GBS Gold loads up treasury with $46M bought-deal

Vancouver — After closing a $46-million bought-deal financing, GBS Gold International (GBS-T, GBSFF-O) has a well-padded treasury ready for its acquisition and project development plans.

Fully exercising its overallotment option, Haywood Securities sold 46,000 GBS Gold units priced at $1,000 apiece. Each unit consists of a $1,000 promissory note and 135 warrants, each good for a common share at $3.75 until Sept. 29, 2008. Promissory notes have a 2-year term and pay an annual rate of 12%, paid semi-annually.

GBS Gold intends to use $9.6 million for its planned acquisition of 8 million units of Northern Mining Explorations (MDN-T) at $1.20 per unit.

The unit purchase will give GBS Gold about a 10% position in Northern Mining, which owns a 30% participating interest in the Tulawaka gold mine in Tanzania, 70% owned and operated by Barrick Gold (ABX-T, ABX-N). The mine produced 139,655 oz. gold in 2006.

Northern Mining also holds a number of licences in the Tulawaka region and is exploring projects in Eritrea and in Quebec’s Abitibi region.

Funds from the recent financing are also earmarked for prefeasibility work and development of the company’s Cosmo Deeps and Maud Creek underground gold projects at the Union Reefs operation in Australia’s Northern Territory.

GBS Gold’s main focus has been on ramping up production from its Union Reefs operation, where it celebrated the start of mining and its first gold pour in the third quarter of last year. Full commercial production was achieved at the beginning of 2007.

Union Reefs is an assembled complex of past-producing open-pit and underground operations, and deposits within trucking distance to a centralized processing plant. Modelling has shown positive economics on the recommissioning of a number of the projects.

GBS Gold acquired its Australian processing and project portfolio in 2005 by taking over Northern Gold and Terra Gold Mining.

Northern Gold was previously partnered 50-50 with Harmony Gold Mining (HMY-N, HRM-L, HAR-J) on the Burnside joint venture before it orchestrated the purchase of the major’s half-interest. Burnside consists of a significant land position plus the 2.8-million-tonne-per-year dual mill at Union Reefs.

The Burnside projects cumulatively host a measured and indicated resource of 5.8 million tonnes grading 4.4 grams gold per tonne (about 840,000 contained ounces) plus an additional 20.8 million inferred tonnes at 2.3 grams gold (about 1.56 million contained ounces).

Terra Gold held the Maud Creek gold project, which hosts an indicated resource of 9.3 million tonnes grading 3.1 grams gold (about 935,000 contained ounces) and is within trucking distance of Union Reefs. GBS Gold plans to build a flotation plant and bio-oxidation heap-leach facility at Union Reefs to process the ore, which is refractory.

GBS Gold has set a production target of 150,000 oz. gold in 2007, rising to 300,000 oz. annually by 2009. The company has consolidated more than 2,500 sq. km of claims within a 125-km trucking distance of the Union Reefs plant.