Premier African Minerals Limited (LON:PREM) has bought a 4.5% stake in a mining firm, which gives it exposure to an exciting gold project and the prospect of relatively near term production.
Private company CASA has three mining licences covering 133 sq km known as the Misisi project in the highly prospective South Kivu province in the eastern Congo gold belt of the Democratic Republic of Congo (DRC).
To fund the deal, Premier has raised £300,000 via a share subscription of over 93.7mln of its shares at 0.32p and subscribed for US$250,000 worth of CASA shares.
It can also buy a further interest of up to 30% of CASA within 60 days from this date.
CASA has spent around US$30mln developing the licences over the last six years and the most advanced Akyanga Deposit has an initial near surface inferred resource of 1.2 million ounces at 1.7 grams per tonne (g/t) gold, which is open along strike and down dip, it said.
A scoping study at the project confirmed the potential viability of an 80,000 ounce of gold per year heap leach operation, with a total cash operating cost of US$628 per ounce based on current resources.
CASA now plans to plans to begin a 5,000 metre exploration programme to validate what is a 3mln ounce potential target at Akyanga and issue an updated scoping study by the end of 2017.
Premier's chief executive George Roach said: "The Akyanga deposit has a large and well defined resource base as well as the potential to be brought into production relatively quickly.
"The scoping study potentially demonstrates a technically viable and economically robust project, and the plan to commence an exploration programme to validate the three million ounce potential target should generate significant value for the company.
"I am also delighted that our lender, Darwin, has consented to this investment which we believe provides excellent value at a time when investment demand in the gold sector is picking up."
House broker Shore Capital noted that CASA chairman Michael Foster is a Premier African director.
A scoping study at Akyanga estimated initial capital expenditure of at US$78.4mln, it said, while a total cash operating cost was just US$628 per ounce, based only on the existing resource, said analyst Yuen Low.
Separately today, Premier also updated on its 2% holding in Circum Minerals Limited, which owns the Danakil potash project in Ethiopia.
The mining licence agreement negotiation is well advanced and is expected to be completed before year end according to Circum.
Investment bank Morgan Stanley is helping to find a strategic partner and/or provide a liquidity alternative to shareholders, it added.
Circum is also mulling a possible flotation on an appropriate exchange, noted Premier, after an optimised after-tax NPV (net present value) amounted to US$2.1bn.
Premier African said it was "encouraging to see that Circum has made considerable progress in developing the project".
It notes the much smaller Yara project to the south of Circum was recently funded on a valuation of US$200 million.
Premier shares dropped 6.25% to 0.375p on the day.