By Alastair Ford
“We applaud the company for raising capital in the current difficult market environment”, wrote analysts at Canaccord, after Amara Mining announced it had completed on a £14.5 million fundraising.
The raise was anticipated by Minesite in the article we wrote just a few short weeks ago – here – and fits right in with the strategy then outlined by Amara’s chief executive John McGloin.
Amara will shortly be delivering the results of a major economic study into the viability of development at the Yaoure gold project in Cote D’Ivoire. Yaoure looks like being one of the largest gold mines in Africa not owned by a major, and if previous work is anything to go by, looks more than capable of producing at a rate of 200,000 ounces per year over a number of years.
But the equity markets are in skittish mood at the moment, and have not been given to reward any sort of success on the ground unless there is clear evidence that the next steps are fully funded.
After all, a good project inside a company with no cash to take it forward is going nowhere. Or, looked at another way, is vulnerable to predatory interest.
But a company with a clearly defined path and the cash to pay for it is an altogether different proposition. Hence, Amara has got its raise away ahead of the upcoming pre-feasibility study, meaning that when investors come to look at the numbers they’ll be able to judge the announcement on its merits rather than being spooked that there’s no money in the bank to pay for the next step.
The new money has been raised through existing investors, but also with the introduction of Tembo Capital Mining Fund as a new investor. Tembo is a specialist in African mining finance, run, alongside two others, by David Street, the former director of Endeavour Financial.
Thus the arrival of Tembo onto the project represents not just a tick in the box as far as getting new money into the company is concerned, but also as regards the viability of the project itself. Tembo’s experience in funding projects like Yaoure runs very deep, and its due diligence would have been thorough.
The company can now proceed with confidence through to the bankable stage, and indeed beyond, to a development decision.
What it will then do when it comes to securing project finance remains an open question, but it must be encouraging both for existing and for new shareholders that the size of this raise was increased to meet demand.
A rising gold price always helps of course, though, as John has always maintained, Yaoure has been stress tested to levels far below the current US$1,300 price. The results of the pre-feasibility study should make for very interesting reading.