MDL split to pump up Newco’s gold prospects
MDL split to pump up Newco’s gold prospects
Barry Fitzgerald
August 30, 2010
FOR all the talk about the West African gold boom and the role being played by a horde of ASX-listed companies, there is not much in the way of production by the Aussies just yet.
Melbourne-based Mineral Deposits is an exception, having switched on its Sabodala goldmine in Senegal in March 2009. In the 2010 June year, the mine pumped out 172,140 ounces at a cost of $US495 an ounce.
It was good start all right. But you would never know that from the group’s share price performance. You can blame that on two things: the very structure of the company and some legacy hedging (246,500 ounces at $US846 an ounce).
The good news is that MDL has got to work on the first problem, its structure. Come November, the plan is to split in two, with MDL to continue here holding the group’s potentially world-class Grande Cote mineral sands project, also in Senegal, and a new Canadian-listed company (Newco) to hold the Sabodala goldmine.
That means Newco should get the full gold premium in its share price that other West African gold players get, while MDL is left to progress financing talks on the proposed $US406 million ($A451 million) Grande Cote development.
MDL will hold on to about 15 per cent of Newco and pick up some cash from the initial public offering of shares in the company on the Canadian market, with MDL shareholders getting 80 per cent of the shares in Newco.
It is what the market has been wanting MDL to do for several years. It’s all very interesting enough in its own right, but got real interesting with MDL’s share raid on Canadian group Oromin Explorations last Thursday.
MDL snared 15 per cent of Oromin, which has been working towards a $US291 million development of its OJVG gold project, which is in walking distance of MDL’s Sabodala operation.
Oromin’s development planning for a 196,000-ounce-a-year operation off a reserve base that stands at 1.4 million ounces of gold looks a bit dumb given the presence of MDL’s nearby treatment plant – one that could easily be doubled in size to accommodate ore from the OJVG.
MDL picked up the Oromin shares in a scrip deal that valued Oromin shares at $C1.13 each ($A1.20). Oromin shares surged 21 per cent to $C1.27 on Friday in response to the move by MDL.
MDL’s current 15 per cent stake in Oromin does not give it a deal on the OJVG. But it is a good start on achieving the logical rationalisation of gold deposits in the Sabodala region, opening up the prospect of MDL’s Newco being on a path to mid-tier gold-producer status. MDL closed at 91.5¢ a share on Friday.
