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Cape Lambert Resources Limited 02.05.2019
Term sheet CFE-Patience Draft Terms Sheet

Kipushi Cobalt-Copper Tailings Project Market Update

 

Highlights

 

-          Contractual arrangements between Paragon and Patience finalised.

-          Soludo Lambert’s interest in the Kipushi Project increases to 75%.

-          A maiden JORC compliant resource for the Kipushi Project estimated with copper cobalt tailings of 2.3Mt @ 0.33% co and 1.0% cu, and zinc cobalt tailings of 2.1Mt @ 0.14% co and 1.2% zn for a total of 4.4Mt of treatable tailings.

-          Only approximately half of the available tailings drilled and estimated allowing for significant upside in the resources.

-          Large zinc resources identified in addition to the copper and cobalt providing for significant increase in revenues.

-          Additional exploration target for remainder of the tailings determined.

 

Australian resources and investment company, Cape Lambert Resources Limited (ASX: CFE) (Cape Lambert or the Company) is pleased to provide an update on its Kipushi Cobalt-Copper Tailings Project (Project) in the Democratic Republic of Congo (DRC).

 

Project Joint Venture

 

The Project, located near the town of Kipushi approximately 25km from Lubumbashi, involves the reprocessing of cobalt-copper tailings contained in the Kipushi Tailings Storage Facility (Kipushi TSF) and is operated by Soludo Lambert Mining SAS (Soludo Lambert), under a 50/50 joint venture arrangement between local entity Paragon Mining SARL (Paragon) and Cape Lambert. Paragon has a 70% interest in the Project, increasing to 75%, via a contract it has with La Patience SPRL (Patience) that gives it the right to exploit and process the tailings from the Kipushi TSF and sell the product. The agreement between Patience and Paragon is subject to DRC laws.

 

The Company’s interest in the Project is derived from its 50% interest in Soludo Lambert (refer ASX Announcement dated 3 May 2017 for terms of the joint venture arrangement).

 

On 8 January 2019, the Company’s securities were suspended from official quotation pending an announcement on the Project, and in particular the security of tenure over the Kipushi tailings.

 

Paragon and Patience Settlement Agreement

 

The Company was informed in Q4 2018 that Patience had purported to terminate its agreement with Paragon, on the basis of delays in the production timeline that had resulted from the development change of repairing the existing flotation plant to a much more efficient leaching plant. Whilst a leaching plant provides better Project financial outcomes, this has delayed the revenues Patience, and State-owned mining company La Générale des Carrières et des Mines (Gecamines), had anticipated receiving from the Project in 2018. Paragon disputed the purported termination.

 

Due to the concerns raised, the Company had minimized the work undertaken on the Project since Q4 2018 pending a resolution of the matter, and also engaged in discussions separately with both Patience and Paragon.

 

After a period of lengthy negotiation (which the Company was not party to) on 10 April 2019 Paragon and Patience reached a commercial settlement and executed a settlement agreement (Settlement Agreement). The Settlement Agreement reconfirm the terms of the contractual arrangement that Patience has with Paragon for the exploitation of the tailings from the Kipushi TSF, provides the security of tenure for the Project to recommence and move forward, and for Paragon’s interest in the Project to increase to 75%.

 

The Company is not a party to the Settlement Agreement.

 

Cape Lambert Warranties on Settlement Agreement

 

The Settlement Agreement is subject to the Company providing certain warranties as outlined below. These warranties were negotiated in parallel with the Settlement Agreement and reflect the basis of the Soludo Lambert joint venture arrangement whereby the Company is responsible for funding the working capital and capital costs of the Project. In agreeing to give the warranties and given its 50% interest in Soludo Lambert, the Company considered the uncertainties, risks and likely delays if Paragon and Patience had not reached any agreement and the dispute resolved under DRC law.

 

The warranties provided by the Company pursuant to the Settlement Agreement are:

 

-          make a US$500,000 payment to Patience within 21 days of the date of the Settlement Agreement, being a prepayment repayable from Patience’s future profits from the Project (non-refundable should production not commence);

-          commencing 1 month after the date of the Settlement Agreement, make a US$25,000 monthly payment to Patience, being prepayments repayable from Patience’s future profits from the Project (non-refundable should production not commence);

-          commencing 1 month after the date of the Settlement Agreement, purchase 42,700 tons of tailings per month from Gecamine at a monthly cost US$292,068;

-          within 3 months from the date of the Settlement Agreement, Cape Lambert will provide certification from a financier that project development funding has been approved; and

-          commence production of a newly constructed gravity separation and leach plant no later than 15 months from the date of the Settlement Agreement.

 

Failing to meet the above warranties entitles Patience to terminate the Settlement Agreement and Cape Lambert will lose its interest in the Project.

 

Payments as detailed above are planned to be funded from proceeds of the Company’s finance facility with MEF I, L.P. (Magna or Investor) as announced 17 December 2018 (remaining facility amount of A$6.75m).

 

In line with the release of this announcement, the ASX has advised that the Company’s securities will be reinstated to at the commencement of trading on 2 May 2019.

 

Kipushi Maiden JORC Compliant Resource

 

A maiden resource estimation has been completed for the drilled area representing approximately half of the Kipushi TSF. As the tailings are contained by dam walls at both the east and west ends, the remainder of the area not yet drilled has been included as an exploration target based on interpreted continuance of the river channel profile and expected grade ranges as known from the drilling.

 

Geology

 

The mineralisation consists entirely of post processing tailings from the nearby KIKO process plant. The deposit was interpreted as an artificial sedimentary deposit contained within a natural river valley with dam wall up and down stream.

 

Sampling

 

Samples were taken of a dead stick auger at varying lengths according to auger penetration up to a maximum of 1.4m in length. Sample material was removed from the auger flights for each respective interval. No sub sampling was undertaken.

 

Sample Analysis

 

Samples were analysed by ALS in Lubumbashi and Johannesburg. Multi element analysis using method ME-MS61 and OG62 for over grade samples was used.

 

Drilling

 

Drilling was undertaken with a dead stick auger method using approximately 1 inch flights on a 6 inch shaft.

 

Estimation Methodology

 

An Inverse distance method was used for interpolation of grades with a power of 2.5. A flattened circular search was employed orientated downstream to limit vertical influence of samples within the tailing profile.

 

Cut off Grades

 

No cut-off grades were used to report the tailings resource andthe entire contained tailings deposit within the estimation area was reported. Statistics were run on the assay data set which showed the minimum cobalt grade for the cobalt copper zone is 0.106%, well above potentially economic grade. Similarly, the zinc cobalt zone had only 4 samples out of 244 with zinc grades below 0.5% however they all had corresponding cobalt grade above 0.15%. This allowed the entire deposit to be included as resource and no cutoff grade for reporting was necessary.

 

Classification

 

The resource was classified using a combination of data availability (drill hole spacing), material type continuity, grade continuity and physical constraints on volume. Drilling was nominally on a 75m x 75m diamond pattern for which an indicated category as applied. Where drill holes were missing (subject to interpreted continuity) but still volumetrically constrained within known boundaries, the resource was categorised as inferred.

 

Mining and Metallurgical Considerations

 

Mining is assumed to use either a hydraulic method or via dredge given the semi saturated nature of the deposit. Processing is assumed to use gravity to produce a pre concentrate followed by leaching for a saleable product.

 

Drilling of 47 holes for a total of 432m was completed during the second half of 2018 with all assays received by the end of January 2019. Holes were planned nominally on a 75m x 75m grid using a diamond pattern and were drilled with a dead stick auger method where captured sample was removed from the flights of the auger progressively as the holes were drilled. Some of the hole locations were unable to be accessed due to wet ground conditions, although sufficient holes were drilled to enable the estimation of a resource, refer figure 1 for hole location plan. Cross sections of the drilling are included in Appendix 1, while Appendix 2 includes a list of the assay results as received.

 

The assay results clearly showed a discrete layer of copper cobalt tailings in the top half of the total tails underlain by zinc rich tails deposited from the nearby Kiko mine. The drilling covered less than half of the tails area due to a lack of access from water inundation. The results however reflect what was anticipated.

 

A topographic survey of the TSF was completed in August 2018, which combined with the drilling information provided the basis for the volume calculation of the tailings.

 

The data was imported directly from the lab into Micromine software as a comma delimited file and validated in three dimensions for a number of common errors and inconsistencies. Minor corrections were made where GPS measured surface levels were inconsistent with the digital terrain model or where there were typographical errors in hole location made by the field geologists. The data was also checked for out of range assay values and other possible lab errors.

 

 

Figure 1. Hole Location Plan

 

Interpretation of the data was conducted using a combination of assayed grades and geological logging information particularly in the determination of the tailings basement. This was easily determined due to the contrast of fine grained light grey to dark grey tailings against orange brown pisolitic gravels of the natural basement.

 

In determination of the two different material types, this was also clear because of the sharp changes in zinc and cobalt grades at the boundary of the material types, refer figure 2. These variations were consistent between holes in all directions allowing a base of copper cobalt tailings above older zinc tailings to be accurately determined.

 

 

Figure 2. Grade contrast used in interpretation

 

After consideration of the artificial nature of the deposit it was decided that an inverse distance interpolation method would be best suited. The search ellipse and lengths in each direction were determined by sample density and spacing rather than geological control due to a lack of knowledge of depositional history other than an assumed single discharge point in the northwest corner of the deposit. The search was restricted to a very flat ellipse with 1m in the vertical direction and roughly 1.5 times the hole spacing in both the X and Y directions to intersect sufficient samples for estimation. The estimation was carried out in three successive stages increasing the search area at each stage. An additional 4th stage was included for the zinc material type due to the greater sparsity of drilled data in this area. All model cells were successfully filled at the completion of the resource estimate, refer to figure 3 for an example of the estimation performance.

 

 

Figure 3. Example of estimation performance

 

Density was determined by collecting known volumes of in-situ tailings from several locations and depths within the deposit and individually drying them in an oven to determine an in-situ dry density. Samples that were logged as being overly wet or contaminated in some way were excluded from the calculation with the remainder giving an average result of 1.27.

 

Resource classification was based on data availability and continuity. The copper cobalt material type is classified entirely as indicated and the zinc material type is classified as indicated and inferred where drilling was lacking but volumetric controls were still considered adequate. Table 2 contains the results of the estimated resource.

 

Table 2. Estimation Results

 

MATERIAL TYPE

CATEGORY

VOLUME

DENSITY

TONNES

Co %

Tonnes Co

Cu %

Tonnes Cu

Zn %

Tonnes Zn

 

 

 

 

 

 

 

 

 

 

 

Cobalt Copper

Indicated

1,850,000

1.27

2,330,000

0.33

7,542

1.00

23,652

0.12

2,789

Sub Total

 

1,850,000

1.27

2,330,000

0.33

7,542

1.00

23,652

0.12

2,789

 

 

 

 

 

 

 

 

 

 

 

Zinc Cobalt

Indicated

1,130,000

1.27

1,450,000

0.14

2,008

0.60

8,568

1.2

17,306

Zinc Cobalt

Inferred

500,000

1.27

630,000

0.13

819

0.55

3,482

1.3

8,191

Sub Total

 

1,630,000

1.27

2,080,000

0.137

2,827

0.58

12,050

1.23

25,497

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

3,480,000

 

4,410,000

 

10,369

 

35,702

 

28,286

 

In addition, the remainder of the tailings downstream up to the confining dam wall left undrilled have been estimated using an interpreted continuance of the river valley profileand applying the average grade ranges of the resultsfrom the resource estimation as a direct extension of the estimated deposit. The volume was determined using a 3 dimensional wireframe to define the river valley and an upper surface as mapped by the topographic survey. The volume is the material calculated between these two surfaces from the eastern end of the resource down to the confining dam wall at the western end of the tailings. The target is downstream from the cobalt copper tailings and is expected to be a continuance of this material type.

 

The resultant exploration target is 1.8 – 2.0 million tonnes with between 0.3% and 0.35% cobalt, 1.0% – 1.1% copper and 0.1% – 0.15% zinc. The exploration target is based on a proposed exploration programme which will extend directly on from the completed programme using the same drilling method and hole spacing within the same geological terrain, that being the continued downstream flow of the tailings contained by the eastern dam wall. Drilling to support this exploration target is anticipated during the next dry season (from now until November 2019) subject to availability of resources and progression of the project. The potential quantity and grade of the exploration target is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource. It is uncertain if further exploration will result in the estimation of a Mineral Resource.

 

Commenting on the resolution of the Patience matter, Cape Lambert’s Executive Chairman, Mr Tony Sage, said “ In the interest of all Cape Lambert shareholders, I am very pleased to bring this matter to a satisfactory resolution so that trading of the Company’s shares can recommence He added “with the matter now resolved, and with the maiden resource estimate inclusive of zinc for the tailings being issued, Cape Lambert can now refocus on developing the Kipushi Project. The resource together with the exploration target is significantly larger than expected and the planned changes to the plant design should result in a more efficient and more profitable project overall to the benefit of all shareholders.

 

Competent Persons Statement

 

The contents of this Announcement relating to Exploration Results, Exploration Target and Resource Estimation are based on information compiled by Olaf Frederickson, a Member of the Australasian Institute of Mining and Metallurgy. Mr Frederickson is a consultant to Cape Lambert and has sufficient experience relevant to the style of mineralisation and the deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Frederickson consents to the inclusion in this report of the matters compiled by him in the form and context in which they appear.

 

This announcement may contain forecasts and forward looking information. Such forecasts, projections and information are not a guarantee of future performance and may involve unknown risks and uncertainties. Actual results and developments will almost certainly differ materially from those expressed or implied. Cape Lambert has not audited or investigated the accuracy or completeness of the information, statements and opinions contained in this announcement. Accordingly, to the maximum extent permitted by applicable laws, Cape Lambert makes no representation and can give no assurance, guarantee or warranty, express or implied, as to, and takes no responsibility and assumes no liability for, the authenticity, validity, accuracy, suitability or completeness of, or any errors in or omission, from any information, statement or opinion contained in this announcement.

 

Yours faithfully

Cape Lambert Resources Limited

 

Tony Sage

Executive Chairman

 

Cape Lambert Contact

Investor Relations

Phone: +61 8 9380 9555

Email: info@capelam.com.au

www.capelam.com.au

 

Please follow the link to view entire original news:

https://www.asx.com.au/asxpdf/20190502/pdf/444scflhmb5rnx.pdf

 

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