Southern Arc Third Quarter Financial Results and Projects Update
VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 30, 2014) -
Southern Arc Minerals (TSX-VENTURE:SA)(OTCQX:SOACF) ("Southern Arc"
or "the Company") today announced the results of its third quarter
ended March 31, 2014, along with an update on its portfolio of
projects. Details of the Company's financial results are described
in the unaudited condensed consolidated interim financial
statements and Management's Discussion and Analysis ("MD&A"),
which will be available on the Company's website at
www.southernarcminerals.com and on SEDAR at www.sedar.com. All
amounts are in Canadian dollars unless otherwise stated.
FINANCIAL SNAPSHOT
|
March 31, 2014 |
|
June 30, 2013 |
|
Total assets |
$ |
12,574,176 |
|
$ |
18,192,286 |
|
Exploration properties |
|
102,068 |
|
|
102,068 |
|
Working capital |
|
4,579,738 |
|
|
16,060,362 |
|
Comprehensive loss |
|
(5,518,076 |
) |
|
(41,945,170 |
) |
Basic and diluted loss per share |
|
(0.05 |
) |
|
(0.38 |
) |
At May 29, 2014, Southern Arc had approximately $2.8 million in
working capital.
PROPERTY REVIEW AND OUTLOOK
The Company's accounting policy is to record its exploration
properties at cost. Exploration and evaluation expenditures
relating to exploration properties are deferred until either the
properties are brought into production, at which time they are
amortized on a unit of production basis, or the properties are sold
or abandoned, at which time deferred costs are written off.
West Lombok Property (Lombok Island)
The West Lombok project covers a 13-km long by 7-km wide
structural corridor of mineralization and alteration hosting
porphyry copper-gold and epithermal gold deposits. Southern Arc has
completed 26,477 metres of drilling to date on epithermal gold
mineralization in the Pelangan and Mencanggah prospects, and 20,046
metres of drilling at the Selodong porphyry copper-gold intrusive
complex. All drill results and details regarding the prospective
study are available on the Company's website and on SEDAR.
On July 11, 2013, Southern Arc released the first mineral
resource estimate for the West Lombok property (see July 11, 2013
press release). SRK Consulting (Canada) Inc. estimated an inferred
resource totalling 1.49 million ounces of gold, 1.82 million ounces
of silver and 397.3 million pounds of copper from three
open-pittable epithermal gold deposits and one porphyry copper
deposit. The Raja, Bising and Tibu Serai epithermal gold deposits
are estimated to contain 11,783,000 tonnes averaging 1.5 g/t gold
for contained metal of 567,820 ounces of gold, with an additional
1.82 million ounces of silver in the Raja deposit. The Selodong
porphyry copper mineralization is estimated to contain 66,750,000
tonnes averaging 0.43 g/t gold and 0.27% copper for contained metal
of 922,800 ounces of gold and 397,324,000 pounds of copper within
two zones: Montong Botek and Blongas.
Since releasing West Lombok resource estimate in July 2013,
Southern Arc has maintained low-level activities at West Lombok
while continuing to advance discussions with a number of companies
for a potential farm-in, partnership or outright sale of the
property. While Southern Arc believes the West Lombok project holds
great potential, the Company has determined that it can more
effectively build shareholder value by identifying a funding
partner for West Lombok and redirecting the Company's treasury to
high-quality projects in stable jurisdictions. Southern Arc remains
confident that it will find a suitable arrangement, and is working
diligently to conclude a transaction that will bring value to the
Company.
East Elang Property (Sumbawa Island)
The East Elang property covers 9,670 hectares immediately to the
east of Newmont's Elang-Dodo property, which hosts a large
copper-gold porphyry deposit. In October 2010, the Company entered
into an option and joint venture agreement with Vale to advance the
East Elang property. Vale can earn a 75% interest in PT. Selatan
Arc Minerals by funding exploration through to completion of a
bankable feasibility study within an agreed-upon time frame. On the
East Elang property, 60.3% of the area is designated primary
forest. The Indonesian government has imposed a moratorium on
exploration and mining activities in areas designated as primary
forest, and has extended the moratorium to May 2015. While the
property is considered highly prospective due to its location and
results from aerial surveys, exploration of this property has been
deferred pending reclassification of the property's forestry status
and receipt of the appropriate permits. Unless such
reclassification is granted or the moratorium lifted, the Company
cannot commence any significant exploration activities on the
property. Southern Arc has requested reclassification of the
property and has applied to the Regency authorities for suspension
(back-dated from the commencement of the forestry moratorium in May
2011) of the IUP license until the reclassification process has
been completed, to ensure Southern Arc and Vale have adequate time
to evaluate the property once exploration commences.
Taliwang Property (Sumbawa Island)
In December 2012, following a strategic review of the Company's
projects and exploration strategy, the Company agreed to sell its
90% interest in the Taliwang project and during the year ended June
30, 2013, recognized a $3,291,080 impairment provision against its
book value of the Taliwang property. In February 2014, Southern Arc
and the Purchaser renegotiated the terms of the purchase and sale
agreement, whereby the Purchaser will purchase Taliwang in exchange
for US$1,600,000 and the granting of a 5% net smelter royalty to
Southern Arc. The Purchaser has the option to buy back 3% of the
net smelter royalty by paying Southern Arc US$3,000,000. As a
result of the renegotiation, Southern Arc has recognized an
additional $1,889,096 of impairment provision against its book
value of the Taliwang property. To date, the Purchaser has made
payments totaling US$700,000.
Windfall Lake Gold Project (Quebec, Canada) - Eagle Hill
Investment
In August 2013, following an extensive search worldwide for
high-quality properties, the Company partnered with Dundee
Corporation ("Dundee") to invest a total of $12 million in Eagle
Hill. Eagle Hill owns the high-grade Windfall Lake Gold Deposit
("Windfall Lake") in Quebec, Canada. Windfall Lake is located
between Val-d'Or and Chibougamau in the Abitibi Gold Belt, a highly
favourable jurisdiction for exploration and mining. The greenstone
belts of the Abitibi region constitute one of the most prolific
gold-producing regions in the world, having produced over 170
million ounces of gold to date. The project is easily accessible by
paved highways and all-weather gravel roads and has substantial
infrastructure on site, including a 58-person camp and a
1,450-metre access ramp (vertical depth of 100 metres).
From September 12 to December 20, 2013, Eagle Hill completed two
Induced Polarization surveys and drilled a total of 28,232 metres
in 68 drillholes (including one extension and six wedges), with the
objective of expanding the known mineral resource. All drill
results are available on Eagle Hill's website at
www.eaglehillexploration.com and on SEDAR.
In March 2014, Eagle Hill released an updated mineral resource
estimate for the Windfall Lake project, increasing the indicated
mineral resource tonnage and contained gold by 43% and 38%,
respectively. SRK Consulting (Canada) Inc. estimated an indicated
mineral resource of 2,375,000 tonnes grading 9.75 g/t gold for
contained gold of 744,000 ounces, with an additional inferred
mineral resource estimated at 3,084,000 tonnes grading 7.37 g/t
gold for contained gold of 731,000 ounces. These grades make
Windfall Lake one of the highest grade resource-stage gold projects
in the world.
The bulk of the mineralization occurs in the Main Zone, a
southwest/northeast trending zone of stacked mineralized lenses,
measuring approximately 600 metres wide and at least 1,400 metres
long. From February to March 2014, Eagle Hill completed a
3,333-metre drilling program in the Main Zone to test for
extensions of Zone 27 under shallow lakes (2 to 6 metres depth)
that were frozen. Eagle Hill drilled 21 holes to a depth of 120 to
321 metres to test the lateral extensions of Zone 27, where
previous drilling had confirmed near-surface high-grade intervals.
All core has been delivered to the assay laboratory, with results
pending.
The Windfall Lake deposit remains open at depth and along
strike, with additional drilling and technical work planned for
2014.
Subsequent to the quarter end, Eagle Hill completed a number of
transactions to consolidate its ownership in Windfall Lake. Eagle
Hill consolidated 100% ownership of the entire Windfall Lake
property by purchasing 22,580 acres of claims from Murgor Resources
Inc. and Cliffs Chromite Ontario Inc. (see Eagle Hill press
releases dated March 13 and April 1, 2014). Eagle Hill also
purchased three 2% net smelter return royalties related to Windfall
Lake (see Eagle Hill press releases dated April 24 and May 6,
2014).
On March 28, 2014, Eagle Hill announced a private placement to
raise up to $3.5 million, which was subsequently re-priced and
increased to $4.5 million on April 22, 2014. At the date of this
MD&A, Eagle Hill had closed on a total of $3.3 million, and was
still filling orders to raise up to an additional $1.2 million. Of
the funds raised, $1 million was raised as "flow-through" dollars
to be used for exploration at Windfall Lake. The remainder will be
used for Eagle Hill's general working capital. Southern Arc
participated in the private placement with two separate
investments. On April 8, 2014, Southern Arc purchased 7,518,797
million units at a price of $0.07 per unit for an investment of
$526,316. Each unit consists of one common share ("a Share") and
one share purchase warrant (a "Warrant") of Eagle Hill. Each
Warrant entitles Southern Arc to acquire one Share at a price of
$0.10 until April 8, 2016. On May 9, 2014, Southern Arc purchased
20 million units of Eagle Hill at a price of $0.05 for an
investment of $1,000,000. Each unit consists of one Share of Eagle
Hill and one Warrant of Eagle Hill. Each Warrant entitles Southern
Arc to acquire one Share of Eagle Hill at a price of $0.08 until
May 8, 2016. The Shares, Warrants and Shares issuable upon exercise
of the Warrants are subject to a four-month hold.
At May 29, 2014, Southern Arc owned 26.72% of Eagle Hill on an
undiluted basis, and 31.67% on a fully diluted basis.
SUMMARY OF QUARTERLY RESULTS
|
March 31, 2014 |
|
December 31, 2013 |
|
September 30, 2013 |
|
June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
12,574,176 |
|
$ |
13,412,252 |
|
$ |
16,675,188 |
|
$ |
18,192,286 |
|
Exploration properties |
|
102,068 |
|
|
102,068 |
|
|
102,068 |
|
|
102,068 |
|
Working capital |
|
4,579,738 |
|
|
5,207,824 |
|
|
8,146,387 |
|
|
16,060,362 |
|
Net loss |
|
(765,358 |
) |
|
(3,234,969 |
) |
|
(1,517,749 |
) |
|
(35,487,971 |
) |
Basic and diluted loss per share |
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013 |
|
December 31, 2012 |
|
September 30, 2012 |
|
June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
53,939,440 |
|
$ |
54,333,738 |
|
$ |
60,321,920 |
|
$ |
60,884,512 |
|
Exploration properties |
|
37,212,907 |
|
|
35,612,324 |
|
|
38,808,405 |
|
|
37,430,624 |
|
Working capital |
|
15,164,760 |
|
|
17,208,413 |
|
|
19,027,865 |
|
|
21,035,112 |
|
Net loss |
|
(527,628 |
) |
|
(5,172,518 |
) |
|
(757,053 |
) |
|
(1,184,372 |
) |
Basic and diluted loss per share |
|
(0.00 |
) |
|
(0.05 |
) |
|
(0.01 |
) |
|
(0.01 |
) |
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
2014
During the three months ended March 31, 2014, the Company had a
net loss of $765,358 compared to a loss of $527,628 for the three
months ended March 31, 2013. Significant fluctuations occurred in
the following categories:
- Share-based compensation of $50,615 (2013: $65,707) was
decreased due to a lower calculated cost for options granted during
the period. Share-based compensation expense is accounted for at
fair value as determined by the Black-Scholes Option Pricing Model
using estimates that are believed to approximate the volatility of
the trading price of the Company's stock, the expected lives of
awards of share-based compensation, the fair value of the Company's
stock and the risk-free interest rate.
- Foreign exchange gain of $179,626 was higher during the three
months ended March 31, 2014 (2013: $70,666) primarily due to higher
US$ cash balances and the net effect the fluctuation of the
US$/CDN$ exchange rate had on the CDN$ equivalent of the Company's
holdings in its US$ bank balance and its US$ payables balance.
- Management fees increased to $249,135 compared to $202,500 in
2013.
- Travel expenses of $46,483 (2013: $17,248) increased as a
result of a higher level of executive travel.
- Interest income of $9,765 (2013: $38,548) decreased during the
period as a result of lower cash balances.
- The Company wrote-off an additional $252,228 (2013: $nil) of
exploration expenditures incurred on the West Lombok and Taliwang
properties during the period.
- Transfer and filing fees of $21,850 (2013: $15,376) were higher
due to higher regulatory filing fees incurred during the three
months ended Mach 31, 2014.
On behalf of the Board of Southern Arc Minerals Inc.
John Proust, Chairman & CEO, Director
About Southern Arc
Southern Arc Minerals Inc. is a Canadian mineral exploration
company focused on gold and copper-gold exploration. The Company is
advancing two properties in Indonesia: West Lombok, a
resource-stage property with several gold-rich copper porphyry and
epithermal gold vein prospects, and East Elang, a grassroots
exploration property that will be advanced in partnership with Vale
International SA. Southern Arc also owns 27% of Eagle Hill
Exploration, which owns the high-grade Windfall Lake Gold Project
in Quebec, Canada. More information is available at
www.southernarcminerals.com.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as such term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Forward-looking Statements
This news release contains forward-looking statements
relating to expected or anticipated future events and anticipated
results that are forward-looking in nature and, as a result, are
subject to certain risks and uncertainties, such as general
economic, market and business conditions, the regulatory process
and actions, technical issues, new legislation, the uncertainties
resulting from potential delays or changes in plans, the occurrence
of unexpected events, and the company's capability to execute and
implement future plans. Actual results achieved may vary from the
information provided herein as a result of numerous known and
unknown risks and uncertainties and other factors.
Qualified Person
The technical information in this document related to
Southern Arc's Indonesian properties has been reviewed by Southern
Arc's Executive Vice President, Andrew Rowe, B. App. Sc. Geology,
MAusIMM. Mr. Rowe has over 20 years of international mineral
exploration experience throughout Southeast and Central Asia and
Australia. During this time he has held such positions as Principal
Geologist - Feasibility Studies, Senior Geologist and Consulting
Geologist. The West Lombok drill program and sampling protocol is
managed by Southern Arc under the supervision of Andrew Rowe. The
diamond drill holes are drilled at PQ, HQ and NQ sizes depending on
hole depth and core recovery to date has averaged 98.0%. Half core
is cut by rock saw and is generally sampled using nominal 1-metre
intervals; however, sample intervals are varied according to
geological contacts and have ranged between 0.2 to 2.5 metres in
length. Three quality control samples (one blank and two standards)
are inserted into each batch of 40 samples. The half core samples
are securely transported from the project site to the Intertek
Testing Services ("ITS") sample preparation laboratory in Sumbawa
Besar via private truck hired by Southern Arc. Sample pulps are
then sent to the ITS Jakarta laboratory by ITS. Gold is analysed by
fire assay with AAS finish and a four-acid digestion with ICP-MS
finish is used to analyse a full suite of elements including silver
and base metals. ITS is one of the world's largest product and
commodity testing, inspection and certification organizations. The
Jakarta laboratory is ISO 17025 accredited and employs a Laboratory
Information Management System for sample tracking, quality control
and reporting.
The technical information in this document related to the
Windfall Lake property has been reviewed by Eagle Hill's Vice
President Exploration, Jean-Philippe Desrochers, PhD, PGeo, who has
sufficient experience relevant to the style of mineralization under
consideration and qualifies as a Qualified Person as defined by
National Instrument 43-101. The drill program and sampling protocol
is managed by Eagle Hill under the supervision of Jean-Philippe
Desrochers. The diamond drill holes are drilled at NQ sizes and
core recovery to date has averaged better than 95.0%. Half core is
cut by rock saw and is generally sampled using nominal 1-metre
intervals; however, sample intervals vary according to geological
contacts and have ranged between 0.3 to 1.5 metres in length. Two
quality control samples (one blank and one certified reference
material) are inserted into each batch of 20 samples. All assays
were performed by ALS Chemex Laboratory Group, in Val d'Or, Quebec.
The half core samples are securely transported from the project
site to the ALS Chemex laboratory by Eagle Hill personnel. Gold
analyses reported in this release were performed by standard fire
assay using a 50-gram charge with atomic absorption finish and a
gravimetric finish for assays greater than 10 grams per tonne and
by metallic sieve method for samples containing significant amounts
of pyrite or visible gold. In addition, an Aqua regia digestion
with ICP-AES finish is used to analyse a full suite of elements
including silver and base metals.
The technical information in this document has also been
reviewed by Southern Arc's President & Chief Operating Officer,
Dr. Mike Andrews, PhD, FAusIMM, who has sufficient experience
relevant to the style of mineralization under consideration and
qualifies as a Qualified Person as defined by National Instrument
43-101.
Southern Arc Minerals Inc.Rhylin BailieVice President,
Communications & Investor
Relations604-676-5241info@southernarcminerals.comwww.southernarcminerals.com