Ndaba Ntsele, chairman Pamodzi Gold
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» Pamodzi Gold is one for the gamblers
» Pamodzi Gold offers a ray of hope
» Pamodzi Gold's funding plan in tatters
» Reviving two old mines will kickstart Pamodzi

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Pamodzi back on track with R400m loan
Allan Seccombe
Posted: Fri, 24 Oct 2008

[miningmx.com] -- PAMODZI Gold has received the R400m vital cash injection it needs to pull it from the brink of a disaster and focus on projects that will quickly ramp up gold output, lower costs and raise confidence levels in the company that will allow it to deal with an onerous hedge book.

The securing of two tranches of R200m from the Industrial Development Corporation and other investors will pour into the company in the next month.

Pamodzi will prise R103m debt off the balance sheet by converting it into equity in the company and boosting empowerment levels.

Pamodzi's shares were by far the best performer on a disastrous day on the JSE. Pamodzi gained 118% at 240 cents.

That’s how quickly we can turn this around
Gold production this year will be 200,000 oz on an annualised basis, something which acting chief financial officer Kobus du Plooy said is unsustainable.

Production can be ramped up to 360,000 oz from its three underground mines and one open cast project in 12 months, which will pull costs down to $600/oz, he said.

“We’ll be free cash positive in six months. That’s how quickly we can turn this around,” he said.

Pamodzi, which had basically run down to the wire and operating in survival mode, ran up large bills with suppliers after struggling to raise the R400m for nearly a year. One of the first priorities is restoring trading terms to 30 and 60 days.

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Pamodzi has earmarked R180m of its new funds to paying suppliers and other bills, chief operating officer Tony Murdoch-Eaton told Miningmx.

Another R30m will be pumped immediately into the President Steyn, which is possibly the flagship mine of the company and has the best growth potential of all the assets, Murdoch-Eaton said. Pamodzi will produce 400,000 oz by the end of 2009.

A single project costing about R3m to open a shaft rendered useless under previous owners will add 40-50 kg/month of gold to the cash-starved mine.

Miningmx has received a number of calls over recent months warning of the exodus of a number of senior people and raising the possibility that even if the cash injection was received it would battle restore the mines to their potential.

To Pamodzi’s advantage, Uranium One has shut its Dominion mine in the neighbourhood, putting a lot of skilled people onto the market.

“We’re going to have no problem finding the people we need because of Dominion and now that we have cash we need,” Murdoch-Eaton said.

The cash raising had been put in the hands of a bank instead of being done inhouse, which was a bad mistake, said Pamodzi chairman Ndaba Ntsele. The bank tried to raise cash offshore as the markets crumbled.

An announcement on restructuring the hedge and the appointment of a new financial director will be made soon, he said.