[miningmx.com] – WITWATERSRAND Consolidated Gold Mining Company (Wits Gold), a Johannesburg-listed gold exploration company, said it would “undertake a capital raising’ in the second half of its 2013 financial year in order to repay a R40m loan.
If it failed to raise the required capital, it would make efforts to scale back planned expenditure, it said.
“These adjustments will ensure that the company can continue as a going concern for at least 12 months beyond the approval date of these summarised audited results,’ Wits Gold said. The company was commenting in notes to its annual results ended December 31, 2012.
Cash and cash equivalents fell to a mere R15m as of December 31 from R111.6m at the end of the previous financial year. In addition to R18m in losses for the 2012 financial year (FY11: R24.6m), the company spent just north of R50m completing the purchase of the Merriespruit mineral rights from Harmony Gold.
Importantly, Wits Gold is an gold exploration and development company and therefore does not generate any cash. The company does want to become an operating firm, however.
Wits Gold said the funds from a successful capital raising would also be directed towards unspecified “operational expenditure’, and to fast track the development of its De Bron/Merriespruit (DBM), a prospect in the southern Free State province that could yield production of 200,000 ounces/year in terms of a recently completed prefeasibility study.
Peak funding of Wits Gold’s DBM project was estimated to be R2.37bn, the prefeasibility study found. Wits Gold has a current market capitalisation of R465m.
No mention was made of Wits Gold’s possible interest in acquisitions, however. CEO Philip Kotze was quoted by BDLive earlier this month as saying the company was potentially interested in buying AngloGold Ashanti’s Navachab mine in Namibia.
He also reiterated his interest in mining Burnstone, an operational gold mine currently the property of Great Basin Gold which is in business rescue proceedings. Wits Gold had spent R20m studying its options for Burnstone, Kotze told BDLive.
Kotze said by text response to Miningmx questions that he could not comment on the proposed capital raising. Clearly, however, the low level of cash means that the balance sheet needs to be bolstered as a necessity, notwithstanding the weakness in Wits Gold’s share price.
All gold equities have suffered in the last 12 months to two years, but Wits Gold has been under pressure more than most. In the last 12 months, the stock is some two-thirds weaker.
In fact, the share price weakness prompted Wits Gold chairman, Adam Fleming, to declare his interest in adding to his 20% stake in the company. “It is . my intention to purchase shares from time to time at around current market levels which I believe to be anomalous,’ he said on November 15.
Since then, Fleming has bought about 63,000 Wits Gold shares, all in November, when the company was trading at about R25/share. The stock has nearly halved in that time, but Fleming has not been back into the market, according to published announcements on Wits Gold’s website.
Wits Gold has a R40m loan with the Joburg Trust which is a related party. In terms of the loan, it pays interest of 10.07% on a monthly basis. The loan is repayable by December 31 in 2014.
