Why is this gold company raising a whopping $175 million?

Horizon Minerals Ltd (ASX: HRZ) shares were placed in a trading halt on Tuesday while the company sought to lock in $175 million in new equity to fund its Western Australian gold ambitions.

The company said in a statement to the ASX that it had completed a scoping study for the Black Swan plant and mine plan near Kalgoorlie in the goldfields region of Western Australia.

Project looking good

The scoping study found that the project was an “attractive gold development opportunity with low capital intensity, utilising existing mining and Black Swan processing infrastructure”.

The project was expected to have an initial mine life of five years, producing an average of about 102,000 ounces of gold per year.

First gold was expected in mid-2027, with the mine processing about 2.2 million tonnes of ore per year.

The company said the mine plan contained 74% of its gold in the high-confidence measured and indicated status, with the remainder in the lower confidence inferred status.

The gold contained at the nearby Burbanks underground prospect was also not yet included in the mine plan, the company said.

The mine would cost $160.5 million to build, “including estimated plant refurbishment and conversion costs of $101.0 million, site establishment and infrastructure refurbishment costs of A$45.6 million and mine development costs of $13.8 million”.

The project was expected to have an all-in sustaining cost of about $3353 per ounce of gold, and a payback period of 18 months.

Horizon also said management believed there was potential upside from ongoing exploration drilling and the potential to “debottleneck” processing plans to boost ore throughput.

Horizon Managing Director Grant Haywood said the results were pleasing.

The study outcomes demonstrate the quality of our assets and show a robust economic case to support our vision of becoming a meaningful, independent WA gold producer. It’s the culmination of building our strong gold portfolio with some key strategic acquisitions over the last 18 months, with the hard work and dedication of our talented team delivering an outstanding result. Our initial plans of achieving a throughput of 1.5Mtpa through the Black Swan processing facility with a minimum 5 year life of mine plan have well and truly been met with the plant study having now being upscaled to its nameplate capacity of 2.2Mtpa, whilst remaining at a 5 year mine life and achieving our aspirational target of production of 100,000 ounces per annum.

New funding on the cards

The company’s capital raise, also announced on Tuesday, aims to raise $175 million by issuing new shares at $1.08 apiece, compared with the last trading price of $1.23.

Existing Horizon shareholders will be able to subscribe for a share of an extra $10 million at the same price.

Horizon Gold was valued at $253.8 million at the close of trade on Monday.

The post Why is this gold company raising a whopping $175 million? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.