Sihayo Gold is seeking to raise up to approximately $4.5 million through a pro rata non-renounceable entitlements offer with the majority of funds to be used for loan repayments. Funds will also be allocated to optimisation of a feasibility study into the company’s Sihayo/Sambung Gold Project in North Sumatra, Indonesia.

The ASX-listed company also plans to utilise funds for working capital and for expenses of the entitlement offer.

In 2014, the company received ‘initial’ approval of the Government of Indonesia Feasibility Study and receipt of approval from the Department of Environment and Minister of Environment for the AMDAL and Environment Permit.

Sihayo Gold's priority remains to complete ‘final’ approval of the feasibility study and issuance of a Construction Permit and Forestry or ‘Borrow and Use’ (Pinjam Pakai) Permit from the Forestry Department.

With the passage of time since the completion of the feasibility study in January 2014 and the recent improvement in the gold price, Sihayo believes there are a number of opportunities to optimise the project financial returns, which warrant further investigation.

The company has also held preliminary discussions with a large EPCM company looking to expand its area of operations to include Indonesia. While discussions are still at a very embryonic stage and there is no certainty of progression beyond this stage, this company has raised the possibility of providing a high proportion of the financing required to construct the project.

Potential availability of such project financing is an additional incentive to re-evaluate and optimise the assumptions in the original feasibility study, especially providing the opportunity to increase the throughput of the mill and plant.

The re-evaluation/optimisation work would focus on power supply, metallurgical recovery, and construction capital and consumables prices.

Regarding the latter, the company has been able to study the construction costs and operating costs of two other gold projects under construction and recently commissioned in Indonesia. It would like to take the insights gained from studying these projects and apply them to the Sihayo/Sambung project.

There has also been a material and sustained reduction in the price of diesel fuel and other consumables since the completion of the feasibility study. The company would like to perform a detailed analysis of these lower prices to determine the overall impact on the feasibility study.

www.sihayogold.com