THE BOURSE WHISPERER: Mutiny Gold has booked a profit of $11 million following a recent strategic gold transaction.
Mutiny, along with its adviser Noahs Rule, used a $75 million gold buying facility the company has been provided by Credit Suisse to take advantage of, what it perceived to be a recent weakness in the gold price.
Mutiny stepped up to the gold market of the London Metals Exchange and purchased 50,000 ounces of gold at an average price of $1,491 per ounce.
The company explained the strategy behind the acquisition will enable it to deliver the recently-acquired gold into a current 50,000 ounce hedge put in place in December 2011.
This has resulted in Mutiny achieving a total gain of $11 million, which would be used to repay an existing $11 million short-term Credit Suisse loan.
Mutiny Gold managing director John Greeve said the short-term loan provided by Credit Suisse had provided important momentum for the company.
“The $11 million loan allowed us to complete the purchase of the Deflector gold project from ATW Gold Corporation Ltd and fund the highly successful drill programs and Feasibilities Studies at Deflector,” Greeve explained in the company’s announcement to the Australian Securities Exchange.
“The hedge developed in December 2011 was an important component of the facility agreement with Credit Suisse and it is strategically significant that the company has improved its balance sheet in anticipation of securing a Senior Debt Funding Agreement for project financing.
“We believe that the value of the Deflector gold project has increased significantly since we negotiated our initial short term loan, and hedging position.
“By using the profits from this transaction to retire our short term debt, we have an opportunity to simplify our funding arrangements and reduce the level of financial exposure to our lenders.”
The company outlined the three key considerations behind the Mutiny Directors’ decision as being:
1. The company believed that the 2011 hedges had served their purpose and Mutiny had maximised their value;
2. Ongoing economic instability in Europe and America – plus the growing potential for a resumption of hostilities on the Korean Peninsula and the impact these would have on global market sentiment – are expected to see the gold price rally from its current low levels; and
3. The company has an opportunity to use the profit to reduce short-term debt and simplify its balance sheet as part of completing its project financing agreements.