Hawk lands at AfriOre’s FSC deposit

Toronto-based Hawk Precious Minerals (hawk-u) has agreed to take up to a half-interest in AfriOre‘s (AFO-T) 1,090-sq.-km FSC gold project in South Africa.

Hawk can earn an initial 35% by paying $20,000 and reimbursing certain of AfriOre’s costs. It must also advance AfriOre US$2.1 million for exploration, development and property maintenance. Of that, US$500,000 has already been paid, with the balance due Nov. 11, 2003.

AfriOre must exhaust the advance by June 20, 2006, at which time the funds will be converted into shares of AfriOre’s wholly owned Kwagga Gold, which holds the mineral rights to FSC.

If Kwagga decides to discontinue the project, it can retain the unused portion of the advance payment, at Hawk’s discretion, in return for the 35% stake. Otherwise, the agreement is terminated and the balance of the advance is returned to Hawk.

Hawk can boost its stake by 15% by paying an additional US$1.4 million.

AfriOre will manage the project, as well as carry out exploration aimed at finding Witwatersrand-type gold mineralization on previously identified targets.

Iamgold (IMG-T) dropped its half-interest in the project in June 2001 after a second drill hole cut rocks deemed to be too young to correspond to the targeted Witwatersrand rocks that might host gold.

Meanwhile, Toronto-based MPH Consulting has delivered a positive technical report at AfriOre’s Somkele anthracite project, 60 km from the coal export plant at Richards Bay.

A measured anthracite resource of 2.7 million tonnes exists in Area 2, where open-pit mining is planned, and an indicated resource of 27.5 million tonnes is estimated for Area 1, where a combination of open-pit and underground mining is envisaged. Combined with a third area, the project’s total resource is believed to exceed 50 million tonnes.

The resources are classified as Class I Anthracite, Group 3 (Semianthracite), based on standards set out by the American Society for Testing of Materials. The coal has a generally high-ash, low-sulphur and phosphorous content.

The company has been granted mining authorization at Somkele, and an ongoing feasibility study is expected to wrap up later this year. The company is also in talks with a potential black empowerment partner for the project.

AfriOre intends to produce 40,000 tonnes per month via several small pits at Somkele. The project’s low-sulphur (0.7%) anthracite would be blended with that of the nearby Springlake project (1.5% sulphur).

AfriOre put in a loss of $77,643 (or nil per share) for the 12-month period ended Feb. 28, compared with year-earlier net profits of $1.7 million (or 7 per share). Revenue between the two periods slipped by $1 million to $8.7 million. The loss reflects the fact that profits at Springlake were halved as a result of both a softening coal market and a stronger rand.

Coal production at Springlake was scaled back by about 100,000 tonnes to 464,768 tonnes (half to AfriOre’s account) during the year to counter the soft market. Open-pit operations were suspended and inventories slipped by 20% to 131,209 tonnes (65,604 tonnes attributable to AfriOre), as total sales climbed to 495,092 tonnes from 476,622 tonnes.

At the close of the fiscal year, AfriOre’s cash position had shrunk to $1.3 million, compared with $2.4 million at the end of February 2002.