Gascoyne Resources Ltd (ASX:GCY) is undertaking a capital raising of up to $19 million to underpin the next phase of a near-mine exploration and production growth strategy at the 100%-owned Dalgaranga Gold Mine in Western Australia.
The raising at $0.30 per share comprises a $15 million share placement to sophisticated and professional investors, including existing shareholders, and a Share Purchase Plan (SPP) to raise up to $4 million.
Strong support
Firm commitments have been received for the placement, including from GCY’s largest shareholder, Deutsche Balaton AG, which has committed to subscribe for approximately 11.7 million new shares to maintain its ownership interest at just over 17%.
The placement was well supported with applications for more than $15 million received but was scaled back to $15 million despite the strong level of investor demand.
“This up to $19 million capital raise is underpinned by our existing major supportive shareholders along with significant support provided by new institutional investors located domestically and offshore,” managing director and CEO Simon Lawson said.
"The $4 million SPP also enables all retail shareholders resident in Australia and New Zealand to participate in the equity raise on the same terms."
SPP terms
The SPP will enable all eligible Gascoyne shareholders with registered addresses in Australia or New Zealand at 5:00pm (AWST) on the record date of Friday, March 25, 2022, the opportunity to apply for new shares at the same price as the placement. The SPP is not underwritten.
Eligible shareholders will be offered the opportunity under the SPP to apply for up to $30,000 worth of new shares, subject to scale back at the company’s absolute discretion.
The company reserves the right to close the SPP early as soon as applications of at least $4 million have been received.
The placement and SPP issue price of $0.30 per new share represents a:
- Discount of 15.5% to the last closing price of $0.355 per share on March 23, 2022; and
- Discount of 10.9% to the 10-day volume-weighted average price of $0.337 per share to March 23, 2022.
“Multi-faceted strategy”
“Over the last three months we have been working on a multi-faceted strategy to increase mine life and ore feed grades at the Dalgaranga gold mine and reposition Gascoyne as an investable mid-tier gold producer with a clear growth strategy,” Lawson said.
“We have streamlined our management processes and put in place an effective staff retention strategy – with zero resignations since the policy was put in place in January.
“We have optimised and stabilised the mine plan, delivering consistent ore feed at an elevated +1g/t head grade, and we are now delivering record monthly and quarterly production outcomes – with increased visibility to being able to maintain this over a longer period of time through future development of the promising Gilbey’s North discovery.
“At the end of last year, we removed the restrictions of our previous debt arrangement by closing out the Investec facility, which had the effect of also removing our existing hedge book – exposing us to an increasing spot gold price. This has had the effect of delivering improved cash-flows, which reflects the significant differential between the price we would have received under our previous hedging to what are now making on spot sales.”
Use of funds
Proceeds from the capital raising will be used as follows:
- $10.5 million to repay in full the remaining principal amount owed on the convertible note debt held by entities controlled by Deutsche Balaton AG plus accrued but unpaid interest to the date of repayment;
- $3.5 million to fund an accelerated drilling program at the Dalgaranga Gold Project to be completed over the next 3 to 4 months; and
- $5.0 million for general working capital purposes and to fund the costs of the offer.
Lawson said, “$10 million of the proceeds will go to retiring the remaining convertible note debt, meaning that Gascoyne will be completely debt-free and unhedged for the first time since production began in 2018, and approximately $4 million towards accelerated near-mine exploration.
"The balance will strengthen our treasury position, which stands at around $24 million, further de-risking our balance sheet during this period of increasing COVID-19 cases in Western Australia and putting us in a strong position to deliver organic growth through exploration and the ability to quickly capitalise on regional opportunities.”
Strong progress
“We have made a significant shallow high-grade discovery less than 1-kilometre from our processing plant which is still growing and has the potential to substantially add to the life-of-mine,” the MD and CEO said.
"We are working on significant updates to our existing mineral resource estimates, specifically at Plymouth and Gilbey’s, which have the potential to immediately add to the mining schedule and the life-of-mine, as well as new mineral resource estimates at Gilbey’s North and Archie Rose, that also have the real potential to make meaningful additions to the life-of-mine, all within 10 kilometres of our processing plant.
“We will continue to consistently drill and increase our near-mine prospects and bring them into a rapidly growing pipeline of advanced resources and into an expanded mining and milling plan, including the Yalgoo assets and the 200,000-ounce mineral resource at Melville."
Placement details
The placement comprises a single tranche placement of approximately 50 million fully paid ordinary shares using the company’s existing ASX Listing Rule 7.1 placement capacity. New shares will rank equally with Gascoyne’s existing shares.
Canaccord Genuity (TSX:CF, LSE:CF) (Australia) Limited is acting as the lead manager and sole bookrunner while Bridge Street Capital Partners Pty Ltd is acting as co-manager. Herbert Smith Freehills is acting as legal adviser to the company in relation to the offer.