AFCR
http://minesite.com/news/african-co...-with-plans-for-a-100-000-ounce-per-year-mine
October 25, 2012
African Consolidated Now Boasts 3.2 Million Ounces Of Gold At Pickstone-Peerless, And Is Pushing On With Plans For A 100,000 Ounce Per Year Mine
By Robert Tyerman
Selling mining projects in Zimbabwe to a sceptical City is hardly the easiest of tasks these days, even if optimists do detect chinks of light in the political situation there.
Pickstone-Peerless
Yet Andrew Cranswick, chief executive officer of African Consolidated Resources, is indefatigably upbeat as he extols the potential of his company’s projects there and in neighbouring Zambia.
The commodities African Consolidated has in its portfolio range from gold to rare earths, copper, silver and phosphate.
There’s also a long-standing claim to Zimbabwe’s rich Marange diamond fields, where Cranswick notes Afcon has legally established its ownership, even though a South African group is now depleting the resource with permission from the Harare government.
Cranswick, himself a Zimbabwean, prefers to celebrate a six-fold increase in the company’s gold resource at the Pickstone-Peerless mine to 3.2 million ounces.
The plan now is to put together an ownership structure that will bring the company and its assets into line with the country’s 51 per cent ‘indigenous’ ownership policy.
Quoted and lately not much loved on Aim, African Consolidated has recently begun a bankable feasibility into re-starting production at Pickstone and Peerless, which were owned and operated until the 1970s by mining colossus Rio Tinto.
African Consolidated has had ownership for seven years.
Operating in Zimbabwe has not been easy. But, says Cranswick, there are ways. “We have had to go for mature projects with near-term cash flow and tap non-traditional capital markets, in Abu Dhabi, China, India and Russia”.
But appetite from more traditional directions may be about to pick up again. “We think Pickstone-Peerless could produce seven to eight million ounces of gold”, says Cranswick, which ought to be enough to whet the appetites of even the most jaded of junior mining specialists.
For now, Afcon is targeting production of 100,000 ounces a year from the mine, at a modest average grade of 2.7 grammes of gold per tonne of ore.
Stressing that Pickstone-Peerless has good access to infrastructure and labour, Cranswick argues that cash costs are likely to come in at “US$700 an ounce or less”, against a current market price of around US$1,700 an ounce.
The deposit is open at depth and along strike and, says Cranswick, “the grade sweetens at depth.”
Meanwhile, some 19 miles from Pickstone-Peerless lies the Gadzema gold project, where Afcon claims a potential 1.1 million ounces of gold at a grade of 1.2 grammes a tonne.
“We have hardly scratched the surface there”, says Cranswick. He reckons Gadzema could yet turn out to be much bigger, and that it has potential as a low grade, bulk tonnage operation.
Still, it’s a hard road he’s following. The company’s shares have fallen from a 12p float price in 2006 to 2.75p today, valuing the company at £16 million.
The company raised £2.16 million at 2p in August and will be spending US$250,000 on the first phase of the gold project’s feasibility study and another US$500,000 on the underground phase, says Cranswick.
But he argues the key to success will be the ownership structure he has devised to comply with the indigenisation legislation.
The hope is, he says, to “vend the asset to a group of technical and finance guys we found”. The company would then provide a profit-earning loan to this group, which, as the project began to generate cash, would shift to equity.
Cranswick compares this to a debenture and says he hopes for official approval by March, shortly after he expects the bankable feasibility study to be complete.
“One day we’ll lose control”, he reflects. “But we’ll have an independent company with a revenue stream, which we could perhaps float in Singapore.”
Analysts believe another spin-off candidate in future could be the company’s Kalengwa copper and silver project on the southern edge of Zambia’s Copperbelt.
This project has in places shown grades of up to 9% copper with silver at 50 grammes a tonne, though there are legal problems with Lebanese intruders. Yet another divestment candidate could be the phosphate.
Afcon is also in a rare earths joint venture at Nkombwe Hills in Zambia, with Colin Bird’s Aim-traded company Galileo Resources. Here samples have shown grades of 23.6% along 350 metres.
Cranswick says this project also has phosphate credits, which could be grouped with African Consolidated’s Chishanya phosphate deposits in Zimbabwe. All in all, there’s plenty to keep investors interested, although much depends on the market’s overall appetite for Zimbabwean political risk.
