Vatukoula Gold Mines

Shares in Vatukoula Gold Mines almost doubled on Monday as Chinese oilfield services firm DRK bought a 19% stake at more than twice the price on Friday

Vatukoula Gold Mines announced steady progress in its first quarter, says broker WH Ireland, which rates the shares a 'buy'.

Lower production in the year just ended is only half the story says WH Ireland with the company making progress in laying the groundwork for the longer term.

Vatukoula says the cash investment will bring new expansion opportunities at the firm’s gold mine in Fiji, and it means the company will be able to consider a wider range of growth opportunities. 

The current emphasis is on re-establishing the underground infrastructure and access to the high grade ore that will be the mainstay of future production. In just over a year’s time the critical parts of this development work will be complete.

A Chinese mining investor is putting £5.4 million into the company. It is buying 9 million new shares at a premium to take a 9.2 per cent stake in the Fiji focused gold miner.

This morning’s quarterly results are a sign that Vatukoula Gold Mines big investment into underground mining is starting to pay off.

One of the big challenges for Fiji-focused gold miner Vatukoula is to restore confidence in its prospects after a disappointing share price performance. Its management looks determined to rise to it.

The accelerated underground development plan by Vatukoula Gold Mines will create some short term pain for miner but it will eventually afford it some much needed “production flexibility”. This is the conclusion of broker WH Ireland, which restated its buy and 224 pence a share price target in the wake of today’s update from the group.

The money will be used to progress the Vatukoula gold mine and an exploration programme on the special prospecting licenses covering the Tavua Cladera mining area in Fiji. On closing of the placing, the group will have  cash of approximately £12m.

It’s never straight forward returning an old mine to its former glory, particularly so if it is an underground mine, but that is exactly what Vatukoula Gold Mines is in process of doing in Fiji.

Vatukoula Gold Mines expects the first quarter performance of its flagship mine in Fiji to beat its forecast as the recent investments in equipment and facilities are taking effect.

With £11 million of new money in the bank, the majority of the new fleet in place by the end of the calendar year, and funds in hand for the rest, VGM are at last well placed to achieve their ambitions for the Vatukoula mine.