EnviroGold (ASX: EVG) will issue 65 million shares at 11 cents each to raise $7.15 million to a small number of sophisticated investors with approximately 90% of the proposed issue going to three top 20 shareholders of the company.
From these funds, EnviroGold expects to meet the first tranche payment of US$3.0 million to buyout the minority interest in its Las Lagunas gold project in the Dominican Republic.
On November 1 EnviroGold reached agreement on a buyout price for the minority interest in Las Lagunas, which will be transferred on settlement.
The purchase documentation is nearing completion with settlement now scheduled for 6 December 2010. The terms of the acquisition will be advised once documents have been formalised and signed.
The company currently owns 92.5% of the project and has secured financing of $37.5 million and placed 7.88% of its shares with Macquarie Bank.
The financing is subject to the settlement of the purchase of the remaining 7.5% interest in the project held by Grimston World Inc.
The issue of 35 million of the shares is subject to ratification by shareholders of a previous issue, at the company's annual general meeting on 30 November 2010.
The balance of funds will allow exploration work to be accelerated on the adjacent Papercorp and Pinglio underground mines in the Azuay region of Ecuador in which EnviroGold is earning-in to a 65% interest.
The company is currently establishing a substantial exploration camp near the mines and is purchasing the necessary plant and equipment to undertake the underground drilling program, including two Bazooka diamond drills which can later be used in mining operations.
Consulting geologists, surveyors, and drilling contractors will be mobilised in the first week of January 2011 and the company is expecting initial drilling results by the end of the following month.
Surface drilling should commence in March 2011 in anticipation of a JORC Compliant Resource being established in the fourth quarter of 2011.
The extensive sampling completed by Consulting Limited on both Papercorp and
Pinglio concessions collectively reinforces the prospect that the two project areas have the potential to host a combined mining target of approximately 4.0 million tonnes at grades of 10g/t to 12g/t which could produce over 1 million ounces of gold.
This mining target was established after sampling 7,200 of drives within the Azuay ore body but limited to less than 15% of the relevant Mining Leases.
The company's aim is to expand total production from the two small scale mines to 75,000-100,000 oz Au per year during 2012.