Linear Gold, Central Sun plan 'aggressive growth' after merger
miningweekly.com
By: Liezel Hill
Published on 6th January 2009
Updated 3 hours ago
TORONTO (miningweekly.com) – Canadian juniors Linear Gold and Central Sun Mining, which plan to merge to create a new mid-tier gold-miner, will use the financial muscle of the combined entity to seek further growth, Linear president and CEO Wade Dawe said on Tuesday.
According to an agreement between the two firms, Central Sun shareholders will receive 0,4 of a Linear share for every Central Sun share they own.
If the merger proceeds successfully, “the company plans to pursue an aggressive growth strategy, focused on building a very profitable intermediate gold producer,” said Dawe, who will chair the board of the new firm.
The merged entity, which will be based in Toronto, will have assets in Nicaragua, Mexico and the Dominion Republic, and, crucially, will generate cash from day one, thanks to production from Central Sun's Limon mine.
“This production will allow us to play the consolidation game,” agreed Central Sun chairperson Stan Bharti.
Central Sun also owns the Orosi mine, in Nicaragua, which it is converting to conventional milling to increase gold output.
The project is about 50% complete but was put on hold last year because of cash constraints and difficulties in raising the necessary funds.
Post-merger, the company will have about $21-million in cash and cash equivalents, which means that the project can be revived.
Peter Tagliomonte, who will take the reins as president and CEO of the merged company, said on Tuesday that the firm will aim to restart construction at Orosi by the end of March, which would then mean commissioning should begin by September.
By 2010, the new company is expected to be producing 130 000 oz/y of gold from Limon and Orosi, at average cash costs of below $450/oz.
Based on current figures, the expanded firm will have 726 700 oz of proven and probable reserves, 1,1-million ounces in the measured and indicated categories, and 861 000 oz inferred.
FINANCING
Although the merger will provide Central Sun with the necessary cash to restart construction on the Orosin mine, the company will need to raise additional funds to complete the project and refinance existing loans.
The company will seek to refinance a $8-million loan which is owed by Central Sun, and will also require an incremental $7-million to complete the Orosin mine.
The firm plans to finance all of its requirements through debt, and is “actively” in discussions with potential lenders, Dawe said.
The merged entity will trade on the TSX. |
