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Focus Completes $225M Placement

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FOCUS COMPLETES $225 MILLION RAISING VIA PLACEMENT TO SHANDONG GOLD

  • Final approvals received to complete $225M placement
  • Focus receives $225M in cash from Shandong Gold
  • Placement priced at a significant premium to Focus’ share price
  • Placement cements strategic partnership with one of China’s three largest gold producers
  • New directors appointed to join existing Board
  • Focus outlines immediate investment priorities to accelerate organic growth 

Focus Minerals Ltd. (“Focus”) (ASX: FML), a leading Australian gold producer and explorer, said today it has completed a placement to Shandong Gold International Mining Corporation Limited (“Shandong Gold”), issuing 4,501,997,651 new fully paid ordinary shares at 5 cents per share for approximately $225 million (“Placement”).

The finalisation of the Placement follows the receipt of all required Chinese regulatory approvals by Shandong Gold and the overwhelming vote last month by Focus’ shareholders to support the company’s plan to raise funds through the issue of new shares to Shandong Gold.

The Placement, which will double Focus’ market capitalisation, has been transacted at a significant premium to Focus’ current share price.

“This is one of the largest mining deals for an emerging mid-tier Australian gold producer in recent times and underscores the importance of Australia-China mining interests,” said Focus Minerals Chairman, Don Taig.

“Focus now has an exceptionally strong balance sheet and – importantly – a significant strategic partner in the region with whom we are looking forward to working together to ensure that we accelerate the development of our significant landholdings across two of Australia’s key gold producing regions.”

Shandong Gold General Manager, Zhang Dahui, said: “The establishment of our first strategic partnership in Australia demonstrates our determination to develop our business in Australia.  It is a significant investment we are making into Focus Minerals and reflects both our confidence in Focus and our capability to help develop the Focus operations at an accelerated pace for the benefit of all shareholders.”

Since Focus moved into production in 2008 the Company has reinvested its profits back into the ground, growing its Mineral Resources, Ore Reserves and production. Based just on its existing 4.3 million ounce resource inventory, Focus has an extensive production roadmap.  Development of new projects and ongoing exploration success will strengthen this position.

USE OF PROCEEDS

The funds raised from the Placement will establish the foundation for Focus to accelerate the development of its existing gold projects, targeting a growth in Ore Reserves and Mineral Resources, new discoveries from targeted exploration programmes, the ability to expand the capacity of its processing operations and the future potential for value accretive acquisitions.

Initial spending by Focus as a result of the Shandong Gold investment is planned to include:

  • $18 million on Ore Reserve growth drilling in next 12 months, with the goal of rapidly increasing Ore Reserves;
  • $22 million on exploration across its tenements in Laverton, Coolgardie and Treasure Island in the next 12 months, capitalising on work the exploration team has done in identifying more than 40 priority targets to develop across the Company’s tenement holdings;
  • Increasing mill capacity at its Three Mile Hill plant at Coolgardie from its current 1.2Mtpa capacity, to a rate to be determined by Ore Reserve growth; and
  • Focus will also consider refurbishing the company’s Barnicoat plant at Laverton. Through 2013, as it seeks to build its Ore Reserve inventory, Focus will determine whether this would be at its current nameplate capacity of 1.45Mtpa or greater.

“The refurbishment of the Barnicoat mill can clearly change the economics of our operations in Laverton where we currently mine for 365 days of the year but are only able to process for less than 200 days,” said Focus Minerals CEO, Campbell Baird.  “This has the potential to drive a strong increase in the margins in our business.”

Mr Baird said that the investment by Shandong Gold, apart from providing an immediate capital injection of $225 million to assist in fuelling an accelerated growth of Focus’ projects and operations, will introduce a large, supportive investor that will allow for the exchange of technical knowledge.

“The investment provides expertise at Board level to assist with the exploration of Focus’ large tenement holdings and it significantly increases the market capitalisation of Focus” said Mr Baird.

Focus recommissioned the Three Mile Hill plant in Coolgardie in 2009.  In the past two years, Focus has transitioned its Coolgardie operations from a single underground operation to now having multiple operating mines.  Following its successful takeover of Crescent Gold in 2011, it has integrated those operations into the Group and, under Focus, Laverton has turned from a $51 million loss-making operation in FY11 to a $3.8 million profit in FY12.

BOARD APPOINTMENTS

Mr Li Zhongyi, Executive Chairman of Shandong Gold; Mr Zhang Dahui, General Manager of Shandong Gold; and Mr Michael Guo, Deputy General Manager and the Chief Geologist of Shandong Gold have been appointed as Non-Executive Directors of Focus.  They join Chairman, Mr Don Taig and Non-Executive Directors; Mr Bruce McComish, Mr Gerry Fahey and Mr Phil Lockyer on the Focus Board.

Mr McComish has also agreed to represent the interests of Shandong Gold on the Board. He will liaise between the Independent Focus Directors and Shandong Gold’s Board representatives as well as providing an important and critical “on-the-ground” direct link between Shandong Gold’s Board representatives and Focus’ Chairman, Don Taig. Mr McComish will also assist and provide counsel to Shandong Gold’s three nominee directors on their duties.

“Mr McComish knows and understands the Focus business and is an ideal choice to act as a liaison between Shandong Gold’s Board representatives and Focus’ Independent Directors,” said Mr Taig.

“His role will benefit all Focus Minerals’ shareholders and will facilitate and ensure that strategic business matters are dealt with in an efficient way.”

Mr Taig said the new board structure reflects Shandong Gold’s post-Placement stake in Focus, with four nominees on the seven-member Focus Board. “Importantly, this will also maintain the same total number of Directors on the Focus Board as originally contemplated, and minimise costs associated with the employment of additional Directors,” said Mr Taig.

Mr Taig, was recently in China visiting his counterparts at Shandong Gold and took the opportunity to see two of Shandong Gold’s underground mines, two major processing centres and a gold refining plant, whilst also being able to talk with their staff at all levels and see the quality of the operations first hand.

“The scale of Shandong Gold’s operations is significant,” said Mr Taig.  “Much of the operations are heavily automated providing strong efficiencies.  They have a major commitment to eco-friendly mining concepts by management and staff as well as a proud record of improving the economic and social situation of the Shandong workforce.

“Clearly, both Focus and Shandong can assist one another on a number of levels, but in the short term, there is much that can be learnt from Shandong Gold’s track record.”

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