This was posted14 Mar 2011 19:32
by someone on advfn: Hambledon Mining (LON:HMB) shares have slumped in recent days amid market speculation of a discounted cash-call. This morning it confirmed plans to raise just over £9 million to upgrade infrastructure at the Sekisovskoye gold mine in Kazakhstan.
Right now Hambledon is a steady-state gold producer. It expects to produce between 24,000 and 26,000 ounces from the Sekisovskoye open-pit mine this year.
But it is preparing to take the mine underground with an ambitious expansion programme which will see it almost double production to around 45,000 ounces next year and ultimately ramp-up to 100,000 ounce by 2016.
This morning it unveiled a discounted £9 million fundraising that has disappointed some investors. We caught up with chief executive Tim Daffern as he waited to jet off to Kazakhstan to get his view on the placing and the group’s ambitious expansion programme.
Daffern took the helm at Hambledon in November 2010, and he quickly initiated a detailed review of the operations and the group’s plans to expand the Kazakhstan gold mine.
What he found was a debt-free, un-hedged gold mining operation generating a decent amount of cash.
However he quickly recognised the need for further investment to improve infrastructure, so that it is more suited to a 20 - 30 year mining operation.
Crucially Daffern expects the planned upgrades to improve the mine's economics in the near term too.
“We see an opportunity to move forward, with investment, to reduce cost and increase gold recovery,” Daffern said. “Some of the infrastructure that was put in place during 2007 and 2008 now needs to be upgraded for the long-term.”
He added: “We are trying to get more operating costs out of the business. Therefore these investments are not just designed for the long term project, but they are also going to provide cost savings sooner rather than later.”
While the rationale behind the move seems fairly straightforward, the terms of the funding haven’t exactly been welcomed with open arms. It is issuing 227 million new shares at 4 pence each - a 15.79 percent discount to Friday’s closing price of 4.75 pence - to raise £9.09 million gross.
The shares, which were trading at 8.5 pence as recently as January, had already fallen from Friday’s opening price of 5.6 pence as market speculation grew that a potential funding was in the works. Since the placing was confirmed this morning Hambledon shares dropped another 13 percent to trade at 4.125 pence a share - just above the placing price.
“I know some people are disappointed by the price that we’re issuing the new shares at, but unfortunately that is the market of the London Stock Exchange,” Daffern said.
“It is disappointing but it reflects perhaps some of the historic aspects of Hambledon.”
He added: “Over the past month or so there has been some ‘
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