logo-loader

UPDATE - Kolar Gold shares surge as Jonnagiri mining lease granted

Last updated: 13:50 28 Oct 2013 GMT, First published: 14:50 28 Oct 2013 GMT

no_picture_pai

---ADDS SHARE MOVEMENT AND BROKER COMMENT---

Kolar Gold (LON:KGLD) was one of London's star risers on Monday after its plans to build one of India's first private gold mines took a step further.

Shares shot up 53.33% to stand at 5.75p as it told investors that its Indian partner company, GMSI, had received the final state government approval for the Jonnagiri mining lease.

It is a 30 year licence with an option to extend for a further 20 years.

"This is a rare event in a complex and bureaucratic licence regime and therefore a major step forward for the companies," said Kolar chief executive Nick Spencer.

"We now look forward to working closely together to develop the project with the intention of building one of India's first private gold mines and realising its significant resource potential for the benefit of all stakeholders, including the local population," 

As reported in August this year, the two companies will explore and develop GMSI's portfolio of 49 gold projects, of which Jonnagiri is one.

Kolar has signed a heads of agreement with GMSI, a leading exploration company, that will see it take a 30% equity interest in GMSI in return for £700,000 cash and cancellation of a £300,000 loan made to its partner.

Broker N+1 Singer said: "In our view this is good news and allows GMSI to commence exploration and development of the Jonnagiri gold project. 

"We believe this will add value for Kolar through its 30% interest in GMSI with the possibility of further involvement via funding if appropriate."

Kolar is not obligated to fund the development of the GMSI gold projects but the board may decide to do so in the future depending on the commercial rationale.

The immediate plan is to mobilise drilling rigs to undertake further exploration drilling to extend and upgrade the JORC resource, Kolar said today.

Planning is underway for the development and design of the open pit and the necessary shaft sinking and underground development work.

The project lies in the Kurnool district of Andhra Pradesh in India and has a JORC resource of 720,000 ounces and an exploration target of between 2 and 5 mln ounces.

A 2012 CPR confirmed an open pittable resource at the Dona East block of 190,000 ounces at 2.1g/t and 530,000 ounces at 4.3g/t in an underground resource at the Dona Temple block.

Over the last 15 years, Geomysore Services India (GMSI) has secured the project rights and preferential rights under application to 49 gold projects, including reconnaissance permits, 32 prospecting licences and six mining leases covering 11,066 sq km across India with 1.36 million ounces of JORC resources defined.

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

1 hour, 3 minutes ago