3rd October 2012
The ratification by Chinese group Xintai, of their investment in Vatukoula Gold Mines, VGM.LN provides a further boost to the company at a moment when both market and operational conditions for VGM are starting to look good.
With analysts remaining bullish on gold and no sign that the price is set to slip and with VGM now solving what has been an age old problem, under-capitalisation, the company is now well positioned to see through its operational transition.
It is this transition into a focus on foot-wall mining underground, a more efficient way of liberating Vatukoula's high grade gold from its ore body in what is a shift in emphasis from the less efficient strike drive mining method, the traditional way Vatukoula has been mined down the years.
Whilst strike drive mining at Vatukoula is good for volume and underground development, it does come at a cost and that is the mine to waste ratio is often high.
The move into mining through the foot-wall method is set to see Vatukoula mine a greater percentage of ore and less waste, putting higher grades through the mill.
The Chinese clearly have confidence in what the VGM mine management are doing and rightly so. If VGM comes out of this transition process the other side, the company will be in a great shape and the Chinese investors both Xintai and Zhongrun will have got themselves a really good stake in not just Vatukoula but also within Fiji itself where there is a raft of other mineral extraction opportunities, least of which is still Vatukoula that have a huge under-expored land package themselves!!!!!
In addition, should VGM set off on a deal with Fiji Sugar to build a biomass electricity generating facility, then this would be a really good value catalyst for Vatukoula, in a move that would significantly reduce power consumption costs and likely to mean a net reduction in cash costs per ounce by as much as $200
Below is the latest RNS release where I would like to draw your attention to the statement by the Xintai CEO Mr Wang,
Vatukoula Gold Mines Plc. (AIM: VGM), the AIM listed gold producer and explorer, provides an update to the announcement made on 29 August 2012 in relation to a binding placing agreement with Shengen Xintai International Mine Industry Group Co. Ltd. ("Xintai").
Under the agreement the placing is to be completed in two tranches via the issue of a £3,195,900 convertible loan ("Loan Note") and the issue of 13,812,374 new ordinary shares in the Company at a price of 51.65 pence per share ("Placing") to raise £7,134,091. The Loan Note will automatically convert to 6,187,626 ordinary shares upon closing of the Placing, such that Xintai will invest a total of £10.3 million to acquire a total of 20 million new ordinary shares
The Placing is conditional on the approval of the state authorities in China. As a result of longer than expected timeframes in obtaining the regulatory and administrative approvals Xintai have requested an extension to the date of completion of the Placing and the Loan Note. The long-stop date of the original agreement was the 3rd October 2012. Therefore given the above Vatukoula has granted a non-exclusive extension to the Loan Note until the end of October 2012 and the Placing until the end of November 2012.
Mr Dingli Wang, CEO of Xintai commented;
"Xintai remains committed to the placing and we continue to believe that Vatukoula represents an excellent investment opportunity. We have spent considerable time at the operations in Fiji and remain confident that the right strategy and management team are in place and are capable of delivering on their stated goals."
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