Under the first deal, AfriOre has agreed to sell its 50% interest in the flagship Springlake anthracite colliery, north of Dundee in KwaZulu-Natal, for $4.5 million. CIBC Capital Partners holds the remaining half-interest. The same arm’s-length buyer can also pick up a half-interest in AfriOre’s wholly owned Somkele coal project for just shy of $1.5 million in cash.
The financier for the buyer is the New African Mining Fund, which was established by the mining industry in 2002 with the aim of providing capital to junior mining entrepreneurs to pursue opportunities in Africa.
AfriOre says NAMF plans to line up and, and provide funding to, a black empowerment partner to acquire the assets. South Africa’s new Empowerment Charter includes goals of 15% ownership by disadvantaged groups in mining ventures within five years and 26% ownership within 10 years.
Both deals will face a shareholder vote at a special meeting slated for Aug. 26. AfriOre and CIBC will receive a cash distribution from Springlake before completion of the sale.
During the year ended Feb. 29, Springlake produced 691,000 tonnes of anthracite, down from 741,000 tonnes a year earlier, owing mostly to higher costs associated with a stronger rand. AfriOre’s share of the mine’s yearly loss came to $291,030, in stark contrast to the year-earlier profit of more than $2 million. AfriOre expects the mine to perform only marginally better in the coming year. The mine’s workforce was reduced by 22% during the year in order to cut costs.
In late 2003, underground production at the Springlake was suspended after a rock fall killed the operator of a load-haul-dump machine. The incident was not the mine’s first: in the second quarter of 2001 a roof partially closed in the same section.
Meanwhile, test work on coal samples from the trial mining pit at Somkele has confirmed its application to the titanium and ferrochrome metallurgical markets, as well as to domestic heating and selected power utilities.
The company still requires a permit to allow for the construction of a rail siding to advance Somkele. Poor market conditions have delayed a development decision.
Somkele is home to measured and indicated resources totalling 30.1 million tonnes of anthracite, including 8.6 million tonnes in the proven and probable category. An internal feasibility study envisages monthly production of 40,000 tonnes of low-sulphur anthracite. The material would be blended with higher sulphur-bearing Springlake anthracite.
During the three months ended May 31, AfriOre lost $459,868 (or 1 per share), compared with a year-earlier loss of $380,792 (1 per share).
AfriOre’s gold interests include a high-grade gold discovery at the Banankoro project in Mali, the FSC Witwatersrand-type gold project in South Africa, several targets in Kenya, and more than 1,000 sq. km of prospective ground at the Capricorn gold project, adjacent to a new gold discovery in Namibia.
At FSC, AfriOre is looking for an extension of the Witwatersrand basin with joint-venture partner
In June, the first hole drilled to test the southern structural block to a depth of 2,984 metres failed to cut any Witwatersrand rocks. Two more holes are planned, pending permitting.
Wits Basin can earn an initial 35% interest in FSC by spending US$2.1 million on exploration; it can boost its stake to 50% in return for spending an additional US$1.4 million.
Also, AfriOre can earn a 70% stake in the advanced-stage Dwaalboom gold project in South Africa from
A previous in-house estimate by former owner
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