Sumatra Copper & Gold updates Indonesian projects
Monday, April 29 2013 - 08:18 AM WIB
OPERATIONS
Tembang Project
Project Development Funding
During the Quarter, Sumatra put in place a comprehensive in-principle debt and equity funding arrangement to finance the development of the Tembang Project. The funding package comprises three components:
? a placement of 38 million Sumatra CDI?s to the Company?s major shareholder and cornerstone investor, Provident Minerals Pte Ltd, to raise A$8.36 million;
? a pro rata non-renounceable entitlements offer, to be undertaken in May/June 2013, to raise ~A$20 million. The entitlements offer is fully underwritten by Provident Capital Partners Pte Ltd; and
? US$35 million in principle project funding from Credit Suisse AG (?Credit Suisse?), incorporating a US$30 million senior debt finance facility as well as US$5 million of cost overrun funding.
Placement of CDI?s
Under the CDI subscription agreement, Provident Minerals Pte Ltd and their associates were allocated 38,000,000 Sumatra CDIs at a subscription price of 22cps. This placement was completed in March 2013 and raised A$8.36 million.
Entitlement Offer to Shareholders
Sumatra proposes to undertake an entitlement offer to all eligible shareholders to raise approximately A$20 million (Entitlement Offer). Subject to entry into formal documentation and agreement on outstanding issues, Provident Capital Partners Pte Ltd has agreed to underwrite 100% of the New CDI?s not taken up by the Company?s shareholders under the Entitlement Offer. On 22 February 2013 the Company announced a 1 for 3 Rights Issue to raise ~A$20M. This was based on the Company?s share price of A$0.22. Subsequent to the announcement, gold and silver prices have fallen significantly. The Company will provide further details of the entitlement offer (together with a timetable) in coming weeks.
Senior Debt Finance Facility
On 21 February, Sumatra received credit approval from Credit Suisse for US$30 million in senior debt finance facilities to fund the commercial development of the Tembang Project, as well as up to US$5 million of cost overrun funding. Credit Suisse was appointed following a competitive process conducted by Sumatra?s debt advisors, Optimum Capital Pty Ltd.
Provision of the in-principle US$30 million senior debt facilities is subject to completion of the project finance documentation and conditions precedent customary for a financing of this nature. These include final approval of the company?s Forestry Permit, which was received on 26 April 2013, and the completion of the entitlements issue component of the funding package outlined above.
Forestry Permit
Following the grant of the In-Principle Permit in December, Sumatra lodged its submission for the final ?Borrow and Use? Forestry Permit or ?Pinjam Pakai? for the Tembang Project in February.
This followed the successful completion of all requirements requested of the Company in order to apply for the ?Pinjam Pakai?, namely:
? The completion of the baseline survey for the Borrow and Use area including the forestry contained therein;
? The adjustment and finalisation of the Forestry Rehabilitation Work Plan which is dependent on the baseline survey;
? The appointment of a Forestry Policy Advisor, and internal Sumatra Forestry Officer; and
? The notarization of all formal documents for the Pinjam Pakai Permit.
Under new Mining Law in Indonesia, holders of Mining Business Permits (or IUP?s) in forested areas must obtain an ?Izin Pinjam Pakai? (?Borrow and Use? permit) from the Forestry Department before proceeding with the development of a mining project.
Sumatra was awarded the final Pinjam Pakai for the Project on 26 April 2013, clearing the way for construction to proceed and marking the most significant milestone to date for the Company and its shareholders.
The award of the Final Forestry Permit marks the completion of a rapid and highly successful approvals and permitting process and puts Sumatra on track to join the ranks of leading Indonesian gold producers next year.
The award of this final permit represents one of the final remaining conditions precedent required to complete the US$35 million senior project finance facility with Credit Suisse announced on 21 February 2013, clearing the way for development of the Stage 1 Tembang Project to proceed.
Sumatra had previously provided guidance to the market that it was targeting the end of March 2013 to secure the grant of the Pinjam Pakai. However, as a result of a Ministerial Decree Number 14, 2013 concerning a second amendment of the Pinjam Pakai guidelines on 20 February 2013,
Forestry Permits can now be granted for the life of the mine rather than 5 years as originally advised by the Company in its ASX Announcement of 13 February 2013.
In light of these amendments, the Company amended its Permit Application to cover a period of 10 years in line with the current life-of-mine plan for the Tembang Project.
Whilst the minor amendments to the Company?s original permit application did cause a slight delay in the permit process, the Company believes that the favourable outcome of these amendments for the Tembang Project was well worth the minor delay incurred.
Process Plant & Surface Infrastructure Construction Schedule
The construction schedule for the Tembang Project remains on track with the detailed design of the process plant and surface infrastructure well advanced.
The key contractors responsible for the fabrication and erection of the structural, mechanical and piping components of the process plant, as well as the electrical and instrumentation supply and installation contractor have been selected.
A proposal for the first structural steel package has been received with fabrication expected to commence in May 2013. Vendor equipment has been selected to provide for a submission to the Indonesian foreign investment board for import tax exemption.
Preparations for the dewatering of Belinau pit are well advanced with pumps and piping to be mobilised in May 2013 upon approval of the forestry permit. ASX-listed company Resource Equipment Limited has been selected to provide dewatering expertise. The task of dewatering the Belinau open pit is expected to take approximately 3-4 months.
Jakarta-based PT ODG has been selected to provide additional staff accommodation and general infrastructure at the Tembang campsite in preparation for the construction and operations phases.
Optimisation Studies
Subsequent to the completion of the Tembang Stage 1 DFS study in September 2012, the Company has undertaken a series of optimisation studies to de-risk the project both in terms of the environment and project economics.
The Company engaged well respected Perth-based MBS Environmental consultants to assist in developing a practical and effective environmental implementation strategy in partnership with the Company?s experienced environmental team.
In addition, further mining studies are being undertaken aimed at evaluating the optimal mining sequence of the Belinau, Asmar, Buluh, Berenai, Bujang and Aidit gold and silver deposits within the Tembang orefield. These studies are well advanced.
In light of the recent prevailing gold and silver pricing, the Company expects to provide an updated mining strategy aimed at further enhancing the project?s robustness by July 2013.
The optimisation studies are targeting lower cash cost, extending the Reserve Base, which has met the Definitive Feasibility Study criteria and expanding the planned production base for the Stage 1 plant size. The Company is also looking to capitalise on the improved availability and costs associated with the turndown in he global resource sector.
Tandai Exploration
The Tandai Project is located within the northern part of the Bengkulu Utara IUP, in the Kabupaten area of Bengkulu Utara, approximately 100km north of Bengkulu.
Tandai has a long history of formal mining from the early part of the 20th century until after World War II. The Company?s tenements cover a district in which at least three Dutch companies worked portions of the system. The old Dutch mining town at Tandai still remains, and was re-furbished (when the mine was redeveloped and worked between 1985 and 1995).
Under the arrangements agreed with Newcrest Mining Limited (?Newcrest?) in August 2010, Newcrest has the right to earn a 70% interest in the Tandai tenement by spending US$12 million on the project over 5 years.
Final results from the last hole in Ulukau, UDD12012, were received this month and confirmed visual observations that the hole intersected only minor mineralization.
Reconnaissance exploration of the Asa Prospect continues to show good progress with additional new outcrops containing base metal associations discovered mid-January. A total of 26 channel samples were collected from a 20 metre outcrop at the north bank of Nokan River which exhibited massive base metal sulphides galena + chalcopyrite + sphalerite. Final assay results includes a 0.65 metre wide channel sample grading 13.50 g/t Au, 291.0 g/t Ag, 5.20% Cu and 5.67% Pb and another 0.85 metre wide channel sample at 6.86 g/t Au, 119.0 g/t Ag, 0.92% Cu, 4.71% Pb and 0.77% Zn.
Ulukau
The Ulukau Prospect is located approximately 10km SSE of Tandai. This prospect was first identified during the regional sampling program, when three outcrop samples returned assays of 1.53 g/t Au, 2.81 g/t Au and 3.72 g/t Au. The results from more recent selective sampling of quartz veins and pervasive silica-clay-altered wall-rock indicate up to 55 g/t Au in outcrop and 44 g/t Au in sub-crop.
Final results from the last hole in Ulukau, UDD12012, were received and confirmed visual observations that the hole intersected only minor mineralisation.
Drilling Results
UDD12012
Final assay results from Ulukau, UDD12012, were received and confirmed only minor mineralization was intersected. The best result was 0.87 g/t Au and 11.6 g/t Ag from 250 to 251.6 metres down hole.
Regional Exploration Program
Asa Prospect
The Asa Prospect is proving to be an excellent exploration target with the continuous discovery of outcrops containing massive base metals. Since late December 2012 three new outcrops were discovered north of Nokan River containing base metal sulphide associations.
Final results from 11 samples taken in one of the recently discovered outcrops returned gold grades ranging from 0.19 g/t Au to 1.92 g/t Au. In addition, the base metal content of the samples were as high as 1.12% Cu, 25.1% Pb and 12.1% Zn.
An additional encouraging outcrop approximately 100 metres south of this outcrop was also discovered and proved better grade with massive base metal associations (galena + chalcopyrite + sphalerite) occurring as smears and vein stringers in a 20-metre wide outcrop. The outcrop is brecciated andesite, cut by galena-pyrite-chalcopyrite rich veining.
Final assay results included a 0.65 metre wide channel sample grading 13.50 g/t Au, 291.0 g/t Ag, 5.20% Cu and 5.67% Pb and another 0.85 metre wide channel sample at 6.86 g/t Au, 119.0 g/t Ag, 0.92% Cu, 4.71% Pb and 0.77% Zn.
Gold and base metal mineralisation is hosted in brecciated andesite. Mineralisation is likely structurally controlled, acting as conduits for gold and base metal deposition as the sulphides occur in the breccia or appear as veins and smears along fault planes. A series of post mineralization northwest trending normal faults exposed the mineralisation.
North of the prospect area are younger, flat-dipping sedimentary rocks of quartz conglomerate, sandstone and tuffaceous siltstone unconformably overlying the phyric andesite. The prospect is open both to the north and south with younger sediment cover complicating and preventing further reconnaissance exploration a situation similar to the Tandai District.
This prospect shows considerable potential given the association of gold with base metals, andesitic to dacitic host rocks and structural setting. There are similarities to both the Tandai (1.4Moz) and Lebong Donok (1.34Moz) gold systems.
Due to its ease of access, a significantly lower-cost, but detailed exploration program has been planned and will be carried out in the upcoming quarter. This program will comprise of continued systematic detailed mapping and channel sampling of all available mineralised outcrop along both stream and ridge traverses.
Ridge and spur soil geochemistry, compositing on 12.5 metre centres will also be employed to delineate the extent of mineralisation within the window of Hulusimpang volcanics. Should results warrant, a decision will then be made on an initial scout drilling program.
Tembang Exploration
Development Drilling
A program of both in-fill and exploration drilling was developed in Januaryfor Asmar, Aidit East, Belinau and North Belinau and will be executed over the next 6 months.
In-fill drilling is required at Asmar to confirm continuity of mineralised zones within the Stage 1 Pit for mine planning purposes. At Belinau, three in-fill holes are planned within the open pit to confirm the geometry of the vein. Two exploration holes are planned at Aidit south to follow up high grades from previous drilling. The compelling exploration target at North Belinau remains untested.
During the Quarter, in-fill drilling was completed at Asmar. Six holes, RDD 13209-13214, were completed for a total of 533.7 metres. Results (up to RDD 13212) were in line with expectations.
Higher grader intersections were returned in zones of banded quartz + sulphide veining. The best intersection was returned from hole RDD 13210 of 2.6m @ 4.83 g/t Au, 28.4 g/t Ag (including Includes 0.6m @ 14.6 g/t Au, 112 g/t Ag) from 144.6 to 147.20 metres downhole.
Geochemical sampling
Sub-soil geochemical sampling is on going over the CSAMT anomalies outlined in 2012. As part of this program, sampling has been completed near the proposed Tailings Dam (Kenapa Prospect). Results have confirmed coincident strong gold, silver and arsenic anomalies.
There is sparse outcrop in the area and a program of ground magnetics and possible trenching is planned to identify sterilisation drill targets.
Wacker soil sampling was also completed along the extension of the Aidit vein to north-east and at south west Aidit. Ground magnetics will be completed at North East Aidit in the upcoming quarter.
Relinquishment
The Company?s relinquishment proposals for the Jambi, Musi Rawas and Bengkulu Utara IUP?s are currently being processed by the Indonesian Government. The Company expects to provide additional information to the market once the relinquishment process has been completed. (end of edited release)