Operations and Explorations Q4 Update

Asa Resource Group plc

("Asa Resource", "the Group" or "the Company")


 Operations and Explorations Q4 Update
(1 January to 31 March 2017)

 


Asa Resource is pleased to provide an update on operations and exploration activity for the quarter ended 31 March 2017, including an overview of recent events post the period end.

 

Quarterly operational highlights
The detailed performance figures for each mine are quoted in the latter part of this update and relevant additional management commentary follows the highlights.

ASA Gold - Freda Rebecca Gold Mine (Zimbabwe)

 

·      Revenue decreased by 16% to $15.5m (Q3: $18.4m)

·      Tonnes milled decreased by 27% to 231,739t (Q3: 319,026t)

·      Average feed grade increased to 2.04g/t (Q3: 1.78g/t)

·      Gold recovery rate increased by 0.4% to 83.2% (Q3: 82.8%)

·      12,462oz of gold produced in Q4 (Q3: 15,365oz)

·      All-in sustaining C3 costs increased by 22% to US$1,291/oz (Q3: US$1,055/oz)

·      C1 cash costs were 16% higher at US$1,113/oz (Q3: US$956/oz).

·      Average gold price received was US$1,241/oz (Q3: US$1,195/oz)

·      Zindico Consortium legal update: FRGM requests High Court to dispose of the matter by dismissing the claim with punitive costs

·      Business Interruption Claim progressing

 

ASA Gold - Zani-Kodo JV (Democratic Republic of Congo)

 

·      Three out of four exploration permits renewed until 2029

·      Funding options and engagement with potential JV partners ongoing

·      Discussions with the DRC Minister for Mines and local partners continue



ASA Nickel - Trojan Nickel Mine (Zimbabwe)

·      Production of nickel-in-concentrate increased by 13% to 1,771t (Q3: 1,571t)

·      Head grade was 13% higher at 1.684% (Q3: 1.495%)

·      Recovery was 4% higher at 89.2% (Q3: 85.6%)

·      Average net realised nickel-in-concentrate price was US$6,675/t (Q3: US$7,004/t), reflecting a 5% decrease in global nickel prices this quarter

·      Nickel sales volume were 1% higher at 1,631t (Q3: 1,610t)

·      C1 cash costs for nickel-in-concentrate decreased by 20% to US$4,955/t (Q3: US$6,159/t)

·      All-in sustaining C3 costs of nickel-in-concentrate decreased by 31% to US$4,549/t (Q3: US$6,554/t)

·      Re-deepening project progress continues to extend life of mine by 5 years

·      Smelter Restart Project is 82% complete

 

ASA Diamonds - Klipspringer (South Africa) 

 

·      New coarse tailings programme started in January 2017

·      Average price achieved increased to $32.86/ct (Q3: $17.91/ct) but this was offset by grade and recovery

·      Metallurgical testing of tailings underway to understand why sampled grade not achieved

 

Group financial update

 

In light of recent circumstances, the Board considers it appropriate to update the market as to its financial performance for the year ended 31 March 2017. Please note that these figures are unaudited and may be subject to change:

·    Revenue up 0.6% to $122.0m (FY2016: $121.3m)

·    EBITDA increased to $20.5m (FY2016: $0.3m loss), a significant improvement on 2016

·    Both Freda Rebecca and BNC operating profitably

·    Cash balance at 31 March 2017 $2.1m (FY2016: $7.4m), decline in cash due mainly to mismanagement of cashflows and capital expenditure at BNC, Freda Rebecca and investment on Zani Kodo gold project

·    Cash generated from operations of $17.8m (FY2016: $0.7m), a 90% (FY2016: 100%) conversion ratio of EBITDA to cash

·    Total assets (before any impairments as described below)  of $235.5m (FY2016: $221.3m) and total liabilities of $100m (FY2016: $85m)

 

Potential impairments:

·    Zani Kodo has an intangible asset with a carrying value of $56.9m (FY2016: $55.2m). The auditors are seeking to validate the full value of this investment in greater detail. This may lead to a revaluation and a possible partial impairment.

·     SEMHKAT is a copper intangible asset with a carrying value of $17.9m (FY2016: $17.8m) which may also be subject to revision by the Group's auditors, Ernst & Young.

·   A review of intercompany loan balances across the Group is underway and this may lead to other non-cash adjustments within the Group.

 

OVERVIEW BY MR DAVID MURANGARI
In view of the dismissal of the Group's previous finance director, Mr Yim Kwan, and previous chief executive officer, Mr Yat Hoi Ning, Mr David Murangari, the Group's non-executive chairman, in conjunction with Toindepi Muganyi, interim chief executive officer, provide the following commentary and review of operations:

"Recent events have without question been a major distraction for the Group and shareholders will understandably be seeking reassurances about how the Board is managing these matters and short-term plans.

The action taken has not been easy but was necessary to protect shareholders' interests and to maintain the long-term sustainability of the Group's operations and assets. Communities and those who work for Asa Resource depend on the Group to protect their livelihoods and the Group has a duty to eradicate anything that brings the Group or any subsidiary into disrepute. Shareholders should take some comfort from the urgency of the directors' actions and the speed with which the board has sought to restore corporate governance, both within Zimbabwe and across the Group.

By dismissing the previous executives, we have given control to local management in Zimbabwe - this has had a very positive effect upon local management and employees at both BNC and FRGM. Freda Rebecca and Bindura Nickel are first-class assets with highly experienced management. Their success is the Group's success.

The promotion of both Toindepi Muganyi and Batirai Manhando is invaluable as they have unrivalled knowledge of BNC and Freda Rebecca operations as well as high standing within the Zimbabwean mining community.

There is no doubt that this last quarter's performance at Freda Rebecca has been adversely affected by the policies and financial mismanagement imposed by the previous executives. Demoralisation amongst the workforces was a clear effect of imposed changes. However, the rapid reaction to events and a thorough review of financial controls by Carla Tait at Group level and Jan Lampen at operational level gives the board confidence that it can manage its exposure and stabilise its finances.

The board and senior management have wasted no time in coming to grips with its challenges and has received overwhelming endorsement for its actions from its employees, partners and connections right across Zimbabwe.

Given what has occurred lately, I take the opportunity to comment on these as well as specifics of Q4 (FY2017) performance.

CORPORATE
Corporate costs have been reducing for some time and whilst these are very necessary, a more responsible approach will be taken to ensure quality controls and corporate governance are maintained to the highest levels. In addition, retaining and motivating the most experienced workforce is the lifeblood of a successful mining operation and management has already started reviewing current resources to ensure previous targets and plans can be maintained.

An intense review of procurement policies is underway, where transactional transparency, stock levels, suppliers, quality, pricing and timing will all be scrutinised very closely. Decision-making for this vital part of the supply chain must be left to senior management operating under proper controls, and not by unqualified staff appointed by executives.

The Group's office in Hong Kong has been closed and staff will be retrenched. Relevant functions will be absorbed into operations at Zimbabwe or South Africa. These retrenchments and changes will further reduce overheads.

The board has already initiated a review of its ancillary activities including agribusiness and any assets that are not core to our main mining operations. For example, farming land that is under our management may be leased out or become part of our community indigenisation programmes by encouraging miners and other members of the community to farm it for local benefit.

Group cash has been constrained by the currency restrictions imposed by the Reserve Bank of Zimbabwe and ongoing issues at Freda Rebecca. There are a number of outstanding creditors, mainly relating to legacy litigation, normal corporate expenses and unpaid directors' fees and salaries. The board has several refinancing options under consideration and  amounts outstanding will be paid in due course.

In terms of the broader enquiry into alleged mismanagement of funds, the Board is satisfied that it has established that the total amount of Group funds unaccounted for does not exceed $4.3m. Of this amount, $2.7m relates to the year ended 31 March 2016 and $1.6m to the year ended 31 March 2017. The sum of $1.6m in 2017 has been traced to two Group companies administered from Hong Kong and the board is making progress in its investigations. Our auditors, Ernst & Young, are still investigating a $2.7m transfer in 2015 and is seeking access to all records held in Hong Kong. Should it transpire that the funds were used for any purpose other than that they were intended for, the board will aggressively pursue their recovery and take action against those involved. 

Since the launch of this enquiry, it has been especially encouraging to receive so much support from within Zimbabwe and a number of approaches to the Group and its subsidiaries have been received from interested parties either to form joint venture partnerships, purchase assets, extend loans or offer temporary financial support, should it be required.

We would ask shareholders to be patient whilst operations are normalised. We remain optimistic that the previous targets outlined for Freda Rebecca are achievable over the medium term.

ASA GOLD

Freda Rebecca (Zimbabwe)

While the price of gold increased steadily in Q4 FY2017, major challenges arose due to low availability of hauling units in consequence of the mismanagement of Freda Rebecca's working capital by the previous executives and their appointees. This resulted in contractors not being paid and staff threatening to strike. The boards of FRGM and Asa Resource quickly intervened once the extent of the mismanagement was known. Meetings with the workers council and key contractors were convened and, after giving reassurances, staff morale improved quickly and contractors returned to site. We can confirm that operations are slowly being normalised.

The impact of this was a fall in tonnes milled (down 27%), a 16% drop in revenues to $15.5m and a 19% decrease in the amount of gold produced to 12,462 oz. This contributed to C1 and C3 costs also increasing as a result of lower volumes being processed. Freda Rebecca senior management expects this trend to be reversed in coming quarters. Recovery rates were steady with head grade up to 2.04g/t (Q3: 1.78g/t).

The strategy for the mills is also being reversed. Freda Rebecca has two large and three additional smaller mills acquired within the group assets with the following annual capacity to process ore:

Main Plant
Mill (#1)    - 600,000/t
Mill (#2)    - 600,000/t                              Total 1.2m/t per annum

CIL Plant 2 
Mill (#3)    - 300,000/t
Mill (#4)    - 300,000/t
Mill (#5)    - 300,000/t                              Total 0.9m/t per annum

Currently Freda Rebecca is operating three smaller mills. The two larger mills have been working on an intermittent basis for around 10 months. Mill (#2) is expected to  be repaired at a cost of cUS$1.5 million and fully commissioned by September 2017. For Mill (#1) to run at full capacity it requires replacement parts - these have been sourced and are in the process of being delivered from outside Zimbabwe. This repair and refurbishment has been initiated by FRGM to reverse the former executives decision of potential replacement with a mill manufactured in China. The combined total processing capacity will be 2.1m/t per annum and more than adequate to match the mine capacity of 1.8m/t per annum. Once mill and mine capacities are aligned, gold production
should increase steadily in line with the targets indicated previously - 70,000 to 80,000 oz within six months increasing to over 90,000 oz within a year. Achieving this full mill capacity is a key objective for the Group.

All-in-sustaining costs were on a positive downward trend up until this quarter and, once mill capacity and contractors' issues are fully addressed, we remain confident of reaching our target of AISC target of $1,000/oz this year. With a gold price of over $1,200/oz and higher production, Freda Rebecca's margins and sales will become more sustainable. It is worth reminding shareholders that in Q3 last year, Freda Rebecca reported gold production of 18,506/oz with AISC of $988/oz.

Freda Rebecca made an insurance claim following a serious incident in 2016. It is awaiting a final settlement figure for a secondary claim to cover business interruption. The final approximate value is expected to be between US$1 and US$2m and may take several months to conclude.

Freda Rebecca continues to earn export credits. For the year ended 31 March 2017 it will have received US$1.3m in cash rebates. In the next 12 months it is expected that FRGM will earn more than US$3.6m in cash rebates.

Zindico Consortium lawsuit
The applicants who brought a claim by Zindico Consortium ("Zindico") in January this year failed to present their Heads of Argument within the prescribed time set by the law. FRGM filed Heads of Argument in time, which technically means Zindico is barred from being heard by the court and can no longer file an answering affidavit. A more detailed explanation of the case is provided in the Management Report below.

Zani-Kodo JV (Democratic Republic of Congo)

The Group continues to maintain its exploration permits in the Zani-Kodo and engage regularly with its JV Partner and the DRC's Ministry of Mines. Licence fees have been brought up to date with approximately $80,000 due to creditors as at 31 March 2017 - these sums are in line with the Group's normal level of creditors. Separately, exploratory talks regarding JV opportunities and potential funding strategies continue with various entities. Progress has been delayed in establishing the gravity plant at Zani-Kodo whilst other operational matters are resolved in DRC.

Detailed information on the Group's concessions has been updated recently and can be viewed on our new website here: http://www.asaresourcegroup.com/commodities/asa-gold/zani-kodo

 

ASA NICKEL
Trojan Nickel Mine (Zimbabwe)
 

In contrast to Freda Rebecca, the performance of Trojan for Q4 FY17 was encouraging. Most results were ahead of target with higher nickel production, lower operating costs, strong recoveries and head grades. The standout achievement was the control of costs: C1 decreased by 20% to US$4,955/t and all-in-sustaining C3 costs by an impressive 31% to US$4,549/t (Q3 FY17: US$6,554/t). Q4's performance was in part a result of adjustments to the mine plan, where more massives and less disseminated ore were mined. As this plan was not sustainable in the long-term, BNC management is reverting to its previously accepted plan to maintain a blend of massive and disseminated ores, which sustains the life of mine.

Over the last few years BNC has outsourced its development which has not proven as successful as expected. Outside contactors can be unreliable and often unable to respond to fluctuating equipment needs. This contract has been terminated and development and internal haulage will be handled internally.

BNC is also currently reassessing its business plan: review of equipment, mineral resources, systems and structures with a view to improving their overall performance in the new financial year. The focus will be on increasing equipment uptime, asset utilisation, productivity targets and cost controls.

Since March 2017, the price of nickel has dropped on the back of news from the Philippines and Indonesia that their respective governments may be softening their stance on the curtailment of shipments of unprocessed ore. It is a reasonable expectation that the nickel price may remain range-bound for the next few quarters. Given this lower price environment, BNC will need to keep their operating costs (C3) around or below US$5,000/t.

Re-deepening project
Since the decision to progress the final phase of the re-deepening project was taken in December 2016, progress has continued. It is costing approximately $5m to complete and will extend the shaft system by 240m from 37/0 to 45/0 level. While this project is on-going, management is exploring ways to mitigate its impact on production. On completion, it would extend the life of the mine by about 5 years and allow access to drill for ore reserves beyond 45/0 level and potentially provide higher grades in advance of the smelter restart. There is a more detailed progress update at the end of this announcement.

Smelter Restart Project
The pace of progress has been carefully managed to prioritise cash flow requirements. It is currently 82% complete. It is important to emphasise that the long-term strategic and economic value of the smelter is when the nickel price is more elevated than it is at present (the original plan worked on a nickel price of $16,250/t). Operation of the smelter will require significant, additional, costly power supplies and the overall operating cost has a major bearing upon it coming into operation. BNC negotiated a 12-month moratorium on the principal of its bond repayments - these will be paid quarterly from September 2017 and a sinking fund to provide for them is in place. Bondholders have been kept up to date on developments in relation to the smelter programme.

In the meantime, BNC continues to explore conversations with third party nickel producers in the region. As the price of nickel recovers, more concentrate will come to the market and an off-take agreement with another producer would be positive for the economics of our smelter.

There is a detailed update at the end of this announcement.

 

ASA DIAMONDS

Klipspringer (South Africa) 

The tailings retreatment programme has been in transition. In January 2017, Gemcore (JV partner) commenced a 3-year coarse tailings programme on Marsfontein coarse tailings. When De Beers operated the mine in the late 90s, Marsfontein was one of the highest-grade diamond mines in the world. The tailings area is extensive and, while the bulk sampling results were encouraging, there have been issues in locating those parts of the tailings dump that match the sampling tests.

However, while results have been more encouraging recently, continuing quality issues cannot be ruled out.

The Group reported previously that it is seeking opportunities to introduce a new BEE JV partner to re-start Klipspringer's underground mine operation. Discussions with potential operators are ongoing.

 

ASA COPPER 

As part of the Board's review, it is seeking full and detailed clarification on all of its JV partnerships including those held with Hailiang. There is little to add until this process has been completed. Further information is available on our website

 

AGRIBUSINESS
The Group's agribusiness assets are under review and we will update the market in due course.

MANAGEMENT REPORTS

ASA Gold - Freda Rebecca Gold (Zimbabwe)

 



Quarter ended March 2017

Quarter ended Dec 2016

Quarter ended Sept 2016

Quarter ended June 2016

Tonnes mined

t

293,705

311,349

363,082

321,630

Tonnes milled

t

231,739

319,026

262,633

274,474

Head grade

g/t

2.04

1.78

2.28

1.96

Recovery

%

83

83

84

83

Gold sales

oz

12,462

15,365

15,904

14,463

Average gold price received

US$/oz

1,241

1,195

1,341

1,275

Cash cost (C1)

US$/oz

1,113

956

944

993

All-in sustaining cost (C3)

US$/oz

1,291

1,055

1,115

1,153

 

Figures shown are unaudited and may vary upon final audit.

1.     C1 cash cost includes costs for mining, processing, administration, accounting movements for stockpiles and gold-in-circuit, and net proceeds from by-product credits. C1 costs exclude capital costs for exploration, mine development or processing mill capital works and royalties.

2.     C3 (all-in sustaining) costs reflects C1 costs plus depreciation and amortisation, thus incorporating the capital cost of production plus interest, other indirect costs and royalties. All-in sustaining costs represent all costs attributable to gold production over the period.

 

Management comments - Freda Rebecca

Management offers additional comments on their operation performance:

 

·      Gold production decreased by 19% in Q4 FY2017 to 12,462 oz compared to 15,365oz in the previous quarter. The decrease in production was mainly attributed to a 27% decrease in tonnes milled.

·      Tonnes mined for the quarter under review decreased by 6% to 293,705t from 311,349t in Q3 FY2017. The major challenge was low availability of hauling units driven by working capital challenges experienced by outsourced contractors, a direct result of FRGM cash flow mismanagement.

·      Tonnes milled decreased by 27% to 231,739t in Q4 FY2017 (Q3 FY2017 - 319,026t) due to extended breakdown of Mills 1 and 2.

·      The feed grade for Q4 FY2017 increased by 15% to 2.04g/t from 1.78g/t in Q3 FY2017. The increase is due to the introduction of 15 new stopes that have increased confidence level.

·      Q4 FY2017 C1 Cash cost increased by 16% to $1,113/oz (Q3 FY2017 US$956/oz) - as a result of a 19% decrease in gold production. Consequently, all-in sustaining costs realised an increase of 22% from $1,055/oz in Q3 FY2017 to $1,291/oz.

 

Zindico Consortium lawsuit - detailed update
After service of summons by Zindico (or the "Applicant"), FRGM filed a notice to defend and served on their lawyers of record. FRGM also applied through the court for further particulars and details about the claim including: the identities of the members of the consortium, a signed copy of the alleged agreement to enable FRGM to know the nature of the claim and place it in a position to know what it was responding to. Zindico failed to respond within the prescribed time set by the law. FRGM then engaged and instructed Advocate Mpofu, through its lawyers of record, to file Heads of Argument and these were duly issued out of the High Court and served on the Applicant's legal practitioners. Once FRGM had filed its Heads of Argument, Zindico is technically barred from being heard by the court.

 

Since FRGM has filed Heads of Argument, the Applicant can no longer file an Answering affidavit and the Applicant must seek specific leave of the court in order to do so.  Alternatively, they must withdraw the matter, tender costs and file a fresh application for that purpose. Zindico has not taken either of these actions.

 

On 10 March 2017, Zindico through its lawyers wrote to our lawyers requesting FRGM to lift the bar in the matter so that they can file their Heads of Argument. FRGM has refused to accede to this request on the grounds that Zindico does not seem to be serious about prosecuting the matter and its claims that they did not know that some of the defendants were not based in Zimbabwe, have no merit.

 

Neither Asa Resource nor FRGM have any record that the lawyers for Zindico have carried out their intended action of serving papers on the foreign-based respondents (Asa Resource and other subsidiary companies) in this matter. FRGM has not seen any evidence of action on their part following their last letter of the 10 March 2017. FRGM reasonably believes there is no intention to prosecute the matter further.

 

As it stands, FRGM's next steps is to have the High Court dispose of the matter by dismissing the Zindico claim with punitive costs and has instructed their lawyers to file an application for dismissal of the matter.

 

Asa Resource has considered the basis of the claim and is satisfied that the conditions precedent to the alleged agreement, including approval by the board of directors of Asa Resource, were never met and that the claim has neither foundation nor merit.

 

Asa Nickel - BNC Trojan Nickel Mine (Zimbabwe)

 

Trojan Mine


Quarter

ended

Quarter

ended

Quarter ended

Quarter ended

Mar-17

Dec-16

Sep-16

Jun-16

Tonnes mined

t

107,604

123,532

104,018

97,689

Tonnes milled

t

112,608

122,721

103,857

101,433

Head grade

%

1.684

1.495

2.016

1.760

Recovery

%

89.2

85.6

89.1

87

Ni in concentrate

t

1,771

1,571

1,866

1,555

Nickel sales

t

1,631

1,610

1,971

1,493

Average nickel price

US$/t

6,675

7,004

6,668

5,728

Cash cost (C1)

US$/t

4,955

6,159

4,782

5,736

All-in sustaining cost (C3)

US$/t

4,549

6,554

5,151

6,489

 

Figures shown are unaudited and may vary upon final audit.

 

1.     C1 cash cost per tonne includes costs for mining, processing, administration, off-take costs and penalties, transport costs, accounting movements for stockpiles, and net proceeds from by-product credits. It excludes capital costs for exploration, mine development or processing mill capital works, and, the cost of royalties.

2.     All-in sustaining C3 cost reflects the cash cost per tonne plus depreciation and amortisation, thus incorporating the capital cost of production, plus interest, other indirect costs and royalties. All-in-sustaining cost represents all costs attributable to nickel production over the period

3.     The company has amended the reporting of the nickel price received, cash cost and all-in sustaining cost. The average nickel price received reflects the actual price received rather than the actual average price for the quarter as previously reported. Cash costs and all-in sustaining costs are now reported as actual costs incurred, previously these costs were adjusted for the opportunity cost forgone as a result of selling a nickel concentrate rather than a nickel cathode.

 

Management comments - BNC

Management offers additional comments on their operation performance:

 

·      Mined tonnage was 13% below the previous quarter at 107,604t (Q3 FY2017: 123,532t). Hoisting decreased for the fourth quarter due to adjustments to the mine plan where focus was to mine more massives and reduce disseminated ore. Mining constraints for the fourth quarter include lagging development and low availability of dump trucks.

·      The outsourced development contract was terminated and development is now being carried out internally. The mine is currently reviewing the business plan that includes the state of equipment, mineral resources, systems and structures with a view to improving performance in the new financial year. The focus is on increasing equipment uptime and asset utilisation to increase productivity and cost effectiveness.

·      C1 cash costs for nickel-in-concentrate decreased by 20% to US$4,955/t (Q3 FY2017: US$6,159/t)

·      All-in sustaining C3 costs of nickel-in-concentrate decreased by 31% to US$4,549/t (Q3 FY2017: US$6,554/t). The decrease in C1 and C3 costs is attributable to an increase in production achieved and cost control measures.

 

 

Re-deepening project - detailed update

The Re-deepening project critical path is now on the Subvertical Rock winder upgrade that requires at least 8 months for design, procurement, manufacture and delivery of spares to site. The impact of non-availability of Re-deepening for the financial year will be mitigated by continued use of Service Winze infrastructure for hoisting of massives ore and handling of waste from 41 Level and 43 or 45 Level haulages. It is envisaged that the tie-in will complete by Q1 FY2018/19 (e.g. March 2018).

 

Cost

BNC has spent $13.9m million of the $18.9m authorised amount. $1m has been spent since the restart in September 2016 and $4.5m is available to spend with the supplementary $5.2m of the authorised headroom. The winder brakes and controls system upgrade total costs are being firmed up with original equipment suppliers. Loading station civils has been done internally to reduce cost and the strategy will be to utilise internal labour as far as possible whilst focusing on the critical path time frame that is the winder upgrade.

 

SHEQ

The project has gone for twenty months accident free, the last fatality was in 2015.

 

Activity update

The project is 32% complete and activities that require minimum funding are in progress:

1.   Loading Station civils are 80% complete. Activity was slowed down to allow Crusher civils to be completed by the contractor, as material movement became a constraint. Most steelwork is on site now and payment of design engineers will be made to allow the remaining commissioning equipment to be delivered ahead of tie-in shutdown.

2.   Crusher chamber civils was completed in April 2017 and installation of steel work is now in progress targeted for completion in September 2017. Internal labour will be utilised to reduce cost. After completion, the crusher will be commissioned using massives ore to be hoisted via 45Level using kibbles.

3.   Decommissioning of service shaft that is the waste pass will be finished during tie-in shutdown to allow use of hoisting infrastructure to support the production plan to hoist massives ore on 39 Level and reduce dump truck tramming distances.

4.   Other activities that are in progress include: drilling of dewatering drain holes; de-watering pipeline commissioning and installations of switchgear on 39 and 44 Level substations.

5.   Major milestones still outstanding include:

·      Firming up of a Subvertical Rock winder controls upgrade supplier with a focus to utilise Schneider who commissioned the Service and Main Rock Winder successfully in 2015. Mining of 46/0 Level shaft 3 metres overrun, 10 metres lateral overrun and installation of spillage handling facility will be done at a slower pace to allow use of hoist for production.


Smelter Project - detailed update
The Smelter Restart Project is progressing well and is currently 82% complete. Much of the refurbishment work and installation of new equipment has been done. 

 

Major work has been completed and some equipment has been cold commissioned. However, there has been a delay in completing some of the planned work due to cashflow constraints and nickel prices.

 

The major highlights of the progress in various sections of the project are:

 

1.   Concentrates Handling Plant: The modified dryer drum and the new hot air furnace were successfully cold commissioned. The conveyance system refurbishment is in progress and awaiting drive system ancillaries.  The major outstanding work in this section is installation of conveyor belts and plant control system.

2.   Crushing and Screening Plant: The crushing plant was hot commissioned and is running well. The screening plant refurbishment is still in progress and now awaiting delivery and installation of drive system ancillaries before plant commissioning.

3.   Cooling Water System: Installation of the two new BSR cooling towers was completed and the section is currently undergoing cold commissioning. 

4.   4Blower House: A new compressor and a cooling tower were installed and commissioned. The spares for the three HEH blowers were sent to South Africa and are now awaiting repair quotations.

5.   Electrostatic Precipitator (ESP) Refurbishment: Installation of the three new ID fans, ESP outlet and inlets cones, dust conveyance system and all ductings were completed.  The ESP and mixing chamber roofs were also repaired.

6.   Converters: The first converter shell and all its drives and a new 30t crane were installed. The second converter shell and its drives are still to be delivered. Refurbishment of the old 30T crane is still outstanding because the required components are still to be procured and delivered due to cashflow constraints. The punching machines are being manufactured in South Africa and expected for completion by end of May 2017. The new pumps and pipes for matte granulation were installed and now awaiting cold commissioning.

7.   Furnace: Furnace refractory rebuilding was completed while the cold commissioning of the new feed system is awaiting delivery of drive motors. Refurbishment of the electrode and cooling water systems and installation of the off gas ducting are currently in progress. The new pumps and pipes for slag granulation were installed and now awaiting cold commissioning.

8.   Civil Work and Structural Refurbishment: The major civil and structural refurbishment works were completed and plant painting is in progress.


Planning

Refurbishment work is continuing at a slower pace utilising the already received equipment and materials. Major equipment and materials will be funded as and when funds become available from the Trojan Mine production. The commissioned equipment will continue to run on a periodic basis to ensure that it remains in good state until the whole plant is fully commissioned.



Asa Diamonds - Klipspringer Diamond Mine (South Africa)

 



* Quarter

Mar 2017 

** Quarter

Dec 2016

Quarter

Sept 2016

Quarter

June 2016

Tonnes treated

t

42,024

41,485

47,873

52,403

Head grade

cpht

3

34

50

59

Recovery

%

0.99

1.37

1.52

0.97

ROM diamonds recovered

 

carats

 

1,274

 

14,016

 

23,832

 

30,888

Diamond sales

carats

785

19,170

36,131

29,921

Average diamond production cost

 

US$/ct

 

73.41

 

26.57

 

13.13

 

10.91

 

Average diamond price

 

US$/ct

 

32.86

 

17.91

 

18.42

 

20.35

 

*Quarter ended Dec 2016 saw the end of the slimes project.
**Quarter ended Mar 2017 was the commissioning and start of the coarse project. 

 

Ratio of Run of Mine (ROM) diamonds delivered to diamonds in stock (DIS) after sieving, cleaning and sorting.

Figures shown are unaudited and may vary upon final audit.

The slimes project ended in November 2016 and was replaced with the coarse dump project that first produced in February 2017. The diamonds recovered and grade will drop in the coarse project, but the $ per carat increases.

 

Management comments - Klipspringer

The coarse tailings production commenced in January 2017. For the first 3 months the project did not achieve the expected sample grade and averaged 3 cpht instead of 6 cpht.

 

Gemcore have made many metallurgical changes and also audited the plant and recovery tailings in order to find out why sampled grade was not achieved. They also changed the mining sites and are carrying out further analysis on the dump."



 

Contact

For more information http://www.asaresourcegroup.com/ or contact us below.

 

Asa Resource Group plc

One Fleet Place, London EC4M 7WS

Ian B Dearing, Executive Director, Group General Counsel and Company Secretary

Niall Henry, non-executive Director (Investor Relations)

communications@asaresourcegroup.com

 

Nominated Adviser and Broker

SP Angel Corporate Finance LLP

Prince Frederick House, 35-39 Maddox Street, London W1S 2PP

John Mackay, Jeff Keating, Caroline Rowe

Tel: +44 (0) 20 3470 0470

 

 

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Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.


Cautionary statement


This Quarterly Update has been prepared solely to provide additional information to enable shareholders to assess the Group's strategy and business objectives and the potential for them to be fulfilled. It should not be relied upon by any other party or for any other purpose. This Quarterly Update contains certain forward-looking statements and has been made by the Directors in good faith based on information available to them at the time of their approval of this update. These statements should therefore be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.