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PMI Gold Plans West Africa Mine

Written By Brian Hicks

Posted August 30, 2012

Despite the consistent tone of uncertainty across markets, gold still finds favor among a lot of investors who are even willing to become interested in new mining efforts. PMI Gold Corp. (ASX: PVM) hopes to take advantage of that attitude as it seeks out funding for its $296.6 million Obotan project in Ghana, West Africa.

PMI expects to raise up to $150 million by this year’s end in share placements to investors. As of the end of July, PMI listed $39 million in cash.

The Australia- and Canada-listed firm counts Australia’s Macquarie Bank as its largest single investor, with 12 percent holdings. Sydney-based Taurus Funds Management follows with 7 percent.

The company last raised around $36.3 million in March through issue of shares at C$1.25 each (about $1.26). However, mining dropped out of investors’ favor since then, so those shares are now around 80-90 Canadian cents.

Gold has, of course, developed a distinct appeal as a safe-haven investment amidst depressing economic news from China, Europe, and the U.S.

The Obotan mine will produce 220,000 troy ounces of gold, and it is awaiting investor approval, requiring a decision by the end of this year. PMI has stated that the Obotan project has a value, based on gold prices of $1,300 per ounce, of about $387 million after taxes. But gold is currently somewhere above $1,600 per ounce, which shoots the mine’s worth up to over $680 million.

In addition to equities efforts, PMI is coordinating efforts with six Australian, U.K., and African banks to arrange debt between $150 to $200 million for the Obotan mining project.

The Wall Street Journal quotes Colin Ellison, PMI managing director:

“The feeling is the project probably could be fully debt funded, but you wouldn’t want to.”

Operating costs are estimated at $626 per ounce, which indicates expectations of an overall profit even if gold prices drop.