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GBG's $100m rights issue for SA gold mine
Allan Seccombe
Posted: Tue, 24 Feb 2009

[miningmx.com] -- GREAT Basin Gold (GBG) will issue shares to raise US$100m to bring its Burnstone mine in South Africa into commercial production over the next 15 months and it’s hoping there won’t be too much of a discount to the market price, said CEO Ferdi Dippenaar.

The market to raise debt funding has changed markedly in the past six months and banks require mining companies to “put more skin in the game”, said Dippenaar.

“There are different pressures on us now how we put these kinds of things together now,” he told Miningmx.
we need money now
The banks will match the funding GBG puts into Burnstone, but the company has to raise the money first.

GBG has to raise $50m towards the Burnstone project, another $26m towards a standby facility for potential overruns and then $24m more towards operating capital for the mine until its start commercial production in June 2010.

“By the end of 2010 we should be cash flush, but we need money now,” Dippenaar said.

Mining will start at Burnstone this year and ore stockpiled ahead of the commissioning of the plant from June 2010. Burnstone’s output is forecast at 250,000 oz in 2010. It recently bought a metallurgical plant from Papua New Guinea which it hopes to fully commission in the same year.

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The book building exercise is underway and should be completed early next week and the price determined by around Tuesday, 2 March. The book will close a week to 10 days later.

“Now it’s all a function of interest in the issue. I’d expect we’ll not see a significant discount (to the current share price),” Dippenaar said.

“We are working at full speed at Burnstone and want to maintain that momentum. We don’t want anything to hold it up,” he said.

Metorex, a South African diversified miner with a focus on copper, recently issued shares at nearly a 50% discount towards raising R922m to complete a copper and cobalt project in the Democratic Republic of Congo.

A number of junior companies have brought their projects to a standstill because of the inability to raise funds because of the difficulties banks are experiencing and their reluctance to extend debt, as well as the dramatic fall in share prices, particularly those of exploration or development companies.

GBG’s Hollister project in Nevada is generating free cash, but banks declined to recognise this in assessing the funding risk for Burnstone.

A syndicate led by BMO Capital Markets and RBC Capital Markets is underwriting the issue.

South African institutions are included in the book build in an effort to increase the liquidity of the TSX and JSE-listed company’s shares on the Johannesburg bourse, Dippenaar said.