TIDMCRA
RNS Number : 5725J
Cradle Arc PLC
03 April 2018
Cradle Arc Plc / EPIC: CRA.L / Market: AIM / Sector: Mining
3 April 2018
Cradle Arc plc
("Cradle Arc", the "Company" or, together with its subsidiaries,
the "Group")
Operational and Financial Update
Cradle Arc (AIM: CRA), the African focused base and precious
metals exploration and production company, is pleased to provide an
operational and financial update in respect of its Mowana Copper
Mine in Botswana ("Mowana" or the "Mine"), including details of an
enhanced independent mineral resource estimate for the Mowana open
pit, an accelerated Mine development plan (the "Accelerated
Development Plan") and US$10 million of secured debt funding (the
"Debt Funding").
Highlights:
-- Maiden JORC (2012) mineral resource estimate for Mowana of 75
million tonnes at 1.15% Cu for 861,000 tonnes of contained
copper
o Measured and Indicated Resource estimate of 40 million tonnes
at 1.17% Cu for 466,000 tonnes of contained copper
o Previously published JORC resource estimate for Mowana was not
constrained as per the requirements of JORC (2012); on a directly
comparable basis, at a 0.25% Cu cut-off, the resource grade has
increased by 18% and contained copper by 6%
-- Maiden JORC (2012) ore reserve estimate for Mowana scheduled to be announced in Q2 2018
-- Accelerated Development Plan to be implemented following the
positive resource update and metallurgical test results, in order
to fast-track access to the deeper ores, which have demonstrated
better recoveries and grades, enabling Cradle Arc to reach steady
state production and positive cash flows more rapidly
-- Additional mining fleet of 25 vehicles, including trucks,
excavators, loaders and support equipment, delivered to site, to
facilitate the Accelerated Development Plan
-- US$10 million secured Debt Funding, providing additional
working capital for implementation of the Accelerated Development
Plan and enabling the Group to refinance offtake linked pre-payment
facility provided by Fujax, serving to improve the overall cost of
borrowing for the Mine and improve the capital base of the
Group
Kevin van Wouw, CEO of Cradle Arc, said:
"Mowana has demonstrated its significant scale and, following
the successful recommencement of production during 2017, our focus
has now turned from the testing phase to increasing throughput and
building towards profitability. To achieve this, we have formulated
an Accelerated Development Plan, whereby four mining units will be
in service in the Mowana open pit. We are delighted to have secured
US$10 million of debt funding to support these efforts and
refinance part of the Group's existing indebtedness. The net funds
raised will enable us to bolster our mining fleet, accelerate
access to the supergene and sulphide ores where grades are higher
and recoveries have been shown to be strong, and refinance the
Group's offtake linked pre-payment facility to reduce overall
borrowing costs and improve the capital base of the group.
"Our new resource model captures our improved understanding of
the Mowana opportunity, allowing for better returns to be achieved
in the near term as we move from the testing and recovery phase
towards steady state operations and our goal of achieving initial
nameplate capacity of c.12,000 tonnes of copper per annum.
Alongside this, work continues on the definition of the maiden JORC
(2012) reserve estimate, which will incorporate the planned process
plant improvements so that, once we have achieved initial nameplate
capacity at the current plant, we can look to build production to
over 20,000 tonnes per annum via the planned DMS upgrades. With a
restructured and strengthened balance sheet and clearly defined
accelerated development plan, we look forward to establishing
Mowana as a major copper producer."
FURTHER INFORMATION
Operational Update
Following the Company's admission to trading on AIM on 24
January 2018, additional mining equipment comprising 20 x 40-tonne
ADTs, 3 x CAT D8 dozers, 2 x CAT374 excavators, a grader and a
water truck, along with the accompanying support equipment and
spares, has been delivered to site in support of the Group's
Accelerated Development Plan.
The Accelerated Development Plan envisages having four mining
units in service in the Mowana open pit, with a mining unit
consisting of a 75-tonne excavator and five 40 tonne articulated
dump trucks (ADTs). With the ability to operate each mining unit
independently in the open pit, the Accelerated Development Plan
will enable the Group to mine additional faces in the ore body
simultaneously and thereby increase the volume of ore and waste
mined.
Accordingly, the Accelerated Development Plan provides for more
rapid access to the sulphide and supergene ores, which have
demonstrated very good metallurgical recoveries as confirmed by
recent onsite laboratory testwork, ahead of the Group's original
schedule, as well as increasing the tonnes of ore delivered to the
run of mine (ROM) pad. This expected increase in ROM tonnage
permits improved blending and will allow the Group to build
stockpiles of ore ahead of the planned implementation of the Dense
Media Separation (DMS) upgrades which, subject to securing the
requisite additional funding or financing from retained cash flows,
is anticipated to result in copper production at Mowana increasing
significantly.
Pursuant to the Accelerated Development Plan, which is based on
and supported by the new resource model, the Group will now focus
its activities on the higher-grade ores at the 950 level and below.
Recent test work completed by the Group's onsite metallurgists,
which, as announced on 31 January 2018, has been independently
verified in South Africa, has confirmed that these ores should
provide excellent metallurgical recoveries, with the average plant
recovery expected to be in excess of 85%. Accordingly, mining
operations will initially be concentrated on the 960 - 980 levels
of the open pits to remove waste material and progress to mine the
higher grade ores at the 950 level and below, as soon as
possible.
The Group has concluded a successful period of campaign runs,
whereby the Mine processed and tested different ore types from the
Mowana open pit, historical stockpiles and tailings. The
comprehensive data compiled from this metallurgical test work has
allowed the Group to develop the Accelerated Development Plan,
which has been targeted at achieving a period of steady state
production as quickly as possible. Stockpiled material and freshly
mined ores underwent comprehensive metallurgical performance
analysis, which identified that ores below the 960 level would have
acceptable plant recovery rates.
At the end of February 2018, the plant was shut down temporarily
to facilitate the completion of a mill re-line, along with other
essential maintenance, in readiness for the pursuit of steady state
operations. As a result of such maintenance activities and the
formulation of the Accelerated Development Plan, there has been no
material change to the quantity of copper concentrate produced from
that reported in the Company's general meeting circular published
on 26 February 2018.
Having secured the additional Debt Funding, excavation of the
waste material in the 950 - 980 levels of the Mowana open pit will
accelerate to ensure that the Mine ramp-up remains on track to
achieve nameplate production of 12ktpa. As the maiden ore reserve
is not yet available, providing specific guidance on timing is not
currently possible, however, the Accelerated Development Plan,
along with the maiden JORC (2012) resource, provides confidence
that Mowana should be able to move through breakeven mid-year as
build up to full name plate capacity takes place. The Group intends
to initiate quarterly reporting of production levels and other key
performance indicators once steady state operations have been
achieved.
Enhanced Mineral Resource Estimate
The Board decided to update and consolidate the existing mineral
resource models in order to improve confidence in the resource at
Mowana. Upside potential was identified following a successful
reverse circulation ("RC") drilling campaign conducted by the Group
in 2017, which comprised a total of 51 RC holes for 2,546 metres
and which has been augmented by the inclusion of data from other
historical drill holes that had not been previously
incorporated.
Cradle Arc has afforded Wardell Armstrong International Ltd
("WAI") with access to a comprehensive dataroom, containing the
relevant drill data, which was reviewed and analysed by WAI's
consultants to form the basis of its maiden JORC (2012) mineral
resource estimate, as set out in Figure 1. The refined geological
interpretation of the mineralised zones has included material
outside of the main breccia orebody and is supported by new data
generated by Group's 2017 drill programme.
The maiden JORC (2012) mineral resource estimate for Mowana
includes a measured and indicated resource of 40 million tonnes at
1.17% Cu for 466,000 tonnes of contained copper and an inferred
resource of 35 million tonnes at 1.12% for 395,000 tonnes of
contained copper. The new estimate produced by WAI includes the
results of acid soluble copper, which was not included in the
previous unconstrained Golders Associates' resource model.
Mineralisation remains open for expansion along strike to the north
and at depth.
Mowana Copper Mine Mineral Resource Estimate(1, 3)
=========================================================================================================================================================
Cut-Off(4) Measured Indicated Measured + Indicated Inferred
(% Cu)
------------ ----------- ------------------------------ ------------------------------ ------------------------------ ------------------------------
Tonnes Cu (%) Cu Metal(6) Tonnes Cu (%) Cu Metal(6) Tonnes Cu (%) Cu Metal(6) Tonnes Cu (%) Cu Metal(6)
(Kt) (Kt) (Kt) (Kt) (Kt) (Kt) (Kt) (Kt)
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Oxide 0.72 572 1.58 9 568 1.28 7 1,140 1.43 16 434 1.67 7
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Transition 0.37 1,262 1.31 17 1,449 1.12 16 2,711 1.21 33 651 1.28 8
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Supergene 0.34 1,553 1.41 22 1,511 1.23 19 3,064 1.32 40 906 1.41 13
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Fresh 0.29 11,689 1.30 151 21,239 1.06 225 32,928 1.14 376 33,194 1.10 366
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Total - 15,076 1.32 199 24,767 1.08 267 39,843 1.17 466 35,185 1.12 395
------------ ----------- ------- ------- ------------ ------- ------- ------------ ------- ------- ------------ ------- ------- ------------
Notes:
1. Mineral Resources are reported in accordance with the guidelines of the JORC Code (2012).
2. Mineral Resources were constrained by an optimised pit shell based on a copper price of
$3.20/lb.
3. Mineral Resources are based on the most current topographic survey, dated 26 February 2018.
4. Cut-off grades are breakeven cut-off grades based on open pit optimisation parameters.
5. Mineral Resources are not Ore Reserves until they have demonstrated economic viability
based on a feasibility study or pre-feasibility study.
6. Cu Metal represents estimated contained metal in the ground and has not been adjusted for
metallurgical recovery or any other factor.
7. Numbers may not cast due to rounding differences.
8. Average Cu % shown rather than total
=========================================================================================================================================================
Figure 1: maiden JORC (2012) mineral resource estimate for
Mowana
The previous JORC resource estimates published for Mowana were
not reported in accordance with JORC 2012. In 2015, Golder
Associates defined and published a resource estimate at a 0.25% Cu
cut-off grade, which, because it overstated the resource estimate,
needed to be adjusted by the Company to account for overlap between
pits (for further information see Table 2 on page 28 of Cradle
Arc's AIM admission document published 18 January 2018 (the
"Admission Document")) (the "Adjusted 2015 Golder Resource"). The
Adjusted 2015 Golder Resource estimate comprised a measured and
indicated resource of 65 million tonnes at 0.96% Cu for 659,000
tonnes of contained copper and an inferred resource of 96 million
tonnes at 0.76% for 727,000 tonnes of contained copper.
For direct comparison purposes with the resource figures
presented and reported on in the Adjusted 2015 Golder Resource, WAI
has also produced an estimate for an unconstrained resource, using
a 0.25% cut-off, including the data from the Group's 2017 drill
campaign.
This estimate shows an unconstrained measured and indicated
resource of 66 million tonnes at 0.99% Cu for 657,000 tonnes of
contained copper and an inferred resource of 74 million tonnes at
0.99% for 728,000 tonnes of contained copper. Figure 2 below sets
out a comparison between the 2015 Golder Associates' model and
WAI's aforementioned model, neither of which is constrained and
therefore neither are in accordance with the JORC Code (2012).
COMPARABLE UNCONSTRAINED RESOURCE MODEL (0.25%
CUT OFF)
Mowana Copper Mine Resource Model (after the
Adjusted 2015 Golder Resource)
Category Tonnes %Cu %ASCu AG_PPM AU_PPM Contained
Cu t
-------------------------- ----------- ----- ----------- ------------ ------- ----------
MEASURED 14,696,000 1.00 - 0.585 0.005 146,960
-------------------------- ----------- ----- ----------- ------------ ------- ----------
INDICATED 50,693,000 0.95 - 1.45 0.007 481,584
-------------------------- ----------- ----- ----------- ------------ ------- ----------
MEASURED
& INDICATED 65,389,000 0.96 - 1.252 0.007 628,544
-------------------------- ----------- ----- ----------- ------------ ------- ----------
INFERRED 95,691,000 0.76 - 1.97 0.055 727,252
-------------------------- ----------- ----- ----------- ------------ ------- ----------
Mowana Copper Mine unconstrained Resource Model
(after WAI, 2018)
Category Tonnes %Cu %ASCu AG_PPM AU_PPM Contained
Cu t
-------------------------- ----------- ----- ----------- ------------ ------- ----------
MEASURED 16,021,511 1.27 0.21 1.41 0.04 203,403
-------------------------- ----------- ----- ----------- ------------ ------- ----------
INDICATED 50,118,779 0.90 0.09 1.49 0.07 453,473
-------------------------- ----------- ----- ----------- ------------ ------- ----------
MEASURED
& INDICATED 66,140,290 0.99 0.12 1.47 0.06 656,875
-------------------------- ----------- ----- ----------- ------------ ------- ----------
INFERRED 73,699,170 0.99 0.03 1.85 0.04 728,171
-------------------------- ----------- ----- ----------- ------------ ------- ----------
Variance
(M&I) 751,290 0.03 - 0.215 0.056 28,331
-------------------------- ----------- ----- ----------- ------------ ------- ----------
% Var 1% 3% - 17% 802% 5%
-------------------------- ----------- ----- ----------- ------------ ------- ----------
Figure 2: Comparison of the 2015 Adjusted Golder Resource (as
reported on in the Admission Document and adjusted by the Company
to account for overlap between pits) with the new WAI's equivalent
model, at a 0.25% cut-off (non-JORC (2012)).
Notably, there is a decrease in the overall tonnage but a
significant improvement in the overall grade and contained copper.
The measured and indicated categories have increased by
approximately 1.3 million tonnes and decreased by approximately 0.5
million tonnes respectively, due to the additional drill hole data
generated in 2017. Material in the inferred category has decreased
due to the removal of very low grade internal waste (below 0.1%
Cu).
The improvement in the unconstrained resource model, along with
the maiden JORC (2012) mineral resource estimate, provides a solid
foundation for Life of Mine (LOM) planning, day-to-day Mine
scheduling and the targeting of higher grade ores.
The new WAI resource model demonstrates the importance of
improving the confidence of the resource estimate, through
converting the large inferred component into the indicated and
measured categories. Through this, the Company anticipates that it
will be able to gain further insight into the large copper orebody,
which, in turn, will allow Cradle Arc to formulate a strategy on
how to unlock future opportunities to increase output beyond the
proposed DMS upgrade, both by extending the open cast opportunity
as well as investigating the future underground potential of the
orebody. On receipt of the maiden mineral reserve estimate, the
Group will allocate its resources accordingly to scope out such
opportunity effectively.
WAI is currently working on an ore reserve from the maiden
Mowana JORC (2012) resource that will comply with the guidelines of
the JORC Code (2012), the results of which are currently
anticipated to be to be announced in Q2 2018.
Fujax Offtake and Financing Arrangements
As set out in the Admission Document, Leboam's off-take partner,
Fujax Minerals and Energy Limited ("Fujax"), is also a lender to
Leboam having advanced certain pre-payment financing to Leboam to
commence production at the Mine during its start-up year. The
balance outstanding pursuant to this pre-payment facility (the
"Pre-Payment Facility"), including accrued interest, is
approximately US$3.9 million. The Pre-Payment Facility is currently
unsecured and Leboam has not drawn down on the secured Fujax
Financing Agreement (as defined in the Admission Document).
The Group considers the cost of borrowing from Fujax to be
prohibitive due to its interest rate of 13.5% and royalty
obligation of 5% of the Mine's gross revenues for the duration that
monies are outstanding to Fujax, over and above standard offtake
marketing fees, and so the Company has therefore elected to repay
the balance outstanding in full. On 1 April 2018, being the 13
month anniversary of initial drawdown, the Pre-Payment Facility
became repayable on demand. Leboam therefore intends to settle the
balance outstanding as soon as practicable from the net proceeds of
the Debt Funding.
Accordingly, following settlement of the amount due, Fujax will
no longer be a lender to Leboam and the 5% revenue royalty will no
longer be payable. Leboam will continue to sell copper concentrate
to Fujax, as Leboam's offtake partner.
New Debt Funding
The Company has agreed to grant to a consortium of lenders (the
"Financing Parties"), in aggregate, US$10 million secured loan
notes (the "Loan Notes") pursuant to the terms of a loan note
instrument. Obtaining this new Debt Funding is a key component to
enabling the Group to pursue its abovementioned Accelerated
Development Plan. The Company will utilise the net proceeds from
the Debt Funding for the repayment by Leboam of the Fujax
Pre-Payment Facility (as set out above), additional working capital
for implementation of the Accelerated Development Plan and for its
general corporate purposes. The Loan Notes are not convertible and
there are no equity rights attached to the Loan Notes save in
respect of the Warrants (set out below).
The Loan Notes are redeemable 12 months from the date of the
loan note instrument. The Company shall be entitled to redeem the
Loan Notes prior to the redemption date however, a redemption fee
equal to three per cent. of such principal amount shall be payable
to the Financing Parties if the Loan Notes are redeemed prior to
the date falling 11 months from the date of loan note
instrument.
The redemption obligations of the Company are secured initially
by way of a pledge over the entire issued share capital of Leboam's
direct holding company, Cradle Arc Investments (Proprietary)
Limited.
The Company has also agreed to use reasonable endeavours to
enter into such security documents required to allow the Financing
Parties to share in the existing security held by Leboam's 40%
shareholder, ZCI Limited ("ZCI") (the "Security Arrangements").
Interest is payable on the Loan Notes at the rate of 18% per
annum (payable quarterly in arrears). In the event that the
Security Arrangements are not entered into within 2 months from the
date of the loan note instrument, or if the Loan Notes remain
outstanding after six months, then the interest rate will increase
from 18% to 22% per annum.
An aggregate arrangement fee of 4% of the principal amount of
the Loan Notes is payable to the Financing Parties in respect of
the Debt Funding, which will be deducted from the proceeds of the
Loan Notes.
The agreements in respect of the new Debt Funding contain
customary warranties, undertakings and events of default.
In conjunction with the new Debt Funding, the Company has
agreed, subject to shareholder approval, to grant to the Financing
Parties, in aggregate, 71,336,852 warrants to subscribe for new
ordinary shares in the Company (the "Warrants"). The Warrants are
exercisable at a price of 5 pence per share during the exercise
period of 12 months from the date of the warrant instrument
constituting the Warrants.
The issue of the Warrants is subject to shareholder approval to
be sought at the 2018 Annual General Meeting of the Company or a
general meeting of the Company to be held by no later than 30 May
2018. The Company has received an irrevocable undertaking from
PenMin Botswana (Pty) Ltd to vote in favour of the resolutions to
approve the issue of the Warrants. As at the date of this
announcement, PenMin (Botswana) holds 115,517,689 Ordinary Shares,
representing approximately 55% of the total issued share capital of
the Company.
Tamesis Partners LLP is acting as the Company's financial
adviser in connection with the Debt Funding.
Related Party Transaction
City Financial Investment Company Limited ("City Financial") has
subscribed for US$0.75 million of loan notes as part of the Debt
Funding. As City Financial is a substantial shareholder, this is
considered to be a related party transaction pursuant to Rule 13 of
the AIM Rules for Companies. Accordingly, the Directors of the
Company, having consulted with the Company's Nominated Adviser,
Strand Hanson Limited, consider that the terms City Financial's
participation are fair and reasonable insofar as the Company's
shareholders are concerned.
Review of Information
Kevin van Wouw, who is the Company's CEO and a Fellow of the
South African Institute of Mining and Metallurgy, has reviewed and
approved the technical information contained within this
announcement. Mr van Wouw has sufficient experience relevant to the
style of mineralisation and type of deposit under consideration and
to the activity that he is undertaking and meets the criteria as a
qualified person under the AIM guidance note for mining and oil
& gas companies. Mr van Wouw has reviewed this announcement and
consents to the inclusion in this announcement of the matters based
on his information in the form and context in which they
appear.
Glossary of technical terms
ADT articulated dump truck;
Cu copper;
DMS dense media separation;
Indicated Resource that part of a Mineral
Resource for which quantity,
grade (or quality), densities,
shape and physical characteristics
are estimated with sufficient
confidence to allow the
application of Modifying
Factors in sufficient
detail to support mine
planning and evaluation
of the economic viability
of the deposit. Geological
evidence is derived from
adequately detailed and
reliable exploration,
sampling and testing
gathered through appropriate
techniques from locations
such as outcrops, trenches,
pits, workings and drill
holes, and is sufficient
to assume geological
and grade (or quality)
continuity between points
of observation where
data and samples are
gathered;
Inferred Resource that part of a Mineral
Resource for which quantity
and grade (or quality)
are estimated on the
basis of limited geological
evidence and sampling.
Geological evidence is
sufficient to imply but
not verify geological
and grade (or quality)
continuity. It is based
on exploration, sampling
and testing information
gathered through appropriate
techniques from locations
such as outcrops, trenches,
pits, workings and drill
holes;
JORC the Australasian Code
for Reporting of Exploration
Results, Mineral Resources
and Ore Reserves, as
published by the Joint
Ore Reserves Committee
of the Australasian Institute
of Mining and Metallurgy,
Australian Institute
of Geoscientists and
Minerals Council of Australia;
JORC (2012) the 2012 edition of the
JORC code;
kt thousands of tonnes;
ktpa thousand tonnes per annum;
m metre;
Measured Resource that part of a Mineral
Resource for which quantity,
grade (or quality), densities,
shape, and physical characteristics
are estimated with confidence
sufficient to allow the
application of Modifying
Factors to support detailed
mine planning and final
evaluation of the economic
viability of the deposit.
Geological evidence is
derived from detailed
and reliable exploration,
sampling and testing
gathered through appropriate
techniques from locations
such as outcrops, trenches,
pits, workings and drill
holes, and is sufficient
to confirm geological
and grade (or quality)
continuity between points
of observation where
data and samples are
gathered;
Mineral Resource a concentration or occurrence
of material of economic
interest in or on the
earth's crust in such
form and quantity that
there are reasonable
and realistic prospects
for eventual economic
extraction. The location,
quantity, grade, continuity,
and other geological
characteristics of a
Mineral Resource are
known, estimated from
specific geological evidence
and knowledge, or interpreted
from a well-constrained
and portrayed geological
model;
Modifying Factors considerations used to
convert mineral resources
to ore reserves. These
include, but are not
restricted to, mining,
processing, metallurgical,
infrastructure, economic,
marketing, legal, environmental,
social and governmental
factors;
ore the economically mineable
part of a measured and/or
indicated mineral resource.
It includes diluting
materials and allowances
for losses, which may
occur when the material
is mined or extracted
and is defined by studies
at pre-feasibility or
feasibility level as
appropriate that include
application of Modifying
Factors. Such studies
demonstrate that, at
the time of reporting,
extraction could reasonably
be justified;
ppm parts per million;
ROM Run-of-mine; and
supergene processes or enrichment
of ore that occur relatively
near the surface.
**ENDS**
For further information on the Company, please visit
www.cradlearc.com or contact:
Cradle Arc plc Tel: +44 (0)20 7499
Kevin van Wouw 5881
Mark Jones
Strand Hanson Limited Tel: +44 (0)20 7409
Angela Hallett 3494
Matthew Chandler
James Dance
Tamesis Partners LLP Tel: +44 (0)20 3882
Richard Greenfield 2868
St Brides Partners Limited Tel: +44 (0)20 7236
Charlotte Page 1177
Susie Geliher
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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