New entity for Gold One’s Megamine

[miningmx.com] — AUSTRALIA and JSE-listed mining junior GOLD ONE INTERNATIONAL LIMITED is set to proceed with spin-off plans for its Megamine assets when it launches Goliath Gold later this week.

After the group’s media office on Monday extended invitations to the launch of Goliath Gold on Wednesday, investor relations manager Ilja Graulich said although he could not comment on the nature of the new company, it has for a while been on record that Gold One is seeking a separate vehicle for Megamine.

The project incorporates the consolidated areas in the vicinity of the three former gold mines of Spaarwater, Vlakfontein and West Vlakfontein, east of Johannesburg.

The main reason for a separate listing is that Megamine’s resources were deeper and therefore riskier than Gold One’s other assets, notably its shallow depth Modder East flagship.

In a resources update issued on Monday, Gold One said Megamine’s audited resources increased by 115% to 12.65 million ounces.

“The substantial increase in the Megamine resource base is the result of intensive desktop studies, which were completed over the past year,’ read the statement.

“Together with the company’s geological advisers Gold One has collected, collated and verified a significant historical database.’

SHARE SURGE

Shares in Gold One surged on Monday, after the company also posted details of a significant production increase at Modder East.

According to the update, Gold One production for the September quarter amounted to 19,470oz, a 58% increase relative to June quarter output of 12,287oz and in line with earlier guidance of between 18,000oz and 20,000oz.

In Australia, the share closed 8.5% higher at 32 Australian cents. At around 15:00 local time, Gold One also traded 6.19% higher on the JSE at 223c.

The spike followed a lacklustre performance by the share in recent months, which dropped from a 12-month high of 244c to a low of 181c in June.

In September, CEO Neal Froneman suggested the main reason for the uninspiring showing could be investor uncertainty about the financing of convertible bonds maturing in December.

This obstacle was, however, largely removed last week when the group said it had received credit approval for a $65m facility from Absa Capital and BNP Paribas.

Imara SP Reid analyst Percy Takunda said the take-off in Gold One’s shares was surprising, given that production numbers were in line with an earlier forecast.

“Perhaps it’s because the firm is able to keep its promises,’ he said. “They don’t appear to be too grand.’

RBC Capital Markets analyst Leon Esterhuizen said the stock is exceptionally cheap and, given the earnings potential derived from production figures, the company has a lot of upside.

RBC has given Gold One an “outperform’ rating.