Gold: Dacian completes $98m capital raising, Red 5 tops up satellite resource

Troubled miner Dacian Gold (ASX:DCN) has completed the $28m retail component of its entitlement offer priced at 30c per share, bringing the total raised to $98m.

Eligible retail shareholders subscribed for about 74 per cent of the shares on offer with the remaining shares to be allocated to sub-underwriters on a pro-rata basis.

Shares in the company dived from $1.40 before it entered into a suspension in early February to about 40c when it was reinstated thanks to a 40 per cent downgrade of its mineral resource estimates.

Dacian’s hedge book has not done it any favours either with practically all of its production for the current quarter committed at a miserly $1,768 per ounce, a far cry from current gold prices.

While just over half of its production for the 2021 financial year is also hedged at an average of $2,092, this still means that the company is not fully exposed to the high gold price.

Analysts have flagged that gold could hit anything from $US1,800 to $US3,000 per ounce, or $2,799 to $4,665.5 per ounce.

Spot gold is currently at $US1704.3 per ounce, or about $2,647.77 in Australian dollar terms.

Proceeds from the capital raising will be used to partially repay Dacian’s project debt, carry out pre-stripping at the Doublejay open pit, fund exploration activities and for working capital.

The company has ambitious plans to deliver a three-year outlook with average expected production of 110,000 ounces of gold per annum at all-in sustaining costs of $1,350 per ounce sourced almost entirely from open pits that are proven, low-risk and well understood.

Potential upside could come from the targeted near-mine exploration program, regional consolidation opportunities and the Westralia underground resource, which is not included in the three-year plan.

Meanwhile, fellow producer Red 5 (ASX:RED) has defined maiden resources for the Cerebus-Eclipse and Centauri satellite open pit deposits at its King of the Hills project in Western Australia.

Cerebus-Eclipse has estimated resources of 2.8 million tonnes (Mt) grading 1.2 grams per tonne (g/t) gold, or 112,000 ounces of contained gold, while Centauri has a resource of 1.7Mt at 1.5g/t gold, or 81,300 ounces of contained gold.

Along with the recently announced resources for the Ranbow and Severn deposits, the company’s total satellite open pit resource now stands at 308,200 ounces of gold.

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Red 5 expects the deposits to be a key component of its mining strategy, providing potential complementary mill feed and cash flow during the early stages of the proposed stand-alone 4-million-tonne-per-annum processing operation.

The final feasibility study for an integrated bulk open pit and underground mining and processing operation at King of the Hill is on-track for completion in the September 2020 quarter.