Cleveland Mining (ASX: CDG) is a South American-focused miner with gold and iron ore projects in Brazil, including the Premier Gold Mine, where commercial production recently began. Cleveland has an all-star Board of Directors, which includes Don Bailey (former Deputy Mining Director for Rio Tinto and the founding CEO and Chairman of LionOre), Russell Scrimshaw (former Dept. CEO of Fortescue Metal Group Ltd., “FMG”), Jim Williams (former Head of Mining at FMG), David Mendelawitz (former Head of Business Improvement at FMG) and Aaron Finlay (former CFO Mayne Pharma Group Ltd.).
Cleveland Mining Company (ASX: CDG) has received firm commitments from institutional and sophisticated investors to raise $7 million.
The funds raised will allow the company to immediately begin exploration and extensional drilling surrounding the Premier Gold Mine in Brazil as well as sampling programs and drilling at the Mara Rosa Gold Project, also in Brazil.
David Mendelawitz, managing director, said the funds raised would allow the company to build upon its gold resource at Premier while also testing multiple targets thought to have significant potential for new zones of mineralisation.
“With these funds, we can accelerate our exploration programs while we ramp up the mine at Premier.
“We are pleased to have received the backing and support of several large financial institutions and family offices that can support our company’s growth both now and into the future.”
The capital raising comprised of a $5.5 million placement and a $1.5 million underwritten share purchase plan both priced at $0.25 per share.
DJ Carmichael is acting as Lead Manager of the Placement and SPP.
Under the share purchase plan, eligible shareholders can subscribe for up to $15,000 worth of shares on the same terms as the placement.
Subscribers to the placement and share purchase plan will also be issued one free option, exercisable at $0.65 with a 36 month term, for every two shares allocated under the capital raising.
Cleveland’s most advanced project is the Premier Gold Project, where mining and processing are ongoing.
Debt free gold production has commenced at the mine and the company has outlined multi-million ounce potential for development in surrounding project areas within the Crixás Hub.
Initial exploration drilling at Premier will be conducted on a large gold‐in‐soil anomaly located 1 kilometre south of the mine, about 800 metres and along trend from the 5 million ounce Serra Grande Gold Mine.
Drilling will also test an anomalous zone to the north of the Premier ore‐body, which is expected to be an overlying repetition of the Premier host geology.
Mara Rosa Gold Project
The Mara Rosa Gold Project, located around 100 kilometres from Premier, has significant potential to host mineralisation similar to Amarillo Gold Corporation’s (TSX-V: AGC) Posse deposit, which is located between tenements now controlled by Cleveland.
Amarillo’s Posse deposit hosts a total Proven and Probable Reserve of 17.1 million tonnes at 1.72 grams per tonne (g/t) for 945,200 contained gold ounces.
The securing of A$7 million via a capital raising is no mean feat and is testament to Cleveland’s experienced team and perception of the earnings capacity of the company’s Brazilian gold project and potential of its iron ore projects.
The Premier Gold Project has advanced from a brownfields acquisition to gold production in less than 3 years with construction taking less than 12 months.
Refreshingly, Cleveland had a low CAPEX criteria before project acquisition.
This business strategy will see Premier produce 20,000 ounces of gold per year, at a low OPEX and doubling production with a year.
At the current gold price of A$1,629.13 ounces this equates to approximately $23.58 million of cash-flow basis, and before the 50:50 joint venture partners account for repayment of capital, taxes and other outgoings.
Multi million ounce exploration prospectivity has also been demonstrated through drilling, geophysics, soil sampling and mapping.
Cleveland Mining will then generate a very significant and ongoing cash flow stream for exploration, development and production upgrades within the Crixás Hub.
The recent purchase of a 5% interest in Cleveland Mining by BC Iron for $5.7 million values Cleveland Mining at $114 million, or $0.64 per share, and the previously announced sale of a 6.25% interest in Cleveland Iron to Chinese interests that remains unconsummated places a potential valuation of $164 million on the iron interests alone.
This equates to $0.93 per share, and underlines the tremendous discount that the market currently applies to Cleveland Mining.
Based on this metric alone, and applying a discount for conservatism, we value Cleveland Mining at between $0.54 and $0.73 against a current share price of $0.27.
This affords an opportunity for investors to acquire a newly minted gold producer – Cleveland Mining with multi-million ounce exploration potential before investors discover the mis-pricing and uplift expected in the 12-18 months’ time.
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