TIDMCGO
RNS Number : 4018C
Contango Holdings PLC
19 October 2020
Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural
Resources
19 October 2020
Contango Holdings Plc
('Contango' or the 'Company')
Contango Acquires The Garalo Gold Project in Mali and Raises
GBP1.8 million at 5p per Share
Highlights
-- Acquisition of the Garalo Project for gross consideration of US$1M
-- Targeting production scenario of 30,000oz per annum
-- Further drilling expected to expand resource and mine life
-- Oversubscribed GBP1.8M capital raise provides funds for first gold production in H2 2021
Contango Holdings Plc, the London listed natural resource
development company, is pleased to announce the acquisition of the
Garalo Gold Project ("Garalo") in Mali for US$1M (the
"Acquisition"). The Acquisition of Garalo, which is expected to
commence gold production in H2 2021, further advances the Company's
strategy of acquiring defined assets with near-term production
potential and modest capital requirements.
In conjunction with the Acquisition, the Company has raised
GBP1,800,000 (before expenses) through an oversubscribed Placing of
36,000,000 New Ordinary Shares of GBP0.01 each ("Placing Shares")
at a price of 5 pence per Placing Share (the "Placing Price"). The
Placing was undertaken by its broker Brandon Hill Capital Limited
and is expected to provide sufficient funds to bring Garalo into
production in H2 2021.
The Garalo Project
The Garalo permit occupies 62.5km(2) in the Sikasso region of
southern Mali, 200km south-east of the capital Bamako and close to
the Guinea border. The permit is surrounded by a number of
multi-million ounce gold deposits and the region is home to some of
the world's leading gold miners, including AngloGold Ashanti,
IAMGOLD, Barrick, B2 Gold, Endeavour Mining and Hummingbird
Resources, which has helped to establish Mali as the third largest
gold producer in Africa.
Contango has secured an agreement to acquire Garalo for US$1M,
of which US$100K has already been paid to the vendor, who will
retain an initial 25%. The vendor's interest is not free carried
and will dilute in the event the vendor does not provide his pro
rata contribution to the development of Garalo. The balance of the
Acquisition cost, being US$900k, falls due in February 2021,
following conformational exploration work to be undertaken by
Contango in the period. It should be noted the deposit has been
known to certain members of the Contango team since 2015 and the
Company does not foresee any discrepancy with historical data
reviewed to date.
Garalo is an advanced discovery and has a non-independent
resource of 320Koz Au at an average grade of 1.5g/t across three
dominant structural trends. Garalo has been subject to the
following work to date:
-- regolith mapping and interpretation;
-- soil geochemistry;
-- airborne magnetic and radiometric surveys;
-- over 900 drill holes, which have returned grades of up to 43g/t.
To date the drilling programme has focused on the G1A and G3
targets, which cover a relatively small footprint of the licence
and remain open along strike, indicating further resource upside.
With the planned exploration work to be undertaken by Contango over
the coming months, the Company expects to be in a position to
reclassify the resource to JORC standards in 2021, in conjunction
with an anticipated increase in resource ounces. However, given the
attractiveness and robust nature of the economics and drilling
undertaken to date, the Company intends to trigger construction
ahead of this to enable first production in H2 2021.
Given the excellent infrastructure in the vicinity, historical
exploration and the deposit's surface location, the Company
believes the mine can be brought into production in H2 2021 for a
capital cost of just US$1.2M. This will enable initial production
of circa 10,000oz of gold per annum through an oxide plant, with
further capital required for subsequent production from the
sulphides. The Company is also looking at the potential of sourcing
a further US$4M through non-equity capital providers, which would
enable the Company to increase production to a rate of 30,000oz per
annum. Discussions are underway with regional banks, well versed in
the gold industry, as well as providers of royalties and the
Company is optimistic it will have sourced this additional funding,
without any dilution at the plc level, to enable a larger project
and significantly enhanced economics by the time construction is
scheduled to start in Q1 2021.
At current gold prices of circa US$1,900, the Company's mine
planning and block modelling studies suggest that margins on
production would exceed US$1,000/oz (at the 10,000oz per annum
production level). Consequently, the Board believes this would
result in a potential EBIT figure of circa US$1M per month from
Garalo. In the event a larger 30,000oz per annum mine was
constructed, the average cost per ounce of production would reduce
further, thereby increasing the margins and associated EBIT
figures.
An updated presentation with further information on the Garalo
Project has been uploaded to the Company's website:
https://contango-holdings-plc.co.uk/corporate-documents/#
Carl Esprey, Executive Director of Contango Holdings, said:
"I am delighted to confirm the acquisition of Garalo for just
US$1M. It is a deposit both myself and our newly appointed
in-country mine manager have known for some time and I am confident
it is an ideal fit within the Contango portfolio, which is focused
on low capex, high margin, near term production assets.
"Once Garalo is in production, there should be a significant
opportunity to acquire similar projects nearby, which have
typically been overlooked by the larger operating companies in the
region that are developing multi-million ounce deposits. This,
coupled with the prospectivity that remains unexplored at Garalo,
should in due course ensure a significant boost to reserves and
mine life, which already stands at over 10 years.
"At a stabilised base case of 10,000oz per annum, we would
expect the Garalo deposit to generate circa US$1M of EBIT per
month. In the event we are able to increase the production rate to
30,000oz per annum, there would be a further material increase in
earnings.
"In Zimbabwe we recently reported two LOIs for a combined
32,000t per month from our Lubu coking coal project. As previously
stated, we expect to move these to formal offtakes over the coming
months, thereby enabling construction ahead of first production
also in H2 2020. Discussions are ongoing with other interested
parties with respect to additional LOIs and offtakes and we expect
to provide a separate operational update to the market on Lubu
later this quarter. If the Company is successful in converting the
32,000t per month under LOI, the Board believe additional earnings
of circa US$1M per month could be realised from Lubu based on
current pricing discussions.
"I would like to thank all our existing shareholders who
participated in the over-subscribed GBP1.8M capital raise at 5p, as
well as welcome new shareholders who are joining the register. I
believe the demand for the Placing highlights the underlying value
now within the Contango portfolio and across our two assets, both
of which we expect to have in production in H2 2021 without the
need for further funds at the Company level. The Company has stated
previously it would look to pay dividends once stable cashflows
have been established. With the acquisition of Garalo and the
potential for both projects now in the portfolio to yield +US$1M
per month of earnings each, the Company remains ever focused on
achieving this objective targeting the pay out of 50% of net
profits by way of a dividend.
"I look forward to updating all shareholders on our progress
over the coming period."
Admission and Total Voting Rights
The Company has raised GBP1.8 million, before expenses, through
the issue of the Placing Shares with certain existing Shareholders
and new investors.
An application has been made for the Placing Shares to be
admitted to trading on the London Stock Exchange with effect from
22 October 2020 ("Admission").
In accordance with the FCA's Disclosure Guidance and
Transparency Rules, the Company confirms that following Admission,
the Company's enlarged issued ordinary share capital will comprise
239,633,278 Ordinary Shares. The Company does not hold any Ordinary
Shares in Treasury. Therefore, following Admission, the above
figure may be used by shareholders in the Company as the
denominator for the calculations to determine if they are required
to notify their interest in, or a change to their interest in the
Company, under the FCA's Disclosure Guidance and Transparency
Rules.
Details of Director Subscription
Oliver Stansfield, a Director in the Company, subscribed for a
total of 700,000 New Ordinary Shares in the Placing. He currently
holds 5,300,000 ordinary shares. Following Admission he will have a
revised interest of 6,000,000 ordinary shares in the Company,
representing 2.5% of the enlarged issued share capital.
Related Party Transaction DTR 7.3
RAB Capital, an entity controlled by Philip Richards, subscribed
for 7,000,000 shares as part of the Placing for gross consideration
of GBP350,000 resulting in an interest of 2.9% of the enlarged
issued share capital. As Philip Richards is a director of the
Company, this Subscription is deemed a related party transaction as
defined under DTR 7.3. The independent director Roy Pitchford
(Non-Executive Chairman), considers the terms of the Director
participation in the Fundraising are fair and reasonable insofar as
the Company's shareholders are concerned.
Philip Richards directly holds 5,940,699 shares in the Company
resulting in an interest of 2.5% based on enlarged issued share
capital.
**S**
For further information, please visit
www.contango-holdings-plc.co.uk or contact:
Contango Holdings plc E: info@contango-holdings-plc.co.uk
Chief Executive Officer
Carl Esprey
Brandon Hill Capital Limited T: +44 (0)20 3463 5000
Financial Adviser & Broker
Jonathan Evans
St Brides Partners Ltd T: +44 (0)20 7236 1177
Financial PR & Investor Relations
Susie Geliher / Cosima Akerman
1 Details of the person discharging managerial responsibilities
/ person closely associated
a) Name Oliver Stansfield
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2 Reason for the notification
--------------------------------------------------------------------------
a) Position/status Non-executive Director
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b) Initial notification Initial Notification
/Amendment
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3 Details of the issuer, emission allowance market participant,
auction platform, auctioneer or auction monitor
--------------------------------------------------------------------------
a) Name Contango Holdings PLC
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b) LEI 213800HZ69B3QHCUGX36
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4 Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of transaction;
(iii) each date; and (iv) each place where transactions
have been conducted
--------------------------------------------------------------------------
a) Description of the Ordinary shares
financial instrument,
type of instrument
Identification code GB00BF0F5X78
b) Nature of the transaction Placing
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c) Price(s) and volume(s)
-------------- --------------
Price(s) Volume(s)
-------------- --------------
GBP0.05 700,000
----------------------------------------------------------- --------------
d) Aggregated information
- Aggregated volume 700,000
- Price GBP35,000
e) Date of the transaction 19/10/2020
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f) Place of the transaction London UK
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END
IOEEANEPFDEEFFA
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