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Nov 2004 - Michelago Limited

Michelago Limited (MIC) – Heading for Attributable Gold Production of 215,000ozpa based on 50% ownership of Gold Ridge and its BioGold SFJV (once approved) in China

  • On 29 November 2004, MIC announced that it has become a 20% shareholder in a consortium to acquire the Gold Ridge mine in the Solomon Islands from the American Home Assurance Company (AIG), with a strategy to acquire an additional 30% in the ASG consortium and fund 50% of the acquisition.
  • As part of the funding, MIC has placed 200m shares at 10c (with a 1-for-2 free option at 15c to December 2006) to raise A$20m subject to shareholder approval in late December 2004. The A$20m is to be used to pay the first funding requirement of A$13m (US$10m), $6m as part of the entry into the BioGold SFJV and A$1m for general working capital.
  • The ASG (Australian Solomons Gold P/L) consortium estimates that up to US$90m could be required to purchase the Gold Ridge mine and return it to production of 150,000ozpa for 10 years from the second half of 2006, based on 2.3moz of resources and 1.7moz of reserves as at June 2000.
  • Gold Ridge operated successfully for almost 2 years before it was suspended in unrest following a coup in June 2000. However, the intervention of the Regional Assistance Mission to the Solomon Islands has since restored sovereign stability, and aid has been injected to significantly improve the Islands’ infrastructure.
  • With 75,000ozpa for 10 years and 82% (after SFJV approval) of BioGold’s 170,000oz (ahead of the expansion), MIC could be able to attribute 215,000ozpa of production from 2006. There is a further 51% of 82% of 90,000ozpa from the gold refinery, although margins on dore are almost negligible at 1%.
  • Conceptually Michelago’s market cap could increase to over $200m representing an almost doubling of its current share price of about 10 to 11c. Our target of >20c for MIC remains, rating it as a SPEC BUY.
  • Written by: Keith Goode
  • Tuesday, 30 November 2004