Information om projektet
Update regarding the project
SStar Gold Resources ABs are focusing on developing exploitation and exploration licenses in the Chita region in Russia. The Kadara license was acquired beginning this year with the anticipation that we should receive the complete exploitation license during this year and that this would be more or less just a formality. In the due diligence process and in contacts with responsible authorities it seems as if the granting of the Kadara license might be further delayed or might not even take place.
“We are in discussions with the authorities and we foresee that we will receive further information on the status during February. In the mean time we continue to pursue our strategy to build a portfolio of licenses in the region.”
Subject of the Project
The project includes an investment attraction for establishing a gold mining company with the initial resource base of 177 tons (5.7 million troy ounces) of gold and annual extraction of gold-bearing ore totaling to 3.5 million tons per year. The company’s primary activity shall be gold mining on the gold field of Kadara in the Trans-Baikal Territory.
The company has a license for geological survey and extraction of ore gold and associated components in the Kadara river basin. The expected annual extraction is 8.5 tons of gold (273.3 thousand troy ounces).
The project envisages financing of prospecting works for confirmation of the gold reserves and construction of a gold-processing complex. All investment shall be completed within four years after the project is commenced. Click on image for larger version.
The project involves financing from the following two sources: funds from investors and own funds of the gold mining company (based on refinancing).
Investment attraction conditions are as follows:
- The share of investors’ funds in the financing – 49.68% (60 million USD),
- Financing Period – 6 years,
- Dividend interest rate – 5%.
- The financing return schedule is developed according to the seasonal nature of sales; according to the provisional evaluation, the return is scheduled for late 2022.
- Under the aforementioned conditions, the dividends for the estimated period will amount to 12 million USD which will be paid, since 2020.
Implementation of the project is estimated as feasible for both the parties to the project participants and the economy, as well as the society in whole. The project takes on even more importance in the current social and economic situation – instability of the national currency and demand for gold from banks, mostly from the Central Bank of the Russian Federation, as well as private investors.
Benefits of the recipient:
- Activity diversification, development in a stable industry of the economy
- Extra profit (157.7 million USD a year, on average, after reaching the project capacity)
Benefits of the investor:
- Economic attractiveness for the investor – the income gained as dividends will total to USD 12 mln for the scheduled period
- Low risk level (development a successful and operating enterprise, which will be provided with property, plant and equipment), as well as reputation of the project promoter ensures strict compliance with the target financing principle and timely payment of the declared dividend amounts
Social and economic expediency:
- The region development assistance due to the social and economic significance of the project
- Providing more than 200 permanent jobs, the salary fund will exceed 4.6 million USD a year
- Budget efficiency – tax contributions to budgets of all levels will exceed 59.2 million USD a year
The scheduled period of the project is 6 years.
The commercial efficiency of the project was calculated based on the discount rate of 15%.
The aggregates of the project efficiency, after the gold mining complex reaches the project capacity, are shown in Table 3.
The financial forecast analysis confirms high investment attractiveness of the project:
- High annual sales level – USD 113,962,166.
- High return level resulting in high average annual net profit – USD 51,129,466.
- High level of the internal return rate – 29% per year.
- Rapid time to value – 5 years.
Click on image for larger version.
Benefits of the Project
The benefits of the project are based on its primary feature, i.e. establishment of a gold mining company engaged in the sphere of gold mining with a long-term perspective of extracting at least 8.5 tons of gold a year for 20 years:
- The expected provision with all required resources – a field, a gold-processing complex with modern equipment, workforce, established vendors, contractors and customers
- Steady demand for gold, investment appeal of the industry
- Competitive advantages – development of a gold field with a commercial content of gold per ore ton at a reasonably low cost of production and processing
The drawbacks of the project include its high investment cost and the need for a long-term financing. Moreover, a permanent monitoring of production costs and gold quotations is required to maintain the production profitability.
Overall, the project is estimated as a perspective one, featuring considerable financial and business advantages.
SStar Gold Resources AB (publ)
World Trade Center, Klarabergsviadukten 70, Stockholm
Telefon 08- 506 36 388
Fax 08- 506 362 01
Karl-Axel Waplan, direkt 070-510 42 39
Emissionsinstitut och Aktieboksansvarig
S-400 10 Göteborg
Henrik Kristensen, Telefon: +46 733 31 11 03
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