives in conjunction with our corporate adviser, Goldman Sachs, we decided that this was the best option for shareholders for a number of reasons," Mr Simich said.
"Firstly, it facilitates the introduction of new Australian and International institutional investors to the Company's register while allowing existing shareholders to participate on attractive terms."
"Secondly, it enables the Company to complete the DFS and enter into project funding discussions in a strong financial position and with the ability to commence development of the high-grade open pit resources at DeGrussa while construction of the plant and underground development commences. This will ensure that we are able to commence copper-gold production in a timely manner."
"Finally, it ensures that we can maintain our robust exploration activities at DeGrussa, both within the 6km long near-mine corridor and more broadly within our 400km2 tenement position, where we consider there is potential for additional new discoveries."
Sandfire recently announced plans to increase the targeted design throughput rate for the DeGrussa processing facility to 1.5Mtpa following the Phase III resource upgrade to 10.67 million tonnes grading @ 5.6% copper, 1.9g/t gold, 15g/t silver (containing 600,000t copper, 660,000oz gold, 5.1Moz silver) (see ASX Announcement - 3 September 2010).
Sandfire expects to announce a further update to this resource inventory later in November following completion of in-fill drilling and a revised resource estimate for the dispersion zone of near-surface oxide copper.
Entitlement Offer and Placement
The Entitlement Offer will be made on the basis of 1 new Sandfire ordinary share for every 12 existing Sandfire ordinary shares held at 5pm Perth time on Friday 19 November 2010 ("Record Date").
The Entitlement Offer is underwritten and will raise approximately A$72 million. The Entitlement Offer will consist of an institutional component ("Institutional Entitlement Offer") and a retail component ("Retail Entitlement Offer").
The Entitlement Offer price will be $6.60, which represents a 15.2% discount to Sandfire's last close on Monday 15 November 2010, and a 14.2% discount to the theoretical ex-rights price ("TERP").
The Placement is underwritten and will raise a minimum of A$30 million. The Placement price will be determined by way of a bookbuild process ("Institutional Bookbuild") starting from an underwritten floor price of $7.00, representing a 10% discount to last close on Monday 15 November 2010. The Institutional Bookbuild will also incorporate shares equal in number to entitlements not taken up by institutional shareholders and entitlements that would have been offered to ineligible institutional shareholders.
