The underwriter is Tanami Gold’s major shareholder Allied Properties Resources.
Tanami Gold also has negotiated an in-principle funding arrangement with Hong Kong-based AP Finance, an Allied Properties Resources subsidiary, to provide a $40 million loan facility. These funds will provide the remainder of the development capital necessary to bring the Central Tanami on line as its second production centre.
Despite the news, shares in the company were down 19.51% in morning trade to 3.3c.
Tanami Gold said the terms of the funding facility with AP Finance would be agreed and finalised if and when it was required, however, current prefeasibility development and pre-production costs had estimated costs of about $40 million.
This could be refined following completion of a final feasibility study, expected over the next few months.
Tanami Gold also proposes to undertake a one-for-30 consolidation of its issued capital following completion of the entitlements issue, This would leave it with 260 million shares on issue.
The pro-rata renounceable six-for-five entitlements issue is priced at 1.5 cents a share. It will be used to pay back a $37 million loan from AP Finance and a $5 million loan from Eurogold.
Once finalised, Tanami Gold will emerge with no debt and no hedging and well placed to meet its target of producing 200,000 ounces per annum within two years from two operational centres located 90 kilometres apart.
It has been a busy 12 months for the company, culminating in its best ever annual gold production since mining began at its Western Tanami Operations. It also has made discoveries and ore extensions at both the Coyote underground and Bald Hill open pit operations.
Late last year the company entered into a strategic exploration alliance with ABM. That resulted in Tanami Gold transferring its Northern Territory exploration tenements into ABM for a 21.57% equity position in the junior, 300 million ABM options, $1 million in cash and a position on the board.
More recently, it was the successful bidder for the $22 million Central Tanami project from Newmont Asia Pacific, which had an existing JORC compliant resource of 516,000oz and a 1.2Mtpa Central Tanami treatment plant.
Tanami Gold quickly identified four priority areas with potential for early production and resources, including the Carbine deposit, Gallifrey, Pendragon West and Pendragon East and grew the resource to 11.67Mt grading 2.81gpt for a contained 1.06Moz.
It then kicked off the largest drilling program in its history early last month with four rigs contracted and plans to increase this to eight within the next two months, in parallel with scoping study work.
Drilling is designed to further grow the resource at both the Western and Central Tanami project, test a number of deep conceptual targets and underpin its core objective of achieving production of 200,000ozpa by the end of 2011.
Shares in Tanami were down 19.51% in morning trade to 3.3c.
