Sula Iron & Gold raises cash at steep discount for gold project

20th Aug 2015 09:19

(ShareCast News) - Shares in Sula Iron & Gold plunged after the Sierra Leone metals explorer announced a steeply discounted £0.4m fundraising to fund drilling at its Ferensola gold project.AIM-listed Sula raised the cash via a placing of 66.6m new shares at a price of 0.6p per share, a steep 29.4% discount to Wednesday's 0.85p closing price, but conditional upon shareholders' approval and completion of a share capital reorganisation.Management intend to use the proceeds for general working capital purposes and to help fund a scout drilling programme on its gold exploration target at Ferensola beginning in October to assist with the production of a maiden JORC compliant mineral resource estimate.This resource estimate, however, will require a further drilling programme which will be subject to a further fundraising in due course.But, since the placing price is less than the share's current nominal value of 1p each, this initial placing will require a subdivision of each Sula share into one new ordinary share of 0.1p nominal value and one new deferred share of 0.9p nominal value.In July, Sula unveiled its exploration target of 5-7m tonnes at 4-8g per tonne of gold for 0.8-1.5m ouinces of gold contained.Providing a recap, analyst Yuen Low at Shore Capital said the "ambitious" target was derived from a 2km strike that was based on a fold structure defined by magnetic anomalism, "which experience elsewhere suggests to us tends to overstate prospectivity", with mineralisation assumed our emphasis to comprise discontinuous sheets of massive sulphides of 2-5m width over nominal strike extents of 100-300m."Naturally, the press release contained the cautions that the target was conceptual, with no assurance that a JORC-compliant resource estimate could be defined."He added: "Sula had been trying to identify 'the best and most commercially viable route' to fund the scout drilling, with potential options mooted including a joint venture partnership. Apparently, this has come to naught."Shares in Sula were down 35% to 0.54p by 09:25 on Thursday.