TIDMRLD
RNS Number : 7967I
Richland Resources Ltd
04 June 2014
("Richland" or "the Company") (AIM: RLD)
Option Exercised to Acquire and Redevelop Sapphire Project
Richland Resources Ltd today announces that it has exercised its
option for the acquisition of 100 per cent of the Nardoo Sapphire
project in Queensland Australia ("Nardoo"). The project has been
acquired by Richland for consideration of AUD$1.18 million
(approximately. GBP 653,000) and 18 million fully paid new common
shares in Richland (approximately 8.3% of Richland's enlarged share
capital) which will be issued after a three month escrow
period.
Highlights
-- Richland will establish a major sapphire hub in Australia -
first production planned within 9 months
-- In accordance with project agreements, the total
consideration is AUD$1.18 million and 18 million Richland shares to
acquire the Nardoo sapphire project, near Sapphire in Queensland,
Australia
-- Rapid mine redevelopment of the Nardoo Sapphire project to
bring this back into production, facilitated by previous mining on
site up to 2006.
-- The Nardoo sapphire project has a well defined resource and processing plant on site:
o Measured JORC (2004) resource: 109 million carats (21.8
million grams) with an average grade of 20 carats per tonne (8
grams per loose cubic metre "LCM")
o Existing plant capable of treating 200 LCM/hour and annual
production of 4 million grams (20million carats) of sapphire which
Richland will be refurbishing as part of the mine restart
o Priority now shifts to mine planning and engagement with
regulators and stakeholders to fast track production
-- Richland is planning to use existing cash resources and
working capital facilities to take project into production within 9
months
-- Sapphire with provenance to be sold through established Richland sales channels
Commenting on the announcement Bernard Olivier, CEO, of Richland
Resources said: "Nardoo presents Richland with an opportunity to
start producing high quality sapphires within a relatively short
timeframe. With an established resource and the low redevelopment
capex we expect to recommence sapphire production within 9 months.
The value of sapphires with proven provenance is high and our
intention is to sell certificated Richland stones through our
various existing sales channels. Located in Queensland, Australia
we also believe Nardoo brings an important element of low country
risk and high locale transparency to our portfolio as we build
operations."
Transaction Summary
Richland has exercised its option to acquire full ownership,
control and management of Nardoo. Nardoo, previously mined by ASX
listed Australis Mining Corporation Ltd ("Australis"), presents
Richland with a unique opportunity to diversify the group's
gemstone production. Nardoo was mined by Australis between May 2005
and March 2006 when approximately 2.29 million carats of sapphires
were produced.
Prior to acquiring the project, Richland commissioned Dr Brian
Senior of BR Senior and Associates Pty Ltd to prepare an
independent review of the Nardoo sapphire project, mining leases
and intellectual property then under option by Richland (the
"Independent Report"). Dr Senior wrote the original Competent
Persons Report ("CRP") for Australis as well as other independent
reports on the project and is therefore very familiar with the
project. Dr Senior concluded that he considers, in his capacity as
an independent expert, that the acquisition price to be paid by
Richland for the project can be considered "fair and reasonable".
The Independent Report and other technical information on the
project is summarised in the sections below.
The total consideration paid for the project is AUD$1.18 million
(approximately GBP653,000 or USD1.1 million) and 18 million fully
paid common shares. The shares will be issued after a three month
escrow period and will, when issued, represent approximately 8.3%
of the enlarged share capital comprising the new shares and the
current issued share capital. At the current share price (being
1.875p as at close of business on 3 June 2014) the consideration
shares are worth approximately GBP337,500 (approximately
USD567,000). The aggregate consideration is therefore approximately
GBP990,500 (USD1.66 million).
Project Summary
Nardoo consists of two new mining leases (ML 70419 and ML70447,
which were both granted on 1 April 2014 for a period of five years)
comprising about 490 hectares and associated assets. The mining
leases are each renewable under the Queensland Mining Act (the
"Act"), if the renewal is in full compliance with the Act. The
mining leases are held in GregCarbil Pty Limited ("Gregcarbil") a
special purpose vehicle setup especially for the purpose of holding
the mining leases and which acquired the mining leases in
compliance with the Act. As part of the acquisition of Nardoo,
Gregcarbil is now a 100% owned subsidiary of Richland.
The mining leases contain a JORC (2004) Measured Sapphire
Resource of approximately 21.6 million grams (109 million carats)
of sapphire, based on extensive previous exploration and following
a brief period of mining by Australis.
The associated assets to be acquired comprise the tangible
assets (including the processing plant), completed exploration,
operational and sales data over the mining leases.
The acquisition of a significant proven sapphire resource with
existing mine infrastructure and straightforward alluvial mining
will enable Richland to bring Nardoo back into production within 9
months. While first production can be achieved through a mine
restart, Richland has identified Nardoo as having the capacity for
significant scalability in terms of sapphire production. Mining of
the current JORC (2004) delineated resource can be increased
through low cost exploration at prospective targets within the
licences.
The deposit has a large blue colour resource and it also
produces yellow and green and parti-colour material which would be
of interest for the growing fancy colour industry. While the Nardoo
resource does contains special large stones, Richland believes that
the strength of the resource is in supplying sapphires of
verifiable origin in large quantities in the sizes, grades and
colours used by the international jewellery market.
Geological Setting and JORC Resource
This deposit lies within the Queensland Sapphire Gemfields,
located near the township of Sapphire in Central Queensland. In
total the project tenements (mining leases 70419 & 70447) cover
approximately 494 hectares of potential sapphire-rich alluvial
placers within this known gemfield (see Figure. 1).
http://www.rns-pdf.londonstockexchange.com/rns/7967I_-2014-6-4.pdf
The two wholly owned mining leases have a JORC (2004) measured
resource of 109 million carats of sapphire. The JORC (2004)
resource was based on Calweld drilling (1 metre plus wide diameter
rig capable of measure significant volumes of material near to
surface), and bulk sampled in 1991 and later by infill drilling in
2004. An alluvial placer area of 115ha was identified that
contained an estimated 22 million grams (109 million carats) at an
average grade of 8g/LCM on the original Australis mining leases. As
part of the JORC (2004) resource an average grade of 8 g/LCM was
calculated from drilling and bulk sampling of the mining leases.
These tenements originally covered an area of approximately 390ha
and comprised mining leases 70004, 70005 and 70006. These mining
leases are now encompassed and replaced by mining leases 70419
& 70447 (please see Table 1 below).
Additional sapphire-rich alluvial gravel in the region has also
been identified and could potentially be purchased at a later stage
to further extend the resource base.
Table 1. MINING LEASES CONTAINING SAPPHIRE RESOURCES, JORC
(2004)
Mining Lease Registered Interest Period Licence Resources status
No. Owner Area (ha)
Commenced
70419 Policeman's 1.4.2014 Measured Sapphire
Run Gregcarbil 100% Expires 31.3.2019 318.8771 Resource
Commenced
70447 Policeman's 1.4.2014 Measured Sapphire
Run North Gregcarbil 100% Expires 31.3.2019 175.0037 Resource.
Mining lease
for water supply
Armfest being Commenced located 10km
70451 Rush transferred 14.11.2012 from the Measured
Sorting to Gregcarbil 100% Expires 30.11.2017 0.1621 Sapphire Resources.
-----------
Total area 494.0429
===========
Historical Production
During their 11 months of mining operations, Australis used
open-pit mining techniques to exploit sapphires and produced a
total of 2.3 million carats. Australis reported that the production
period included significant plant commissioning, modifications and
efficiency improvements, including the installing of a 10km water
pipeline to supply the processing plant with adequate water. Their
final quarter of production (Q1 2006) produced 651,199 carats at an
average grade of 8gram/LCM (20.1 carats per tonnes).
Whilst operating the project, Australis experienced inter alia
working capital shortfalls during the ramp up phase, which resulted
in the company being placed into voluntary administration. The
mining operation was subsequently closed in 2006 and the mining
leases cancelled thereafter. The new mining leases were awarded to
third parties and Australis has no ongoing involvement with either
Richland or the Nardoo project.
Additional historic data is also available from public data in
relation to mining of the neighbouring licences (mining leases 7169
and 7162) in 2001 situated immediately west of mining lease 70006
and on the same palaeo-channel system. The available quarter's
production on these licenses averaged 11.35 gram/LCM and 11.5
gram/LCM respectively which further substantiates the average grade
of 8gram/LCM for Nardoo.
The size and quality of stones produced from Nardoo is also
significant for Richland. In addition to high levels of sapphire
recovered greater than 4.1 millimetres and greater than 5.5
millimetres in size, a number of "special" gemstones (those over
about 10 carats in weight) have also been produced from Nardoo.
Sapphires in this size range carry a significant premium to the
smaller sapphires. "Special" gemstones produced during the 11
months of previous mining included a 63 carat dark blue sapphire,
41 carat yellow/green/blue fancy-colour sapphire, 33 carat yellow
green sapphire, 31 carat blue sapphire, 20 carat green sapphire
(see figure 2) The market for fancy colour sapphire is increasing
and these gemstones attract significant interest.
http://www.rns-pdf.londonstockexchange.com/rns/7967I_-2014-6-4.pdf
Figure 2. Photograph of a "special" sapphire weighing 31.44 ct
produced at Nardoo
Processing Plant and Equipment
At the time they commenced mining, Autralis commissioned a
purpose-built alluvial processing plant which was reportedly the
largest of its kind in the southern hemisphere which Richland
understands had an original cost value of approximately
AUD$2.5million. The processing plant was specified as being capable
of treating 200 LCM per hour and consequently could potentially
result in an annual sapphire production of approximately 4.16
million grams (20.8 million carats) (see figure 3).
The processing plant has remained on site and has been acquired
by Richland. Independent assessment of the condition, and
timescales for the re-commissioning, of the plant have been
obtained.
The current mine life of Nardoo, based on the remaining and
identified JORC (2004) Measured Sapphire Resource, containing an
average grade of 8.0 grams per LCM, would last for approximately
5.2 years if the plant is operating at full capacity. However,
Richland is assuming a more conservative throughput of 20 million
grams of sapphire (100 million carats) over a period of 8
years.
http://www.rns-pdf.londonstockexchange.com/rns/7967I_-2014-6-4.pdf
Figure 3. 200 LCM per hour processing plant at Nardoo
Global sapphire market
Sapphires make up a significant part of the global colour
gemstone market but with extraction in the main remaining generally
artisanal and small scale, with a fractured supply market. This
variable, and in some instances declining production in the major
production areas of the world, have led to inconsistent supply
channels. Richland believes that the Chinese market demand for
sapphire is increasing beyond their own domestic supply and,
furthermore, that the US jewellery and gemstone market continues in
its strengthening and recovery since 2013.
Single-origin supply of commercial colours and quantities are
difficult to find due to blending in the wholesale and polishing
markets. Richland has the expertise to apply first-rate mining
practices to a proven sapphire resource and create a platform to
supply consistent quantities of source-assured, ethical gemstones
to major international buyers for mine-to-market assured supply
chains.
Issue of Shares after escrow period
After the three month escrow period has been completed an
application will be made to the London Stock Exchange for the
admission of 18 million new common shares to trading on AIM
("Admission"). At this time the Company will make an announcement
regarding the issuing of the new shares, increased issued share
capital and commencement of dealing in the new shares.
Qualified Person's Declaration.
Brian R. Senior. B.Sc.(Hons), M.Sc., Ph.D., F.Aus.I.M.M.,
Geological Consultant and the principal of B.R. Senior &
Associates Pty Ltd, has reviewed and approved for release the
geological and technical information contained within this press
release, in his capacity as a "competent person" as required under
the 2004 Edition of the "Australasian Code of Reporting of
Exploration Results, Mineral Resources and Ore Reserves". Dr Senior
is a Fellow, in good standing, of the Australasian Institute of
Mining and Metallurgy and has in excess of 40 years of experience
and knowledge in gemstone exploration and mining.
END
For more information please contact:
Bernard Olivier
Chief Executive Officer
+61 4089 48182
Mike Allardice
Group Company secretary
+852 91 864 854
Nominated Advisor & Broker (AIM)
RFC Ambrian Limited
Samantha Harrison
+44 (0) 20 3440 6800
Laurence Read
Corporate Development and Communications Officer
+44 (0)20 3289 9923
http://www.richlandresourcesltd.com
------------------------------------
Glossary of technical terms:
"Alluvial placer" A surficial mineral deposit formed by mechanical
concentration of heavy mineral particles from
weathered rocks in a river valley.
"cpt" Carats per tonne
"CPR" Competent Persons Report
"LCM" loose cubic metre
"Measured Mineral that part of a Mineral Resource for which tonnage,
Resource" densities, shape, physical characteristics, grade,
and mineral content can be estimated with a high
level of confidence. It is based on detailed
and reliable exploration, sampling, and testing
information gathered through appropriate techniques
from outcrops, trenches, pits, workings, and
drill holes. The locations are spaced closely
enough to confirm geological and grade continuity.
A Mineral Resource is consistent with the Measured
Category when the risk associated with the accumulated
mineral estimate is less than 10% (at a 90% confidence
level).
" Mineral Resource" concentration or occurrence of material of economic
interest in or on the earth's crust in such form
and quantity that there are reasonable and realistic
prospects for eventual economic extraction. The
location, quantity, grade, continuity, and other
geological characteristics of a Mineral Resource
are known, estimated from specific geological
evidence and knowledge, or interpreted from a
well-constrained and portrayed geological model.
"JORC" the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves,
as published by the Joint Ore Reserves Committee
of The Australasian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and Minerals
Council of Australia.
"JORC (2004)" the 2004 edition of the JORC code
"Sapphire" A gem quality corundum Al2O3 other than ruby.
Especially the blue transparent and coloured
varieties of crystalline corundum containing
small amounts of oxides of cobalt, chromium and
titanium.
Notes:
Exchange rates used: AUS$1.81/GBP; US$1.68/GBP (rounded to 2
decimal places)
Sapphire: 5 carats = 1 gram
This information is provided by RNS
The company news service from the London Stock Exchange
END
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