Kolar Gold Limited
("Kolar Gold", "Kolar" or the "Company")
Finland Gold Joint Venture MOU Signed
Kolar Gold Limited (LON: KGLD), the London Stock Exchange AIM-quoted India gold exploration and mine development company, is pleased to announce that it has entered into a Memorandum of Understanding ("MOU") to establish a Joint Venture ("JV") to develop gold exploration and mining assets in Finland.
· Gold assets in second jurisdiction secured, to be developed concurrent to Kolar's existing interests.
· Option for Kolar to earn-in up to 50% of existing gold projects in Finland through JV.
· High grade targets within licences covering an area of approximately 24km2.
· Potentially cashflow generative within 12 months via bulk sampling.
· Upfront payment of €150,000 in cash and €150,000 equivalent in Kolar shares based on 14-day VWAP of 1.6p, seeing Kolar commence with a 15.4% JV interest.
· Commitment by Kolar to provide an additional €350,000 in Q1 2017 increasing Kolar's interest to 28.3%.
· Option for Kolar to provide up to a further €1m to be expended over 2017, to earn up to 50% of JV.
· Subject to at least 100kg (3,215 oz.) of gold being produced in 2017 from initial target, 17m warrants exercisable at 3.2p each expiring in October 2018, to be issued to JV partner.
· Traditional mining jurisdiction - politically and financially stable and secure environment.
Cameron Parry, Kolar Gold CEO, commented: "This is a defining deal that sees Kolar secure commercial and operational rights to highly attractive gold assets in Finland, providing exposure to a second jurisdiction, a cornerstone objective of the Company's corporate strategy, whilst we concurrently progress our interests in India.
"Our new JV partners are well known to us and I am very pleased to have the opportunity to work with them again. It is particularly exciting that we now have the potential to generate cashflow from one of our Finland targets next year, helping achieve Kolar's fundamental business objective to build value, generate cashflow and mitigate risk.
"Through this MOU, Kolar and its JV partner, shall jointly operate a new Finland-incorporated subsidiary company, of which, following completion of our minimum commitment for equity, Kolar shall own 28.3% with the option to increase to 50% by the middle of next year, just prior to the planned first gold production through bulk sampling."
Joint Venture Partner
Mineral Exploration Network (Finland) Limited ("MENF" or "JV Partner") is a privately-owned UK registered exploration company founded in 2009. The company has been actively involved in the exploration for gold in Finland since 2009. MENF undertakes and manages its own exploration work, with an in-house team of experienced exploration geologists and exploration technicians, specialist geophysics equipment, diamond drill rig, XRF and ICP-MS sample assay laboratory facilities. Directed by highly experienced management, this in-house capability and the specific exploration methodologies employed, allow MENF to operate in both a time-efficient and cost-efficient manner.
MENF's exploration holdings are focussed in eastern Finland on the Archaean age Hattu-Ilomantsi and Kuhmo-Suomussalmi greenstone belts. As well as Finland, MENF has active exploration interests in Spain; the seasonality between the two jurisdictions allows ground works to be progressed year-round. Kolar Gold CEO, Cameron Parry (as then CEO of Metal Tiger PLC), first commenced working with MENF in early 2015 under a joint venture arrangement on a successful exploration programme for tungsten and gold in licensed areas in Spain.
Joint Venture Structure
On 13 October 2016, Kolar entered into a MOU with Mineral Exploration Network (Finland) Limited, to earn up to 50% of a joint venture company ("JVco") to be incorporated in Finland, to develop highly prospective greenstone belt gold licences held by JVco in the Suomussalmi region of eastern Finland.
Key Terms of the MOU:
· MENF to incorporate a new gold mining and exploration operating company in Finland) with 1,800 ordinary shares in issue.
· MENF to assign relevant licences and historic data to JVco.
· Kolar to initially pay €150,000 in cash for 150 new ordinary shares in JVco.
· Kolar to issue to MENF 8.5 million new ordinary shares in Kolar Gold, locked in for six months from the date of issue, at an implied price of 1.6p representing approximately €150,000 ("Transfer Shares") in exchange for 150 existing shares in JVco held by MENF (at which point Kolar will hold 15.4% of JVco).
· Kolar and MENF to complete a Joint Venture Agreement by the end of February 2017.
· Kolar to complete its minimum cash commitment by payment of €350,000 for 350 new ordinary shares in JVco by 28 February 2017 (at which point Kolar will hold 28.3%).
· Kolar Gold has the option to contribute up to a further €1,000,000 by 30 June 2017 at €1,000 per share in JVco to increase its shareholding to 50% of JVco.
· Kolar can also choose to only take up part of its option and enable a third party entity as a permitted nominee to subscribe for the balance at a price determined between itself and any such third party.
· Subject to JVco achieving its target of producing at least 100 kg of gold from bulk sampling at its Kuikka project in 2017, Kolar will issue to MENF warrants to subscribe for 17 million new ordinary shares in Kolar Gold at an exercise price of 3.2p at any time prior to 31 October 2018.
The Company expects JVco to be established and Kolar's investment and the issue of the Transfer Shares to take place within the next fourteen days at which point a further announcement will be made.
JV Licence Areas
Once fully assigned, the JVco will hold five exploration licences and two pending licences comprising the 'Syrjälä Project' (the "Project") and covering an area of 23.81km2 (Table 1 below).
Table 1: Licences Under Joint Venture
Valid From (Reg. date for pending)
The Syrjälä Project area is located approximately 600 km north of Helsinki and 35 km north of the town of Suomussalmi. There is good road and power infrastructure in the immediate area and the Project is served by a network of gravel forestry roads.
Mineralisation is hosted by Archaean greenstone metasediments and meta-volcanics, with the licences located on the southern part of the Suomussalmi greenstone belt. Two types of gold mineralisation are observed within the Project: high grade quartz veins; and moderate grade disseminated mineralisation.
Previous gold exploration work carried out over the Project area during the 1990s and early 2000s, discovered numerous gold occurrences. This historical exploration work included aerial geophysics, regional scale basal till sampling, boulders and outcrop sampling and ground geophysics; which delineated a number of gold targets. Subsequent drilling conducted over a limited number of these prospective areas confirmed the presence of intensive gold mineralisation.
The historical drilling reached a maximum depth of around 100 metres, and as such has yet to test the full potential of the system as the major gold deposits in Finland generally consist of steep dipping ribbons and pipes extending to depth. It is therefore considered that the Syrjälä Project holds great potential for significant resource development where deeper diamond drilling can be employed.
MENF commenced work on the Syrjälä Project in 2013, undertaking a detailed assessment of the known gold occurrences and undertaking project wide, detailed soil sampling (12,400 samples), basal till sampling profiles (238 samples), 580-line km of ground magnetics survey and 12-line km of Induced Polarisation / Resistivity geophysics. As a result of this work a number of additional gold mineralisation targets were identified within the Project.
An appraisal of the historical and new gold targets concluded that they held good potential for being developed into a significant resource, but that the necessary deep drilling would also require a significant drilling budget. Following discussions between Kolar and MENF, rather than raise money for a long term exploration programme in the short term, it was decided to instead generate cash through a bulk sampling program from known surficial deposits, and then to reinvest the majority of this money into subsequent deep drilling. In order to delineate a box-cut area suitable for a permitted 10,000t ore bulk sample, to be taken during 2017, MENF undertook 937 metres of infill Rotary Air Blast ("RAB") drilling, for a total of 19 holes, at the historical Kuikka deposit during July 2016. The high grade intersections from the 2016 drilling have enabled the bulk sample area to be further delineated, and planning is progressing with a view to undertaking the work during summer 2017.
The Kuikka gold deposit had previously been diamond core drilled by Geological Survey of Finland (GTK) and the Finnish company Outokumpu Mining. GTK drilled a total of 52 diamond drill holes (at 42mm and 32mm core diameter), at a 25m spacing for a total 4,359m.
Of the 52 holes 17 returned positive intersections with highlight intersections including:
· 16.2m @ 18.97g/t Aufrom 15m in Hole R361;
· 11.8m @ 2.8g/tfrom 36.4m in Hole R362;
· 7.7m @ 5.3g/t Aufrom 4m in Hole R363;
· 8.0m at 2.1g/tAu from 62.9m in Hole R367; and
· 7.4m @ 4.0g/t Aufrom 36.6m in Hole R372.
The MENF 2016 infill RAB drilling programme at Kuikka, successfully confirmed the continuity of high grade gold mineralisation between the historical GTK diamond drill hole collars with over 19 significant gold intersections. The 19 drill hole collars were at 12.5m spacing, holes were inclined at 45 or 60 degrees and drilled perpendicular to mineralisation strike. The average downhole depth attained was 49m.
Highlight intersections include:
· 6.0m @ 15.58g/t Aufrom 12.5m in hole KU002;
· 6.0m @ 18.10g/t Aufrom 17.00m, and
· 13.0m @ 7.58g/t Aufrom 26.00m in hole KU005;
· 6.0m @ 26.95g/t Aufrom 7.00m in hole KU008; and
· 11.0m @ 12.15g/t Aufrom 34.5m in hole KU010.
Additional intersections are set out in Table 2 below.
The RAB drilling samples were analysed by utilising the MENF's internal ICP-MS labortatory and high grade samples are to be sent for duplicate analysis.
Table 2: Highlight Intersections for 2016 RAB Drilling Programme at Kuikka.
Grade (g/t Au)
Gold Mining in Finland
Finland has a long history of mining and is considered a mining friendly jurisdiction within the European Union (EU). It ranked first for investment attractiveness in the 2014 Fraser Institute mining survey.
The largest primary gold producer in Europe is Agnico Eagle's Kittila mine, located approximately 360km north-west of Kuikka, in northern Finland. Kittila has proven and probable gold reserves of 4.4 million ounces (28 million tonnes at 4.80 g/t gold) and a projected mine-life to 2035. Ore has been mined from underground since 2010. The surface mineralisation footprint of the Kittila deposits are believed to bear a similarity to the surficial gold anomalies seen with the Syrjälä Project. Other currently operating gold mines include Dragon Mining PLC's Jokisivu Gold Mine and the Orivesi Gold Mine, both in southern Finland.
The technical information contained in this disclosure has been read and approved by Mr Nick O'Reilly (MSc, DIC, MAusIMM, FGS), who is a qualified geologist who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies. Mr O'Reilly has visited the Syrjälä Project. Mr O'Reilly is a consultant working for Mining Analyst Consulting Ltd which has been retained by Kolar Gold Limited to provide technical support.
For further information, please visit www.kolar-gold.com or contact:
Kolar Gold Limited
Cameron Parry (Chief Executive Officer)
Luke Cairns (Executive Director)
Tel: +44 (0) 207 397 2880
WH Ireland Limited (Nominated Adviser)
Tim Feather / Ed Allsopp
Tel: +44 (0) 113 394 6600
Smaller Company Capital Limited (Broker)
Rupert Williams / Jeremy Woodgate
Tel: +44 (0) 203 651 2911
Tavistock (Financial PR)
Tel: +44 (0) 207 920 3150