Things appear to be looking up for Hambledon Mining (LON:HMB). Its £9 million cash call has been approved, with the open offer over-subscribed.
The fact that existing investors were prepared to pump in more cash even after a series of disappointments suggests they have faith in the plans set out by new chief executive Tim Daffern.
The new funds will bankroll the turnaround of the company’s Sekisovskoye gold-silver mine (Sekis) in Eastern Kazakhstan, which last year produced 24,000 ounces of the precious metal from its open pit operation.
Underground production is set to get underway towards the end of this year, so the gold grade and the cash costs should improve markedly. By 2016 Hambledon wants to be a 100,000 ounce a year producer.
The cash-call will help fund a plant waste management system, electrical infrastructure and gold recovery improvements. A small amount has also been set aside for corporate development.
Ambrian, the company’s joint broker, this morning upgraded its recommendation to buy from hold, valuing Hambledon at 6.5 pence a share. The stock is currently trading at 4.4 pence.
The Ambrian price target still represents a discount to the company’s net asset value, which analyst Duncan Hughes estimates is closer to 7.25 pence a share.
“We expect continued news flow covering assay results from the current drill programme, consistent production performance and resource upgrades to act as catalysts for share price growth over the coming months,” said Hughes.
“We expect to be in a position to increase our valuation with continued consistent production output, infrastructure developments and growing confidence in the resource base over the coming year.”
On Wednesday the company revealed the underground drilling programme on Sekis had yielded some encouraging early results.
Eight holes have been drilled for a total of 1,700 metres, which uncovered grades of 4.5 grams per tonne over 33 metres all the way up to 10.75 grams per tonne over an eight metre section.
The longest section was 60.4 metres at a grade of 5.6 grams of the precious metal.
The data is the first from an 18 month programme over 25,000 metres designed to expand the resource base at Sekis, which stands at 2 million ounces of gold at a grade of 3.9 grams per tonne and 2.9 million ounces of silver.
It has already expanded the known dimensions and increased the volume of ore in zone eight one of the main zones, by over 22 per cent.
Further resource updates will be announced with the drill results, the company said. Meanwhile, a revised underground mine design and infrastructure engineering study is being undertaken by Golders Associates which will enable updated mine reserves to be issued in December.
The Sekisovskoye deposit is in the Rudny Altai metallogenic belt and is one of seven gold fields in East Kazakhstan.
The host rocks are very coarse grained, altered, igneous breccia zones of variable composition within granitoid intrusives.
The breccias range up to 700 metres in width by 160 metres in breadth, with steep northeasterly dips, and extend to drilled depths greater than 950 metre.