True Gold taps new sources to raise capital

Mark O’Dea has to be the envy of every of nearly every junior mining CEO in the country.

As the executive chairman of True Gold Mining Inc., Mr. O’Dea has signed off on deals to raise $33.5-million of fresh capital since the start of May. That equates to more than half of True’s $60-million market value.

It is an enormous amount of money for a junior gold miner to raise at this point in time. Juniors are suffering through some of the worst market conditions seen in decades, as risk capital has fled the sector and equity financing opportunities have dried up due to lack of demand. The recent drop in gold prices only made matters worse.

Mr. O’Dea, a well-known mining entrepreneur, said he recognized the equity markets were a non-starter for raising capital. That caused him to take a different approach and look for strategic investors. His success demonstrates that money is available for quality junior companies, but they have to work a little harder for it than they used to.

“We’ve really tried to target a different style of niche investor, and different pools of capital from the traditional resource sector funds which have been really beat up,” the 45-year-old said in an interview.

Many juniors like to talk about how they are courting various “strategic” investors (particularly in Asia) but almost none are able to raise substantial amounts of money that way.

True Gold, however, was able to tap two different sources. Back in May, the Vancouver-based miner raised $10-million through a private placement with Canadian giant Teck Resources Ltd. And on Thursday, the company announced it is receiving a $23.5-million investment from Liberty Metals & Mining Holding LLC, a subsidiary of Liberty Mutual Insurance and a very long-term investor in the resource space.

True Gold was helped by the fact that Mr. O’Dea has a strong track record. He was the CEO of Fronteer Gold Inc., which made a discovery in Nevada and was sold to Newmont Mining Corp. for $2.3-billion in 2011. He also has a relationship with Teck that dates back to his days at Fronteer.

But on its own, that would probably not be enough to raise significant funds in this market.

Mr. O’Dea said the key was to match the project he wanted to build with the right kind of long-term investors. He said that Liberty was interested in True Gold’s Karma project in Burkina Faso because it has low capital intensity, with a construction cost of less than $150-million. That is a must in a market where capital is so scarce, and provides a useful lesson for juniors trying to tackle more ambitious projects.

“As the market began to turn, we recognized that projects with low capital costs, that can get into production relatively quickly, and can withstand downward pressure on the gold price are the projects you want to be in,” he said.


Will You Be Buying Groceries With Gold Soon?

The Arizona legislature last week tried to legalize shopping with gold and silver coins. Thankfully, Gov. Jan Brewer quickly put the kibosh on the idea, vetoing the law on Thursday. But even if she hadn’t, it never would have worked. I’m sorry. Did that statement sound a bit too matter-of-fact? Too dismissive of the gold bugs’ idea of a “sound monetary policy”? Well, let’s consider the evidence. Bugs of a feather flock together Arizona’s proposed law was flawed from the get-go, because it fatally misunderstood the philosophy behind precious-metal investors. Stock investors sometimes buy gold stocks such as Yamana Gold Inc. (USA) (NYSE:AUY) or Goldcorp Inc. (USA) (NYSE:GG) in hopes they will rise in value, so they can cash out at a profit. (Although with Yamana shares down 13% so far this year, and Goldcorp down 21%, there have been precious few profits to cash out lately.) They’re equally willing to trade one gold-mining stock with a high P/E (Goldcorp Inc. (USA) (NYSE:GG) costs 16.5 times earnings for example, and Yamana Gold Inc. (USA) (NYSE:AUY) more than 20) for a gold miner that looks cheaper than the competition — for example, Newmont Mining Corp (NYSE:NEM), which costs only 10 times earnings. People who buy actual precious metal — or invest in it vicariously, through ETFs such as SPDR Gold Trust (ETF) (NYSEARCA:GLD) or iShares Silver Trust (ETF) (NYSEARCA:SLV), which own actual ingots — have a different motivation. They buy gold or silver because they think it’s safer than cash. They’re convinced the metal will hold value over time. More than that, they’re convinced it will gain value over time. Hence, they’re wholly uninterested in converting their gold or silver into cash, or, even worse, converting their gold and silver into orange juice and Oreos at the supermarket, as Arizona’s law would have permitted.

Had Gov. Brewer signed Arizona’s bill into law, Arizona would have joined Utah as the second state in the Union to permit use of gold and silver coins as currency. Colorado tried to follow suit last year, but the bill died in the state Senate, and several other states are said to be contemplating, or actually working on, similar legislation. But for now, the sole state in the nation that permits use of gold and silver as legal tender is Utah. So how’s that working out? Recognizing that even with the law’s passage, few Utahns would feel comfortable walking down the street, their pockets a-jingling full of gold and silver coins (muggers being one risk, holey pockets another), Utah came up with an alternative. Rather than literally paying for goods and services in gold coins, the state permitted the establishment of a depository — the Utah Gold and Silver Depository — where folks could deposit their precious-metal coinage, and bullion as well. Deposits would be linked electronically to debit cards at UGSD, which account holders could then use to pay for goods and services with funds backed by their gold and silver — funds that automatically translated the day’s price for an ounce of gold, for example, times the amount of gold in an account, into a current gold-backed balance that could be paid out of the card.


Centerra Gold confirms 2012 production hit

The gold miner was forced to substantially cut its 2012 production outlook in November, as output at its Kumtor mine was hit by ice movement in the pit.

Author: Reuters
Posted: Tuesday , 15 Jan 2013

(Reuters) -

Centerra Gold Inc said its 2012 gold production totaled 387,076 ounces, down 40 percent from a year ago on lower production from its Kumtor mine in Kyrgyzstan, but expects to produce about 605,000 ounces to 660,000 ounces of gold in 2013.

Toronto-based Centerra was forced to substantially cut its 2012 production outlook in November, as output at Kumtor was hit by ice movement in the pit. Kumtor is Centerra’s largest gold mine.

“The year proved to be a challenging one beginning with the unexpected acceleration of ice and waste into the central pit (at Kumtor),” Chief Executive Ian Atkinson said in a statement on Monday.

In 2011, Centerra had produced 642,380 ounces of gold.

The miner produced 219,316 ounces of gold, during the fourth quarter of 2012, up from the 151,562 ounces produced, an year earlier.

Centerra also said it expects capital expenditures for 2013, excluding capitalized stripping, to be $107 million.

Shares of the company, which has a market value of about C$2.19 billion, closed at C$9.38 on Monday on the Toronto Stock Exchange ahead of release of the production figures.

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