Charlotte Mathews
2 October 2008
Johannesburg — PAMODZI Gold's shares gained 4% or 5c to 120c on modest volumes of trade yesterday after it said it had conditionally secured half of the R400m financing it needed, after four months of negotiations.
Uncertainty over its future, together with general negative sentiment towards junior miners, has seen the shares in steady decline from R10 in January and R15 a year ago.
In May Pamodzi Gold said it was seeking to raise $50m from a consortium of international and local investors to recapitalise the President Steyn and Orkney mines, acquired on March 1. After the consortium dropped out, citing inadequate security, Pamodzi turned to local funders.
It said yesterday the Industrial Development Corporation (IDC) had approved a R200m loan, on condition that agreements were secured for the other R200m.
One of Pamodzi Gold's short-term funders had asked to convert its R103m of debt into equity after the conclusion of the R400m fundraising. Pamodzi Gold said it would hold a rights issue, underwritten by its holding company Pamodzi Resources and funded by the debt provider, to do so, which would increase its black empowerment holding.
The refinancing of R103m of debt by shares at the current price would necessitate issuing almost 100-million shares, roughly doubling the company's issued share capital of 93-million shares.
The company's latest results showed gearing was about 56% at the end of June, which would rise to 183% with the addition of another R400m in debt, before the new equity issue.
Pamodzi Gold CEO Peter Steenkamp said the company was getting reasonably good terms from the IDC, and other potential funders had only been waiting for the IDC to commit, which it did this week, before making a decision. He expected the other R200m would be raised in the next days or weeks.
The loan funding, together with the money raised from the rights issue and the restructuring of the company's hedge book on its East Rand operations, would enable Pamodzi Gold to grow revenue, Steenkamp said.
The President Steyn and Orkney mines performed well below potential in the three months to June, as large areas were unsafe to mine and critical items of equipment including refrigerators and winders had to be repaired. Lower volumes pushed up unit costs.
Pamodzi said once financing was available, production would increase within six months to 96000oz of gold a quarter from all its operations at a cost of below $650/oz and within a year to 105000oz a quarter at a cost of below $600/oz. In the June quarter Pamodzi produced 56385oz of gold at a cost of $996/oz.
Pamodzi made a headline loss of 355c a share in the six months to June compared with a loss of 500c in the year to December on revenue of R541,6m (R369,3m), taking the realised hedge loss into account.
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