Crescent Gold Limited
ASX : CRE
TSX : CRA
FRANKFURT : CRE5

Crescent Gold Limited

November 22, 2010 19:52 ET

Crescent Gold's $45 Million Rights Issue Creates a Platform for Growth

PERTH, WESTERN AUSTRALIA--(Marketwire - Nov. 22, 2010) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

A capital raising of A$45 million has been announced today by Top 10 Australian gold producer, Crescent Gold Limited (TSX:CRA)(ASX:CRE)(FRANKFURT:CRE5). Substantially strengthening its balance sheet, the issue will provide financial flexibility for the company to optimally grow its production profile and enhance the value of its asset portfolio.

One of the principal uses of proceeds from the 2-for-3 non-renounceable rights issue will be to bring the Summit underground gold mine, previously known as Lancefield and located within the Laverton area, back into production. Initial studies suggest the project could produce between 50,000 and 70,000 ounces per annum. Additionally, in conjunction with the Company's forecast cash flow, the proceeds will allow the Company to undertake a partial reduction of its debt, place it in a strong position to negotiate a more attractive working capital facility, and provide the opportunity to consider supplementing its existing highly successful reserve enhancement and exploration drilling, while still allowing it to maintain a strong cash balance.

Terms of the Issue

Crescent proposes to issue approximately 414 million ordinary shares under the 2-for-3 non-renounceable rights issue, at a price of A$0.11, to raise approximately A$45 million. This will take the total number of Crescent Gold ordinary shares on issue to 1.03 billion and capitalise the Company at A$160 million based on Crescent's last closing price of A$0.155 on the ASX last Thursday, November 18th, 2010.

Potential for a New Era at Summit

"The rejuvenation of Summit represents a significant high grade underground gold mining opportunity for Crescent," the Company's Interim Managing Director, Mr Mark Tory, said today.

"A previously operating mine in the 1980s, Summit produced in excess of 1.0 million ounces but closed in 1994 when the gold price was approximately US$380 per ounce," Mr Tory said.

Preliminary mining studies indicate the opportunity to recommence mining of 2.66Mt of resource at an average grade of 6.64 g/t Au generating life-of-mine total production of over 500,000 ounces at cash costs of around A$755 per ounce. At current gold prices a robust profit margin is forecast and excellent returns are anticipated. Independent cash flow analysis for the rejuvenation has estimated an IRR exceeding 50%, based on an initial capital outlay of A$33 million.

"Crescent views Summit as a longer term development asset with substantial and very well defined resource and reserve upside, and our focus now is on confirming the processing flow-sheet. Crescent envisages constructing a concentrator at its Barnicoat plant at a cost of A$20 million, with the concentrates then treated at nearby facilities," Mr Tory said.

Laverton background

The Laverton province, where Crescent controls more than 1,400 km² of mining, exploration and prospecting licences hosting multiple defined shallow oxide gold deposits, has already produced more than 22 million ounces of gold.

The Company's current Laverton gold production commenced late in 2009 under a four year Ore Purchase Agreement with Barrick Gold. Processing occurs at Barrick's large, efficient, 3.8 Mtpa Granny Smith gold mill. This output is part of potentially a seven year mining schedule to be rolled out over four phases from known Laverton Gold Project (LGP) mineable deposits. However, Crescent has more than 20 additional exploration targets expected to further extend the life of the LGP.

Mr Tory said that while Laverton remains one of the best gold-endowed Archean greenstone belts in Western Australia, less than 2% of all holes drilled on Crescent properties tested beyond 150 metres depth, in an area hosting several multi-million ounce deposits which occur below 200 metres depth.

"There is considerable scope for growth from extension of existing open pit resources, development of high grade underground deposits such as Summit, and abundant potential for the delineation of new zones of mineralisation," Mr Tory said.

In its latest September 2010 resource update, Crescent announced total Proven and Probable ore reserves of 6.5 million tonnes at an average grade of 2.21 g/t Au for 445,000 ounces of contained gold within the Laverton Gold Project. This represented an increase of almost 200,000 ounces from the 254,000 ounces the previous year.

Overall mineral resources are estimated at 2.1 million ounces within a 30Mt gold resource.

Operational Update

The company's Laverton operations have just completed their fifth campaign of ore processing through Barrick's Granny Smith processing facility. The previous four 50 day processing campaigns produced an average of 25,000 ounces each; however the last campaign was affected by 15 days of rain, which reduced production to approximately 20,000 ounces with proportionally higher operating costs. Temporary reductions in haulage rates forced production from low grade stockpiles, which combined with the impact of commencing mining in several new pits resulted in temporarily reduced production rates. Conditions have improved at site, mine plans outline modestly higher grades in future campaigns and stockpiles are being rebuilt. The company forecasts production for the year to be in the range of 105,000 to 115,000 ounces. 

Debt Renegotiated

The Company has renegotiated default and covenant conditions of its $15 million facility with its financier, Indago Resources (Indago). In return for postponing all conditions subsequent (which were proving difficult to achieve) until the date for repayment of the facility and properly establishing the loan in good standing, Crescent has granted Indago an increase in the existing royalty-like payments of 1.75% to a royalty of 2% and extended the term of the royalty to the life of the tenements. Additionally A$5 million will be repaid out of proceeds of the Company's Rights Issue (subject to raising a minimum of A$20m), which will pave the way for the Company to pursue its objective of further restructuring its balance sheet to provide flexibility to manage working capital and advance its business development opportunities.

Cautionary Statement Regarding Forward-Looking Statements

Information set out in this press release contains forward-looking statements, which involve a number of risks and uncertainties. These statements reflect Crescent's current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions in light of currently available information. Crescent cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to, statements about the Summit underground development, including estimated production and costs, possible or assumed future results of operations and operating cash flows, growth opportunities and other statements that are not historical facts. These forward-looking statements should not be relied upon as predictions of future events. Crescent does not undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

The information in this report that relates to gold Exploration Results is based on information compiled by Mr Jeff Ion, who is a Member of the Australasian Institute of Mining and Metallurgy and a member of the Australian Institute of Geoscientists and is employed by Crescent. 

The information in this report that relates to Ore Reserves utilising underground extraction (the Summit deposit) is based on information compiled by Mr William Holly, who is a Member of the Australasian Institute of Mining and Metallurgy and is an independent consultant.

They each have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and a Qualified Person under "Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects". They each consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 

Additional information related to the Company is available for review at sedar.com or on the Company's website at www.crescentgold.com

ABN 49 087 360 996

SHARE INFORMATION    
ASX Share Price:   A$0.155
Issued Shares:   620.1m
Market Cap:   A$96.1m
Unlisted options:   35.9m
     
FULLY DILUTED BASIS    
Shares:   656.0m

Contact Information

  • Crescent Gold Limited - In Australia
    Mark Tory
    Interim Managing Director
    +61 8 6380 7100
    +61 8 6380 7199 (FAX)
    or
    Crescent Gold Limited - In Canada
    Renee Brickner
    +1 604 802 6806
    info@crescentgold.com
    www.crescentgold.com
    or
    Field Public Relations
    Kevin Skinner
    Media
    +61 8 8234 9555