Rich Gold Deposit in Mozambique Looking for Joint Venture Partner

Opportunity Snapshot

Investment Opportunity

This is lucrative business prospect if this mine is operated with a very high returns and it will breakeven in six month by producing 0.5 ton of gold.

5024L Licenses for gold and associated minerals were notified in the local newspaper “Noticias” on 7th February 2012. The geological team after doing necessary desktop study visited the licenses on 24th April 2012 in order to physically verify the local geology in and around the license area for the primary source rock, presence of gold and associated minerals as placers in the river Luenha and status of mining in the locality.

From the visual observation, the presence of Au in river sand appears to be >3ppm and to be on a safer side can be considered as 3ppm. The Au grains and flakes in the contact zones where mineralization is profuse and visible (approx. 10 to 20m width & could be seen in 4 zones on the way) can have a concentration of 5 to 8ppm at least. When the total area was considered for resource, a minimum of 50T of Au is expected within a depth of 10m within the license.

The financial forecast for the 1st year of operation (see attachment) takes into account all expenses born so far, as well as overhead expenses, depreciation & interest and still account for a profit. It is expected that from 2nd year the operating expenses will be minimum as the capital cost will be almost nil but depreciation, interest & operating expenses will amount to high profits. The exploration will prove whether refinery is required or not. If required for this small scale of operation, the exact cost of the refinery has to be considered. The proposal looks to be lucrative and a highly profit making project.

Sales @ selling price of gold USD 45000/Kg: 22,500,000
Total expenses: 18,227,500
Net profit: 4,272,500
Royalty: 1,350,000

Rationale for the deal

Acquisition & Development process:
1. The party interested to acquire has to sign a NDA (Non-Disclosure Agreement) with the owner of the license.
2. Register a company in Mozambique and make a JV (minimum 20% Mozambican partnership to retain) with the party and inform GoM concerned department.
3. The JV Company has to start exploration of the area and quantify the reserve and quality and submit the reports every quarterly, 6 monthly and yearly to DNM (National Directorate of Mining) for appraisal. If exploration not finished and mining license not granted, the license can be extended for another 3 years by applying to DNM.
4. JVC has to get the environmental clearance for exploration as well as MICOA permission for mining in a later stage.
5. Make the feasibility, mining plan for approval and then land acquisition (mostly free hold lands and owned by GoM, unlike India farmers farming land in this area have to be given meager amount as compensation)

Use of financing

Costs of development:
1. Exploration cost total : According to SAMREC standards: 350m grid x 15m depth = 6480m for the total area. But if the potential area is taken for consideration it should be around 25% of the total meterage. Hence = 1620m. The cost of drilling per meter being around USD 200/m the cost comes to be USD 324000 or say roughly USD 400000 including all other over head expenses. For this operation the time required to complete is 3 months.
2. Environmental clearance cost for exploration = USD 30000 (approx.)
3. Analysis of samples (USD 100/sample) and metallurgical studies(LS : USD 750000). Hence a total of maximum USD 150000 will be spent.
4. Feasibility and final environmental clearance (MICOA) = USD 220000 (approx.) This includes R&R policy approval from GoM also.
5. Rehabilitation & Resettlement cost may come around USD 75000 for this area.
6. Over head expenses for developing the license to mining project in 3 years time = 4 x USD 25000 = USD 100000.

Cost of Mining Machineries, plant & Infrastructure:
The target is kept to produce only 0.5 Ton of gold per year for calculation purposes:
1. Mining will be for 100000 T of host rock/placer
2. Machineries required will be by blasting-1, crushing-1, screening-1, shovel-2, dumper-4, tabling- 3, diesel and water bouser, pump set etc. For all these a LS is considered as USD 3 Million.
3. If digestion plant is required, cost of acid and plant will be additional.
4. Infrastructure like office, work shop, electrical sub-station will come around USD 300000.
5. Operating expenses for producing 0.5T of host rocks/placer = 1000000
6. The existing road and rail network can be taken for transportation.

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