The higher gold price and a big backer have given a fallen Western Australian gold miner a second chance, a year after it failed.
Stirling Resources says it has reached agreement with the Administrators of Monarch Gold Mining to fund the recommencement of operations at the Davyhurst and Mt Ida gold projects in Western Australia.
Stirling said in a statement to the ASX that it will provide the capital through wholly-owned subsidiary, Stirling Gold Pty Ltd.
The agreement will ensure all Monarch creditors and debt providers receive 100 cents in the dollar, "being a total payout of $55 million, based upon creditor figures provided by the Administrator."
In July 2008, Monarch Gold was placed in voluntary administration due to the continued underperforming of the Davyhurst open pit mine.
Stirling says that with the strong rise in the gold price over recent times the previous cash negative operations of Davyhurst would now deliver a healthy cash margin.
Stirling Managing Director Michael Kiernan said the aim was to recommence the operations as soon as possible, ahead of a proposed name change and re-listing on the ASX.
Stirling said it had undertaken an extensive $250,000 mine study which included reassessing, reviewing, mine planning including metallurgical, engineering and geological analysis.
Mr Kiernan said Mt Ida was targeted to produce 48,000 ounces per year at a projected cash cost of $450/oz and Davyhurst which was intended to be re-commissioned within three months of settlement with a production target of 65,000 ounces per year at a projected cost of $850/oz.
"We had been determined to reach an agreement that enabled all creditors and debt providers to receive full payment and to see the Monarch corporate structure survive for the benefit of all existing shareholders together with ensuring a healthy return for Stirling Resources via dividends," Mr Kiernan said in the statement.
"Going forward, we propose to change the name to Swan Gold Mining Limited and re-list the company as soon as possible, focusing solely on the Mt Ida and Davyhurst operations."
Mr Kiernan said he expected Stirling Resources to ultimately hold in the order of 40% of Swan Gold Mining Limited.
Equity funding for Swan Gold Mining is expected to be satisfied by Stirling Gold issuing a Commercial Bond to Austrian international commodity leader DCM DECOmetal, a major shareholder in Stirling Resources.
Mr Kiernan said Stirling Gold was well positioned to operate the gold assets, with a Board and management team having strong gold experience and specific knowledge of the Monarch projects.
For Mr Kiernan, the Monarch deal represents something of a comeback.
Monarch collapsed last year when he was in charge.
Monarch was forced into administration in July last year after operational problems at the Davyhurst mine near Kalgoorlie, which it had picked up from Croesus Mining, which ran into its own problems in 2006 when it went into administration.
Monarch suffered financial problems after the major shareholder Territory Resources, refused to agree on a rescue package for the miner.
Reports said Monday that deal with the administrators needs the approval of Territory, which Mr Kiernan used to chair but with whom he has since had a major falling out.
But yesterday’s announcement made no mention of that and said all creditors would be paid out.
Territory Resources said it would look at the Stirling offer before deciding whether to accept it.
Stirling’s financiers, DCM DECOmetal, a global commodity marketer and, NMDC, a major Indian resources group enterprise — are backing Mr Kiernan in his renewed Monarch play.
DCM DECOmetal was also an investor in Consolidated Minerals and has backed Mr Kiernan for sometime. DCM owns 19.9% of Stirling
Stirling shares fell one cent to 27 cents.
