May/June 2013 - The ASIA Miner

Mining Success Stories
have collectively produced 17 million ounces,
which is not a bad address but it needs the
capital, drilling and specialized geological and
exploration knowledge to succeed.
“We have the expertise to deal with the
unique geology. Exploration guys from the
Castlemaine tenements share experiences at
Ballarat, the mine general manager had the
same position at Bendigo, and I have worked
in Tasmania and Western Australia. We have
an expert from Snowdens here three days a
week and he travels the world examining different
models. You don’t want to be all the
same as you can get stuck in a fixed way of
doing things and with a fixed model.”
Funding boost
Castlemaine did a capital raising to fund the
Ballarat purchase and 9-month drill program,
then another raising to commence development.
“We believed the $25 million raised
was enough to see us into production,” he
says, “but this relied on picking up small
satellite ore bodies underground on the way
to the main zone to bolster revenue. By November
2011 we realized these ore bodies
which were supposed to come in at around
4 grams/tonne were only yielding 2 to 3
grams. It doesn’t sound a lot but was the difference
between having enough funds to
reach the main zone and not. We had to do
a $15 million raising quickly but the market
hates surprises. Our share price got hammered,
dropping from around 30 cents to 10
cents per share. Our market cap fell from
around $60 million to under $30 million, and
we only raised $10 million.
“Meantime, LionGold had changed its
focus from environmental manufacturing to a
gold mining business, had commenced the
takeover of Signature Metals with its Ghana
prospects and was looking for other opportunities.
We were looking for someone to pick
up the $5 million shortfall and received a call
from Singapore asking if we were interested
in talking with LionGold. They had seen how
much had been invested here, that we had a
market cap of only $30 million, that we had
people, plant, property and equipment, and
were producing gold.
“When the friendly all-scrip takeover was
announced in March 2012 Castlemaine’s
share price was around 11 cents and the implied
value of LionGold’s offer was around 17
cents. What we didn’t realize was that there
were a few fund managers following LionGold
because it was one of the few positive share
appreciating gold companies. As shares
came on the market the funds bought them
and at the close of the offer Castlemaine’s
shares were up to 20 cents which meant
shareholders could sell on the market and
didn’t have to take up the takeover offer.
“Considering the circumstances and the 60%
premium provided by LionGold, I think it was
the right decision of Castlemaine’s Board to
recommend the offer and let shareholders
decide. There was a 96% take-up and the remainder
was compulsorily acquired which
meant we became a 100% LionGold subsidiary.
The ability to do what we want with
our projects in Australia is now underpinned
by the financial strength of a bigger company,
and there’s a lot to be said for that.”
LionGold’s vision
LionGold’s director, investor relations, Lesley
Bendig, says the company’s vision is to become
a serious mid-tier player in the gold industry
within the next two years. “Our targets
by the end of 2014 are to have a minimum of
200,000 ounces of gold being produced annually,
10 million ounces of resources and 2
million ounces of reserves.”
She says, “We started in the gold space
about two years ago looking at operating traditionally
by obtaining prospects and proving
up resources through exploration and drilling
but then recognized there are many existing
operations well below their asset value, so why
not leapfrog the early stages and move straight
into developing mines and producing gold.
“Castlemaine is extremely important to LionGold.
At present it’s our crown jewel because
it’s our only producing mine and has
turned around, being worth more now than
when we bought. It’s over-capitalized to
some extent but this gives us growth opportunities
in the region and we can process
third party ore from the area.
“We also have property in Africa through our
Signature Metals acquisition, have a project in
Bolivia, are the major shareholder in CitiGold
whose asset is at the famous Charters Towers
goldfield in north Queensland and have recently
taken an interest in a Canadian property
through Acadian Mining Corporation in Nova
Scotia, an area which we believe has been very
under-explored. We don’t always take 100%
of a company at first but just an initial stake
which enables us to get closer to the project.”
Lesley Bendig says, “I think we will grow rapidly
over the next two years and largely via acquisition.
We have looked at Asian opportunities
but none have passed our screening criteria.
Acquisition costs to date have been below
US$26 an ounce and in order to provide shareholder
value, we need to obtain assets at a discounted
price and then add value.
“In Victoria we believe we have the classic
pipeline to sustain production, lengthen operational
life and expand in the future,” Matthew Gill
says. “LionGold can assist but we have to compete
for funds with its other projects. When considering
our $3 million drilling program at
Castlemaine for example, we must realize Lion-
Gold also has 12km of undrilled Ashanti Shear
Zone strike length in Ghana, 80km up the road
from AngloGold Ashanti’s 32 million ounce
Obuasi mine. This provides healthy competition
and is a nice problem to have.”
Owing to its suburban location and presence of denuded historic workings revegetation is an important aspect of
the mine’s environmental programs.
May/June 2013 | ASIA Miner | 7