|Chinese firm to take 16pct stake in Kagara's gold spin-off
China's government has approved a $23.8 million investment by Guangdong Foreign Trade Group (GFTG) in Kagara Ltd's gold spin-off, Mungana Goldmines.
GFTG has agreed to take a 16 per cent stake in the new North Queensland-focused company, which is currently raising $76 million under an initial public offer of 80 million shares at a price of 95 cents per share, Kagara said in a statement on Monday.
Just over 50 per cent of the shares have been offered to existing Kagara shareholders under a priority allocation on the basis of one Mungana share for every 16 Kagara shares held as at April 27.
Assuming full subscription, Kagara will retain a 49 per cent stake in Mungana.
Kagara executive chairman Kim Robinson said the company appreciated GFTG's support given the uncertainty surrounding the federal government's proposed new resources tax.
"The resources tax threatens to make a huge dent in the financial returns generated by Australian resource projects, and therefore only those with quality assets and strong growth prospects will secure investor support," Mr Robinson said.
"Kagara is delighted that GFTG believes that Mungana Goldmines will be one of those companies."GFTG, which holds a 19.8 per cent stake in Kagara, has nominated Mark McConnell as its representative on the Mungana Goldmines board.