RNS Number:7895S
Cluff Mining PLC
03 December 2003
CLUFF MINING PLC
Proposed option for disposal of the Company's gold projects
Results of Blue Ridge Platinum Project feasibility study
and exploration update on Sheba's Ridge Platinum Project
Notice of Extraordinary General Meeting
Cluff Mining PLC ("the Company") is a UK-based AIM listed mining and exploration
company. The Company's activities are concentrated in South Africa where,
following recent exploration success on its two main platinum Group Metals
("PGM") projects, the Company is focused on becoming a PGM producer.
* Completion of the feasibility study on Blue Ridge project is
announced.
* Feasibility study envisages an underground mining operation producing
136,000 oz /year contained PGM concentrate over a 17-year life.
* With indicated peak funding requirement of US$118 million, the
Company is exploring financing options with Standard Bank of South
Africa.
* At Sheba's Ridge project, drilling has confirmed continuity of
mineralisation and indicates an orebody with potential for a
large-scale open pit PGM-base metal mine.
* With its JV partner, Anglo Platinum, the Company expects, to announce
estimated mineral resources by end-March 2004.
* In line with the stated strategy of concentrating on PGM production,
the Company intends to sell its entire gold interests to, Cluff Gold
Ltd, (a company independent of Cluff Mining PLC currently being
established by J G Cluff for this purpose) for US$5 million. This
will be a related party transaction under the AIM Rules.
* These assets comprise the Company's interests in the Kalsaka gold
project in Burkina Faso (Cluff Mining 78%), the Maligreen project
(Zimbabwe), Yako Arbole (Burkina Faso), Seripe (Ghana) and Niokolo
(Senegal) exploration projects.
* Shareholders will be asked to vote on the disposal of the gold assets
at an EGM to be held on 19 December 2003.
Terence Wilkinson, Chief Executive, commented:
"Now we have completed the feasibility study at Blue Ridge we are exploring a
number of ways of enhancing the economics of this operation.
"The planned sale of our gold interests is consistent with our stated strategy
to concentrate on our platinum group metal projects".
3 December 2003
ENQUIRIES:
Cluff Mining PLC Tel: +44 20 7495 2030
Terence Wilkinson (Chief Executive)
Francis Johnstone (Commercial Director)
College Hill Associates Tel: +44 20 7457 2020
Mark Garraway
Michael Spriggs
CLUFF MINING PLC
Proposed option for disposal of the Company's gold projects
Results of Blue Ridge Platinum Project feasibility study
and exploration update on Sheba's Ridge Platinum Project
Notice of Extraordinary General Meeting
The Board of Cluff Mining PLC (the "Company") announces that it has entered into
a letter of intent with Cluff Gold Limited in relation to the potential sale of
all of the Company's gold interests, the most significant of which is its 78%
interest in the Kalsaka Gold project in Burkina Faso, for a total consideration
of US$5 million. Cluff Gold Limited ("Cluff Gold") is independent of the
Company and is in the course of being established by J. G. Cluff, non-executive
Chairman of the Company, to acquire the Company's gold assets. N. W. Berry, a
non-executive Director of Cluff, is also interested in Cluff Gold.
The potential sale of these assets would be in line with the Company's
previously announced strategy to increase the focus of the Company on its PGM
projects. The transaction would be classified under the AIM rules as a related
party transaction and requires approval of shareholders under the Companies Act
because it is a disposal to a company connected with a Director. A circular
outlining the proposed transaction has today been sent to shareholders together
with a notice of an Extraordinary General Meeting ("EGM").
The Company also announces the results of the Blue Ridge Platinum Project
feasibility study and an exploration update on the Sheba's Ridge Platinum
Project.
Description of gold projects
Kalsaka Gold Project - Burkina Faso
The principal gold asset proposed to be sold is the Kalsaka Project, located in
Burkina Faso, approximately 150 km northwest of the capital, Ouagadougou. The
mineral resources identified to date occur within a zone of oxidation and
lateritisation which outcrops as a series of low lying hills. The deposit has
been explored by trenching and reverse circulation and diamond drilling and has
been the subject of exploration since 1997.
The Company completed a feasibility study on the project in 2003. The project
is envisaged by this study to comprise a conventional open pit mine and heap
leach processing facility processing 1.2 million tonnes of ore per annum for a
period of four years. A mining licence is in the process of being applied for
under the terms of the mining convention signed with the government of Burkina
Faso.
SRK Consulting has audited all technical aspects of the study and supports the
major conclusions of this work as incorporated into the technical-economic
model.
The following Kalsaka mineral resource and ore reserve statements were estimated
by SRK Consulting in accordance with the guidelines of the JORC Code and used in
the feasibility study:
SRK Mineral Resource Estimate
Gold
Tonnes Grade content
Category (millions) (g/t Au) (Ounces)
Kalsaka Hill
Measured 5.4 1.7 300,000
Indicated 2.1 1.3 90,000
Inferred 1.5 1.5 70,000
------------ ------------ -----------
Sub-total 9.0 1.6 460,000
------------ ------------ -----------
K Zone
Indicated 2.0 1.3 80,000
Inferred 0.5 1.5 20,000
------------ ------------ -----------
Sub-total 2.5 1.3 100,000
------------ ------------ -----------
Total 11.5 1.5 560,000
------------ ------------ -----------
SRK Ore Reserve Estimate
Gold
Ore tonnes Grade content
Classification (millions) (g/t Au) (Ounces)
Proved 2.9 2.3 210,000
Probable 1.5 1.8 90,000
------------ ------------ -----------
Total 4.4 2.1 300,000
------------ ------------ -----------
The feasibility study indicates that, following a metallurgical recovery of
87.5%, the project will produce a total of 263,000 ounces of gold over a four
year period at an average cash operating cost of US$221 per ounce. Initial
capital costs amount to US$16.5 million with an ongoing capital requirement of
US$2.9 million over the life of the project.
Assuming gold prices of US$325, US$360 and US$400 per ounce, the project
economics, after tax and royalties but excluding any finance charges, show an
internal rate of return (IRR) of 16, 26 and 38 %., respectively, and net present
values (NPV) at a 15% discount rate of US$0.2 million, US$4.4 million and US$9.2
million, respectively, for the entire project. Under the terms of the mining
convention with the government of Burkina Faso a new operating company will be
formed to hold the exploitation licence in which the Cluff Mining (West Africa)
Limited will have a 78% interest.
No account of the additional exploration potential in the remainder of the
Kalsaka licence area is incorporated in the above figures, including the
estimate of an inferred mineral resource of 0.7 million tonnes at a mean grade
of 1.2 g/t (containing 30,000 ounces of gold) from the nearby Zoungwa East and
Middle Zone orebodies. The written down carrying value of Kalsaka in the
Group's financial statements as at 30 June 2003 was US$2.4 million.
Yako Arbole - Burkina Faso
The Yako permit is located to the southwest of, and contiguous with, the Kalsaka
Project in Burkina Faso. The permit comprises an area of 505 km2. It is
currently held under an exploration licence, which has been renewed for the
third and final time until 16th May 2004. In 1997, the Company estimated an
Inferred Mineral Resource at Yako of 2.5 million tonnes grading 1.9 g/t with a
gold content of 150,000 ounces.
Due to the relatively small size of the mineral resource at Yako and the fact
that results of preliminary metallurgical testwork carried out on samples
collected at Yako suggested that a relatively large amount of cement would be
needed to agglomerate the ore ahead of heap leaching, Yako was reclassified as a
low priority target and the Company's attention in Burkina Faso was re-directed
towards Kalsaka.
Seripe - Ghana
The Seripe permit is located in the northwestern region of Ghana, approximately
220 km northwest of Kumasi, covering an area of 150 km2.
Cluff's work has comprised a regional stream sediment sampling programme
(consisting of 800 samples defining six anomalous zones) and follow-up soil
sampling over two of these (amounting to 2,000 samples) and 600 metres of
trenching. No further exploration has been undertaken at Seripe for the last
two years.
Niokolo - Senegal
The Niokolo licence covers 110 km2 in south east Senegal. Award of a
prospecting permit is pending the finalisation of the terms of a mining
convention which would include a commitment to an agreed work programme.
Maligreen Project - Zimbabwe
The Maligreen permit area is located some 240 km southwest of Harare, the
capital of Zimbabwe. Prior to Cluff's acquisition of the project in 1999 from
Reunion Mining PLC, a significant amount of work on the project including
drilling, geological modelling, resource estimation, geotechnical, hydrological
and environmental investigations, preliminary pit optimisations and
metallurgical testwork, had been undertaken on the project.
The Company has a joint venture agreement with Pan African Mining, which covers
the drilled portion of the deposit. Pan African Mining has earned a 50%
interest in the oxidised part of this drilled portion by meeting 100% of the
development costs required to bring the oxide mine into production. Mining of
the oxide deposit was completed as planned in mid 2002.
In addition to the oxide resource that has been mined out, Reunion estimated an
underlying sulphide mineral resource of 2.6 million tonnes at a grade of 4.6 g/t
with a gold content of 370,000 ounces.
Metallurgical testwork has suggested that the gold in this sulphide resource is
refractory and therefore its development would require the construction of
additional processing facilities which could handle this type of ore. Due to
the prevailing political and economic situation in Zimbabwe, it has not been
considered worthwhile to investigate the feasibility of developing this resource
or to carry out further exploration on the remainder of the Maligreen licence
area. The written down carrying value of the Zimbabwe interests in the Group
financial statements as at 30th June 2003 was US$0.36million, a significant
portion of which relates to a property which will be sold prior to the exercise
of the option.
Terms of the Disposal
The Company and Cluff Gold have signed a letter of intent and propose to agree
and execute an option agreement, the Gold Option Agreement, as soon as
practicable after receiving the authority of shareholders at the EGM. Pursuant
to the Gold Option Agreement, Cluff Gold will have an option to acquire from the
Company the issued share capital of Cluff Mining (West Africa) Limited ("the
West Africa Option"). Cluff Mining (West Africa) Limited is the holding company
for the Company's interests in the Kalsaka, Yako Arbole and Seripe and Niokolo
projects as described above.
The West Africa Option will be granted for a consideration of US$250,000 in cash
payable as to US$150,000 on signature of the Gold Option Agreement and as to the
balance of $100,000 on the grant of an exploitation permit in respect of the
Kalsaka project, expected in the first half of 2004.
The West Africa Option would be exercisable on or before 30 September 2004 or,
if Cluff Gold is floated on AIM or another stock exchange before such date,
within two weeks of such flotation. The exercise price payable by Cluff Gold to
the Company is US$5 million, less any amounts already paid by Cluff Gold to the
Company in respect of the grant of the option. If Cluff Gold has, at the time
of the option exercise, been floated on AIM, US$1 million out of the exercise
price of US$5 million may, at Cluff Gold's option, be paid in shares in Cluff
Gold at the AIM flotation price.
The Company will be obliged to retain such shares for 12 months after they are
allotted. Cluff Gold will also take over from the Company the liability to pay
DD Chikohora, a director of Cluff Mining (West Africa) Limited, a 1% royalty in
relation to the Kalsaka project as set out in his service agreement.
If Cluff Gold exercises the West Africa Option, it will also have the option to
acquire, on terms similar to those applying to West Africa, Cluff Mining
(Zimbabwe) Holdings Limited for a nominal amount ("the Zimbabwe Option").
Cluff Mining (Zimbabwe) Holdings Limited is the holding company for the
Maligreen project described above.
Reasons for the Gold Option Agreement
In 2002, the Board formulated a strategy to divest its gold interests in order
to concentrate on its PGM projects in South Africa. The Directors consider that
the potential of the Company's PGM projects is considerably greater than that of
the gold projects and therefore decided to commit the majority of its resources
to its PGM projects.
If the Company were to continue to hold its gold interests without developing
them further, it would not only run the risk of losing such projects, but their
continued retention also involves overhead costs.
Since the Company announced its decision to dispose of its gold interests in
2002, the Company has received no other offer to acquire them.
The Directors believe that the exercise prices under the Gold Option Agreement
are fair and reasonable and that the disposal of the gold projects under the
terms of the Gold Option Agreement will realise cash which can be spent on
developing the PGM assets. In addition, if a portion of the consideration is
received in shares of Cluff Gold this will allow the Company exposure to a
company with a proven management which will be dedicated to realising the value
in these projects.
The Directors believe that the exercise prices under the Gold Option Agreement
represent a sufficiently attractive price for the Company not to carry out a
formal competitive process, taking account of the distraction of management time
and the associated costs involved and also given the absence of offers since the
Company's announcement that it intended to dispose of its non-core projects.
The Directors, with the exception of J. G. Cluff and N. W. Berry (who have taken
no part in the Directors' deliberations, in view of their interest in the Gold
Option Agreement), consider, having been advised by Standard Bank London and
having also consulted Investec (its nominated adviser under the Rules of AIM),
that the terms of the transaction are fair and reasonable insofar as its
shareholders are concerned.
Use of proceeds
The Directors intend to use the net proceeds of the Disposal to further develop
the Company's PGM projects and for general corporate purposes.
Operational update
Blue Ridge
The Company today announces that the Blue Ridge feasibility study has been
completed. The study has been carried out by Cluff utilising experienced
consultants of international repute where specialist expertise has been
required. SRK Consulting has reviewed the entire study to ensure that all
aspects were completed to "bankable" standard.
Further drilling during 2003 has resulted in the increase and improved
definition in the mineral resource estimate at Blue Ridge since the last audited
estimates in December 2002. Measured and Indicated mineral resources have
increased by 30% to 4.8 million ounces 6E and the total mineral resources are up
by 18% to 5.45 million ounces 6E, including the inferred category.
The Blue Ridge mineral resource has been estimated in accordance with the JORC
Code and audited by SRK Consulting as follows:
Tonnage Thickness Contained Contained
Resource Class (Mt) 4E (g/t) 6E (g/t) (cm) 4E Moz 6E Moz
Measured 26.3 3.2 3.8 130 2.68 3.22
Indicated 13.2 3.1 3.7 127 1.30 1.58
Indicated Oxide 1.2 3.3 3.9 137 0.13 0.15
Inferred 4.1 3.1 3.8 127 0.41 0.50
------------ ------------- ------------ ------------ -----------
Total/Average 44.9 3.1 3.8 129 4.52 5.45
------------ ------------- ------------ ------------ -----------
The UG2 orebody has an average thickness of 1.29 metres and dips at an average
of 17o. The mining plan employs a hybrid of labour intensive and mechanised
mining methods. The declines, sub-reef haulages and reef drives will be
excavated by mechanised means while the reef itself will be won by labour
intensive methods. The feasibility study contemplates the underground mining of
1.8 million tonnes of UG2 chromitite ore per annum via three decline shafts for
a period of 17 years including a two year ramp up.
The mining plan and Reserve calculation were undertaken by Snowden Mining
Industry Consultants P/L of Australia in accordance with the JORC Code:
Contained
Ore Reserve Classification Mt 4E (g/t) 4E (Moz)
Proved Ore Reserve 21.4 2.8 1.95
Probable Ore Reserve 7.5 2.8 0.67
Total Proved and Probable Ore Reserve 28.9 2.8 2.62
The mined ore will be crushed and processed through a concentrator facility.
The plant and infrastructure were designed by Dowding Reynard and Associates for
a 150,000 tonnes per month capacity processing plant, equating to the production
of approximately 136,000 4E oz per annum.
The plant design incorporated the results of the bulk metallurgical testwork
performed by Mintek on underground bulk samples. The process plant is a
mill-float mill-float (MF2) design using ball mills. The plant will produce
2,100 tonnes per month PGM concentrate of approximately 160 g/t 4E, which will
be filtered and dried prior to transportation. SRK (South Africa) were
responsible for the environmental management plan report and design of the
tailings dam.
Cluff has received indicative terms from one of South Africa's major platinum
producers to purchase the concentrate and these terms form the basis of the
study.
The financial model was prepared on the basis of project generated cash flows
after tax and royalties. The financial model was based in South African Rand at
an exchange rate of ZAR/US$8.50 in 2004 depreciating at a rate of 6% per annum
and the following long term metal prices:
Platinum: US$550/ounce
Palladium: US$250/ounce
Rhodium: US$700/ounce
Gold: US$360/ounce
The above prices result in a basket price of US$476 per ounce for Blue Ridge
ore.
The following key indicators were derived:
Rand US$
(at ZAR/
US$8.50)
Peak funding requirement 1,004 million 118 million
Net Cash Generated 1,904 million 224 million
NPV @10% 89 million 10.5 million
Cash operating cost per oz 4E 3,535 415
Internal Rate of Return 10.6% 10.6%
The Company will now explore its financing options with Standard Bank of South
Africa which has the right to arrange project finance. The Company is in the
process of evaluating a number of options which would enhance the returns of the
project, the most significant of which would be the toll smelting and refining
of its concentrate rather than the sale of concentrate as envisaged in the
feasibility study.
The feasibility study also incorporates a mining royalty of 4% of the value of
platinum group element sales based on the rate proposed in the draft Royalty
Bill announced earlier this year. Industry representations have been made to
the government of South Africa to reduce the level of royalties payable and the
government is expected to make a further announcement on this in March 2004.
Sheba's Ridge Update
The Company commenced exploration of the Sheba's Ridge Project in April 2001.
This Phase I programme identified three distinct units of mineralisation: a
layer similar to the UG2 termed the "Platchro layer"; a layer analogous to the
Merensky Reef; and the Platreef.
In February 2003 a joint venture agreement was signed with Anglo Platinum on the
core area of Sheba's Ridge under which the Company will increase its interest to
65% and, following a decision by the Company to construct a mine, further
increase its interest to 87.5% in the joint venture.
The Phase II exploration programme, which commenced in July 2002, was initially
designed to investigate both the Platchro and Platreef units of mineralisation.
Drilling results on the Platchro were mixed, with the mineralisation appearing
to be structurally disturbed and, in consequence, attention at Sheba's Ridge was
focused on the Platreef. Exploration results from the Platreef were
sufficiently encouraging for the Board to decide in February 2003 to expand the
Phase II drilling programme.
The drilling programme has recently been completed with 126 vertical holes
drilled totalling 38,600 metres through the Platreef. Of these holes, 94 are on
a grid with average spacing of 100 metres along a 4 km strike; eight holes are
off grid along section lines and two were deeper holes intersecting the Platreef
down dip to 600 metres. Ten holes were drilled in the vicinity of previous
Anglo Platinum holes near the eastern limit of the joint venture area. In
addition, 7 exploration holes were drilled on the neighbouring Kameeldoorn farm
(not subject to the joint venture with Anglo Platinum) to investigate the
potential additional strike length.
The Phase II programme has established that the visible sulphide envelope of
Platreef mineralisation is continuous across the 4km strike with a width ranging
from 120 metres to 200 metres and averaging 155 metres along strike. Within
this overall envelope is a continuous layer of higher grade material, between 15
and 80 metres thick, which in turn hosts bodies that carry the highest grade.
The Platreef is potentially amenable to open pit mining and therefore mining and
grade control would be carried out using methods similar to those used at Anglo
Platinum's Potgietersrust operation.
Sampling, assaying and data verification are expected to have been completed by
the end of January 2004, at which stage the resource will be modelled in
collaboration with the Mining and Geological Services division of Anglo
Platinum. It is anticipated that the Company will be in a position to announce
an estimated mineral resource in the indicated and inferred categories as
defined by the JORC code by the end of March 2004. In line with the Company's
normal practice, the resource will be audited by internationally recognised
independent consultants. At the same time it is planned to conduct a scoping
study on a possible mining operation at Sheba's Ridge, which will define the
parameters of a pre-feasibility study to be undertaken during the remainder of
2004.
Extraordinary General Meeting
An Extraordinary General Meeting of the Company will be held at the offices of
Investec, 2 Gresham Street, London EC2V 7QP at 11 a.m. on 19 December 2003. At
the EGM, Shareholders will be asked to pass an ordinary resolution to approve
the Disposal.
Circular
Copies of the circular which is being sent to shareholders today will be
available free of charge at the offices of Cluff Mining PLC, 29 St James's
Street, London, SW1A 1NR for one month from today.
This information is provided by RNS
The company news service from the London Stock Exchange
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