TIDMAFCR
10 December 2014
African Consolidated Resources plc
("AFCR" or the "Company")
Placing and Subscription of up to 318,418,000 New Ordinary Shares at a
price 0.5 pence per share
Details of Proposed Acquisition
Capital Reorganisation
Grant of Conversion Rights
Change of Name to Vast Resources plc
Notice of General Meeting
African Consolidated Resources plc, the AIM listed resource and
development company, is pleased to announce that it has raised GBP1.59m
(approximately $2.50m) via a Placing of and Subscription for New
Ordinary Shares, conditional on Shareholder approval for the issue of
sufficient New Ordinary Shares and the Capital Reorganisation required
to effect the Placing and Subscription, to be sought at the General
Meeting to be convened for 11.00 a.m. on 30 December 2014 at the offices
of Daniel Stewart & Company plc, Becket House, 36 Old Jewry, London EC2R
8DD.
The General Meeting will also be asked to consider and, if thought fit,
approve, inter alia, the issue of New Ordinary Shares to satisfy the
grant of Conversion Rights, a change in the Company's name to Vast
Resources plc and the replacement of the Company's existing allotment
authorities and the disapplication of pre-emption rights up until the
next Annual General Meeting.
Capitalised terms in this announcement carry the same meaning as those
ascribed to them in the circular, which will shortly be sent to
Shareholders (the "Circular") and which will also be available on the
Company's website at www.afcrplc.com.
The Placing and the Subscription
Further to the announcement on 4 December 2014 of its interim results
for the six months ended 30 September 2014 (the "Interim Results"), the
Company has conditionally raised GBP1.59m (approximately $2.50m)
via the Placing and the Subscription at a price of 0.5p per New Ordinary
Share. The Placing and the Subscription are not underwritten.
As disclosed in the Interim Results, the Company has been advancing
discussions regarding a number of opportunities in Romania and has
already secured a $1.0 million loan from Grayfox Investments (Pvt) Ltd,
on the terms announced on 17 October 2014, to advance this aim.
The purpose of the Placing and Subscription is to provide additional
funds for furthering these opportunities in Romania.
Romanian Opportunities
The Company has been investigating opportunities in Romania since late
2012 and, as announced on 21 May 2013, has had a period of effective
exclusivity in order to carry out due diligence and evaluation of the
entire polymetallic mineral interests, which include copper and gold, of
the Romanian State mining company Remin SA ("Remin"). Discussions with
Remin are ongoing regarding future opportunities.
Romania
The Carpathian Mountains in Romania have a significant mineralisation
footprint which has been well established since Roman times. Since the
breakup of the Soviet Union, and in particular since Romania's admission
to the European Union ("EU") on 1 January 2007, the Romanian mining
industry has been largely inactive as a result of state aid being
withdrawn from it, in line with EU rules. Because of the work that the
Company has now carried out in the country over a two year period,
considerable knowledge has been acquired by the Company, both with
regard to the specific mining opportunities and the business culture of
the country. The Board believes that as a result the Company now has a
significant 'first mover advantage'.
Romania has low sovereign risk, an established mining culture and a
pro-mining government, including a highly skilled but relatively low
cost residential workforce. It has an excellent power and transport
infrastructure to support development and a strategic location, with
access to Europe, the Middle East and Africa. Geologically it has, in
the Directors' opinion, the potential for significant new discoveries.
Mineral Mining and Baita Bihor
As an example of possibilities outside the Remin discussions, a specific
near term opportunity to undertake the proposed acquisition of the Baita
Bihor mine (the "Proposed Acquisition") has arisen, in which the Company
has obtained an option to acquire a 68 per cent. interest in Mineral
Mining, subject to the completion of due diligence to AFCR's
satisfaction. The Directors believe, subject to the completion of due
diligence, that Mineral Mining is the 100 per cent. owner of a
well-developed polymetallic underground mine, Baita Bihor, and its
associated mining rights.
Mineral Mining is currently the subject of insolvency proceedings in
Romania, which are expected to be concluded shortly. Once such
proceedings have been completed, it is anticipated that title to the
Baita Bihor mining licence will be confirmed.
Baita Bihor is located in the Apuseni Mountains, Transylvania, an area
which hosts Romania's largest polymetallic and uranium mines, 50km NW
from Romania's largest Au-Cu mine, Rosia Montana (>10Moz Au) and also
52km NW of Rosia Poiena, which contains over one billion tonnes of
porphyry copper ore.
Baita Bihor is a skarn deposit comprising several veins in calcareous
sediments in eight distinct pipes. It is estimated, by the Company, to
contain 1,800,000 tonnes of polymetallic ore (gold, silver, copper, zinc,
lead, tungsten and molybdenum) at 6% copper equivalent or 10g/tonne gold
equivalent, at current prices, (estimated in accordance with the Russian
Reserves and Resources Reporting System) within the licensed area. It
has unmeasured resources in other pipes and substantial exploration
upside. Due to lack of capital investment and modernisation the mine
became uneconomic and was put on care and maintenance in 2013. Plant
and equipment for the mine are in place but require some rehabilitation.
Resource estimation has been calculated, by AFCR, on two different grade
assumption bases - the 'AFCR Model' and the 'Production Model'. The
AFCR Model is based on official records which show an in situ resource
based on the Russian Reserves and Resource Reporting System of 1.8
million tonnes at 2.19% Cu, 128g/t Ag, 3.46% Zn, 3.07% Pb and 1.41g/t
Au. Mine laboratory records and underground inspections with a Niton
XRF cross correlate. The Production Model grades are back calculated
from actual historical production records but are thought to produce
conservative results on account of known inefficiencies in previous
production methods.
Included in this resource is a 400,000 tonne
copper/silver/zinc/lead/gold/tungsten/molybdenum ore body identified
within the current mine workings (non JORC but conservative estimations
by AFCR geologists) which is ready to mine.
Two high level financial models have been prepared for Baita Bihor (both
on a 100 per cent. basis), one on the AFCR Model grade basis reduced to
take account of processing losses and one on the Production Model grade
basis, to demonstrate possible results over the life of the mine on the
basis of a production rate of 10,000 tonnes per month.
Ore modelled using AFCR Model compared to Production Model provides the
following indications:
AFCR Model Production Model
Ore Resource tonnage 1,8m tonnes 1,8m tonnes
Production rate 10,000 tpm 10,000 tpm
Life of Mine 15 yrs 15 yrs
Capex over life of Mine: $40.4m $40.4m
Startup, retire debt to end 2014 $3.3m $3.3m
Upgrading to design capacity $3.6m $3.6m
Development deeper levels $15m $15m
Closure $5m $5m
Stay in business capital $13.5m $13.5m
Revenue discount on LME $ 15% 15%
Peak cash flow per annum after
tax $14.7m pa over 11 yrs $7.6m pa over 12 yrs
Cash flow NPV 0% $217m $101m
NPV 10% $100m $41m
Opex $81/tonne $81/tonne
IRR 563% 92%
Financial models using geological AFCR 'industrial' (diluted) head grade
vs production figures. Note in the Production Model, Ag head grades have
been dropped from a back-calculated 264 g/t to the AFCR Model of 109 g/t
as Ag assays are problematical. Au $1,250/Oz. Ag $20/Oz, Cu $3/lb
($6700/t) Pb & Zn $0.90/lb
Further information concerning the Baita Bihor mine is appended to this
announcement.
An 85 per cent. equity interest in Mineral Mining is beneficially owned
by AFCR's Romanian senior management and other AFCR group employees, led
by the President and Executive Director of the Company's Romanian
subsidiary African Consolidated Resources Srl ("AFCR Romania"), Mr.
Andrew Prelea (the "AP Group"). The members of the AP Group include,
inter alios, Mr. Andrew Prelea (50 per cent. beneficial interest), Mr.
Mike Kellow, a former Director of the Company and currently director of
exploration for AFCR (30 per cent. beneficial interest) and Mr. Roy
Tucker, Finance Director of the Company (10 Per cent. beneficial
interest). The shares of Mineral Mining are currently registered in the
name of AFCR Romania which holds them on trust for the AP Group.
The Company has an option to acquire 68 per cent. of Mineral Mining,
leaving the AP Group interested in 17 per cent of the equity. It is the
Board's opinion that the remaining 15 per cent. of the equity of Mineral
Mining, which will initially be retained by Mr. Dong Quosheng and Mr. Ni
Jin Ming its former owners (the "Former Owners"), could be acquired in
the future, on favourable terms and in the same ratio of ownership
between AFCR and the AP Group as in the Proposed Acquisition.
Due to the way in which the AP Group has brought the opportunity to the
Company, initially funding diligence work when AFCR had decided that it
did not wish to pursue the Proposed Acquisition, it will neither be
required to fund the acquisition of its interest in Mineral Mining, nor
the initial development costs.
It is expected that following completion of the Proposed Acquisition,
equity owned by the AP Group will revert to its individual participants.
Due to the participation of Mr. Roy Tucker, Mr. Andrew Prelea and Mr.
Mike Kellow in the AP Group, the Proposed Acquisition will be deemed a
related party transaction under the AIM Rules and the independent
directors of the Company for these purposes (being all of the Directors
except for Mr. Roy Tucker) will be required to consult with Strand
Hanson, as the Company's Nominated Adviser, and opine that the Proposed
Acquisition is fair and reasonable insofar as Shareholders are
concerned.
Should it complete, the Proposed Acquisition will be deemed a
substantial transaction under the AIM Rules and all the information
required by Schedule Four to the AIM Rules will be included in the
announcement to be made at that time.
In order to consummate the Proposed Acquisition, AFCR would have to pay
up to $3.6 million which would be applied as follows:
$,000
Retire existing debt in the Company (EUR900,000)* 1,224
A payment on account of obligation to the Former Owners
(EUR250,000) 340
Improve mine infrastructure, ventilation and floatation
circuits, plus develop incline shaft to access next
level 1,468
Operational overhead (3 months pre-production) 367
Pre-acquisition costs (including due diligence) 200
3,599
* This figure is being audited and is believed by management to be
substantially lower
This expenditure is expected to result, within four months from
deployment of funds, in commencement of production at a rate of 5,600
tpm and within a further two months, a production rate of 10,000 tpm.
There will likely be future costs after positive net cash flow has been
achieved which might be funded from cash flow from existing operations
or debt or both. It is estimated as follows:
$,000
Balance due to the Former Owners (EUR950,000)* 1,292
Exploration costs 1,333
Mine development to deeper levels 934
3,559
* Based on currently available information, the Board is confident that
this payment will only become payable out of future operating cash flows
from Baita Bihor.
It is anticipated that this further expenditure would sustain production
at a rate of 120,000 tpa and provide the basis for further expansion at
Baita Bihor.
It is believed by the Directors that the funds used to upgrade mine
infrastructure, ventilation and floatation circuits will:
-- improve plant recoveries from the previous 65 per cent. or worse;
-- upgrade float circuit to capture wolfram and molybdenum by-products that
are not currently included in the concentrate sales;
-- upgrade the 1970s vintage ore-loaders, which are expected to cause a
current bottleneck;
-- improve ventilation and hoisting for safety and productivity; and
-- reduce production costs per tonne.
The Company emphasises that due diligence is yet to be completed and the
Placing proceeds will not therefore necessarily be applied to the
Proposed Acquisition. In the event that it does not complete, the funds
may instead be applied towards other opportunities in Romania.
The Capital Reorganisation
As the Issue Price is lower than the nominal value of the Company's
Existing Ordinary Shares it is proposed to subdivide each Existing
Ordinary Share into one New Ordinary Share of 0.1p each and one deferred
share of 0.9p each. The Deferred Shares will have very limited rights
and be effectively valueless, with the result that the New Ordinary
Shares will effectively have the same rights as the Existing Ordinary
Shares. The Capital Reorganisation is necessary in order to complete
the Placing and Subscription at the Issue Price.
Change of Name
In order to take account of the change in the Company's geographical
focus, it is proposed that its name be changed to Vast Resources plc.
Related Party Transaction
The Directors and their associates have, in aggregate, subscribed for
76,819,400 New Ordinary Shares in the Placing and Subscription. Due to
their participation in the Subscription and the Placing these are deemed
to constitute a related party transaction in accordance with the AIM
Rules and the independent director of the Company for these purposes
(being Mr. Eric Diack) having consulted with Strand Hanson, as the
Company's Nominated Adviser, considers that the Placing and Subscription
are fair and reasonable insofar as Shareholders are concerned.
The General Meeting
The General Meeting is to be held at the offices of at the offices of
Daniel Stewart & Company plc, Becket House, 36 Old Jewry, London EC2R
8DD at 11.00 a.m. on 30 December 2014. Full details of the Resolutions
are included in the Circular and accompanying Notice of General Meeting.
Directors' Recommendation
For the reasons set out above, the Board considers that the Placing and
Subscription, the Capital Reorganisation and the change of the Company's
name are in the best interests of the Company and its Shareholders as a
whole.
Accordingly, the Board recommends that Shareholders vote in favour of
the Resolutions at the General Meeting as the Directors each intend to
do in respect of their own shareholdings of in aggregate 29,295,892
Ordinary Shares, representing approximately 3.39 per cent. of the issued
Ordinary Shares at the date of this announcement.
**ENDS**
Roy Pitchford, Chief Executive Officer, said:
"Following the successful funding of the Pickstone-Peerless Mine in
Zimbabwe, the mine development opportunities available to AFCR in
Romania provide the company with expansion and growth possibilities.
The Baita Bihor Mine is targeted to process a similar monthly tonnage as
Pickstone-Peerless, but is a multi-metal mine with a higher equivalent
grade sourced from underground instead of by open-cast mining methods.
It would therefore be a significant step up in terms of mining and
processing. AFCR is therefore fortunate that it has very good local
Romanian mining expertise available to meet this challenge.
"On the basis that the Proposed Acquisition completes, the funding from
the Placing would enable AFCR to start its first mining operation in
Romania, which in turn would be expected to provide the base for the
development of the very much larger mines that are part of the Remin
Group. Baita Bihor would complement the development of the
Pickstone-Peerless Mine in Zimbabwe and would be a further step in the
process of transforming AFCR from an exploration company to a mining
company. AFCR looks forward to having two operating mines in H2 2015"."
For further information, please contact:
African Consolidated Resources plc www.afcrplc.com
Roy Tucker (Finance Director) +44 (0) 1622 816918
Roy Pitchford (Chief Executive Officer) +44 (0) 7920 189012
+263 (0) 7721 69833
+40 (0) 7411 11900 / +44 (0) 7793 909985
Strand Hanson Limited - Financial & Nominated Adviser www.strandhanson.co.uk
James Spinney +44 (0) 20 7409 3494
Ritchie Balmer
James Bellman
Daniel Stewart and Company - Broker www.danielstewart.co.uk
Martin Lampshire +44 (0) 20 7776 6550
Colin Rowbury
St Brides Media & Finance Ltd www.stbridesmedia.co.uk
Susie Geliher +44 (0) 20 7236 1177
Review by a qualified person
This announcement has been reviewed by Mr. Mike Kellow BSc, and by Mr.
Vasile Pop.
Mr Kellow, Director of Exploration for AFCR, has reviewed this
announcement in his capacity as a qualified person under the AIM Rules.
Mr Kellow is a member of the Australian Institute of Geologists and has
34 years' experience of in the metals and mining industry.
Mr Pop has been certified, since 1988, by the Attestation Commission of
the Romanian National Agency for Mineral Resources (ANRM) as fulfilling
all the criteria to qualify as an expert with technical and professional
skills for groundworks, geological, technical and techno-economical
documentation for mining activity, geological research and exploitation
of mineral resources.
Further Information on Baita Bihor Mine
-- Official records show an in situ Resource (based on the Russian Reserves
& Resources Reporting System) of 1.8m tonnes at 2.19% Cu, 128g/t Ag,
3.46% Zn, 3.07% Pb and 1.41g/t Au. Mine laboratory records and
underground inspections with a Niton XRF analyser cross-correlate very
closely
-- Polymetallic mix equates to a copper equivalent grade of 6% or a gold
equivalent grade of over 10g/t
-- 400,000 tonne copper-silver-zinc-lead-gold-tungsten-molybdenum ore body
identified within the current mine workings on the Antonio 1 and Antonio
2 skarn pipes (non-JORC but conservative estimations by AFCR and Mineral
Mining Geologists) - ready to mine
-- A molybdenum orebody exists on the Blidar Fault, about 150m west of Shaft
1 - it has been mined out to level 18 (bottom of mine) but below that
depth it is untouched, but is not included in Ore Reserves or cash flow
models
-- Below are the in-house grades and flotation recovery factors together
with back calculations of grades from actual production records
* AFCR ore reserve grades (based on official records on the Russian
Reserves & Resources Reporting System) vs production figures. Head
grade is diluted or 'industrial grade' presented to the concentrator.
Recovered grade is that achieved after flotation losses.
Management has reason to suspect that inefficiencies and incorrect
recording of value of past metal production render the calculation of
recovered grade in the concentrate back calculations very conservative.
Confirmation of in-situ grades throughout the mine will be a critical
task for future planning of mining and exploration. Once these grades
are established, a reconciliation against production can be instigated,
applying factors for ore loss, dilution and flotation recovery.
-- Considerable exploration potential within the mine and in satellite
targets in licence area
-- Depth potential below the deepest Level 18 has only been drill tested for
about 90m - it is not yet certain how deep the skarn mineralisation will
persist before being cut off by an underlying granite intrusion - see
below
-- The branching skarn geometry suggests the mine is currently in the
shallow upper levels of the system and the deep roots could persist for
at least several hundred metres - a previous Russian drill hole in the
1970s indicated +350m from base of mine to granite
-- Orebody is zoned vertically with Au-Ag caps and Pb-Zn being richer at
upper levels
-- Copper grades increase with depth from 0.8% Cu near surface to >2% Cu
below Level 18, with spectacular Ag and Au grades (200-2,000g/t and 1-4
g/t respectively) associated with copper on thin veined contacts with the
host dolomite
-- Antonio 2 pipe lies approximately 300m north of Antonio 1, both have good
access from drives (galleries) down to Level 18 at Antonio 1 and Level 15
at Antonio 2
-- Postulated that the Antonio 1 and 2 pipes may merge at depth forming a
substantially larger orebody representing a priority drilling target
-- Rights to mine polymetallic minerals (Cu, Pb, Zn, Ag, Au), molybdenum,
bismuth, wolfram, boron, and wollastonite on exploitation licence LE
999/1999 until 2019, renewable thereafter in 5 year periods
-- A processing plant comprising crushing, milling and flotation circuits to
produce Cu, Pb, Zn and Mo concentrates with Au and Ag credits - current
design capacity is 20,000 tonnes per month
-- A tailings dam in good operational order for waste disposal, current
tonnage approximately 4.6Mt with all appropriate environmental approvals
-- Underground mining infrastructure at Antonio 1 including three access
shafts, and active mine levels 16-18 (base of mine)
-- Access above those levels is shared with state and private groups who
have sub-permits to mine limestone and dolomites
-- Above-ground infrastructure including railway and rail wagons
-- Current mining is at mine levels 16-18 at depths from 260m to 350m from
surface
-- Ore is loaded from mine face into 1m3 rail cars
-- Electric hoist to surface
-- 3 silos holding 250 tonnes at surface
-- Rail cars of 3m3 move ore 1km to concentrate plant
-- Concentrate plant crushes and floats ore to a concentrate of 26% Cu,
10g/t Au, and 800-1,000 g/t Ag, plus separate Zn and Lead concentrates
with high Ag (2,000 g/t)
-- Concentrate transported by rail or truck for export
-- Production costs before closure have been stated by Mineral Mining at
$45/tonne, with overheads running at approximately EUR80,000 per month
-- Using OPEX figures from comparable Australian underground mines, the
models herein are calculated at a base case of $81/t
-- Romanian labour costs are at least five times lower than Australia, so
the OPEX estimates are considered conservative
OPEX is broken down into:
OPEX $/tonnes
Mining $56.00
Processing $15.00
Overheads $10.00
Total OPEX $81.00
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: African Consolidated Resources Plc via Globenewswire
HUG#1878976
http://www.acrplc.com/
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