Acquisition of Bushveld Resources and Fundraising

RNS Number : 4112C

Obtala Resources Limited

07 March 2011

 



Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Acquisition of Interest in 2 Billion Tonne Magnetite-Hosted Iron Ore Deposit, South Africa

and fundraising of £6,000,000

The Board of Obtala Resources Limited, the resources investment, development and production company, today announces that it has agreed to acquire a 50% interest in the issued share capital of Bushveld Resources Limited ("BRL") through Obtala's 100% owned subsidiary Bendell Enterprises Ltd ("Bendell") (the "Acquisition"). Consideration of US$11.5 million is to be satisfied by US$500,000 in cash and the issue of 11,949,378 new ordinary shares in the Company at a price of 57.0 pence per share. Further consideration of $20 million in either shares in the Company or cash (at the discretion of Obtala) may be payable as described below. Obtala has also raised £6,000,000 through the subscription of 12,000,000 new ordinary shares in the Company at a price of 50 pence per share.

Highlights:

·      Bendell has agreed to acquire a 50% of the entire issued share capital of Bushveld Resources Limited ("BRL"), a sub Saharan African focused mining group with interests in iron ore projects in South Africa for a consideration of US$11.5million. A further contingent payment may arise as described below

·       32% and 34.25% interest in the underlying subsidiaries that hold the licences over the Mokopane Iron Ore Project, and cover 7,409 hectares

·       BRL Geologists have identified potential for >2Billion tons of iron ore

·       Magnetite hosted iron ore deposit with vanadium and titanium

·       Deposit located in the Limpopo Province of South Africa, within a highly established mining region; located in close proximity to the world's largest open pit platinum mine and associated infrastructure

·      Favourable host rocks for iron mineralisation, with several potentially economic  magnetite seams, traced over 10km by BRL geologists

·       Two main seams are well developed with thicknesses of 70m and 8m

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

·       18 month operational objectives; Pre-feasibility study, mineralogical and metallurgical test-work, and advanced drilling campaign

Frank Scolaro, Chairman of Obtala, commented "The Mokopane Iron Ore deposit is located in one of the most advanced mining regions in the world with the potential for over two billion tonnes of magnetite resource already identified to date.  Obtala sees the Mokopane project as having the potential to become a significant iron mine that can deliver its end products to customers from within a country that already has an advanced infrastructure framework established for the natural resource industry. Our objective will be to rapidly delineate Mokopane and the recently acquired Greenhill tin project, into economical mines located within the established mining regime of the Republic of South Africa. Obtala remains fully funded and debt free with a strong cash balance."

Obtala Resources Limited 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]

Bushveld Resources Limited ("BRL") Company Information

Bushveld Resources Limited is a private Guernsey registered company focused on evaluating and developing iron ore projects in sub Saharan Africa. BRL is the holding company of two subsidiary companies in South Africa which hold 64% and 68.5% interests respectively in two prospecting licences over the Mokopane iron ore project. The remaining 36% and 31.5% is held by Black Empowerment partners in South Africa. Through its subsidiaries BRL holds the following licences:

	Country	BRL % Interest	Licence Type	Area Km2	Expiry
License 1	South Africa	64.0	Prospecting	55.45	Under renewal*
License 2	South Africa	68.5	Prospecting	18.64	Under renewal*

*The renewal process underway is an administrative matter and the Directors are of the opinion that the risk of the licences not being renewed is minimal. Completion of the agreement is conditional on the successful renewal of these licences.

Details of the Acquisition

Bendell has agreed to acquire 5,000 shares in BRL (representing 50% of the issued share capital of BRL) from Mineral Wealth International Limited ("MWI") for an aggregate consideration of US$11.5 million. The consideration will be satisfied by $500,000 in cash and the issue of 11,949,378 new ordinary shares in Obtala at a price of 57.0 pence per share. MWI has agreed not to dispose of its shares in Obtala for one year from completion of the Acquisition, and thereafter via an orderly market agreement for a further year. The cash payment of $500,000 will be used by BRL for working capital purposes.

Completion of the Acquisition is conditional upon Obtala being satisfied with its due diligence into BRL's assets with completion expected to be completed within 3 months.

Within 12 months of the date of this announcement, Obtala has agreed to use all reasonable endeavours to procure that BRL's shares are admitted to the AIM market of the London Stock Exchange (and Obtala shall be responsible for all costs associated with such admission). If a listing is not forthcoming within 12 months then Obtala has agreed to pay MWI further consideration of $20 million in either shares in the capital of Obtala or cash (at the discretion of Obtala).

MWI will act as the operator and manager of the project and engages the same technical personnel as listed in the BRL Management section below.

As a result of the Acquisition, Bendell will be an equal shareholder in BRL with the other principal shareholder, MWI who will also hold 50%. Obtala will have the right to Board representation with BRL 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 and has capitalised expenditure within the balance sheet of approximately US$1,500,000 financed by way of a loan from its parent company.

Bendell has also entered into a shareholders' agreement with MWI, pursuant to which:

·     MWI and BRL give certain warranties in favour of Bendell relating to BRL and its subsidiaries (the "Group") and the licences held by the Group;

·     MWI will procure that certain decisions are not taken by the Group without the consent of Bendell;

·     MWI and BRL will procure that certain financial information relating to the Group is provided to Bendell;

·     Neither MWI nor Bendell will transfer their shares in BRL without following a pre-emption procedure under which such shares are offered to existing shareholders first;

·     If a third party offers to purchase 50% or more of the issued share capital, the remaining shareholder(s) has the option to require that such offer is extended to them; and

·     Each of MWI and Bendell shall be entitled to appoint at least one director of BRL.

Issue of Equity

The Company has issued 12,000,000 new ordinary shares of 1p each in respect of the fundraising at a price of 50 pence per share. The new shares will rank pari passu with all existing ordinary shares, and dealings on AIM are expected to commence on 10 March 2011. Following the issue of the subscription shares, there will be 236,079,974 ordinary shares in issue.

The Company will issue 11,949,378 new ordinary shares of 1p each, as part of the consideration for the Acquisition at a price of 57.0 pence per share. The issue of these consideration shares is subject to the completion of the conditions under the Acquisition agreement. This is principally, Obtala being satisfied with the due diligence on BRL's assets. This is expected to be completed within 3 months.

A further announcement will be made upon completion of the Acquisition detailing the number of shares in issue at that date.

Description of the assets

(Information supplied by BRL geologists)

BRL is exploring a new, potentially world‐class magnetite-hosted iron ore deposit in the Limpopo Province, South Africa, which has the potential for hosting >2 Billion tons of iron ore. The Mokopane iron ore portfolio, comprise two prospecting licences covering a total of approximately 7,409 hectares (74.09 km2). The project is located, approximately 60km from Polokwane and is in close proximity to several large scale mining operations and associated mining infrastructure.

The main resource is contained within two outcropping magnetite layers. These two distinct magnetite layers, 8m and 70m thick respectively, are amenable to opencast mining, initially along a consistent identified strike length in excess of 10 km.

The stratigraphically lower Main Layer ("ML") is comparable to the Main Magnetite Layer mined within the Bushveld Complex for vanadium and iron, although at Mokopane the layer is 8m thick compared to the average of 2m as found in layers within the Bushveld Complex. Average vanadium (V₂O₅) content is in the range of 0.9% ‐ 1.4%. Crushing and milling procedures are expected to be similar to those used by other producers operating in the region where pyro‐metallurgical treatment of ore to produce V₂O₅ and in some cases pig iron, is already being undertaken.

The Upper Layer ("UL") is primarily a magnetite iron ore resource with titanium (~9.55% TiO₂) and lesser amounts of V₂O₅ (~0.09% V₂O₅). This layer is exceptionally thick at ~70m, with a weathered zone down to +/‐20m, which is more amenable to metallurgical treatment without the need for fine milling.

The mineralisation delineated in the southern portion of the project area during the exploration programme has been classified by BRL as an Inferred Mineral Resource whereas to the north the mineralisation is classified as Mineral Deposit at this stage.

Upper Layer

(Estimated down to 150m below surface)

SAMREC Mineral Class	Tonnes (Mt)	Fe2O3 (%)	V2O5 (%)	TiO2 (%)
Inferred Mineral Resource	866	41.01	0.09	9.55
Mineral Deposit	1,122	Est 41.01	Est 0.09	Est 9.55
Total Resource	1,988

Main Layer

(Estimated down to 50m below surface)

SAMREC Mineral Class	Tonnes (Mt)	Fe2O3 (%)	V2O5 (%)	TiO2 (%)
Inferred Mineral Resource	32.71	67.89	0.79	10.14
Mineral Deposit	16.92	Est 67.89	Est 0.79	Est 10.14
Total Resource	49.63

Total Resource (Upper + Main Layers)  = (1,988 + 49.63)Mt = 2,037.63Mt

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.

Project Work Plan

Over the next 18 months, BRL's programme will mainly be focused on:

·     An extensive drilling programme to establish an inferred/indicated resource and to investigate the potential of weathered and eluvial resources

·     Beneficiation testwork - extensive expertise and experience exists within South Africa in the exploitation and beneficiation of vanadium-titanium-magnetite ("VTM") deposits. Several mines extracting mainly vanadium from similar but narrower magnetite layers are currently operating in the region

o  Main Layer: The ore of the Main layer is a similar type and of comparable quality to that used as feedstock by Highveld Steel (owned by Evraz)

o  Upper Layer: Indications are that the Upper Layer may be easier to beneficiate than the Main Layer

·     A prefeasibility study to determine mining and metallurgical methods and the costs thereof

BRL 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 investmentbanking 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.

Joey Borromeo - Executive Director

Filipino national, resident in Hong Kong, with extensive capital markets experience. His professional experience includes

-      Managing Director of Spruance Investments Limited, a corporate finance advisory firm for Asian and African natural resource companies;

-      President of Credit Lyonnais Securities (Philippines), Director for Equity Capital Markets of Union Bank of Switzerland, General Manager of Investment and Commercial Banking of ABN AMRO Bank (Philippines), Vice President for gold and eurodollar futures trading Citibank N.A. Philippines.

-      Jose has years of experience in raising funds for clients in the international capital markets, including leading engagement teams to undertake initial public offerings for companies in the Hong Kong, Philippine and UK markets.   

Peter Cheshire - BSc. Hon. Geol., GDE Min. Eng. Wits: EXPLORATION MANAGER

A geologist who qualified with BSc Hons Geology in Southampton in 1976 and a GDE (Min. Eng.) from the University of the Witwatersrand in 1990.

-      He specialises in technical aspects and project co-ordination/management including structural geological, geomorphology, hydro-geological and environmental investigations.

-      14 years at JCI working initially in field geology and then as an Exploration Manager and has extensive experience in gold, platinum and base metal exploration.

-      For the past 15 years has run his own company that undertakes geological and hydro-geological consultancy services which include exploration and mining projects, mineral beneficiation and manufacturing plants, tailings and solid waste dams, landfill as well as river and wetland systems.

-      Peter has worked in South Africa, Zambia and Zimbabwe.

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.

 

END

 

 

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