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Nov 2005 - Michelago Limited

Michelago Limited (MIC) – A Leveraged Gold Play

  • On 19 September 2005, MIC announced that (subject to shareholder approval) it had made a placement of A$8.2m in the form of 164m shares at 5Ac to settle A$2.1m associated with the purchase of 82% of BioGold in outstanding loans (apart from the concentrate credit facility), purchase the remaining 17% of BioGold for A$1.6m (to increase MIC’s holding to 99%), pay A$1.3m for the BioGold Technology Licence and other financing fees, and have A$3.2m to cover working cap and the completion of the BioGold expansion.
  • Michelago represents a classic leveraged play on the gold price because its profits are based directly on marginal percentages of the gold price, accruing up to ~20% of spot gold revenue from the gold ores that it treats, less treatment costs. MIC’s NPV appears to increase by about 1.6Ac per US$25/oz increase in the gold price.
  • No further funds are being provided to the ASG (Australian Solomon Gold) consortium to complete the feasibility study on Gold Ridge and any required finance before ASG’s expected IPO in perhaps March - June 2006. Consequently MIC are diluting down their holding in ASG and depending on ASG’s required finance, before its IPO, and the IPO itself, MIC could have possibly 29% to 30% post IPO.
  • MIC intends to decide post ASG’s IPO whether to continue to hold its position in ASG, make an in-specie distribution of its holding to MIC shareholders, or make a combination of the two namely, part held, partly distributed. Theoretically MIC’s post IPO 30% holding could be worth ~A$30m or so.
  • The expansion of BioGold’s Bacox© circuit from 100tpd to 200tpd (currently equivalent to 50,000ozpa to 120,000ozpa) is expected to be completed by December 2006 and should gradually increase the current production (including ~100,000ozpa or so from the cyanide leach) to a capacity of ~230,000ozpa by 2007/2008.
  • Written by: Keith Goode
  • Wednesday, 02 November 2005

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