Old Friends And New Money Brighten Up The Outlook For Vatukoula
By Alastair Ford
minesite.com
What goes around comes around, as they say, so it was interesting to see that Wally Berukoff, the serial mining investor from Canada who caused a bit of a kerfuffle on Vatukoula Mining’s share register earlier in the year, is building up his stake again. Back in springtime, Wally wanted Vatukoula to buy a mining asset in Fiji that he controls, and he was able to exert considerable pressure via the 18 per cent shareholding that he had at the time. The Vatukoula management team was less keen, though, and eventually Wally’s proposals were rejected and Wally’s own stake taken out by John Kearney’s Canadian Zinc. Still, as you might imagine in a situation like this, nothing’s ever over till it’s over. Under the deal with Canadian Zinc Wally was left with a swathe of options in Vatukoula. These he’s now exercised, putting around £2 million of new money into Vatukoula’s coffers.
That money won’t go amiss, as the company has been struggling to get its operations at the Vatukoula gold mine in Fiji running to maximum efficiency. A shortage of equipment has been one of the reasons cited for what some see as slow progress there, though chief executive Dave Paxton emphasizes that now, following a recent placing to that raised £9 million, subject to shareholder approval, production should hit the official 60,000 ounces that’s been budgeted for this year. Add that £9 million to Wally Berukoff’s £2 million, and Vatukoula at last looks as though it’s got the funds in place to make a real go of developing a mine.
The most recent set of results showed costs running at over US$1,000 an ounce, which, even in this gold price environment, is unsustainable. But the new kit that Vatukoula will now be able to ship in ought to change all that. Within the last month or so, two haulage trucks and three loaders have been delivered to site, with more on the way. A further £2 million will now be earmarked towards the purchase of even more new, or reconditioned, equipment. Much of the new money, though, will sit on Vatukoula’s balance sheet as working capital.
The plan now is to open up new faces in the mine, to allow for greater flexibility and for the possible creation of a stockpile. What Dave Paxton really wants is room for manoeuvre, and the fundraising environment over the last 12 months has sorely tried his patience on that score, as equipment delivery delays have hampered development. Sentiment seems to have turned, now, though, as this time round Vatukoula only went looking for £5 million, but was, says Dave, actually offered £15 million.
Settling at just about the middle of that range seems a fair compromise, although as might have been anticipated, because new money is coming into the company the shares have strengthened. So it was that even though the financing was actually completed at 1.2p, which is roughly where Vatukoula was at when all the arrangements were being made, the price has subsequently firmed to 1.43p.
Dave’s plan now is to take production towards the 100,000 ounces mark. It ought to be achievable, as the ounces are there, the equipment is now on the way, and because this is the level at which the mine used to produce in the glory days before the gold price tanked and the unions got overconfident. He’s not anticipating any further problems from Wally, either, as at the new levels Wally’s influence won’t be half as marked as it was in the old days. Back when he had 18 per cent, Wally could stop a special resolution, as indeed he did.
No such options are open to him now. But perhaps more importantly from a shareholder perspective, it was in part, heavy selling from Wally which hammered Vatukoula’s shares so badly during the early part of the year. That selling pressure has now been reversed, and with money in the bank and the gold price still jumping around at close to US$1,000, the outlook for Vatukoula looks better than it has done for some time. |
