Lionsgold Limited - Feasibility Study Results and Next Mine Target

16 November 2017

Lionsgold Limited

("Lionsgold", "LION" or the "Company")

Feasibility Study Results and Next Mine Target

Lionsgold, the gold-focused exploration company with assets in India and Finland, and a fintech subsidiary that provides online accounts backed by physical gold, is pleased to release the final results of the NI 43-101 compliant Feasibility Study ("FS") on the Jonnagiri Gold Project ("Jonnagiri") and provide an update on its activities regarding the Kolar tenements owned by Geomysore Services India Pvt Ltd ("Geomysore") in which Lionsgold holds a 21.15% interest.

 

Geomysore holds exploration rights covering in excess of 900km2 in India including a granted 30-year mining lease at Jonnagiri covering 6km2.  The Jonnagiri Gold Project is situated in the state of Andhra Pradesh.  Concurrently to negotiations relating to land acquisition at Jonnagiri, Geomysore has now embarked on an internal scoping study on their South Kolar Project ("South Kolar") situated in the Southern part of the Kolar Gold Field also located in the state of Andhra Pradesh.  South Kolar is an area covered under two Mining Lease Applications, covering approximately 10km2 each, and Geomysore has signed a Memorandum of Understanding with the government of Andhra Pradesh to develop the areas into commercially viable mines.

 

Highlights

·     NI 43‐101 compliant Feasibility Study completed.

·     The Base Case production profile is based on the 151,020 Probable Reserve gold ounces only and shows a Net Present Value of USD$28.2 million (pre-tax) (based on USD$1 = INR67.08) applying an 8.48% discounted cash flow rate (appropriate rate determined by Indian tax and accounting advisors).

·     The Internal Rate of Return for the Base Case is 24.0% pre-tax and 17.8% post-tax.

·     The Total Production Case, which includes the processing of low grade stockpiles and the Inferred Resource within the optimised pit shell, produces an NPV of USD$34.9 million (pre-tax) applying 8.48% discounted cash flow rate.

·     The IRR for the Total Production Case is 28.0% pre-tax and 20.9% post-tax.

·     Land acquisition negotiations still in progress with local landowners to achieve a commercially acceptable price to Geomysore.

·     At full production Jonnagiri is forecast to produce approximately 25,000 ounces of gold per annum.

·     Geomysore's portfolio contains numerous exploration and development targets and the South Kolar Project represents the next target contemplated for mine development.

 

Cameron Parry, Lionsgold CEO, commented: "We are pleased to report that the Feasibility Study is complete and demonstrates a robust project that can be developed into India's first privately owned gold mine.

"Mine development at Jonnagiri is subject to agreement for land acquisition with relevant landowners.  Should commercial agreement be reached, subject to financing, the building of a mine at Jonnagiri could commence as early as Q2 2018.  The build is planned to take 24 months and at full production the Jonnagiri mine is forecast to produce around 25,000 oz of gold annually, which would contribute more than a quarter of India's gold production based on current domestic output.

 

"We look forward to updating shareholders as and when able, noting the commercial sensitivities that exist around negotiations relating to land acquisition and leasing, contracting and financing of Jonnagiri.

 

"Concurrent with trying to progress to a mine at Jonnagiri, an internal scoping study in respect of Geomysore's South Kolar Project has commenced and is currently targeted as the next gold mine to be developed by Geomysore from its portfolio of over 30 licences and applications throughout India with priority rights covering in excess of 900km2."

 

Jonnagiri Gold Mine Feasibility Study Summary

 

The Jonnagiri Feasibility Study is NI 43-101 compliant and the Feasibility Study used a domestic market gold price being the three year average of Indian Bullion Jewellers Association ("IBJA") Price, INR2,806 per gram (equivalent of USD$1,301/oz based on USD$1 = INR67.08).  Gold recovery has been estimated at 92.4% through a Gravity - CIL (carbon in leach) processing circuit.

 

The base case production profile is based solely on the 151,020 ounces of Probable Reserve from the Indicated Resource ("Base Case").  In parallel to the Base Case, a total production model was developed where all available ore was processed, being the Probable Reserve, the debris (unclassified material), part of the Inferred Resource and some low grade material to be used in the event the plant was at times underutilised ("Total Production Case").

 

The Jonnagiri mine will use conventional open pit mining with gold recovered by standard gravity and Carbon In Leach processing to produce a dore on site.  Inputs to the feasibility study are presented as per Table 1 below.

Table 1 -Base Case inputs in the Feasibility Study

 

Life Of Mine

Ore processed

2.8Mt

Ore throughput

~500kt/a (1.5kt/d)

Gold grade

1.68g/t gold

Expected gold recovery

92.4%

Stripping Ratio

4.6:1

Gold produced

139.5koz gold

Capex to first Production*

INR2,622m (US$39.1m)

Operating Cost **

US$25.2/t ore milled

Cash Cost (inc. royalty)

US$571/oz

* Includes capitalised operating costs of US$1.8m

** Includes:  Mining, Plant, Onsite G&A and head office costs

 

The key outputs of the Project as reported in the FS Base Case, based on mining only the Probable Reserve of 151,020 ounces of gold, are as per Table 2below (based on USD$1 = INR67.08).

Table 2- NPV calculation - Base Case

 

Pre Tax

Post Tax

 

US$M

US$M

NPV5%

$39.9

$23.1

NPV8.48%

$28.2

$14.6

NPV10%

$23.9

$11.6

IRR

24.0%

17.8%

 

In parallel to the Base Case schedule which processed only the Probable Reserve (Indicated Resource), a Total Production Case model was developed where all the available ore was processed, subject to tailings dam capacity. The ore processed will be the Probable Reserve, the debris (unclassified material), part of the Inferred Resource and if the plant was underutilised, the low grade material to 'fill the plant'. The Total Case scenario adds value to the Base Case without spending additional capital for the project. The IRR for the Total Case indicated an even more robust project.  The key outputs of the financial analysis for such assumptions are shown in Table 3 below (based on USD$1 = INR67.08).

Table 3- NPV calculation - Total Case Production

 

Pre Tax

Post Tax

 

US$M

US$M

NPV5%

 $47.6

 $28.3

NPV8.48%

 $34.9

 $19.2

NPV10%

 $30.3

 $15.9

IRR

28.0%

20.9%

 

Geomysore is currently engaged in negotiations with relevant landowners to purchase approximately 350 acres of land required for the development of the East Block open pit mine and other associated infrastructure, for example: Processing Plant, Tailing Storage Facility, Waste Rock Dumps and Water Reservoir.  Current expectations of landowners are in excess of the expected market rates and therefore Geomysore is persisting with discussions to achieve a fair market rate for acquisition.

South Kolar Project

Whilst progressing negotiations with landowners regarding the Jonnagiri Gold Project, Geomysore has initiated an Internal Scoping Study ("Scoping Study") on their South Kolar Project ("South Kolar") which is situated in the state of Andhra Pradeshin the southern part of the Kolar Gold Field ("KGF"), which historically produced 25 million ounces of gold over 100years of operation. 

Geomysore initially obtained the Reconnaissance Permit ("RP") on the south Kolar area and subsequently a 20km2 area Prospecting Licence ("PL"), which covered the Mallappakonda gold prospect and extensions of the Chigarungunta gold mine. 

During the PL licensing stage, Geomysore carried out detailed, geological, geochemical and geophysical exploration which was followed with 8,000m of Diamond Core ("DC") and Reverse Circulation ("RC") drilling.  Some of the significant intersections from the Mallappakonda prospect include 21.5m @ 5.5g/t and 19m @ 2.7 g/t.  Based on the drill data, Mining Associates Ltd prepared an ore body model and reported a JORC compliant resource of 195,000 ounces in Measured (33,000 Oz), Indicated (83,000 Oz) and Inferred (79,000 Oz) categories.  Additional resource drilling will be required and is being planned for once and subject to the Mining Leases are granted.

Geomysore has applied for two mining leases.  The first Mallappakonda - Chigarugunta (10km2) and the second Sanganapalli - Bisanattam (10km2), covering the entire PL area.  As both Mining Lease Applications ("MLA") are emanating from the PL, they are valid under the amended mining act.

The Internal Scoping Study ("Scoping Study") includes preliminary beneficiation test work of the Mallappakonda ore body and refinement of the previously prepared ore body model.  Drill core samples of the Mallappakonda prospect have been submitted to the laboratory at the Indian Bureau of Mines at Bangalore and the test work results are expected within 90 days.  During this period technical teams of Geomysore are engaged in assessing the water, power and land infrastructure in and around the project area.  Geomysore plans to submit the Scoping Study once finalised, to the Government of Andhra Pradesh, which is required for further processing of the Mining Lease Applications.

Geomysore has signed a Memorandum of Understanding ("MOU") with the government of Andhra Pradesh to develop both mining leases (subject to approval), into commercially viable mines including fast-tracking, where possible, the approvals process for the mining leases, water and power.

 

The technical information in this statement which relates to the Feasibility Study on Jonnagiri is based on information compiled by Mr Gordon Cunningham who is a full-time consultant with Turnberry Projects Pty Ltd (Johannesburg, South Africa), a Professional Engineer with the Engineering Council of South Africa and a Fellow of the South African Institute of Mining and Metallurgy. Mr Cunningham, as lead FS consultant, consents to the publishing of the information in relation to the FS in the form and context in which it appears.

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

 

For further information, please visit www.lionsgold.com or contact:

 

 

Lionsgold Limited

Cameron Parry (Chief Executive Officer)

 

Tel: +44 (0)203778 0578

 

WH Ireland Limited (Nominated Adviser)

Tim Feather/Ed Allsopp

 

Tel: +44 (0)113394 6600

 

Smaller Company Capital Limited (Joint Broker)

Rupert Williams / Jeremy Woodgate

 

Tel: +44 (0)203651 2911

 

Beaufort Securities Limited (Joint Broker)

Tel: +44 (0)20 7382 8300

Elliot Hance

 

 

Tavistock (Financial PR)

Edward Lee

 

Tel: +44 (0) 207920 3150

 

 

About LIONSGOLD

Lionsgold is a London Stock Exchange AIM market quoted, gold-focused company involved in the exploration, production and retail application of physical gold, with gold assets in India and Finland and a majority owned financial technology company.

Lionsgold's three core focuses are:

·    Strategic partnership with leading India gold exploration and mine development company, Geomysore, in which Lionsgold holds 21.15%;

·    Majority ownership of a financial technology platform providing gold backed online accounts for people to hold and utilise physical gold; and

·    Gold exploration and production in Central Eastern Finland.

 


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