Hambledon Mining reveals plans for US$9 mln share placing - UPDATE

---Adds comments from broker Fairfax---

Hambledon Mining (LON:HMB) plans to raise US$9.06 million through a share placing.

This comes after the European Bank for Reconstruction and Development (EBRD) agreed to provide US$18 million in a mixture of debt and equity last month.

The money will be used to complete the acquisition of Akmola Gold LLP, which owns two gold deposits near the group’s Sekisovskoye mine. 

It will also be used to pay fines relating to the leak at one of the Sekisovskoye mine’s tailings dams as well as repairs to the dam. Additionally Hambledon intends to repay its debt to Alfa Bank, which lent the company money during a period of reduced gold production in the winter months.

“Hambledon can now look forward to the future with a strong balance sheet and a broader shareholder list, including the EBRD and several highly respected investment management group,” said chief executive Tim Daffern.

“With the support of the proposed EBRD debt facility and the new equity raised in the placing, Hambledon is well positioned to become a well funded multiple deposit Kazakhstan focussed gold play.”

Hambledon is looking to issue 177 million new shares, representing nearly 20 per cent of the enlarged group. The new shares will be priced at 3.25p each, a 18.75 per cent discount to yesterday’s closing price.

It said that the placing has been oversubscribed.

“Both the institutional placing and the proposed EBRD funding are highly valued by the directors of the company. We look forward to updating all shareholders with further strong news flow in 2012,” Daffern added.

Hambledon agreed the US$5 million deal to acquire Akmola in September. The acquisition adds the Tellur and Stepok deposits to the group’s portfolio.

These two projects are currently believed to contain 440,000 ounces of gold resources. And they are located close enough to Sekisovskoye for Hambledon to process the ore at the existing plant.

Today Daffern told investors that the expansion of the Sekisovskoye mine is central to Hambledon’s production growth in the future.  

“It is intended that the Sekisovskoye process plant will act as a hub for processing gold from the Tellur project which will leverage the group’s cash generation and gold production,” he added. 

“We look forward to updating Shareholders shortly in relation to final EBRD board approval for the debt and equity investment and completion of the Akmola acquisition."

Fairfax analyst John Meyer called the fundraising effort a success as it enables Hambledon to finance the next stage of development and address the tailings dam issue.

Meyer also said that the investment by EBRD provides a “credible endorsement” for the project, while the environmental and social action plan (ESAP) for the project will remove concerns about the health and safety risks following the recent tailings dam leak.

The analyst expects Hambledon to achieve gold production of 34,000 ounces next year, up from the 2010 output of 21,000 ounces.

Gold production will then increase to 63,000 ounces next year and reach 100,000 ounces in 2015 as the mill operating rate ramps up from 800,000 tonnes per annum in 2012 to 920,000 tonnes in 2015.

At the same time, production costs will fall from last year’s US$750 per ounce to US$520 over the next three years, added Meyer.

Fairfax currently has a target price of 12 pence for Hambledon, representing a 200 percent upside to yesterday's closing price of four pence.