The new Eastern Goldfields boss is ‘quietly confident’ this time it will work
The new head of Eastern Goldfields (ASX:EGS) believes the flailing gold explorer will this time succeed in its recapitalisation and get back to business.
This is not the first time Eastern Goldfields, which is being rebranded as Ora Banda, has tried to lock in a recapitalisation deal.
“I was asked to come in as a non-executive director on a previous capital reconstruction program mid-last year, and said that I would do that if the money was raised and we pulled together a different team of management and directors,” new managing director David Quinlan told Stockhead.
“That proposal ultimately didn’t get up, so I didn’t do anything at the time.”
Quinlivan has spent over three decades in the mining industry, including 11 years with WMC Resources, which was eventually swallowed up by heavyweight BHP (ASX:BHP).
This is not the first mining company he has been called in to help. Quinlivan joined gold miner Sons of Gwalia as CEO during its corporate reconstruction after administrators were appointed. However, that company eventually ended up closing its doors for good.
Quinlivan has also served in the roles of COO at Mount Gibson Iron (ASX:MGX), president and CEO at Alacer Gold (ASX:AQG) and chairman at Churchill Mining.
He has been a principal of mining consultancy Borden Mining Services since 1989 and has worked on a number of mining projects in various capacities.
Quinlivan again agreed to come on board Eastern Goldfields to help reverse the company’s fortunes after shareholders and creditors called for a change in management.
“So I said yes I’ll come on board and see if we can come up with a plan to put this thing back on the rails again and get it out of the administration that it was in, get some money back in the bank, send it back to its roots and start from the ground and work up.
“It does have a lot of good assets and money has been spent on various things that those that are participating in this current round of financing, if it all goes ahead as planned, will get the benefit of.”
Eastern Goldfields, which owns the Davyhurst gold operation 120km north-west of Kalgoorlie, needs to get a $30-40m capital raising across the line, which will give it sufficient cash and wipe out its debts.
Quinlivan said the company’s primary secured creditor, Hawkes Point, had agreed to underwrite up to 25 per cent of the capital raising.
But if the market loses some of its steam, or a “2008 financial crisis comes across us in the next month or so”, Hawkes has agreed to up its underwriting commitment to 50 per cent, he said.
“We will look to raise the rest of it, and there are a number of parties who I have been having some preliminary discussions with and they’re existing shareholders, existing creditors that are keen to see it go forward. So I’m quietly confident.”
Quinlivan’s plan is to go right back to building up the resource, so the company can play the long game this time.
“I think the primary goal is to use the money that we raise in this recapitalisation over the course of the next 18 months to fund the detailed resource and reserve delineation program and then pull together a definitive feasibility study,” Quinlivan said.
This would allow Eastern Goldfields to develop a “bona fide” operating plan to take to potential financiers.
“[We’re] looking to develop a longer-term plan that would enable us to restart production operations with a view that we would have a multiple year life,” Quinlivan explained.
“This is what we believe will give the shareholders and the stakeholders the best return out of it. So it’s more of a stepped process than the one that was adopted before.”
The rationale for the name change to Ora Banda has to do with where the company’s projects are located.
Ora Banda, located 67km north-west of Kalgoorlie, is a ghost town with a single pub.
Ora Banda in Spanish means “band of gold”.
“From a linguistic background point of view, it seemed to be what we were trying to do in the gold mining space with Eastern Goldfields,” Quinlivan said.
“The company’s tenements extend to very near the Ora Banda townsite. So it was keeping as much of a local connection as we could and at the same time a new face with a new strategy for it.”