Johannesburg — GOLD One has completed a critical step towards raising R65m in debt from two banks by agreeing on a value for its Modder East gold mine and the payment due to the company from its empowerment partner, Micawber, CEO Neal Froneman said yesterday.

The credit committees of Absa Capital and BNP Paribas are due to meet this month to decide on the loan after conducting extensive due diligence studies on Gold One's assets, the flagship of which is the Modder East mine.

Gold One is raising the R65m to fund convertible bonds due in December in case all the bondholders decide to exercise the option to cash in their bonds.

Part of the banks' requirements was an agreement on the mine's value, which the parties set at R2bn, including a payment from Micawber of R520m for its 26% stake in the operation.

"This agreement (with Micawber) allows us to complete the debt financing, which we couldn't have done unless we got to this point," Mr Froneman said yesterday.

"The banks wanted security over the assets so the BEE (black economic empowerment) partners had to agree to release their 26% portion for security."

Micawber has six months to arrange financing, failing which Gold One will begin charging interest on the R520m and initiating a vendor financing arrangement, which will see it retain profits from Modder East until the capital and interest are repaid. New-order mineral rights for Modder East are expected in the next six months, Mr Froneman said.

Sandile Zungu, whose African Vanguard Resources is one of the empowerment entities in the Micawber consortium, said first prize would be to secure the R520m from Absa and BNP because they understand the assets, having done the work to prepare for a financing decision.

"Our first attempt will be to approach those banks to see whether they've got a bigger appetite to lend for the empowerment portion," Mr Zungu said.

"We've not started formal discussions with them, but we have established there is a certain level of confidence that when we do they will be aware of what we are talking to them about," he said.

The R2bn value put on Modder East is well above the market capitalisation of R1,49bn, but below estimates of three analysts who evaluated it, Mr Zungu said.

Given the international concerns about the risk of mining in SA and the preponderance of Australian shareholders on the dual-listed company's register, it would not be surprising if Gold One begins focusing its growth intentions outside SA.

It has prospects in Namibia and Mozambique.

Debt financing for Micawber would be preferable to the vendor financing option because it would inject capital into the company, which has a pipeline of projects it will need to finance.