$57m to boost quest for gold

By CHRIS DANIELS

The gold mining operations of GRD Macraes are in line for a $57 million boost as its Perth-based parent launches a share issue to establish a new company named Oceania Gold.

Oceania will take over the operations of GRD Macraes and will receive half the proceeds of an initial public offering aimed at raising A$100 million ($114 million).

The remaining A$50 million ($57 million) will go to the parent company - GRD - in partial payment for its New Zealand mining assets.

Oceania will use the money to develop a new gold mine at Reefton and to increase production at its Macraes site in East Otago and at Sams Creek, near Takaka.

Local chief operating officer Len Jubber said the IPO was "great news - we are very excited about it, it means we now have the capital".

"It's a great time for us. We've got a lot of hard work on our hands but a real opportunity to move forward."

Gold production at the company is expected to increase from 170,000 ounces a year to 400,000 by 2006-07.

GRD also plans to distribute A$60 million of the new Oceania shares to existing GRD shareholders, either through a capital return or a buy-back of GRD shares, which would then be swapped for new Oceania shares.

Oceania will be listed on both the New Zealand and Australian exchanges.

At the end of this procedure, GRD expects to own 60 per cent of Oceania and the public and cornerstone investors will own 12.5 per cent each.

Existing GRD shareholders will own the remaining 15 per cent (by way of the buy-back or capital return).

The chairman of GRD Macraes, Kerry McDonald, will be chairman of the new board of Oceania.

GRD has reported a $12 million group profit after tax for the six months to June.

Currency hedging allowed the Perth-based miner and infrastructure company to weather the impact of a strong exchange rate on its New Zealand subsidiary.

In September, GRD Macraes recorded a $4.6 million profit, after tax and allowance for foreign currency transactions, compared with $3 million last year.

In the six months to June 30, GRD Macraes sold 72,264 ounces of gold.

It expects sales to reach 170,000 ounces for the full year.

Development of its Reefton gold mine has been a long and complicated process because of disputes at many stages over environmental concerns and planning permission.

In July the company said the whole project had nearly doubled in both size and cost and no start date for the development had been settled on.

It said development would cost up to $75 million and take two years to complete.

World gold prices have risen markedly in the past year, going from US$315 ($500) an ounce to just under US$400.