Romarco Expands Snake Pit

VANCOUVER — Coming off strong drill results that expanded mineralization at its Haile project, Romarco Minerals (R-V, RTRAF-O) is raising $30 million through a bought-deal financing.

Paradigm Capital is the lead underwriter and along with GMP Securities, Macquarie Capital Markets Canada and Wellington Capital Markets, it has agreed to buy 34.1 million Romarco shares at 88¢.

Romarco is also giving the underwriters the option to buy up to 15% more shares to cover overallotments within 30 days of the financing’s close, which Romarco expects to occur Aug. 13. If fully exercised, proceeds of the bought deal would come in at $34.5 million.

Romarco says the proceeds will fund development of its Haile gold project, in South Carolina, including purchases of adjacent properties and further drilling.

The company’s first drill result of the 2009 season has extended mineralization in one of three proposed open pits at Haile.

Stepping out about 50 metres northeast of previous drilling at the Snake pit, hole 1547 hit 34 metres grading 5.3 grams gold per tonne, starting 248 metres down-hole.

At that depth, Romarco says the mineralization could still be within extended pit walls of the Snake pit, the most easterly of three adjacent pits outlined in a 2009 feasibility study. The other two pits are called Ledbetter and South.

Romarco president and CEO Diane Garrett says the company is pleasantly surprised by the result as it suggests grade is picking up at depth, and also represents the first evidence at the eastern extent of mineralization of the existence of higher grades more typical of the Ledbetter pit, about 1 km west.

Garrett says drill results from two more 50-metre stepouts northeast of hole 1547 are pending and that it will be interesting to see if the mineralization continues in that direction and at depth.

“There might even be some underground potential,” she says.

Currently, Romarco has four reverse- circulation drill rigs turning on the property as part of a stepout, infill and condemnation drilling campaign.

“We’re drilling ten times the footage this year than last,” Garrett says.

In a 2009 feasibility study, Romarco outlined a 7,000-tonne-per-day open-pit mine with a 12-year mine life at Haile.

The feasibility study pegged capital costs of a mine at about US$153 million. The proposed mine would produce around 128,000 oz. gold per year at a total production cost of US$450 per oz. gold.

Assuming a gold price of US$750 per oz., Romarco estimates the project’s net present value at US$161 million and internal rate of return at 24%.

All told, Romarco has outlined measured and indicated resources of 27.8 million tonnes grading 1.81 grams gold.

With regard to financing the project, Garrett says: “We’re still planning to do it on our own.”

Part of the reason Romarco isn’t considering bringing in a joint-venture partner at Haile is that the company has been growing resources so quickly it has been difficult to put a value on the project.

Garrett says she expects Romarco will most likely finance Haile to production and as evidence of the company’s commitment to do so, “you’ll see us very soon bring on some exceptional talent.”

On news of the bought deal, Romarco’s share price gained 2¢ to close at 89¢. Romarco has 273 million shares outstanding.