THE BOURSE WHISPERER: Citigold Corporation (ASX: CTO) has reached an agreement with Kingsford Investment Groups (KIG) for the investment of $72 million into a joint venture (JV) to develop the company’s Charters Towers gold field in Queensland.
Citigold will manage the project on behalf of the JV.
In its announcement to the ASX, Citigold said the incorporated JV will expand the underground operations at Charters Towers with the intention of moving back into low cost sustained gold production.
The Central area of the goldfield will be the JV’s initial focus with the Imperial area to be brought on stream once Central is cash flow positive.
The Central and Imperial are the two main access declines into the Charters Towers gold mine.
All the ore will be processed in an existing centralised processing facility.
Citigold explained the JV aims to turn this gold deposit into a large-scale gold mine with an initial annual production of 50,000 ounces of gold growing to over 300,000 ounces of gold per annum at completion of the planned expansion.
The principle terms of the agreement include:
All gold produced is sold to KIG at market prices;
KIG’s interest will be earned in the JV after the receipt of the $72 million total investment due to be paid as follows; i. $10 million on or before 6 May 2015; and ii. $62 million on or before 10 June 2015.
KIG interest in JV after the required payments are made will be 60 per cent of the incorporated JV.
The JV Board
Once KIG has completed the investment the Board will comprise of a total of five members with KIG appointing three and Citigold appointing two persons.
The farm-in JV will commence when the initial funds are received from KIG.
“We are excited to be joining with KIG to develop Citigold’s 100 per cent-controlled high-grade gold field at Charters Towers,” Citigold chairman Mark Lynch said in the company’s announcement to the Australian Securities Exchange.
“This JV creates a win-win for Citigold and KIG as it provides the required capital to develop the Charters Towers gold field delivering all stakeholders directly and indirectly whilst also providing KIG with opportunities in their other business areas.
“The combination of our management, the solid foundation in place for expansion at Charters Towers and KIG has created a partnership which can deliver a highly successful and sustainable project.”