PERTH (miningweekly.com) – Junior gold miner Southern Gold on Wednesday announced that it would defer a planned capital raising, citing the current low commodity price environment.

The company had planned to raise funds through a private placement to offshore investors, but said on Wednesday that current commodity prices, including the gold price, were under significant pressure and had resulted in difficult capital market conditions.

Instead, the miner would pursue a A$2-million loan extension available under a current loan facility, given that the Cannon gold project, in Western Australia, was expected to deliver a potential cash flow of between A$12-million and A$15-million in the next 12 to 18 months.

The Cannon mine poured its first gold in November this year, after openpit mining started in August.

The Stage 1 openpit mine would see 152 000 t of ore mined, at an average diluted grade of 3.1 g/t gold, containing some 15 000 oz of gold, with 13 500 oz of gold recovered.

“Capital market conditions at the moment are the worst I have seen and with the recent retractment in the gold price, this has resulted in investors taking a ‘risk off’ position as the end of the calendar year approaches,” said Southern Gold MD Simon Mitchell.

“We prefer not to overly dilute current holders, especially given we have a funding option in the form of a A$2-million loan facility.”

Mitchell noted that despite this loan facility, Southern Gold would continue with its discussions with an Asia-based global investor group on a potential larger funding package to exploit organic growth options in the near term, as well as identified accretive acquisitions with the potential to bolster the company’s resource base in the medium term.

“The company is in very good shape with recent Cannon gold pours confirming our transition into production, the gold price being fixed at A$1 500/oz for the first 10 000  oz of production and an exciting pipeline of project opportunities, which we believe will add to the Southern Gold story going into 2016.”