Lafayette offer in demand (Lafayette)

Lafayette offer in demand (Lafayette)

by Barry Fitzgerald, The Age (Melbourne)

14th December 2005

MELBOURNE-based Lafayette Mining is to pull in $10 million from a widespread placement of shares at the knock-down price of 11¢ a share to get it over the cashflow squeeze caused by the temporary suspension of operations at its flagship Rapu Rapu polymetallic project in the Philippines.

Lafayette went in a trading suspension yesterday before the placement was completed. Brokers reported strong demand for the placement, the price of which compares with Lafayette's pre-placement price of 13.5¢ a share - a price that was well down on ruling market prices before Rapu Rapu had problems with its tailings disposal system. The first incident occurred within the gold-processing plant on October 11 when there was an uncontrolled spill of about five cubic metres of material from the cascading tailings dam system. It contained low levels of residual cyanide. After investigation by the authorities, permission was given to continue operations.

The second spill was on November 1 after torrential rain. Increased volumes of water in the retention/catchment system forced Lafayette to make a "controlled" discharge.

But concerns with the two spills, and the planned switch at Rapu Rapu to base metals production, prompted the decision to suspend operations in mid-November. Lafayette has a meeting with authorities in the Philippines on Friday, with the expectation being that operations will be able to resume early in the new year.

Rapu Rapu is one of several Australian-backed projects that the Philippines Government is banking on to kick-start a revival of the country's mining industry. The Government has identified 23 priority mining projects that it expects to go on stream between 2005 and 2010.

The projects are expected to bring in foreign direct investments of more than $US6.5 billion ($A8.6 billion). Although a modest operation, Rapu Rapu is meant to lead the charge, a fact reflected by Lafayette managing director Andrew McIlwain recently dining with Philippines President Gloria Macapagal-Arroyo at Malacanan Palace. The invitation reflected Rapu Rapu's status as the first foreign-funded new mine development in the country for more than 30 years.