G-Resources sells $218 mln shrs to fund Indonesia project

* Cancels former plan to tap banks for loan

* Vice-chairman says wanted to get funding faster

* Shares fall close to 5 pct 

G-Resources Group Ltd , backed by Mount Kellett Capital and BlackRock Inc , chose to tap the equity markets with a HK$1.7 billion ($218.5 million) share placement after cancelling plans to secure a bank loan to fund its gold mining project in Indonesia. 

The Hong Kong-listed gold mining firm said in June it was finalising details with five to six international banks to secure financing for its $1 billion Martabe project due to start production at the end of this year. 

Company vice-chairman Owen Hegarty said it chose to issue equity as commercial banks were taking too long to finalise a loan deal, while poor sentiment in the European and U.S. debt markets was another weighing factor. 

"That was all progressing but we got to a point when we thought it wasn't progressing fast enough. The banks were a bit on the slow side and they tend to tie you up in knots a bit," Hegarty said. 

"Every day that goes by we get closer to production and cash flow. With gold strong and equity markets for gold good, we chose at that time to go with a placement." 

In a filing to the Hong Kong bourse on Thursday, G-Resources said it planned to sell 2.81 billion new shares, representing 16.67 percent of its enlarged share capital, at HK$0.60 apiece. The price of the issue, handled by Morgan Stanley and Kingston Securities, represented a 9.1 percent discount to the previous close of HK$0.66 on Tuesday. 

Shares in the $1.2 billion firm slid 4.6 percent by 0235 GMT, underperforming the benchmark Hang Seng Index's 1.2 percent fall. 

No further funding would be required for the rest of the year, said Hegarty, a former Rio Tinto Ltd Asia managing director. 

UBS in a note on Wednesday said it raised its target price for the firm to HK$0.80 from HK$0.70, maintaining its buy rating.

"We expect further reserve upgrades in the near-to-medium term due to 1) ongoing exploration activities, and 2) management's strategy to acquire additional assets in the medium-term," the Swiss bank wrote. Source: Reuters