AfriOre cuts high-grade gold in Mali (September 12, 2003)

Best known for its coal-mining activities in South Africa, AfriOre (AFO-T) has created some stock market heat with some exploration drilling success at its new Banankoro gold project in Mali.

Following the release of the drill results on Sept. 4, the stock vaulted from below 60 to the 90 range.

The 144-sq.-km Banankoro property is situated near Kangaba in southwestern Mali, about 130 km southwest of the capital Bamako.

Under a deal signed last September, AfriOre became operator and can acquire a 60% stake in the project from New Gold Mali, a subsidiary of Paris-listed Maurel & Prom, by spending US$2.5 million on exploration or completing a bankable feasibility study, by September 2006.

The Malian government holds rights to a 10% carried interest plus a 10% working interest once the project hits the exploitation stage. If the government exercise its working-interest option, AfriOre can boost its stake by 3.75% under the same terms as the government, and so retain a minimum 51% interest.

The property is home to several geochemically defined gold targets. New Gold spent US$3 million on the property, mainly on the Bagama discovery, where 25 reverse circulation and 14 diamond drill holes identified at least four sub-parallel gold-bearing zones dipping at 60-70. These zones run from surface to a drilled depth of 120 metres within a geochemical anomaly that has a strike length of 700 metres.

One of Bagama’s four zones contains a high-grade zone at depths between 70 and 120 metres, in the transition zone below the saprolite. This zone runs up to 8 metres wide over a drilled distance of about 200 metres. It remains open in all directions.

The New Gold drilling returned values between 0.65 and 421 grams gold per tonne over widths of 1-8 metres.

AfriOre’s first three holes reported in July from an 11-hole follow-up drilling program returned gold intersections of 10.38 grams gold over 2.6 metres, 12.37 grams over 0.80 metre and 9.98 grams over 2.0 metres.

The latest results from the remaining eight holes were equally impressive, with highlights including:

* 13.95 grams over 6.3 metres (from 192 metres) in hole BA5;

* 4.87 grams gold over 3.5 metres (from 128 metres) in hole BA7; and

* 7.36 grams gold over 1.71 metres (from 211 metres in hole BA10.

The remaining five holes graded 0.16-2.45 grams gold over intervals up to 10.5 metres wide.

Further drilling in the hangingwall of the F4 target returned high-grade values over 1-metre wide intervals.

AfriOre states that it is “delighted” with the results, and adds that the drilling has also identified critical mineralization controls to guide further exploration.

Given the thick laterite cover over the property, the company will follow up the drilling with a high-resolution aeromagnetic survey aimed at identifying the extent of a key diorite intrusive and the structural controls on gold mineralization at Bagama and elsewhere on the Banankoro permits.

Formed in 1995 and now based out of Bridgetown, Barbados, AfriOre operates a specialized coal and anthracite mining business in South Africa. Its flagship asset is its Springlake anthracite colliery, situated north of Dundee in Kwazulu Natal. AfriOre is operator and holds a 50% interest while CIBC Capital Partners owns the remainder.

In the fiscal year ended Feb. 28, 2003, the colliery produced 741,000 tonnes of anthracite, generating a small loss on C$8.7 million in revenue attributable to AfriOre — a result of what it calls “difficult trading conditions.”

For the recent first quarter, AfriOre lost $381,000 (1 per share) compared to a profit of $324,000 a year earlier. Net attributable anthracite production was 113,495 tonnes in the quarter, down from 138,676 tonnes in 2002, owing to the closing of open pit mining in December 2002. (However, the open pit was re-opened using augering of the high-walls.)

AfriOre also has a 100% stake in the Somkele anthracite project, also in Kwazulu Natal, where a feasibility study is ongoing.

In an unusual and not entirely successful business plan, AfriOre uses cashflow from its coal operations to fund other exploration and development projects, with a special emphasis these days on gold.

At the same time the company signed the Banankoro deal, it also acquired an interest in the Dwaalboom advanced-stage gold project in South Africa.

AfriOre’s two other priority gold exploration plays are its Witwatersrand-type FSC project in South Africa (recently optioned to CUB-listed Hawk Precious Metals) and the Ndori project in Kenya.

The company has budgeted $3 million for gold exploration and project evaluation over the next 12 months — financed in part by a $2.5-million in private placements completed in the spring.