Southern Cross Goldfields acquires new project and scores new finance arrangement

THE BOURSE WHISPERER: Southern Cross Goldfields (ASX: SXG) has signed a formal Sale Agreement with Troy Resources (ASX: TRY) for the acquisition of the Sandstone gold project.

Southern Cross has also received a credit-approved offer of finance from RMB Australia Holdings for the provision of an acquisition finance facility of up to $7 million to fund the acquisition of the Sandstone project, as well as facility fees and capitalised interest and general working capital requirements.

The Sandstone gold project comes with a 600,000 tonnes per annum Carbon-in-Leach gold processing plant and 100-person camp.

But wait, there’s more.

The acquisition also includes a 1,100 square kilometre tenement portfolio with a JORC-compliant resource base of 14.5 million tonnes at 1.5 grams per tonne gold for 720,000 ounces of gold.

When added to Southern Cross’ existing resource inventory at the company’s Marda gold project, located 220km south, of 535,000 ounces, Sandstone takes its total resources to approximately 1.3 million ounces of gold spread over two mining camps in close proximity.

“We are delighted to have finalised the formal sale documentation for the Sandstone acquisition with Troy Resources, which, together with the receipt of a credit-approved offer of acquisition finance from RMB Resources, puts the company firmly on track to join the ranks of Australian gold producers next year,” Southern Cross Goldfields managing director Glenn Jardine said in the company’s announcement to the Australian Securities Exchange.

“We are also making excellent progress with securing the broader funding package for development of the Marda project, which will ultimately supersede the interim funding package to be secured for the acquisition of Sandstone.

“This caps a transformational year for SXG and puts us on a clear pathway to development and production in 2013.”

Southern Cross said it intends to relocate the Sandstone plant and camp to the Marda gold project to facilitate an early commencement of gold production.

The company has completed studies, which it claims have demonstrated the Sandstone acquisition will improve the economics of the Marda project.

The Marda project is projected to deliver initial gold production of 35,000 ounces per annum at an average cash operating cost of $880 per ounce, generating annual average operating cash flows of approximately $25 million.

The consideration for the acquisition comprises $2.3 million in cash, a 2 per cent net smelter royalty on all production and 43.665 million unlisted Southern Cross options (10 cent strike price, 5-year term), representing 15 per cent of the company’s issued capital.

Southern Cross will also be required to replace $2.7 million of existing environmental bonds.