Big River’s big raising – $20.4 million for Brazilian gold project
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Brazil-focused gold developer Big River Gold has secured $20.4 million to advance the development and construction of its fully-owned flagship Borborema gold project.
The funds, raised by way of a placement to institutional and sophisticated investors, was announced by Big River Gold (ASX:BRV) to the ASX this morning.
It includes a cornerstone $8 million investment by Dundee Goodman Merchant Partners – a highly experienced Canadian-based resources investor which will hold around 9.2% of Big River’s issued ordinary shares on completion.
The ~US$15 million placement as a whole adds a number of new offshore and Australian institutional investors to the Big River register.
The company said it served as a vote of confidence in the 2.43 million-ounce Borborema project as an investment proposition.
Big River executive chairman Andrew Richards said the company was delighted by the support for the placement.
“Dundee, a cornerstone investor to the placement, is a highly experienced investor in the resources sector with extensive experience in both gold and nickel operations,” he said.
“Following the completion of a thorough due diligence process, Dundee shares our view of the significant potential of the Borborema gold project.”
That potential is outlined in a definitive feasibility study initially released in December last year and reviewed in June, which highlights the favourable economics of the project’s proposed stage one operations.
This study highlighted a profitable open pit with a mine life of more than 10 years, which would produce around 729,000 ounces of gold at C1 cash costs of US$534 per ounce and all-in sustaining costs of US$713/oz.
Richards said the funds raised would be used to advance the construction of stage one operations, as well as to review the optimal plant design in anticipation of a further expansion of the 2 million tonne per annum operation should it prove viable.
“The mineral reserve at Borborema is currently 1.6 million ounces, of which over half is outside the currently planned stage one operation,” he said.
“There are clear extensions to mineralisation down plunge, as yet untested by drilling, and down dip as demonstrated by the 566,000-ounce inferred resource immediately adjoining the defined reserve.
“These could further improve the project economics if successfully converted in whole or part into at least indicated resource category.”
On top of being used to explore optimal plant expansion designs, the cash raised in today’s announcement will primarily be used to physically advance Borborema.
It will cover project elements such as early infrastructure works including water catchment, and finalising the water pipeline and power supply.
A project team will be appointed to manage implementation and mine production and grade control teams, and drilling programs will be undertaken to help further mine planning, resource definition and exploration in and around the current planned open pit.
Part of the funds will also go towards general working capital and the costs of the placement, which was overseen by Dundee, Jett Capital Advisers LLC and Petra Capital as joint lead managers and joint bookrunners.
Under the terms of the placement, 408 million shares will be issued at 5c each – a 10.5% discount to the volume-weighted average price of the company’s shares prior to its last trading day of December 2 – across two tranches.
In conversation with Stockhead last week, Richards outlined the value proposition at Borborema – a story he said represented “one of the largest undeveloped gold projects in the world”.
Indeed, the numbers confirm this view. One of the things that stands Borborema apart is its location within the Serido area of its namesake province in north-eastern Brazil.
The 100%-owned project spans three mining leases across 29km2, including freehold title over the main prospect area.
Importantly, it is close to major cities and regional centres, has existing facilities onsite and access to infrastructure such as buildings, grid power, water and sealed roads, while operating under a favourable tax regime.
Couple these features with a DFS which showed the project’s pre-tax net present value (8%) returned US$342 million with an internal rate of return of 64.7% at an assumed gold price of US$1550 per ounce, and the investment case is particularly compelling.
Richards said today’s announcement served as an important milestone in the story.
“This injection of funds will not only accelerate the development of Borborema but greatly strengthen the Company’s balance sheet, shareholder register and Company profile in anticipation of finalising full project funding,” he said.