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Eureka Gold Mine went cheap, says UK firm

29 Jun, 2018 - 00:06 0 Views

eBusiness Weekly

Tawanda Musarurwa
The acquisition of the Eureka Gold Mine by global mining group, Vast Resources’ was an “exceptionally cheap acquisition”, according to a United Kingdom-based independent research company, Equity Development.

Earlier in April, Vast Resources —through its subsidiary Dallaglio Investments (Pvt) Ltd — acquired a 95 percent interest in Delta Gold Zimbabwe (Pvt) Ltd, which operates the Eureka Gold Mine for $4,5 million.

The $4,485 million purchase price of the gold mine was financed by a loan from sub-Sahara Goldia Investments (SSGI) to Dallaglio.

However, analysts at Equity Development say the deal was cheap and foresee an easy recovery of the mine as well as significant benefits accruing to the major shareholder, Vast Resources.

“Based on the low deal cost and 95 percent of the 1,37Moz acquired, this equates to a very low acquisition cost of $3,45 per ounce (oz), or $4,8/oz if you include the $1,8 million creditors payment.

“On any basis we view this as an exceptionally cheap acquisition, coming in well below typical gold space mergers and acquisitions deals ($50-$200/oz) and even below typical African gold discovery costs ($10-$25/oz).

“Vast has not released any development plans, but with a processing plant and infrastructure already on site, we see potential for a very low capital intensity re-start of operations with scope to fast-track Eureka back into production,” said the research firm.

And true to form the new management last week re-opened the Guruve-based Eureka Gold Mine, at an event officiated by President Emmerson Mnangagwa.

The revived gold producer is expected to produce at least 1,5 tonnes of the mineral when it reaches full production capacity in the next 18 months.

The re-opening of the mine came after a $60 million capital injection by the new investors.

Added Equity Development:

“We wait for further development details but based on the low acquisition cost and processing infrastructure required, we believe the deal is likely to be value accretive.

“Even applying $25/oz, our typical EV/oz resource value benchmark for African developers, implies $32, 4 million, $8, 1 million attributable to Vast.”

Eureka Gold Mine ceased operations 15 years ago due a number of challenges.

And its acquisition represents the first new acquisition with Vast Resources’ strategic partners in Zimbabwe for several years, fulfilling one of its priorities to pursue new opportunities in both Romania and Zimbabwe using external funding.

Vast Expands Zim Portfolio

The acquisition widens Vast Resources’ portfolio in Zimbabwe, through a non-dilutive financing mechanism, and provides a neat use of cash flow from Pickstone, which is currently its linchpin asset in Zimbabwe.

The Eureka Gold Mine is situated about 5km south east of Guruve, 300km from the Pickstone Peerless Gold mine.

It was developed as a modern gold mine in 1999 designed to produce approximately 70 000 ounces of gold per annum from an open pit before an underground operation was established. The mine was operated during 1999-2000 after which operations were suspended.

Eureka has a NI43-101 Mineral Resource compiled by Gordon Knoll of TWP Projects (Pty) Ltd in 2012 of                       22,3 million tonnes at an average grade of 1,90 grams per tonne for 1 367 600oz, of which 13,4 million tonnes is an Indicated Mineral Resource at an average grade of 1,78g/t for 1 081 700oz.

The gold operation is exploiting a granitoid intrusion into the Chinhoyi-Guruve Greenstone Belt.

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