Vatukoula Gold Mines has received the first US$10 million of a US $40 million funding package from Chinese firm Zhongrun International Mining Co to be used to rejuvenate its gold mine in Fiji.

The company issued 90 million shares to Zhongrun. A further US$10 million is due at October’s end through another equity issue, with US$20 million of loans to be made available by Zhongrun at the end of January.

Zhongrun will own 66% of Vatukoula on completion of the share issues. The US$40 million investment will fund Vatukoula’s aim of reaching in excess of 100,000 ounces of gold annually in about 18 months.

Vatukoula’s chief executive David Paxton says, “With these funds and the remaining US$30 million due in coming months, the mine can embark on capital expansion plans to both increase the grade and tonnage from underground mining operations.

“Based on current mine plans and costs,” he adds, “we will be able to achieve our long term production targets at a cost of below US$900 per ounce.”

Continuing cost controls and higher grades, meanwhile, are allowing Vatukoula to report lower cash costs per tonne of production in the 12 months ending in August.

In a results and operation update, Vatukoula reported an 18% reduction in cash costs per tonne to US$148 in the 12 months ending August 31 this year compared to US$180 over 2012. In the third quarter, the firm highlighted the cash costs per ounce had lowered by 23%.

Over the year, the firm produced 39,858 gold ounces compared to 53,152 in 2012and shipped 39,517 ounces compared to 2012’s 52,616 ounces with 428,978 tonnes of ore processed over 2012’s 479,524. In the fourth quarter, 11,442 ounces were produced up from 9005 ounces in the previous quarter.

“During the last 12 months we embarked on controlling costs and setting the foundation for future growth,” said David Paxton. “While we finalized long-term financing, Q4 production remained restricted; nonetheless, our continued cost controls and higher grades delivered from underground lowered our cash costs per ounce by some 23% over Q3.”

With the Zhongrun agreement completion, “we will be able to deliver our strategy to grow our production to profitable levels,” he added, “and we expect to see increases in production of the investment with our long-term target being achieved in the 12 months.”

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