[miningmx.com] — VILLAGE MAIN REEF GOLD MIN COMP LD announced on Thursday it has entered into a binding agreement to purchase 74% of Consolidated Murchison mine from To The Point Growth Specialists (TTP) for R30m.
Consolidated Murchison is a 1.3 million ounce equivalent gold deposit, which produces both gold and antimony.
The remaining 26% of the issued share capital of CMM is held by a BBBEE staff trust for existing employees of Consolidated Murchison.
Located near Gravelotte, in the Limpopo province, Consolidated Murchison is one of the largest global producers of antimony and is situated on one of the largest known antimony ore bodies. Together with antimony, the mine produces gold from its three operating shafts, Athens, Monarch and Beta.
Village will also acquire from TTP a mine management agreement for an additional consideration of R10m. Village will consequently be appointed to manage the mine for which CMM will pay Village a monthly fee of R605 000, immediately making Village cash generative.
Village will also raise and then advance to CMM, R20m in order to fund further expansion of the mine.
“The R20m injection will also self fund all of the mines’ future working capital requirements,” commented CEO of Village, Bernard Swanepoel.
The total purchase price of R40m for the acquisition will be payable in cash or through the issue to TTP of up to 18 million ordinary Village shares at a value of 220c.
The issue price represents a premium of 8.9% to Wednesday’s closing Village share price of 202c and a 2.5% discount to the 30-day volume weighted average traded price of 226c for Village shares on October 6 2010.
The 74% investment has significant upside potential for Village shareholders if the price is compared to the independent competent person’s valuation range, carried out by Minxcon, of between R200m and R400m for CMM.
Further value-add potential may be found through the treatment of the high grade gold tailings dam, likely improved antimony beneficiation and the
exploration of the adjacent properties.
“The transaction is in line with our stated strategy of acquiring a cash generative asset and will enable Village to evolve our strategy to that of the acquisition and transformation of mining assets into self sustaining mining activities,” said Swanepoel.
Shares in Village listed on the JSE surged after the announcement, trading 8.91% higher at 220c at around 15:35.
