UPDATE: Glencairn Gold announces $25 million in equity financing and new management

A day after Glencairn Gold (GGG-T, GLE-X) announced it was selling its Cerro Quema gold project in Panama in order to focus on its Nicaraguan gold assets, the Canadian junior unveiled $25 million in equity financing, a new head of exploration and three new directors.

The financing will enable Glencairn to complete the conversion of its La Libertad Mine in Nicaragua from a heap leaching operation to a conventional mill circuit, as well as improve efficiencies at its Limon mine and sink $7 million over the next year and a half into an exploration program to expand mineral reserves and resources.

Were going to refocus our efforts on Nicaragua, Peter Tagliamonte, Glencairns president and CEO, said during a conference call with analysts and investors this morning. Well have a fully funded exploration program on the Nicaraguan gold belt.

I dont think anyone questions that La Libertad is a world-class asset, added Stan Bharti, executive chairman of Aberdeen International (AAB-V, AABVF-O), which has subscribed for $7 million for a 12% stake in Glencairn.

Were planning to have a new name, focus on production with a huge amount of blue sky that were really going to turn into resources, Bharti said. Im also investing a significant portion of my own money into this deal. Bharti said he subscribed for $1 million.

Under the restructuring, Bharti will be appointed as chairman of Glencairns board. George Faught, president and CEO of Aberdeen, and Joe Milbourne, a metallurgical engineer and formerly the technical director at AMEC Americas Inc. will also join Glencairn as directors.

Glencairns La Libertad gold deposit, 110 km east of the Nicaraguan capital of Managua, holds an indicated resource of 16.3 million tonnes of 1.5 grams gold, with total contained gold at 794,000 oz. When that project is completed it will be producing about 85,000 to 95,000 oz. gold at a cash cost of approximately US$350 per oz., Tagliamonte said.

A few hours away from La Libertad is Glencairns 95%-owned Limon mine in northwestern Nicaragua. Limon reported gold sales last year of 33,067 oz. The underground mine holds proven and probable reserves of about 1.2 million tonnes at 5.3 grams gold. It produces about 43,000 oz. gold a year and has got tremendous exploration upside, Tagliamonte said.

Glencairn also holds a 100% interest in the Mestiza gold property, which is within trucking distance of the Limon mine and has an inferred resource of 689,700 tonnes grading 10.3 grams gold per tonne.

Theres a lot of gold in Nicaragua, said Bharti, who noted that Aberdeens mission is to identify undervalued companies and then invest in them to bring them to their full potential. Glencairn has got almost 100,000 oz. of gold. There arent too many companies in Central America with that kind of production profile, with that kind of resource base, with this kind of value.

Tagliamonte also sang the praises of his new executive vice-president of exploration, Bill Pearson, a former head of exploration at Desert Sun Mining. Tagliamonte worked with Pearson and Bharti at Desert Sun Mining. Yamana Gold (YRI-T) bought Desert Sun — whose main asset was the Jacobina mine in northeastern Brazil — last year for about $575 million.

For his part, Pearson is bullish on Glencairns properties in Nicaragua. I dont think people appreciate how strong these epithermal gold systems are in Central America, he said during the conference call from Nicaragua. Most of what were talking about right now in terms of resources and future reserves is in a relatively small portion of the total site. Its a very extensive system and a lot of it really hasnt been looked at in any sense.

As far as political risk is concerned, Tagliamonte said Nicaragua is not a challenging place to work. Weve had nothing but good cooperation with the Sandinista government, he said. We view Nicaragua as an excellent place to do business.

Glencairn plans to use the proceeds of its $6 million sale of Cerro Quema to Bellhaven Copper & Gold (BHV-V, BHVCF-0) to help finance its work in Nicaragua. The sale is expected to close by October 31.

Cerro Quema was a non-core asset, Tagliamonte noted. It is a good property and Im sure it will be a very good asset, but were trying to focus on our core assets located in Nicaragua and Cerro Quema was a bit too small and would distract us.

Bellhaven already owns 40% of Cerro Quema, 190 km southwest of Panama City, and holds several other exploration projects in Panama.

Cerro Quema has 15 million tonnes in measured and indicated resources grading 0.93 gram gold per tonne.

Glencairn has had a hell of a year. In August, second quarter results revealed that the Toronto-based companys income had plummeted to US$1.5 million, down from US$3.8 million for the same period last year.

A month earlier, operations at its 100%-owned Bellavista mine in Cost Rica were suspended following ground movements of about one centimetre per day in sections of the leach pad and waste pile at the open pit gold operation.

Tagliamonte said the company must complete engineering work at Bellavista to determine the best way forward.

Were not confident that it will re-open as a heap-leach mining operation, he said. There is a possibility that this mine could be re-opened as a conventional milling operation.

For now Glencairn has successfully rinsed and removed all the cyanide from the site and will record an impairment charge of about US$40 million to US$50 million in its financial results for the nine months ending September 30.

A few months ago Glencairn was in a serious and difficult position, Tagliamonte said. We had a stock position of about $0.15. We didnt have the funding to continue on the path we needed to go. One of the options was to sell the company at a fire-sale price. The other option, and the one we chose, was to make some difficult decisions.

Under the new capital structure, Glencairn will have approximately 55 million shares outstanding, about $33 million in cash, and no debt, Tagliamonte told analysts.

Glencairn will issue 40 million units and 127 million subscription receipts at $0.15 apiece, with each unit comprised of one common share and half of a share-purchase warrant. Under the planned restructuring, Glencairn will consolidate its stock on a seven-for-one basis and change its name.

On the Toronto Stock Exchange, news of the equity financing sent Glencairns shares down $0.03 to close at $0.17 on a trading volume of 9.1 million shares. Shares of Aberdeen International remained unchanged at $0.72 apiece.