Musgrave Minerals surges as it raises cash; aims for faster gold revenue
Link copied to
Shares in explorer Musgrave Minerals surged Monday as it took steps which may see it generate revenue from some of its gold reserves quicker and cheaper than expected previously.
A quick placement with Westgold raising $3.36 million at 7c a share – a handy premium to Musgraves share price – helped push Musgrave shares sharply higher in early sharemarket trading.
In lunchtime dealings, Musgrave shares were up 16 per cent at 6.5c at with Westgold ahead 7 per cent at $1.66.
Musgrave has worked up some handy gold reserves in Western Australia, around Cue, but it is hampered from raising large amounts of money from investors due to its small market capitalisation.
The funds raised from today’s placement lifts to $5.5 million Musgrave’s cash reserves, which leaves it well-placed to continue exploration while also reviewing the best way of generating cash from its most prospective assets.
Though Musgrave managing director Robert Waugh said that while he company had mining leases in hand, environmental approvals would be needed before production could commence.
As a result, mining would not be likely until the first or second quarter of 2019.
Helping Musgrave to take a step forward towards monetising its assets is the fact that there are gold processors in the same neighbourhood as Musgrave’s Cue reserves.
Musgrave had indicated previously that if it could pull off a tolling deal, this could enable it to commence production sooner, and limit its outlays.
Westgold has three operating gold processing mills in the Cue area, for example, and the two companies will now sit down to work out how best to commercialise the Musgrave acreage.
The nearest mill to Musgrave’s acreage at Cue is Westgold’s Tuckabianna mill which is 40km away, while Westgold is also developing the Big Bell underground gold mine a little further afield.
At its acreage at Cue, Musgrave estimates it has a total resource of more than 440,000 ounces of gold, across a zone extending for more than 20km.
Metallurgical work already carried out on the Musgrave gold reserves has found high levels of recoveries from conventional processing,
Musgrave has argued for some time there is the chance that its existing resource at Cue could be trebled.
Generating cashflows from its reserves at Cue would be the most economical way forward, which would help to limit the need to turn to its shareholders to raise cash.
Musgrave is a minnow compared with Westgold, worth only around $17 million in the sharemarket, compared with Westgold, which is valued by investors at around $600 million.
Westgold has just raised $80 million from the sale of its South Kalgourlie operrations.
Sharemarket analysts have previously highlighted the prospects for Westgold to boost gold output as it focuses on four gold production hubs in Western Australia, at Cue, Meekatharra, Higginsville and its Fortnam project.
Each of these hubs has a processing plant which is capable of handling of 1 million to 1.8 million tonnes of ore trucked in from mines up to 50km away.
The Westgold plant at Tuckabianna, near Cue, has 1.2 million tonne a year of processing capacity, and it was only commissioned earlier this year.
Westgold said the Musgrave resource at Cue is one of the nearest to Tuckabianna, with ‘clear synergies’ with Westgold’s operations.