Volt Resources higher on news of potential purchase of second African gold project
Thursday, 21 May 2020
Volt Resources Ltd (ASX:VRC) has entered a binding term sheet to conditionally acquire an 85% interest in the Luiri Hill Gold Project in south-central Zambia, 120 kilometres from the capital Lusaka. Together with the proposed acquisition of a gold project in Guinea announced last week, purchasing the Luiri project will further diversify Volt's asset base with the precious metal, which has been proving its strength in difficult market conditions. As well as a highly prospective grassroots exploration project in Guinea, Luiri is an advanced gold project that has near-term development potential. "Transforming Volt" Volt chairman Asimwe Kabunga said: “As a shareholder, I am excited about the opportunity for Volt to develop its world-class graphite business in Tanzania combined with the potential to become a gold producer in Zambia in the near future. “The board is working with the management team to realise our goal to transform Volt into a diversified mineral producer. “Our Zambian partners in the Luiri Hill Gold Project have the local knowledge and important relationships which can be utilised to add considerable value if the acquisition proceeds.” Transaction details Volt has entered a binding term sheet to acquire the 85% interest. The project licences are held by two entities incorporated in Zambia, Cupriferous Resources Ltd and Bukimo Mining Limited, with Volt proposing both entities will be acquired by an Australian parent entity which is to be incorporated by Volt prior to settlement. Luiri will be owned 85% by Volt and 15% by the project vendors, who have committed to assist with government and local community engagement using their deep relationship with the local communities and invaluable connection within the Zambian Government. The consideration for Volt’s acquisition comprises: The issue of A$3.75 million ordinary fully paid shares on settlement of the acquisition, with the number of shares to be issued calculated based on the 5 trading day volume-weighted average price of Volt securities on ASX in the period immediately prior to settlement; and Payment of A$250,000 in cash within 30 days of settlement occurring. Completion of the acquisition is subject to the satisfactory completion of Volt’s due diligence enquiries, the execution of a share sale agreement in a form acceptable to Volt, as well as the approval of Volt shareholders to the issue of the consideration shares to be sought at an upcoming meeting of Volt shareholders expected to be held in late June. Luiri Hill Gold Project location Advanced gold project More than US$20 million has been spent to date on the project, including extensive RC and drilling programs, mineral resource reports, metallurgical test-work programs and feasibility studies. The project also reportedly has significant existing stockpiles of gold-bearing ore, which the company considers may be material in terms of providing a funding mechanism for the completion/updating of studies to progress to a mining licence, advance any remaining environmental and other approvals and transition to a development decision. Volt is confident Luiri has the potential to be developed into a medium scale gold mine in the short term. Managing director Trevor Matthews said: “The Luiri Hill Gold Project is at an advanced stage supported by a number of studies. “The opportunity to realise some cash flow from the sale of the existing on-site stockpiles to provide early funding is unique. “Given the substantial increase in the gold price in the past year combined with the project’s potential supports the ability to debt fund the project development to minimise future equity requirements and can create real long-term value for shareholders.” As with the existing mineral resource estimates, the company will access the site to physically inspect stockpiles as part of its due diligence investigations. Next steps With most of the mineral resource near-surface and therefore suitable for open-cut mining, Volt considers there is an opportunity with the current and forecast gold price to reduce the cut-off grade and increase the ounces available for extraction from what has previously been used for the purposes of estimating that mineral resource. In addition to the Dunrobin and Matala project area, a further 24 gold prospects have been identified within the area of licence as being targets for further exploration work. Volt is also exploring the role Yantai Xinhai Machinery can play in development of the Luiri Hill Gold Project, considering their arrangement of vendor financing for the previous owners of Luiri and longstanding relationship with Volt as the preferred processing plant constructor for the Bunyu Stage 1 Graphite Project.