AFRICA — Champion Resources ready to drill phosphate deposit in Guinea Bissau

Champion Resources (CHL-V) has completed a private placement financing of 1.7 million units at a price of 65cents each, for total proceeds of $1.1 million.

Each unit consists of one common share and a half share purchase warrant.

One whole warrant entitles the holder to buy an additional share for 70cents in the first year and 80cents in the second year.

The proceeds will be used, in part, to fund work on projects in Guinea Bissau, a small country on the coast of West Africa, sandwiched between Senegal to the north and Guinea to the south.

In January 1997, Champion acquired the exclusive right from the government of Guinea Bissau to conduct regional mineral exploration over the entire country for a period of two years. The exploration rights cover base and precious metals, as well as industrial minerals and diamonds.

By August, Champion acquired a 100% interest in the Farim phosphate project, situated in the north-central part of the country, near a major navigable river. The phosphate project is estimated to contain a reserve of 105 million tonnes averaging a grade of 29.8% P205.

The deposit was extensively explored in the 1970s and 1980s by the United Nations and the French government agency Bureau de recherches geologiques et minires (BRGM). The reserve estimate is based on 102 holes that were drilled between 1981 and 1983 on a 500-metre grid. The deposit remains open to the northwest.

The Farim deposit occurs within Eocene-age marine sedimentary rocks and occupies a horizon consisting of beige, grey, or white unconsolidated phospharenite with no calcareous cement. The grain size ranges from 100 to 500 microns.

The deposit varies in thickness from less than 1 metre at its edges to more than 6.2 metres in some of the depressions within the basin. Phosphate values range from 25% to 30% in the upper half-metre of the deposit and up to 36% in the grey or beige facies. The overall grade, however, is remarkably consistent at 30% P205.

The Farim deposit occupies a small embayment on the northern flank of the Rio Jumbembem ridge and the Binta Dome, two topographic highs within the basin.

Champion commissioned London-based Fertecon Research Centre and Jacobs Engineering Group of Lakeland, Fla., to review a 1986 prefeasibility study completed by the French agency Sofremines, and provide an updated evaluation.

The preliminary scoping-level study found no fatal flaws in the Farim deposit and confirmed earlier studies regarding the potential viability of the project. The study projected that a yearly production of 2.5 million tonnes of phosphate rock at an average market price of US$40 per tonne could yield a possible pre-tax operating profit averaging US$64.3 million per year, or US$1.48 billion over a 23-year life of the mine. Operating costs are projected to be US$9.41 per tonne of phosphate rock produced.

The initial capital cost is estimated at US$101 million.

The study also concluded that a concentrated higher-grade phosphate rock could be sold for US$52 per tonne, while a finished fertilizer product would bring a predicted US$208 per tonne.

A 1,000-metre diamond drilling program is scheduled to begin in late January to obtain core for beneficiation and to further delineate the phosphate ore reserve, as part of a detailed prefeasibility study.

The Fertecon/Jacobs report found that more than 90% of the phosphate rock mined worldwide today is used to produce finished chemical fertilizers for agricultural use. Producers either directly ship phosphate rock to fertilizer plants, or, more commonly, have a plant on-site to produce a finished fertilizer product.

Aside from the work on the Farim deposit, Champion will be conducting a country-wide reconnaissance exploration program aimed at evaluating gold, base metals and diamonds. The country has seen little exploration over the past 20 years. Previous regional work outlined gold geochemical anomalies in the eastern part of the country, as well as base metal anomalies throughout the east-central portion. Petrographic work on some samples revealed the presence of diamond indicator minerals.

As of the end of the third quarter of 1997, the company had spent about $400,000 exploring the countryside and $161,000 on the evaluation of the Farim phosphate deposit.

Champion has 16.7 million shares outstanding, or 21.2 million fully diluted.

Working capital stands at $1.2 million.