Australian resources company Stirling Resources (ASX: SRE), has reached a deal with administrators of Monarch Gold to inject funds into Monarch Gold Mining Limited (ASX: MON) to fund the recommencement of operations at the Davyhurst and Mt Ida gold projects located in the Western Australian Goldfields.
In July 2008, Monarch Gold was placed in voluntary administration and de-listed due to the continued underperformance of the Davyhurst open pit mine.
The prize?
With the strong rise in the gold price over recent times the previous cash negative operations of Davyhurst would now deliver a healthy cash margin for Stirling.
Stirling will provide the capital through wholly-owned subsidiary, Stirling Gold Pty Ltd and the agreement will ensure all Monarch creditors and debt providers receive 100 cents in the dollar, being a total payout of $55 million, based upon creditor figures provided by the Administrator.
The aim was to recommence the operations as soon as possible, ahead of a proposed name change and re-listing on the ASX. Stirling Resources has undertaken an extensive $250,000 mine study which included reassessing, reviewing, mine planning including metallurgical, engineering and geological analysis.
Mt Ida was targeted to produce 48,000 ounces per year at a projected cash cost of A$450/oz and Davyhurst which was intended to be re-commissioned within three months of settlement with a production target of 65,000 ounces per year at a projected cost of A$850/oz.
Stirling Resources is expected to ultimately hold in the order of 40% of Swan Gold Mining Limited. Equity funding for Swan Gold Mining is expected to be satisfied by Stirling Gold issuing a Commercial Bond to Austrian international commodity leader DCM DECOmetal, a major shareholder in Stirling Resources.
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