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
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March 31, 2014 June 30, 2013
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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)
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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
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March 31, December 31, September 30, June 30,
2014 2013 2013 2013
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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)
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March 31, December 31, September 30, June 30,
2013 2012 2012 2012
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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)
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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:
a. 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.
b. 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.
c. Management fees increased to $249,135 compared to $202,500 in 2013.
d. Travel expenses of $46,483 (2013: $17,248) increased as a result of a
higher level of executive travel.
e. Interest income of $9,765 (2013: $38,548) decreased during the period as
a result of lower cash balances.
f. The Company wrote-off an additional $252,228 (2013: $nil) of exploration
expenditures incurred on the West Lombok and Taliwang properties during
the period.
g. 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Southern Arc Minerals Inc.
Rhylin Bailie
Vice President, Communications & Investor Relations
604-676-5241
info@southernarcminerals.com
www.southernarcminerals.com