Peak Gold raises $110M

Vancouver — A $110-million financing will help Peak Gold (PIK-V, PIKGF-O) move ahead with continued exploration and efforts to increase production efficiencies at its Amapari and Peak mines, even though the money-raising exercise fell far short of the company’s original goal.

Peak Gold, called GPJ Ventures until earlier this year when the company acquired the Peak mine in Australia and the Amapari mine in Brazil from Goldcorp (G-T, GG-N) for US$300 million in cash and shares, initially announced a $225-million underwritten private placement in late October. Two weeks later, it reduced the financing to $110 million, an amount it successfully raised by the end of the month.

To raise the funds, Peak Gold sold 147.7 million special warrants at 75 apiece, with each special warrant good for one share and half a warrant; each full warrant is exercisable at 90 for the next five years. In a conference call, Peak Gold president Julio Carvalho said the proceeds will be used for working capital, for now.

“If a suitable acquisition comes available, then we’ll see how we should best use the money,” he said. “We maintain confidence that we will increase production next year through acquisition.”

Peak Gold also released third-quarter results, which show a US$1.2-million profit after recording US$1 million in stock-based compensation charges. The company produced 53,900 oz. gold in the quarter at a total cash cost of US$303 per oz. The company’s Peak mine contributed earnings of US$6.5 million, while Amapari posted a US$1.6-million loss.

Both Peak and Amapari achieved record mill throughput during the quarter. At the Peak mine, 182,835 tonnes of ore were processed to produce 31,703 oz. gold and 1.9 million lbs. copper. Total cash costs came in at US$176 per oz., reflecting Peak Gold’s efforts to contain costs at the mine in the face of a strengthening Australian dollar.

Gold production at Amapari increased to 22,200 oz. gold from 17,300 oz. over the same quarter last year, an increase stemming from processing a record 519,400 tonnes ore and an increased head gold grade.

The Amapari mine, commissioned in the second half of 2005, consists of an open pit and heap-leach operation, as well as an undeveloped sulphide milling operation sourcing ore from the open pit and an undeveloped underground operation. It is located in the Vila Nova greenstone belt, part of the Guiana Shield that covers the northern part of Brazil, parts of the Guianas, and eastern Venezuela.

Goldcorp spun out the Brazilian mine shortly after posting a US$170-million charge against its 2006 earnings in light of a sharp reduction in proven and probable reserves at Amapari — to 485,000 oz. gold from 1.34 million oz. gold. The reduction was due to the exclusion of sulphide mineralization previously included in reserve estimates.

Peak Gold updated the mineral resource estimate for Amapari in October. The project hosts measured and indicated resources of 14.2 million tonnes grading 2.29 grams gold per tonne, for 1.05 million contained ounces gold. An additional 13 million tonnes grading 3.22 grams gold in inferred resources add 1.4 million contained ounces gold.

The reserve estimate is considerably smaller. Proven and probable reserves at Amapari stand at 3.8 million tonnes grading 2.47 grams gold for 302,100 contained ounces gold, based on a gold price of US$575 per oz. and a cutoff grade of 1.1 grams gold.

A technical report pegs year-to-date operating costs at US$26.40 per tonne. Metallurgical recoveries, which had improved from December 2005 to January 2007, decreased due to higher incidence of saprolite and colluvium in the ore, as well as periods of high rainfall.

Peak fell slightly on news of the financing, losing 4 to close at 47 on over 3 million shares traded. The company has a 52-week trading range of 30-$1.10 and 725.8 million shares issued.