Acquisition

RNS Number : 6714B

Obtala Resources Limited

23 February 2011

 



23 February 2011

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Acquisition of 37% Interest in Near-Term Producing Tin Deposit, South Africa

The Board of Obtala Resources Limited, the resources investment, development and production company, today announces that it has agreed to subscribe a total of $4 million for a 50% interest in the issued share capital of Greenhills Resources Limited ("Greenhills") (the "Acquisition").

Highlights:

·       Obtala has agreed to acquired a 50% interest in Greenhills Resources Limited for a 
US$4,000,000, staggered payment with funds being utilized to develop first tin production for H1 2012

·       Greenhills Resources Limited is a Sub-Saharan African focused mining group with interests in tin projects in South Africa. Through the Acquisition Obtala receives a 37% interest in the underlying  Mokopane Tin Project

·       The Mokopane Tin Project is located in one of South Africa's most important historical tin fields ("Zaaiplaats") lying within the northern limb of the Bushveld Complex of South Africa

·       Exploration and re-evaluating of deposits within the historic Zaaiplaats Tin Mining District to be undertaken

·       3,400 tonnes of near-surface open pittable tin already identified by Greenhills in one of 
five target areas identified to date with significant scope to increase to 20,000 tonnes open pittable tin

·       Tin mineralisation traced over 9km by Greenhills Geologists

·       Deposits located close to existing infrastructure, located 15km from world's largest open 
pit platinum mine

·       Solid management team with over 60 years experience in discovering and developing substantial deposits in Africa

·       Total cash consideration of US$4m payable into Greenhills for shareholding and Board 
representation

Greenhills is a private, un-related, Guernsey registered company focussed on evaluating and developing tin projects in sub-Saharan Africa. Greenhills is the parent company of Renetype (Pty) Ltd ("Renetype"), a South African registered company which holds a 100% interest in the Mokopane Tin Project. Greenhills shareholding in Renetype is 74% with the remaining 26% held by Black Empowerment partners in South Africa. Through its subsidiary Greenhills holds the following licences:

Country	Holder	Greenhills % Interest	Licence  No.	Licence Type	Area Km2	Expiry
South Africa	Renetype (Pty) Ltd	74%	2205PR	Prospecting Licence	165	2015

Description of the assets

Greenhills is a junior exploration and mining company focused on developing a portfolio of mineable tin resources in Africa. Greenhills' anchor assets, the Mokopane Tin portfolio, comprise five prospective targets contained in two new-order prospecting licenses covering a total of approximately 7,500 hectares. The project is located on the northern limb of the Bushveld Complex, 30 km from Mokopane, 60km from Polokwane and approximately 200km north of Johannesburg. The deposit lies less than 15 km from the world's largest opencast platinum mine and associated mining infrastructure.

An initial resource of 3,400 tons of contained tin ("Sn") from 2.65 million tons of ore (average grade of 0.13% Sn) over an average width of 18 metres has been confirmed, by Greenhills, on one of the five targets, the Groenfontein project. The immediate objective is to define a resource in excess of 10,000 tons of contained tin within the Mokopane Tin portfolio, which is located in the old historic Zaaiplaats tin mining district, one of South Africa's most important historical tin fields (with approximately 130,000 tons Sn produced between 1905 -1994). The Mokopane Tin Portfolio covers much of this old tin mining district.

The control on tin mineralisation in the project area is related to the presence of the red, volatile‐enriched Bobbejaankop Granite, lying at the top of Bushveld Granite sheet and occurring in two north‐west trending domes. Tin mineralisation is associated with the uppermost part of the Bobbejaankop Granite (Zaaiplaats target) and in the immediately overlying and finer grained Lease Granite (Groenfontein target). Mineralisation occurs both in pipes and as disseminations within sheets and pods in the granites. The best disseminated mineralisation occurs within two pronounced granite domes exposed by erosion in which tin mineralisation has been concentrated. The Main or Zaaiplaats/Groenfontein dome extends over a distance of 9 km along strike, with the most important mineralised areas related to these two domes.

Another style of tin mineralisation present in the region is associated with the Union Tin Tuff Member of the Rooiberg Group which hosts a number of old tin mines and workings. This style of mineralisation, although derived from solutions emanating from the Bobbejaankop Granite, has been emplaced into suitable structures in the rocks overlying the granite.

The Groenfontein and Zaaiplaats projects are the most advanced targets, with extensive geochemical surveys conducted on both targets, together with a closely spaced drilling programme on the Groenfontein target undertaken in the 1970's. Selective mining on some high-grade tin pipes was also undertaken, as well as some limited quarrying operations on the disseminated mineralisation.

The Groenfontein and Zaaiplaats targets are the immediate focus of Greenhill's exploration programme. An inferred resource has been estimated by Greenhills of 3,400 tons of contained tin from 2.65 million tons of ore over average width of 18 metres and at an average grade of 0.13% Sn, established from over 200 historical drillholes on one of the five targets in the Mokopane Tin project, the Groenfontein target. A cut‐off grade of 500 parts per million ("ppm") Sn was applied.

SAMREC Mineral Class	Tonnages (Mt)	Tin (%)	Contained Tin Metal (Tonnes)
Inferred Mineral Resource	2.65	0.13	3,419

Recent geological modelling by Greenhills' technical team has further confirmed the presence of a well defined mineralized zone and the scope for increased resources. The resource is expected to be increased significantly by deepening boreholes that were stopped in high grade tin mineralisation on the Groenfontein target.

In addition to an outcropping ore body, and thus amenable to low-cost open cast mining, the tin mineralisation of the Mokopane tin project lends itself to relatively simple and inexpensive processing. Locally, South Africa has a long history of tin production and extensive experience and expertise in tin beneficiation. The disseminated tin mineralisation occurs as scattered to isolated grains of relatively coarse‐grained cassiterite (SnO₂) in a fine to medium grained granite (the Lease granite).

The process for concentrating tin is achieved by; crushing, milling and gravity separation. Pre-milling sorting techniques to pre-concentrate the ore are currently also being investigated. If necessary a flotation circuit could be added to improve overall final recoveries. The final concentrate is will be in a form ready for direct smelting and the production of tin metal. Scheelite (a tungsten mineral) and fluorspar (an industrial mineral used as a flux to lower the melting point of raw materials in steel production to aid the removal of impurities) may also be recovered as by‐products.

Tin Market

Market fundamentals for tin are extremely favourable with record high tin prices (US$32,000/ton) projected to be sustained for more than 2 years (LME projections). Supply constraints are pushing prices higher with no significant new mine developments on the immediate horizon. Markets are dictated to by eastern producers, mainly China and Indonesia, coupled with a significant increase in demand from electronic goods and depleting stock piles in LME inventories.

According to the International Tin Research Institute (www.itri.co.uk); almost everywhere in the world tin production has been either flat or declining. There are number of triggers to higher demand and prices:

·     Indonesian production is falling (second largest producer after China) ‐ latest reports are 
that PT Timah may miss its initial annual production target of 50,000 tonnes by 10,000 tonnes or more, while 18 private smelters (out of 31 with export licences) are believed to be shut down.

·     Mine output also falling sharply in Brazil

·     There is a huge political problem around "conflict minerals" from Central Africa. Most 
mining activity in the eastern provinces of DR Congo (which accounts for about 5% of world supply) has been halted since mid‐September 2010.

·     There are no significant new tin mining projects on the horizon until 2012/2013.

Greenhill's Management

The company's team includes:

-      Internationally recognised economic geological exploration expertise with >60 years cumulative target generation experience with several notable successes

-      A Team with a wealth of experience both technically (geology, metallurgy and mining engineering) and in corporate management and capital markets

-      In depth deal-making, corporate finance and structuring capabilities to maximise value for shareholders along the development path of projects, rather than only at the end

-      A proven track record of successful target generation and mineral project development, generating substantial value for principals (>US$3Bn over ~7 years)

Fortune Mojapelo - Executive Director

A South African national,  holding a B.Sc (Actuarial Science) from The University of Cape Town, whose professional background is in strategy/management consulting.  Fortune started his career in consulting with McKinsey & Company, a premier global management consulting firm, where he worked on corporate strategy and organisational development engagements for leading companies in several sectors in Africa. Fortune is a founding shareholder and director of VM Investment Company (Pty) Ltd, a principal investments and junior mining advisory firm focussed on Africa, where it has been responsible for the establishment and project management of a number of junior mining companies across Africa, including New Kush Exploration and Mining (Gold), Coal of Madagascar, Greenhills Resources (Tin), New horizon Minerals (Iron Ore), Frontier Platinum Resources and Eagle Uranium.

Anthony Viljoen - Executive Director

A South African national, holding an undergraduate Bachelors qualification in economics and agricultural economics, with a post graduate degree in Finance Banking and Investment Management, from the University of Natal, Pietermaritzburg. He is currently studying towards a Masters degree in African Development Finance through the University of Stellenbosch. Anthony has 8 years of risk management and investment banking experience. Antony's experience includes working in London for Deutsche Bank and Barclays Capital, and later with Loita Capital Partners, a pan African Investment banking firm, in their structured Trade and Project Finance Division. He is a founding shareholder of VM Investment Company (Pty) Ltd , a principal investments and junior mining advisory firm focussed on Africa, where it has been responsible for the establishment and project management of a number of junior mining companies across Africa, including New Kush Exploration and Mining (Gold), Coal of Madagascar, Greenhills Resources (Tin), New horizon Minerals (Iron Ore), Frontier Platinum Resources and Eagle Uranium.

Prof. Richard Viljoen, MSc, PhD, Wits, FGSSA, FSAIMM, FRSSA, FSEG, FGSI, Pr. Sc. Nat: TECHNICAL DIRECTOR

Richard has over 30 years in the mining industry including 15 years as chief consulting geologist for Goldfields of South Africa. Past experience includes:

-      Key role in the development of significant mines, including Northam Platinum and the Leeudoorn and Tarkwa gold mines;

-      Key role in identifying and development of a significant platinum deposit in the Bushveld Complex of South Africa for Akanani Resources;

-      Consultant for exploration and mining companies in Canada, Mexico, Venezuela, India and China in the fields of base metals, gold and platinum;

-      A number of Competent Persons Report (CPR) for projects including the Witwatersrand South Reef Project, Doornkop mine project and the Uramin uranium project.

Prof. Morris Viljoen, MSc, PhD (WITS), FSEG, FGSSA, FSAIMM, FRSSA, Pr.Sc.Nat: TECHNICAL DIRECTOR

Morris is an internationally recognized geologist, fellow of numerous geological and scientific bodies; both in South Africa and internationally. Past experience includes:

-      20 years with JCI working in base metals (including nickel, copper, antimony), gold and platinum exploration and mining in Southern Africa;

-      Seven years consulting geologist for Rustenburg Platinum Mines, now Anglo Platinum Limited;

-      Past 13 years as Professor of Mining Geology at the University of Witwatersrand;

-      Established the Centre for Applied Mining and Exploration Geology at the University of Witwatersrand, involved in identifying and developing mineral projects, and these have included the Amalia and Blaaubank lode gold deposits, the Akanani/Afri Ore platinum project, the Uramin uranium project and the Central Rand Gold project.

Project Work Plan

Over the next 12 months, Greenhills' work programme will mainly be focused on;

·     Complete a feasibility study on Groenfontein targets, including acquiring a mining license

-      Confirmatory drilling programme, including twinning and deepening holes that stopped in mineralisation, test work for processing

-      Metallurgy and mineralogical tests, processing plant design

-      Bulk sampling programme

·     Define resource on Zaaiplaats and Salomon's Tempel targets

·     Geophysics, geochemical sampling and mapping programme on the Appingendam - 
Groenvley target

·     Geochemical, Geophysics, sampling, mapping and trenching programme on Union Tin 
Member target

·     Acquisition of additional projects through in-house target generation

·     Trial mining at Groenfontein in H1 2012

Details of the Acquisition

Obtala has agreed to subscribe for 100 new shares in Greenhills (representing 50% of the enlarged issued share capital). The consideration is being satisfied by a cash payment of US$4,000,000 paid out in two tranches. The first tranche, of US$3,000,000 is to be paid within seven (7) business days after completion of the Subscription and Shareholders' Agreement ("Agreement"). The second tranche of US$1,000,000 is to be paid within three (3) months of the completion of the Agreement.

Completion of the Agreement is conditional upon (amongst other things) Obtala being satisfied with its due diligence into Greenhills' assets.

Within 12 months of the date of the Agreement, Obtala has agreed to lead the listing of Greenhills onto the AIM Market of the London Stock Exchange (and Obtala shall be responsible for all costs associated with such admission). VML Resources Limited will act as the operator and manager of the project and engages the same technical personnel as listed in the Greenhill Management.

As a result of the Acquisition, Obtala will be an equal shareholder in Greenfields with the other principal shareholder, VML Resources Limited who also holds 50%. Obtala will have the right to one Board representative with Greenhills needing consent from Obtala to make any material changes to the company. There are no related party transactions. All activities carried out by the Group are in the exploration and analysis stages. As such, the Group has not produced any profits to date.

In accordance with the AIM Rules, the information in this announcement has been reviewed by Simon Rollason, a qualified geologist with over 20 years' experience and is the Managing Director of Obtala Resources Limited.

Frank Scolaro, Chairman of Obtala, commented "The market fundamentals for tin are currently extremely favourable and looking forward I believe this investment into Greenhills' assets and its highly professional management team, will be transformational for Obtala and its shareholders.  The funds injected will be used to further enhance resources and progress the resource to production by H1 2012.  Our Company remains debt free and is funding this investment from its own cash reserves.  I look forward to further developing our relationship with Greenhills going forward and building a stronger relationship in South Africa."

Obtala Resources Frank Scolaro - Chairman Simon Rollason - Managing Director www.obtalaresources.com	[phone]
ZAI Corporate Finance Ltd	[phone]
Marc Cramsie Sarang Shah
Threadneedle Communications
Beth Harris Laurence Read	[phone]

Additional Inormation

The SAMREC code for the reporting of mineral resources in South Africa defines these classes as follows:

Mineral Deposit:a concentration (or occurrence) of material of possible economic interest, in or on the earth's crust, that may include mineralized material that cannot be estimated with sufficient confidence to be classified in the Inferred category. Portions of a deposit that do not have reasonable and realistic prospects for eventual economic extraction are not included in a Mineral Resource.

Inferred Mineral Resource: that part of a Mineral Resource for which volume or tonnage, grade and mineral content can be estimated with only a low level of confidence. It is inferred from geological evidence and sampling and assumed but not verified geologically or through analysis of grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited in scope or of uncertain quality and reliability. This category of resource does not take into account the effect of modifying factors such as possible geological losses, mining efficiency, milling recovery, metallurgical recovery and environmental, social, government and legal factors. Verification of the accuracy of the results of the previous closely spaced drilling programme should allow for the upgrading of the resource to the indicated category.

 

END

 

 

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