Kolar Gold Limited GMSI Investment and Jonnagiri Update (1505Y)
27 November 2014 - 8:01AM
UK Regulatory
TIDMKGLD
RNS Number : 1505Y
Kolar Gold Limited
27 November 2014
27 November 2014
Kolar Gold Limited
("Kolar Gold" or the "Company")
Further investment in Geomysore Services India Private
Limited
and commencement of new drilling programme at Jonnagiri
Further to the update given to shareholders in July, the Board
of Kolar Gold is pleased to announce that an agreement has been
entered into by the major shareholders of Geomysore Services India
Private Limited ("GMSI"), Kolar Gold's exploration partner in
India, for new working capital funding for GMSI. The agreement
comprises up to INR 144.7 million (GBP1.49 million)* of equity
funding for a drilling contract and up to INR 158.2 million
(GBP1.63 million) of equity funding for exploration activities from
its major shareholders including Kolar Gold. Kolar Gold intends to
participate pro-rata to its shareholding, amounting to INR 42.6
million (GBP0.44 million), but it also has the option to subscribe
for further shares to the extent that any of the other shareholders
do not take up their pro-rata entitlements. Additionally, as part
of the new funding arrangements, Kolar Gold has been granted an
option ("the Kolar Gold Option") for 12 months from now to
subscribe for a further INR 128.1 million (GBP1.32 million) in
equity in GMSI at the same INR 1,098.0 million (GBP11.32 million)
pre new money valuation at which shareholders would be subscribing
for shares in this funding round.
This agreement will enable GMSI to continue a significant
exploration drilling campaign for up to 15,800m of resource
drilling at the Jonnagiri Mining Lease project in Andhra Pradesh
that aims to extend the currently delineated ore bodies, which have
a 710koz JORC defined resource and a validated 2-5Moz exploration
target. The results of this drilling programme will enable
pre-feasibility studies to commence to assess the viability of
constructing a new gold mine. New procedures have also been put in
place for the strengthening of the management team at GMSI and for
the ongoing review of the drilling activities.
New Shareholders' Agreement and Subscription Agreements in
GMSI
The major shareholders in GMSI have entered into a new
shareholders' agreement and subscription agreement whereby they
intend to subscribe for up to INR 158.2 million (GBP1.63 million)
in new equity to provide GMSI with working capital for its
exploration operations over the next nine months, pro rata to their
current shareholdings, at a pre new money valuation for GMSI today
of INR 1,098.0 million (GBP11.32 million). The INR 158.2 million
(GBP1.63 million) funding will be undertaken in four tranches
between November 2014 and May 2015. Any shareholder not subscribing
in the first tranche can subscribe for subsequent tranches and
shares not subscribed for in any tranche can be taken up instead by
Kolar Gold and Thriveni Earth Movers Limited ("Thriveni"),a large
Indian miner and a major shareholder in GMSI since November
2013.
GMSI will extend a two rig drilling contract for up to a further
15,800m to increase and upgrade the gold resource at the Jonnagiri
mining lease area, at a total drill cost of up to INR 144.7 million
(GBP1.49 million), to be funded by the subscription by Thriveni for
further equity in GMSI, also at the same pre new money valuation
for GMSI today of INR 1,098.0 million (GBP11.32 million), within
the next 12 months.
Kolar Gold intends to subscribe for its pro-rata allocation of
the INR 158.2 million (GBP1.63 million) fund raising totalling INR
42.6 million (GBP0.44 million). If all major GMSI shareholders take
up their rights and the drilling contract is executed in full as
anticipated, Kolar Gold's interest in GMSI would be 22.9 per cent,
and if its INR 128.1 million (GBP1.32 million) option is exercised
in full this would rise to 29.3 per cent. Thriveni has indicated
that it is willing to subscribe for up to INR 79.1 million (GBP0.82
million) and AIR, a 36.7 per cent shareholder in GMSI, also intends
to subscribe for its allocation.
The subscription will provide GMSI with access to working
capital and enable it to take the next steps in determining the
viability of the Jonnagiri deposit as a producing mine. The
financing structure allows GMSI's shareholders to support and
review the drilling on an on-going basis. The Kolar Gold Option
gives Kolar Gold the ability to increase its stake in GMSI
significantly within the next 12 months.
As part of these arrangements, the major shareholders are
entering into a new shareholders' agreement to implement new
procedures and controls especially with regard to the ongoing
review of the drilling activities. Additionally, the management
team of GMSI is to be strengthened with the recruitment of a new
CEO and senior mining engineer and an increase in the size of the
geological team. The current CEO of GMSI will be leaving GMSI at
the end of December to concentrate on the role as CEO of Deccan
Gold Mines Limited.
As at 30(th) June, 2014 Kolar Gold's shareholding in GMSI was
24.2 per cent. Since the year end GMSI's shareholders have funded
further exploration and working capital costs through a rights
issue, in which Kolar Gold participated slightly in excess of its
pro rata entitlement by subscribing INR 17.3 million (GBP0.18
million), so that Kolar Gold currently holds 25.3 per cent of
GMSI.
Kolar Gold expects to announce shortly its annual results for
the year ended 30(th) June, 2014. These will show cash balances at
the year-end of GBP3.4 million.
Commenting on the new funding agreement, Harvinder Hungin,
Chairman of Kolar Gold, said:
"This agreement is a very important step for GMSI in its
transformation from an exploration company to becoming ultimately
one of the first new gold producing companies in India for 30
years. We are delighted to be working closely with GMSI and to be
funding the company alongside its other major shareholders. Kolar
Gold has a significant interest in GMSI and the option to increase
this over the next 12 months. This is a major step forward in our
India gold strategy and I look forward to reporting positive news
regarding drill results to shareholders over the next few
months."
For further information, please visit www.kolargold.com.au or
contact:
Kolar Gold Limited
+61 414 874 491 / +61 417
Nick Spencer / Chris Clowes 197 288
N + 1 Singer (Nomad and Joint Broker)
James Maxwell / Jen Boorer +44 20 7496 3000
Pareto Securities (Joint Broker)
Will Slack +44 20 7786 4370
Tavistock Communications
Ed Portman / Nuala Gallagher +44 20 7920 3150
Churchgate Partners
Sumir Bhardwaj +44 7768 696760
-END-
* Based on exchange rate of INR97/GBP as at 21 November 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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