Oil & Gas and Mining shares make up a quarter of the entire market capitalisation of London’s Alternative Investment Market, so Alliance News subscribers are fortunate to have a drilling and digging reporter with a knack for buttonholing company executives for exclusive interviews.
Tom McIvor has been on a tear in since the start of 2014. Here’s a selection of his recent work that has appeared on Alliance News Professional over the past month.
INTERVIEW: Sula Iron & Gold Looking At Funding Options Following SRK Valuation
LONDON (Alliance News) – Sula Iron & Gold PLC is looking at a range of options for funding after its recent independent valuation for the Ferensola site in Sierra Leone, according to its chief executive.
“We hope to use the results of the SRK independent valuation to try and raise sufficient money to help establish a JORC compliant resource on the iron, a JORC compliant resource on the direct shipping ore and a JORC compliant resource on the gold,” the company’s Chief Executive Officer Nick Warrell told Alliance News.
The company raised GBP800,000 through a share placing in October, which it used to carry out further test work on its gold assets. The results were used to develop a major valuation of the company which suggested a minimum value for the licence of USD8 million, a maximum value of USD200 million and a technical value of USD36.7 million.
Based on the results, the company is now exploring a range of options in order to develop its operations in Sierra Leone.
“It could be that we raise money ourselves, get the JORC compliant resource and then see about opportunities to move forward, we could joint venture with someone just on the iron or the gold, it could be we get a strategic partner in to help us on one or the other, or we could get financial support from investors, for instance from the Chinese,” Warrell said.
Warrell founded Sula Iron and Gold and has headed up various exploration projects worldwide. He has spent 24 years working in Sierra Leone, has discovered gold and platinum deposits and founded Golden Prospect Mining, which floated on AIM and was later sold. Warrell also founded Lion Mining Company Limited, which he operated for three years and also successfully sold.
The company is focused on its 153 square kilometre Ferensola site, prospective for iron and gold in the Sula-Kangari Greenstone belt of Sierra Leone.
The Ferensola site was originally acquired as a gold prospect due to noticeable surface mineralisation and historical gold drilling which included a 9.03 metre space at 6.63 grams per tonne gold and 8.72 metres space at 10.46 grams per tonne gold.
The company completed a detailed ground magnetometer and geochemical soil survey over several of its gold targets in recent months and is expecting results to be reported by the end of the first quarter.
“We did a massive sampling programme for gold, and we should have results within a couple of months and that will give us the mining targets going forward,” Warrell said.
Warrell noted other major gold mines along the Sierra Leone Greenstone belt including Amara Mining PLC’s Baomahun Gold project, which has a reported resource of 2.78 million ounces of gold.
The site has good infrastructure nearby, including access from Freetown via a tarred road followed by 80 kilometres on bush roads. However, the company is focused on the mine site itself and not the infrastructure.
“We are a mine finder, we are not a developer and we are not going to go into production, our job is to use our cash in the most efficient way to bring more value into the site,” Warrell said.
However, while gold is a key part of the company profile, the iron in its name came about after a major discovery across the sites border at African Minerals PLC.
As Sula listed on AIM in October 2012, the company was told that African Minerals, which shares the same mineralised belt as Sula, had uncovered a massive banded iron formation at its Tonkolili Iron Ore Mine. Further studies at African Minerals showed they have a 12.8 billion tonne JORC compliant resource at the site.
“We changed the name to Sula Iron and Gold PLC, because the markets were not good for gold and it was far easier to raise money in the city with the providence of the second largest operational iron ore body in Africa passing through our site,” Warrell said.
Sula then raised some capital and carried out detailed mapping and reconnaissance work at the project which was completed in January 2013 and confirmed the presence of a banded iron formation at the surface, which the company considers a continuation of the African Minerals find.
“We initiated a scout drilling programme on this huge ore body, putting down nine holes in exactly the places we thought the banded iron formation would be and they all came back as we expected,” Warrell said. “Every hole came up trumps, allowing us to guess the width of the zone and the direct shipping ore content.”
The drilling programme was completed in July and confirmed the iron mineralisation with results including a 12.28 metre space at 57.10% iron and a 73.18 metre space at 43.66%.
Sula then gained the services of SRK Exploration Services in order to prepare an independent valuation of the site, the results of which came out earlier this month.
SRK suggested a minimum value for the licence of USD8 million, a maximum value of USD200 million and a technical value of USD36.7 million.
With a current market capitalisation of GBP10 million, or USD16.4 million this valuation could represent significant value potential for Sula Iron & Gold.
The technical valuation, which SRK considers to be a fair and reasonable value for the property, was based on geological information available to the consultancy and its view on the status of Ferensola and their probability of success.
The minimum valuation was based on the purchase price of the property, historical exploration expenditure and the amount that Sula intends to expend on exploration during the next phase of work, with a discount factor of 65 to 80%.
The maximum valuation considers that the highest level of prospectivity for gold is a mesothermal gold model which could be expected to contain 250,000 to 400,000 ounces of gold and may be as large as 40 million tonnes.
Additionally, SRK said that the licence area has excellent potential for an iron ore resource to be delineated after the company made significant iron ore tests at the site throughout 2013, and that Sula can achieve its target of 500 million tonnes of iron at the site.
SRK also noted that the maximum potential value for the gold and iron targets has been heavily discounted due to Sula’s stage of development.
With the release of the SRK valuation and the end of further gold testing in January, the company reached a point where it is now awaiting further funding in order to move forward with Warrell’s development plan.
“We’ve had this serious undervaluation of what the company’s really worth,” Warrell said. “One of our previous brokers, put a piece on the lse.co.uk website on December 30 saying that shares should be valued at 10.2 pence.”
In its first-half 2013 results, the company announced a widening of its pretax loss to GBP988,000 compared from GBP563,000 in the period between October 6 2011 and September 30 2012 based on its administrative costs as it developed the Ferensola site.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
Copyright © 2014 Alliance News Limited. All Rights Reserved.
INTERVIEW: Savannah Resources Eyeing Copper Projects In Africa, Among Others – CEO
LONDON (Alliance News) – Savannah Resources PLC, the company formerly known as African Mining & Exploration, is continuing to look at a range of new investment opportunities as it seeks to diversify, but the focus is on copper projects and Africa, its chief executive says.
The company changed its name last October when it sold its gold mining subsidiary AME West Africa Ltd to Alecto PLC, which it now has a 24.6% interest in. It then pledged to broaden its investment horizon from its previous focus on West Africa, investing in more commodities and geographies.
It said its new strategy was based on a wider range of acquisition or investment opportunities becoming available with less competition, as the fall in commodity prices seen last year meant fewer so-called junior companies have the funds to invest, while others were being forced to sell assets. It also said that reduced capital spending by the major resource companies was expected to result in more opportunities to buy up projects at a relatively advanced level of development cheaply. It said it would target both passive investment holdings and projects that it will manage itself.
“With regards to our investment strategy I have a personal preference for copper projects, we’re looking at some copper opportunities,” company Chief Executive David Archer told Alliance News in a recent interview.
“Africa is basically the focus, which is still extraordinarily under-explored with a high level of prospectivity,” Archer added.
However, he reiterated that the company is looking at all opportunities and will not be limiting itself by focusing too heavily on one specific commodity.
Archer became Chief Executive Officer when the company changed name and strategy last October. He has 30 years resource industry experience and grew both Savage Resources Ltd and Hillgrove Resources Ltd to be companies worth hundreds of millions of Australian dollars.
“Our plan is to build up the optionality of our portfolio while employing a relatively disciplined approach to risk mitigation, to have the greatest chance of hitting major goals in terms of financial assets,” Archer said.
Its first investment, which had actually been announced before the name change, was the acquisition of an 80% shareholding in Matilda Minerals Limitada, the owner of the heavy mineral sands Jangamo project in Mozambique. The sands contain minerals including rutile, ilmenite and zircon.
The initial outlay for the acquisition was modest, involving a cash payment of GBP72,000 and the issue of GBP231,000 worth of Savannah shares. It will pay the rest in three tranches of its shares worth GBP289,000 each if certain inferred resource milestones are met.
“With Matilda, we have managed to secure a major position in a country which is going to be, if not already a major rutile producer in the world,” Archer said. “The route to value at Jangamo is pretty simple: getting on the ground drilling it and proving up a JORC resource, which we’re aiming to do by the second half of 2014”.
Savannah has already completed a 2,000 metre drilling programme at the Jangamo site at the relatively low cost of GBP250,000. The company has sent the resulting samples for testing in Australia and expects the analytical results to be available in the first half of February.
“On the back of results in February, we’ll be designing a second round of drilling on the mineral sands,” Archer said. “Probably something in the order of 5,000 metres of drilling, which will be implemented towards the middle of 2014 in order to hopefully frame up a JORC resource in the second half of 2014.”
The company’s other current investment is the 24.6% stake it took in Alecto when it sold AME West Africa to that company. The deal meant Savannah can keep some exposure to AME West Africa’s Kossanto gold project without having to fund further development costs itself. It is focused on trying to get as much value from that stake as it can.
Alecto has two key assets following the deal: the Kossanto gold project in Mali and two gold exploration assets in Ethiopia it was already invested in through a joint venture with FTSE250-listed miner Centamin PLC.
In December, Alecto reported exceptional gold grades from drilling at the Kossanto project in Mali of up to 31.5 grams per tonne gold. That drilling project aimed to improve the site’s current resource of 2.35 million tonnes at a grade of 1.42 grams per tonne of gold.
On Thursday, Alecto completed the first stage of drilling at Kossanto and said that initial data confirms the potential expansion of the current JORC compliant resource. Results included an 18 metre space at 1.1 grams per tonne of gold, a 9 metre space at 2.22 grams per tonne of gold and a 2 metre space at 7.59 grams per tonne of gold.
The company said it expects the full results from the drilling programme to arrive by the end of the first quarter.
Earlier this month, Alecto raised GBP1.5 million through the issue of 100 million shares at 1.5 pence per share in order to advance development of the Kossanto site.
Alecto entered into the joint venture with Centamin last September to pursue new opportunities in Ethiopia. The initial projects, Wayu Boda and Aysid-Meketal, are being partly funded by Centamin and are both in key gold producing regions, with rock chip samples from the Wayu Boda site providing grades up to 47.4 grams per tonne of gold.
“Via Alecto we can reasonably expect announcements on exploration programmes in Mali and Ethiopia which are both in very attractive geological settings with a potential for the discovery of multi million ounce ore bodies,” Archer said.
Archer expects there to be something in the order of USD5 million spent on Alecto’s tenements in the next couple of years, a large amount for a junior mining company.
“Alecto is at least a medium term investment to us, by medium term I mean up to about five years is our plan,” Archer said. “The company has enormous potential.”
As African Mining & Exploration PLC, the company almost halved its pretax loss to GBP265,379 in the six months to end-June, 2013, from a loss of GBP502,567 a year earlier, as it cut administration costs. Its non-executive directors are paid with share options and not cash.
“We’ve significantly strengthened the balance sheet. I subscribed for half a million pounds in 2013 and we also did a half million placement in October,” Archer said.
“Hopefully we are one of the new companies in the vanguard of really kicking goals in the junior end of the resources sector,” the CEO added.
Savannah Resources shares have seen more than a 150% increase in share price over the last six months as the reorganisation process took hold.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
Copyright © 2014 Alliance News Limited. All Rights Reserved.
INTERVIEW: Black Mountain Resources Close To Production At New Departure – CEO
LONDON (Alliance News) – Black Mountain Resources PLC expects to start production from the New Departure silver mine in Montana during March or April according to Chief Executive Officer John Ryan.
“We’re targeting roughly a million ounces of annual production at the New Departure, scheduled to begin at the end of the first quarter 2014,” Ryan told Alliance News. “March or April is the likely time-frame for start up”
Ryan is a US citizen who has worked extensively in the region at various mines, including the Consolidated Silver Mine operated by Hecla Mining. In 2006, Ryan co-founded US Silver Corporation and successfully negotiated the acquisition of all of the North Idaho assets of Coeur d’Alene Mines Corporation. One of these, the Galena Mine, has been in continuous production since the acquisition and produces roughly 2.5 million ounces of silver annually.
“Two of our projects are located in Montana,” Ryan said. “The main focus is the New Departure project.”
The 427 hectare New Departure Silver Project in Montana, US was operational in the early 20th century, producing high grade shipping ore to a smelter 80 miles north. The site was heavily studied in the past and, in the 1970s, a historic resource was developed.
“While it is not a JORC resource, the physical sampling that was completed in the previous studies is, in many ways, a much more thorough understanding of the site,” Ryan explains.
The company that came to drill New Departure in the 1970s was undercapitalised and failed to reach its target. However In 1998, geological reports at the site identified six separate ore blocks estimated to contain 100,000 to 120,000 tonnes of silver at an estimated grade of 700 to 750 grams silver per tonne.
“Once we took control of the site we rehabilitated about 700 feet of tunnel from previous studies,” Ryan said. “Then started driving new tunnels.”
Grab samples announced in October from the site achieved bonanza silver grades of up to 5,194 grams per tonne from the newly opened up Blue Dot level, a key area of production in the future.
“The upper levels at the site took a 200 pound bulk sample for metallurgical testing, but its heavily oxidized – first couple of tests were low levels, but after new testing processes found high grades,” Ryan said.
The company has an USD850,000 budget for the next five months at New Departure and plans a programme of about 500 channel samples in order to better understand the site.
“Once we’re done with that we will develop a mine model plan for actually mining this ore,” Ryan said.
However, the company has experienced some delays in its mine development. First hit with an air ventilation problem which meant it had to change its timetable in order to tie in other tunnels and keep positive airflow, and secondly, a safety problem occurred as a sampling programme was being completed below blasting. The company decided to take the sampling team out until blasting was complete.
“Getting into production has taken longer than we previously thought,” Ryan said. “However, New Departure will get going by the end of the first quarter.”
Once in production, the company plans to ship its ore to a nearby mill which is already operational. However, the mill does have capacity of 1,200 tonnes per day and is currently running on about half of that.
“The transportation costs are not actually that large,” Ryan said. “The overall production costs are around USD10 an ounce.”
The company’s other major site is the Conjecture Project, a 700-hectare space in the Lakeview Mining District of North Idaho, a prolific silver region.
“Its very close to the Coeur d’Alene district, a silver belt where several different New York stock exchange based companies started,” Ryan said.
The area hosts areas of ore along the same body of quarzites as Coeur d’Alene and was mined for uranium in the 50s and 60s by Federal Uranium, which sunk a massive mine shaft at significant cost but after the uranium bust in the 60s, gave up on the project.
A mineral reserve study was completed for the site in 1981 and historic mining blocks at the site are estimated to contain 50,000 to 60,000 tonnes of silver at an estimated grade of 370 grams silver per tonne.
The company recently completed its maiden 16 hole drilling programme at Conjecture and initial assay results for intercepts had grades of 300 to 1,106 grams per tonne of silver.
While drilling, the company uncovered a key ore body and it now plans to build a decline down around 1,000 feet to meet the vein and drift horizontally along it to pick out some of the key ore shoots following the results of further sampling at the site.
“I’d like to be back up and running at Conjecture by the end of April and that will coincide with New Departure coming into production,” Ryan said. “We at least expect to be back up and running at the site before the end of June”
Ryan said that once the company has found key spaces along the vein, it plans to build a ramp to use a stoping method to mine the areas, trucking out the ore to a nearby mill which is being improved.
“We acquired a 45-year lease on a nearby mill which was built in the 1970’s,” Ryan said. “We’re conducting a large refurbishment programme, if it isn’t quite complete by summer we may have to ship to a custom mill a little further away”
However, Ryan insisted that the costs to ship a little further are not that much higher than the USD15 a tonne to truck to their own mill.
Finally, the company has a tertiary project caller Tabor in Montana, 150 hectares of land in the prolific gold and silver producing Virginia City.
“The third project is quite backburner,” Ryan said.”But I’d hope to peel off about USD200,000 to USD250,000 from our facility to do a 3,000 or 4,000 foot drill programme primarily at the St. John vein or the site.”
In December, the company secured an AUD3 million strategic long term debt financing deal with Alcyone Resources Ltd which it said was towards the funding and development of the New Departure and Conjecture Silver Projects. The company said the capital will allow it to advance New Departure to production in the first quarter of 2014.
If the site was to come into production, Ryan envisaged it to be very similar to the New Departure site, develop the mine before shipping ore to the nearby mill if the costs make it viable.
“Taber conceptually could be something that happens in 2015 as a third production opportunity, assuming we get good drill results,” Ryan said.
The company’s pretax loss widened in its full-year results for the twelve months ending June 30 to USD2.9 million from USD1.4 million the previous year as charges and depreciation costs, coupled with lower interest received hit company finances as it moves through its development phase.
“We think we are poised for a significant share rebound when the market turns and when we get into production,” Ryan said.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
Copyright © 2014 Alliance News Limited. All Rights Reserved.
INTERVIEW: Northcote Energy Close To Reaching Cash Flow Break Even – CEO
LONDON (Alliance News) – Northcote Energy PLC could break even on a cash flow basis as early as February after it ramped up operations in its US shale projects, a milestone that would give it access to cheaper funding to further develop its assets, Chief Executive Randall Connally says.
“We are close to cash flow break even, we’re not quite there yet but we are getting close, maybe next month, it’s definitely not far off,” Connally told Alliance News in an interview. “Once we get to that point, it should give us access to pretty low cost bank finance to continue developing our assets”
The Mississippi-focused conventional and unconventional oil and gas producer has a goal of producing 250 barrels of oil equivalent a day before the middle of this year.
“At listing we had about 25 barrels per day production. We set a goal of growth to 100 barrels per day in our first year and we did so in our first six months, in July,” said Connelly, a former banker and strategic adviser to Eagle Energy Company of Oklahoma LLC before he founded Northcote.
The company increased both its acreage and reserves in the last year and now has multiple operating wells in Osage County, Oklahoma and the Mississippi Lime Formation, a proven commercial trend in the US which has been producing from several thousand vertical wells for more than 50 years.
“It has been a busy year. When we listed we had a little over 500 net acres, as of today we’ve got almost 5,000 net acres in Oklahoma alone,” Connally said. “Our P1 reserves and PV10 have grown from a little over 30 million when we listed to frankly close to 90 million today and we haven’t even had a lot of the assets we’ve picked up this year engineered”
The company is most excited about its Mathis area in the east of its Horizon Project in Osage County, which currently has two producing wells from the Mississippian formation.
“We think it is a much higher quality reservoir. It gives us a good chance of making a multi-hundred-barrel a day well in the next couple of months and that should start test production at some point prior to (the end of 2013), probably to be completed in February,” Connally said.
While Mathis may be the most exciting, the West Little Drum well at the same site is the best the company has at this point. After successful fracture stimulation at the site, it announced in November that production increased over 600% with an average of 40 barrels of oil per day over a seven day period following the tests, and an average of 171 million cubic feet per day of gas for the first week of November.
Northcote, like so many oil and gas exploration and development companies in the US, has significantly benefited from fracking. The fracture stimulation process which has been used at the West Little Drum well is likely to be copied and used across the company’s operations.
“I think overall we’re going to end up getting a frac programme that gives us the potential of a three-to-six-times increase at a cost of USD150,000 to USD200,000 a well,” Connally said. “I’m very happy with that.”
Connally said the company plans to frack a fourth well within weeks and drill its first horizontal well as a public company on the Mathis lease.
Northcote Energy has no plans to take part in the fracture wells developing in central and eastern Europe. Despite seeing massive advantages in fracking for Europe he doesn’t see it developing in the UK, for a number of reasons, Connally said.
“It certainly wont take off in the UK, because of the way mineral rights are handled and its generally too densely populated for it to work,” said the CEO. “But it will happen in Europe and already is in the east, and could be amazing for Europe. Could you imagine what it would do for Europe and its job market if you guys had USD4 to USD6 dollar gas.”
However, as the company put its focus on stabilising the business model, developing the Mathis well and increasing its resource as a whole, Connally admitted the company did not expect to meet its planned 50 barrels of oil equivalent per day at the OKE formation in Osage County by the end of 2013.
“We’re not going to make that. The Mathis well has taken a lot of our attention. We’re still very pleased with that (OKE) project,” Connally said. “It’ll still exceed 50 barrels per day within the next few months but wont happen by December 31.”
For now, the company is focused on its development programme and adding production in the oil-and-gas-rich shale plays in the US.
“Probably right after holidays we will announce our 2014 work programme, I think that will include multiple new drills, somewhere between four and six new drill wells over the next year, plus another four to six fracs,” Connally said.
In September, the company said its pretax loss widened in its first half compared with the previous nine months as it developed its asset portfolio. Northcote said it made a pretax loss of USD2.2 million for the six months to June 30, compared to a USD181,000 loss for the nine months ended December 31, 2012. Despite this, the company said its sales increased threefold to USD360,000 from USD113,000 during the comparable period as it developed its producing sites.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
Copyright © 2014 Alliance News Limited. All Rights Reserved.
INTERVIEW: Armadale Capital Company Secretary Says May Offer Earn In At Mpokoto
LONDON (Alliance News) – Armadale Capital PLC may look for new partners to help fund the development of its Mpokoto Gold Project towards commercial gold production, including taking on an operator once it nears the start of output.
“The overall capital expenditure at Mpokoto is GBP10 million to GBP15 million,” Company Secretary Charles Zorab told Alliance News in an interview last month. “We might not fund that completely, we’re an investment company, and at some point we may offer part of it out as an earn-in”
South Africa-based Armadale might offer a 50% earn-in to the project for a potential operator once development costs for Mpokoto become more expensive, according to Zorab, a former Merrill Lynch investment banker.
The investment company bought Netcom Global Inc last year for about USD2 million. Netcom owned 80% of the Mpokoto project in Democratic Republic of Congo’s Katanga province.
The mine used to be owned by major mining companies like Cluff Gold PLC, Gold Fields Ltd, and more recently Casa Mining Ltd. The three firms have collectively invested over USD20 million in the project.
“They all thought it would be an elephant of a gold mine,” Charles said. “They spent USD10 million in exploration, and we are the beneficiaries of all that data, we don’t have to do a massive amount more in terms of drilling.”
In 2012, mining consultancy Tetra-Tech completed a resource estimation in line with JORC and NI 43-101 guidelines. At a cut off of 0.5 grams per tonne of gold the deposit contains 7.2 million tonnes at 1.6 grams per tonne of gold for approximately 380,000 ounces of gold, with 298,000 tonnes of gold in the indicated category.
In December, after 21 exploration drill hole tests at the site, the company increased its Mineral Resource at the site to 510,000 ounces of gold from 11.2 million tonnes of 1.42 grams per tonne gold at a cut-off grade of 0.5 grams per tonne gold, with 65% of the updated mineral resource in the indicated category.
Armadale is currently completing a pre-feasibility study at the site, which is on track for completion in the first quarter 2014 with an application for a mining licence following shortly afterwards.
“The other thing that we are doing, which we will get to in the first quarter of 2014 is upgrading the indicated part of the resource to measured,” Zorab said.
The company expects to receive its mining licence by the second half of 2014, around the time its definitive feasibility study will be coming to an end at a cost of around USD600,000. After that, Armadale wants to bring the site, which is expected to have a 10-year life of mine, into production in a very short timeframe.
“Its exactly the right size for us, its quite near term, we should be in production within 22 months, we hope, and the capex is pretty low,” Charles said.
In addition to the defined resources, Tetra-Tech estimates that the Mpokoto deposit has potential for an exploration target of between 20 and 24 million tonnes at 1.5 grams to 1.8 grams per tonne of gold.
“We have got an exploration target which has been delineated but not measured, of three times the current resource estimate – in other words about 7.2 million tonnes of delineated resources. Our target is 20 to 24 million tonnes.” Zorab said.
However, the company remains an investment company and, although the site has great potential as a producing asset, Zorab indicated that Armadale may be more interested in developing assets towards that point before looking at other options for the commercial production process.
“Mpokoto is really the big deal and it’s certainly what the shareholders seem to be interested in. It’s a bit of a company builder, but we may not hang on to it forever,” Zorab said. “We’re keen on developing assets, not necessarily actually flowing gold”
The company began with a focus on acid mine drainage in South Africa but after problems with bureaucracy decided to change its strategy to become an investment company.
“A lot of private investors thought acid mine drainage was a great idea but the South African Government didn’t,” Zorab said. “We sold the business in South Africa to a company called Mine Restoration Investments”
However, the company hasn’t forgotten its operations in South Africa and continues to work with Mine Restoration, in which it has a 40% interest, to provide both an acid mine drainage programme and, perhaps more importantly, a coal briquetting business in which coal mines dispose of coal fines by transforming them into briquettes for use primarily in the domestic steel and ferro alloy industries.
Surface and underground coal mining operations in South Africa produce roughly 300 million tons of coal per year, creating significant coal residues with fines typically constituting up to 20% of the total Run-Of-Mine feed. Zorab said that Mine Restoration will be looking at new sites for additional plants and expects to achieve commercial production by year end from coal fines transported from the Vaalkrantz Coal Colliery.
“Once the briquetting gets going we’re expecting about GBP1 million per year of cashflow. It’s useful to pay the bills,” Zorab said.
In line with its new investment strategy, its stake in Mine Restoration may not be kept in the long-term.
“We never bought MRI as a subsidiary,” Zorab said. “If this briquetting goes well, we’ll ride the success and then may well look at other opportunities.”
The same goes for its scale investments in West Wits Mining Ltd and Stonewall Resources, which are both gold producers. Armadale thinks it is sitting on a profit.
“We put GBP50,000 into each of the two and they are probably now altogether worth about GBP180,000,” Zorab said. “They have done pretty well, but its not a long term strategy”
The company’s pretax loss widened in the first half of 2013 to GBP607,000, from GBP113,000 the previous year, as losses from Mine Restoration and other expenses hit the company.
In July, the company raised GBP500,000 through a share placing and, in December, announced a further share placing to raise GBP550,000 before expenses meaning it is comfortably funded for the ongoing development of Mpokoto.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
Copyright © 2014 Alliance News Limited. All Rights Reserved.