Highlands shares surge after Kainantu sale

By BRIAN GOMEZin Sydney
HIGHLANDS Pacific shares rose A$0.045 or 37.5% to A$0.165 yesterday following an announcement that it had sold its Kainantu gold mine in Eastern Highlands to Barrick Gold for US$141.5 million (K412 million).
The deal, reported exclusively in The National yesterday, saw more than 21 million shares were traded yesterday compared with between 400,000 and 1.3 million on a daily basis in the past week. It hit a high of 20c during early trading.
Highlands said it had signed a binding sales and purchase agreement with Barrick for the Kainantu mine and surrounding exploration tenements and shareholder approvals would be sought before the end of this year.
Highlands managing director John Gooding said the group’s future would be secured with the paying out of the monetised gold hedge programme of about US$93 million (K278.44 million and a loan facility of a further US$19.8 million (K59.28 million).
On completion of the sale, Highlands would have cash reserves of approximately US$29 million (K86.83 million) “to pursue other growth strategies and allow it to retain full exposure to its Ramu nickel and Frieda copper-gold assets”.
“Barrick is the world’s largest gold miner, and is presently operating the Porgera gold mine in PNG in which it has a 95% interest.
“Barrick has all the required attributes and capacity to successfully manage the Kainantu operation,” Mr Gooding said.
He said the sale to Barrick effectively recapitalises Highlands Pacific while removing a significant financial risk from a deteriorating hedge book.
“The sale of Kainantu was the very best outcome for all stakeholders in Highlands, and will enable the company to unlock the value of its interests in two other world class assets at Ramu and Frieda,” Mr Gooding said.
Highlands has an 8.56% interest in Ramu nickel which can be increased to 11.3% at no cost to the company once debt for financing of the project has been repaid from the project’s cash flow.
Highlands also had an option at that stage to purchase an additional 9.25% at market value that could take its total stake to 20.55%.
Ramu Nickel is on track for commissioning in 2009 and will produce 32,000 tonnes of nickel and 3,100 tonnes of cobalt annually.
At the world class Frieda copper-gold project, now managed by Xstrata, Highlands, has a 16.22% stake carried to the bankable feasibility study stage.