Fiji-focused Vatukoula Gold Mines (LON:VGM) has appointed Yingbin Ian He as its new non-exec chairman.

He replaces Colin Orr-Ewing who announced his intention to stand down in February and who had been the miner’s chairman since 2004. 

Orr-Ewing said "It has been a privilege to serve as chairman during such a momentous and exciting time for the company. The business has transformed from a diamond exploration company in 2004 to owning and operating one of the highest grade gold mines in the world.”

David Paxton, VGM’s chief executive, said, "Colin has contributed enormously to the growth of VGM during the past nine years and in particular was intrinsic to the acquisition and funding of the Vatukoula Gold Mine.”

He added Yingbin Ian He, who is already a director OF VGM, has thirty years experience in the mining industry and would be a great addition to the management team. 

Shares in Vatukoula have alsmost doubled in the past two days to 12.65p after Chinese oilfield service group DRK bought a 19% stake at 15p per share.

SCD Energy, a subsidiary of DRK Energy, has subscribed for 30mln shares at 15p, which will raise £4.5mln for Vatkoula, and give SCD 19.2% of the Fiji-based gold miner.

SCD will also be able to appoint its own director as chief operating officer once a suitable candidate has been identified.

Under the agreement, DRK has agreed to work in conjunction with Vatukoula (VGM) to source the required debt financing to fund the planned expansion programme of the gold mine.

If VGM enters into a US$40 mln debt financing package facilitated or introduced by DRK within the next 120 days, DRK will have the option to acquire another 24mln shares at 15p.

If exercised, DRK would then hold approximately 29.9% of the enlarged issued share capital.

DRK will be able to nominate two directors, one of which, if suitably qualified, will eventually be appointed chief operating officer, Vatukoula said.

The funds raised from the subscription agreement will be used for working capital purposes while VGM works to secure the debt financing.

DRK is a comprehensive oilfield service group engaged in engineering construction, technology services, chemical engineering and oilfield development.

Zhongrun’s continued backing of Vatukoula Gold Mines (LON:VGM) shows the Chinese firm recognises the significant long-term value in the ore body, according to WH Ireland.

Zhongrun yesterday stumped up £1.32mln at 15p per share, though this was less than half the 33p it paid when it bought into VGM in November.

After the placing, Zhongrun will own 37.8 million shares (29.9%) of the enlarged share capital.

The broker said the mine plan at Vatukoula, in Fiji, has been verified by several respected independent consultants and shows that the ore body can sustain higher production and higher grades once remediation work and development at the mine has been carried out.

WHI has changed its recommendation from ‘buy’ to ‘speculative buy’ even so, reflecting the increased levels of short-term risk but recognising that there is significant upside in the ore body itself.

The broker’s target price is reduced from 80p to 74p due to the increased number of shares in issue.

VGM is currently assessing the best way to obtain finance to fund the necessary capital expenditure at the mine, without which, the short and medium targets will be difficult to hit, adds WHI.

Shares were trading at 12.8p today.

The Chinese mining group took up all of the 8.8mln shares issued at 15p per share, a price over 20% higher than the market price at the time.

Vatukoula said it will use the funds for general working capital while it continues to finalise its longer term funding requirements.

In March, the miner said it was in talks fund  between US$30mln to US$40mln of expansion work. This will help it develop higher grade and lower cost areas of Vatukoula mine in Fiji.

The estimate of Vatukoula's total gold ore reserves has increased by 12% from 700,000 ounces to 790,000 ounces. Estimates for proved and probable ore reserves have increased by 5% and 14%, respectively.

The increase in the updated ore reserve estimate from the previous estimate is attributable to the re-interpretation of the resource models. Metal prices, grades, recoveries and operating costs were used to determine which blocks were included in the ore reserve estimate.

The metal prices and exchange rate used in the revised ore reserve estimate were gold at US1,400 per ounce and an exchange rate of 54 US cents to the Fijian dollar.

Other assumption used in the updated estimate include: a cut-off grade of 4.5 grams per tonne gold (Au); minimum stope mining width of 1.7 metres; 10% stope and development mining dilution; 95% mining recovery in development headings; 85% mining recovery in stopes.

A stope is a step-like layer in a mine.

Last week the company released its interim results in which it informed investors it is in talks to fund between US$30mln to US$40mln of expansion work.

Vatukoula Gold Mines (LON:VGM) has told investors that its long term production targets are achievable and its mine development strategy is sound.

Wednesday morning’s interim results revealed another period where the focus on mine development has encumbered the overall output from the Vatukoula mine.

Operationally progress has been made, however, as two higher grade underground areas can now be accessed, and initial mining has now begun on the Cayzer-Prince ore body.

The company also told investors that it is in talks to fund between US$30mln to US$40mln of expansion work.

"In the first three months of H1 we continued to invest heavily in capital development which opened up access to the high grade Cayzer-Prince ore body,” said chief executive David Paxton.

“Currently we are carrying out limited mining from this ore body which has been reflected in an increase in grade coming from the Phillip shaft of 6.9 grams per tonne compared to the previous six months which yielded 5.3 grams per tonne.

 “Large strides in our development programme have been achieved, with both development at the Philip shaft on 20 level providing access to the Cayzer-Prince and Prince William ore bodies and development in the Smith shaft on several levels providing access to the Matanagata East ore body.”

He adds: “I have taken great confidence in an independent due diligence report that has confirmed that our long term production targets are achievable and that the mine development strategy is sound.”

This morning’s results revealed that gold production reduced to 19,411 ounces in the first half, which is around 30% less than the 29,999 ounces produced in the corresponding period of 2012.

A total of 206,501 tonnes of ore was mined and 216,860 tonnes were processed, versus 242,769 and 243,284 respectively in the first half of last year.

The drop in output meant that cash costs ounce remained under pressure at US$1,635, versus US$1,426 in the same period of last year, though Vatukoula points out that on a ‘per tonne’ basis costs are stable at US$148 per tonne.

Meanwhile, the average realised gold price was US$1,681 per ounce.

Revenues fell to £20.82mln from £30,38mln in the first half of last year, while earnings dropped to just over £1mln versus £4.25mln. Cash generation dipped to around £400,000 versus £4.3ml.

The operation made an underlying loss of £2.1mln compared with a £1.2mln profit in the same period of 2012.

Vatukoula said that due to current constraints on capital it has cut its development spending by around 50%, and this will continue until new funding has concluded.

In a note to clients City broker WH Ireland repeated its ‘buy’ recommendation, but reduced its target price to 80p from 115p.

“We view the current problems at the mine as short term and believe that management can bring about the production increase,” the stockbroker said.

Vatukoula, with assets in Fiji, is a developing gold producer with near-term production growth, says analyst Michael Stoner.

"The company has made significant investment to restructure its mine, with steady-state production expected in 2014. If executed, we would expect to see VGM trade above its current EV/Resource (enterprise value/resource) valuation of US$11 per ounce," he says.

This is at a significant discount to the average multiples for London listed producers of US$112.52 per ounce, says Stoner.

An operational update last month revealed the firm is focusing on capital development as it continues its drive to mine deeper underground.

The Vatukoula mine is currently operating at a rate of 52,616 ounces per year with an average ROM (run of mine) grade of 4.24g/t and average cash cost of US$1627 per ounce.

The company is reconfiguring the operation aiming to re-establish the historic production rate of 100,000 ounces a year by 2014.

This ongoing investment programme is aimed at returning the company to profit, assuming successful mine optimisation and ramp-up to  100,000 ounces a year in 2014.

That compares to full year production in 2012 of 52,616 ounces of the precious metal.

Ian Stalker, non-exec director at Vatukoula Gold Mines (LON:VGM), has resigned from the board.

He steps down with effect from tomorrow (Jan 3) for personal reasons, the firm said.

Colin Orr-Ewing, chairman of the Fiji based gold producer, expressed his appreciation and wished Stalker well for the future.

He added that Stalker had been with the firm since 2008 and was heavily involved in initial commissioning of operations at the Vatukoula gold mine.

At the end of last year the firm revealed its drive underground had affected production in its latest quarter but exposed new mining areas.

Production at the flagship mine in Fiji in the three months to end November totalled 10,549 ounces of gold, with 10,482 ounces shipped.

Vatukoula Gold Mines’ (LON:VGM) drive underground affected production in its latest quarter but has exposed new mining areas it said today.

Production at the Vatukolula mine in Fiji in the three months to end November totalled 10,549 ounces of gold, with 10,482 ounces shipped.

Revenues fell to £11.4mln from £15.7mln, reflecting the drop of one-third in ounces produced compared to a year earlier.

Processing lower grade ore also pushed up cash costs to US$1,590, though this was offset by a rise in the gold price to US$1,721.

Overall, there was a quarterly loss of £1.26mln (2011: £822,000 profit).

David Paxton, Vatukoula’s chief executive, said: "The increase in capital development has impacted on our short-term gold production, but in the longer-term will enable Vatukoula to realise its production targets.

“These production results should be viewed in the context of our efforts to transform the mine's underground mining prospects and realise our overall operational objective of long-term economic mining."

“Although gold produced is less than that produced for the same period last year, the development programme has exposed new mining areas, including the high-grade Cayzer-Prince ore body below 18 level in the Philip Shaft area. These new higher grade areas will provide the bulk of the gold to be mined at Vatukoula for the foreseeable future.”

Fiji-based gold miner Vatukoula Gold (LON:VGM) is taking legal action against Chinese firm Shengen Xintai International after it failed to complete a £10.3 mln cash injection.

Existing shareholder Zhongrun International Mining has stepped in to replace Xintai and will now subscribe for 20 mln new shares at 33p each to raise £6.6 mln for Vatukoula.

Xintai announced in August it would buy 13 mln shares at 51.65p, a 60% premium to the market price at the time, and issue a £3.2 mln convertible loan note to the gold miner.

But after one extension last month, Vatukoula today said it had become clear Xintai cannot complete the agreed subscription in the time frames previously announced.

Vatukoula added it will be pursuing its legal rights against Xintai for its failure to meet the terms of its signed subscription agreement.

The new shares issued to Zhongrun represent 17.01% of the enlarged issued share capital and on completion its stake in Vatukoula will rise to 24%. Zhongrun originally invested £5.4 mln for a 9% stake in April.

Dave Paxton, Vatukoula’s chief executive, said: “The board is disappointed that Xintai failed to complete its subscription agreement but is very pleased to welcome the investment of Zhongrun in VGM and looks forward to continuing its valuable strategic relationship with Zhongrun to assist in the development of the Vatukoula gold mine.”

Broker WH Ireland called the Zhongrun agreement a good deal for Vatukoula as it will help fund the underground development and let Vatukoula pursue other growth opportunities.

Analyst Paul Smith did warn that it will give Zhongrun significant influence over the future strategic direction of the company in the short-term.

“Overall we view this as a positive step for the shareholders of Vatukoula as it ensures the capital required to put the Vatukoula Gold mine on a sound economic footing,” said Smith, who retains a ‘buy’ rating and 122 pence target price.

Shares fell 2 pence or 5.6% today to 36 pence each.

Fiji-based gold miner Vatukoula Gold (LON:VGM) is take legal action against Chinese firm Shengen Xintai International after it failed to complete a £10.3 mln cash injection.

Existing shareholder Zhongrun International Mining has stepped in to replace Xintai and will now subscribe for 20 mln new shares at 33p to raise £6.6 mln for Vatukoula.

Xintai announced in August it would buy 13 mln shares at 51.65p, a 60% premium to the market price at the time, and issue a £3.2 mln convertible loan note to the gold miner. 

But after one extension last month, Vatakoula today said it had become clear Xintai cannot complete the agreed subscription in the time frames previously announced.

Vatukoula added it will be pursuing its legal rights against Xintai for its failure to meet the terms of its signed subscription agreement.

The new shares issued to Zhongrun represent 17.01% of the enlarged issued share capital and on completion its stake in Vatukoula will rise to 24%. Zhongrun originally invested £5.4 mln for a 9% stake in April.

Dave Paxton, Vatukoula’s chief executive, said: "The board is disappointed that Xintai failed to complete its subscription agreement but is very pleased to welcome the investment of Zhongrun in VGM and looks forward to continuing its valuable strategic relationship with Zhongrun to assist in the development of the Vatukoula gold mine."

Vatukoula Gold Mines (LON:VGM) has told investors that it has set back the deadline for the completion of a £10.3 mln funding announced in August.

It said that the strategic investment, from China’s Shengen Xintai International, has been delayed because the approvals from Chinese state authorities have taken longer than expected.

"Xintai remains committed to the placing and we continue to believe that Vatukoula represents an excellent investment opportunity,” said Xintai chief Dingli Wang.

“We have spent considerable time at the operations in Fiji and remain confident that the right strategy and management team are in place and are capable of delivering on their stated goals."

The initial tranche of the funding, a £3.19 mln loan note, was expected to have been completed by October 3. The new deadline is the end of the month

After that a £7.13 share placing is scheduled for November.

In August, Vatukoula said 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. 

Also Vatukoula said it will benefit from working with Xintai’s partner China Gold Science and Technology Ltd (CGST).

Vatukoula Gold Mines (LON:VGM) said today its all of its development targets at its Fiji–based gold mine were either ahead of or on schedule.

The development work impacted on short-term gold recoveries in its year just ended but would enable it to hit its longer-term production targets, the miner added.

Vatukoula produced 11,763 ounces of gold in the three months to August, while shipping 11,597 ounces.

For the full year, Vatukuola produced 53,152 ounces with 52,618 shipped and generating revenues of £54.9 mln, up 14% on the previous year.

Annual cash costs rose to US$1,643 per ounce, compared to a realised gold price over the year of US$1,644.

Cash generated from operating activities was £6.6 mln for the year and £1.9 mln in the last quarter as the company benefited from a rise in gold prices.

David Paxton, chief executive, said; “Underground mining operations at Vatukoula progressed with continued growth in our total tonnes mined. In particular capital development has increased by over 110% compared to last year. The gradual switch from on-orebody development (strike-drives) to below orebody development (footwall drives) to access the deposits is progressing well.

“Work continues on preparing new long-term high grade stoping sections for mining in H2 of this year with our long-term production target being achieved in the following year"

Vatukoula recently received a £10.3 mln cash injection from Chinese firm Shengen Xintai International and has a target of becoming a 100,000 ounce per year producer.

Xintai will invest £10.3 mln in Vatukoula for the issue of 20m new ordinary shares at a 60 per cent premium to the market price at the time of the deal. 

The broker said the agreement reinforces its belief in Vatukoula going forward, especially as it improves production flexibility as its Emperor Gold Mine in Fiji.

Development in the Prince William and Dolphin ‘flatmake’ ore bodies will improve tonnages and grade to the mill and lower unit operating costs, WHI added. 

Early indications are that the investment is also  just the beginning of a  developing relationship between Vatukoula and Xintai, with Xintai expressing an interest in raising its stake further to perhaps 29.9 per cent and gaining two seats on the board.

Vatukoula intends to use the proceeds to fund the underground development and the improved access to higher-grade zones, while a a partner of Xintai will provide research and technological expertise.

WHI concludes the deal is very positive for Vatukuola and reiterates its ‘buy’ recommendation with a price target of 122 pence. 

The rains affected production with 11,390 ounces being produced, compared to over 14,000 ounces in the prior quarter. And just over 12,500 ounces of gold were shipped from the mine.

Around £12.8 mln was generated in revenue for the three months ended May 31 2012, with average gold sales prices of US$1,622. The company revealed that it has now generated revenues of £43.2 million in the first nine months of the year. 

Vatukoula says the impact of the rains led to an increase in cash costs in the third quarter, but the majority of the increases are expected to be temporarily. In the three months to May 31 cash costs per ounce were US$2,034, and in the first nine months it averaged US$1,609.

Operationally, Vatukoula remains focussed on underground development work which is expected to lay the foundations for higher production and improving grades in the future.

“As previously announced heavy rains early in April did have a limited impact on Q3 operations but importantly for our near term and long term production and cost control goals, we were able to increase the rate of combined capital and strike drive development over the period,” said David Paxton, chief executive.

“We expect to achieve our previously guided cash costs of approximately US$ 1,400 per ounce for the remainder of the fiscal year.

“The essential capital development program which will provide long term flexibility for underground mining operations is beginning to bear fruit.

“New long-term stoping sections are being prepared for mining in H1 of next year and should help provide long-term flexible underground mining at Vatukoula.”

Paxton purchased the shares at 47 pence each for a transaction cost of £18,800, it said in a statement.

He now holds 175,000 shares in the gold mining company, or 0.18 per cent of the share capital.

Paxton also holds options over 1 million shares, or around 1.03 per cent of the capital.

Meanwhile, finance director Kiran Morzaria also today bought 6,340 shares at 47 pence each for £2,979.80.

Morzaria now holds 47,280 shares in the firm - or around 0.05 per cent of the share capital.

He also holds options over 700,000 Vatukoula shares, representing around 0.72 per cent of the issued share capital.

It produced gold at a "significantly" higher rate in the six months to February 29 this year, than in the second half last year, although production was "in line" with the comparable period in 2011. 

Vatukoula unearthed 242,769 tonnes of ore and waste - a 24 per cent increase from 195,832 tonnes in the comparable period last year.

And it produced 29,999 ounces of gold compared to 30,000 ounces in the comparative period.

Revenues for the half year stood at £30.4 million -  21 per cent higher than in the same period in 2011, when it stood at £25.2 mln.

The firm also benefitted from the increases in gold prices, with the average realised gold price at US$1,678 in the period compared to US$1,328 per ounce in 2011.

That offset increases in mining, processing and overheads, and led to a gross profit for the period of £4.9 million, compared to £4.2 mln in 2011, the company said.

Vatukoula chief executive David Paxton told investors: "We continued to exceed our mine development targets for the half year. 

"Achieving these development targets will enable us, in the longer term, to mine higher tonnages and at higher grades and will result in a lower cash cost per ounce of gold."

However, he did note the heavy rainfall in Fiji in January and April this year had affected access to and from the mine area. 

"However, I am pleased to report that the mine itself remained secure and protected, albeit with some water ingress which caused temporary disruptions in production and will reflect in third quarter gold sales being lower than planned."

The firm's focus remained on building long-term cost effective sustainable gold production, at 100,000 ounces per year, he said.

Operationally, highlights of the period saw an inferred resource figure of 142,000 ounces defined and a new high mineralised system discovered during exploration drilling.

Paxton concluded by saying that although the mine suffered production hurdles during and after the reporting period, every effort was being made to ensure that "there will be no materially adverse effect" on the company's guidance of 65,000 ounces for the year ending August 31 this year.

Tom Elder, at broker WH Ireland, said today's results provided little new information on operational progress from the Q2 results announced on March 19.

He highlighted that it would be the Q3 results which would be "pivotal" in assessing the firm's operational turnaround, "not so much from an ounces produced perspective but from a profitability per ounce perspective".

"The Vatukoula Gold mine is a significant gold mine with a long operating history and a substantial resource base. These latest results may well mark the nadir of subdued operating performances and we therefore reiterate our 'BUY' recommendation," he said, targeting a price of 122 pence a share.

As at 10.49am, shares in the firm were trading up 2.41 per cent, at 45.5 pence each.

It produced gold at a "significantly" higher rate in the six months to February 29 this year, than in the second half last year, although production was "in line" with the comparable period in 2011. 

Vatukoula unearthed 242,769 tonnes of ore and waste - a 24 per cent increase from 195,832 tonnes in the comparable period last year.

Revenues for the half year stood at £30.4 million -  21 per cent higher than in the same period in 2011, when it stood at £25.2 mln.

The firm also benefitted from the increases in gold prices, with the average realised gold price at US$1,678 in the period compared to US$1,328 per ounce in 2011.

That offset increases in mining, processing and overheads, and led to a gross profit for the period of £4.9 million, compared to £4.2 mln in 2011, the company said.

Vatukoula chief executive David Paxton told investors: "We continued to exceed our mine development targets for the half year. 

"Achieving these development targets will enable us, in the longer term, to mine higher tonnages and at higher grades and will result in a lower cash cost per ounce of gold."

However, he did note the heavy rainfall in Fiji in January and April this year had affected access to and from the mine area. 

"However, I am pleased to report that the mine itself remained secure and protected, albeit with some water ingress which caused temporary disruptions in production and will reflect in third quarter gold sales being lower than planned."

The firm's focus remained on building long-term cost effective sustainable gold production, at 100,000 ounces per year, he said.

Operationally, highlights of the period saw an inferred resource figure of 142,000 ounces defined and a new high mineralised system discovered during exploration drilling.

Paxton concluded by saying that although the mine suffered production hurdles during and after the reporting period, every effort was being made to ensure that "there will be no materially adverse effect" on the company's guidance of 65,000 ounces for the year ending August 31 this year.

“Ingress of water into the mine has rendered some minor areas inaccessible but otherwise production areas remain unaffected,” it said.

On Sunday evening, water carrying debris entered the Smith Shaft, which was transporting 11 miners in a man-riding cage to the underground workings.

The debris caused minor injuries to the miners who were taken to the neighbouring medical clinic.

Chief executive David Paxton said: “To date, we believe that there has been no material effect on the production forecasts as a result of the ongoing rains or the minor accident in the shaft.”

The heavy rainfall has impaired the country’s infrastructure and some Vatukoula employees who live outside the area have been unable to attend work.

The Vatukoula gold mine, which is located in the northern part of the Viti Levu island, contains 680,000 oz of gold reserves and 4.3 million oz of gold resources. Together with its London headquarters Vatukoula has around 700 hundred employees.

A tropical cyclone on Monday brought rain that closed the airport in Viti Levu, which is a 90 minute drive from the mine.

The share price rallied to 56 pence after briefly dipping to below 50 pence this morning before the statement.