BEE poser for Galaxy Gold

Peter Skeat, Blyvoor Gold

[miningmx.com] — GALAXY Gold – the latest project to be developed by mining entrepreneur Peter Skeat – should list on the JSE by about August 18 following the raising of up to R400m from South African and UK investors.

That figure includes money needed to cover costs that would be incurred in servicing vendor finance arranged for Galaxy’s eventual black economic empowerment (BEE) partner should this be required.

Intention is to raise the funds through a book build targeting a share price range of between 500c and 700c.

Financial consultant Rene Hochreiter of Allan Hochreiter said indications so far from the initial road show presentations to South African institutions were promising.

“There seems to be plenty of investor interest in good gold projects at this time.

“Should we find there is appetite from investors to take up more than the R400m we are looking for we will take the extra money and dilute the existing shareholders further.’ he commented.

Despite this promising start Skeat said Galaxy’s back up plan was to raise funds from private equity investors and stay unlisted should insufficient funds be forthcoming from market investors.

Hochreiter commented this was not the preferred route because the private equity investors would drive a harder bargain.

“They would squeeze the share price below R5 a share and then look to list the company in two years or so,’ he said.

Skeat said plans to bring a BEE partner into Galaxy were “about 70% complete’ but added negotiations were complex because of the difficulties inherent in South Africa’s mining legislation.

Those issues were highlighted on June 30 during the signing ceremony held in Pretoria for the Stakeholders’ Declaration On Strategy For The Sustainable Growth And Meaningful Transformation of South Africa’s Mining Industry.

At question time Minister of Mineral Resources Susan Shabangu rejected the concept of “once empowered, always empowered’.

She said mining companies needed to always have an empowerment partner so, should the existing partner sell out, the mining company would have to find another one.

Legal expert Peter Leon – a partner in Webber Wentzel – commented at the time, ” I don’t know the basis for the minister’s comments because I don’t think there’s anything in the mining charter or the joint declaration that would require a mining company to empower itself again.

“I think such a requirement would be unfair, but the problem is that the issue of vagueness in the legislation has not been addressed. It’s essential to have these things spelt out.’

Other observors have pointed out that the requirement is “unfair’ to the BEE partner as well as the mining company.

Restrictions on freedom to sell mean the BEE partner may not be able to get full value for its asset.

Galaxy Gold now provides an actual example of the problems posed by the current situation.

Skeat said the three BEE options were to find a partner with the money to pay for its stake; take on a partner for whom Galaxy would have to organise vendor financing or bring on board one of the rich, established BEE companies.

He commented, “if you find a partner who is prepared to buy his way in then that partner will naturally – and justifiably – insist on the right to sell out when he wants to.

“But we have been told by the Department of Mineral Resources that we have to remain empowered which means we would then have to find a replacement for that partner.

“If we go the vendor financing route then we are providing the finance which means we can insist on locking the partner in for a specified time period.

“If we bring in one of the major BEE companies which will not want to sell out then we are further enriching an established operator which will not do much for the broad based economic empowerment that government wants to promote.’

Galaxy will trade on the JSE through a reverse takeover of listed Wesco Investments.

Galaxy’s operations are based on the mining lease of the Agnes mine near Barberton which a consortium led by Skeat bought for R17m in 2008.

Development work since then has revealed that a series of separate gold orebodies exist in close proximity to each other within the Agnes lease.

Skeat proposes to mine them in a totally novel way to the usual small-scale operations employed on these “greenstone’ gold mines which are typically high-grade but small operations.

He intends sinking a major decline shaft which will provide access for large haul trucks to the operations which will be mined using mechanised methods.

The increased scale of the operations will reduce costs so lowering the pay limit on the ore bodies and increasing profit margins.

The gold will be recovered from the crushed ore using Biox and carbon-in-leach technology.