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cquisition of Gold Mining Company in Australia and Strategic Review
Ferrex plc, the AIM quoted resource development company, has entered into an agreement to acquire 100% of Australian private company Chaffers Mining. Chaffers has negotiated a five year tribute agreement with Paddington Goldfields, a subsidiary of Norton Goldfields to mine certain defined gold deposits located on the Norton leases, located 30km north of Kalgoorlie in the heart of the Western Australian goldfields, for treatment at Norton’s nearby Paddington processing plant.
The acquisition will enable Ferrex to commence production and cash generation with only working capital expenditure in Q2 2016. The funds delivered will be used towards the development of the Nayega Manganese Project located in Togo upon receipt of the mining permit. This acquisition follows a recently completed strategic review by the Company focused on how to best deliver rapid value to shareholders in the current commodity pricing environment.
Overview
· Low acquisition cost, cash generative mining opportunity in a geographically stable mining jurisdiction:
o Production targeted to commence Q2 2016, initially targeting 20,000 to 30,000 ounces per annum
o Agreement covers historic resources of more than 350,000 ounces of gold at a grade of 2g/t
o Mining leases granted – deposits comprised of remnant resources below historic pits and previously unmined near-surface deposits
o Limited working capital costs to commence production estimated at GBP300,000
o Leases located 25km from the mill in an area of excellent infrastructure
o Ferrex to pay mining and processing costs, plus 22% royalty on gold recovered to Norton
· Low cost consideration and addition of highly experienced mining personnel to Board and management which will add further significant and relevant skills to Ferrex
o Consideration of £465,000 in shares at a deemed price of 0.5p to acquire 100% of Chaffers, additional £465,000 in shares on production of 10,000 ounces of gold at 30 day VWAP to announcement of successfully completing this milestone
o Chaffers executive Peter Hepburn-Brown to be appointed as a non-executive director of Ferrex and Chaffers Non-Executive Director Peter George to be appointed as Chief Operating Officer
· Strategic Review of current assets completed with focus directed at adding value for shareholders through near-term, low cost, compelling production opportunities
o Acquisition of Chaffers fits these criteria
o Continuing to develop Nayega as a low cost manganese export mining operation with a view of production within nine months of receipt of the Mining Permit, due imminently
o Evaluating opportunities to realise value or monetise non-core iron ore portfolio, located in South Africa and Gabon, through joint ventures or trade sales
Ferrex Managing Director Mr. Dave Reeves said, “It is very rare to find an opportunity which can deliver production in under six months from acquisition and therefore I am personally very excited about this project, which fits our goal of rapidly delivering cash flow at a low cost. Gold production will commence at 20,000 to 30,000 ounces per annum, the cash flows from which will be used towards the development of the Nayega manganese project in Togo when the permit is received. With our focus firmly on producing cash from these gold assets for the next six to nine months, I have no reason to believe that the Nayega permit will not be fully granted when we have the time to turn our attention to developing this as our next cash producing asset.
“In light of the continued depressed iron ore pricing environment we have been investigating various projects that fit the criteria highlighted above and continue to do so. The appointment of Peter Hepburn-Brown to our Board and Peter George as COO will bolster our mine development expertise and can be leveraged both in terms of this new acquisition and any future ones. This experience will be highly beneficial as we closely plan our next steps at the Norton leases in Australia and we look forward to reporting these plans to the market.”
