Mr. Nicholas Mather reports
SOLGOLD PLC ANNOUNCES HALF-YEARLY FINANCIAL REPORT
Solgold PLC has released its interim financial results for the half year ended Dec. 31, 2018. The interim financial report is included as part of this announcement.
Further, the board advises shareholders and interested investors that the company's website also contains access to additional information required to be filed on SEDAR in Canada in connection with the company's quarterly financial period ended Dec. 31, 2018. This additional information is available in the financial reports section of the investor centre on the company's website.
Review and results of operations
The loss after tax for the company for the half year ended Dec. 31, 2018, was $37,892,291 (Australian) (Dec. 31, 2017, loss of $11,712,027 (Australian)).
Cascabel project (Ecuador)
The Cascabel project is located on the northern section of the prolific Andean copper belt, renowned as the base for nearly half of the world's copper production. The project area hosts mineralization of Eocene age, the same age as numerous Tier 1 deposits along the Andean copper belt in Chile and Peru to the south. The project base is located at Rocafuerte in northern Ecuador, an approximate three-hour drive north of Quito, close to water, power supply and Pacific ports. Having fulfilled its earn-in requirements, Solgold is a registered shareholder with an unencumbered legal and beneficial 85-per-cent interest in Exploraciones Novomining SA (ENSA), which holds 100 per cent of the Cascabel tenement covering approximately 50 square kilometres, and subject to a royalty which may be purchased by Solgold for $4.0-million (U.S.) at development decision. Following the preparation of a feasibility study by ENSA, Cornerstone Capital Resources Inc. -- which currently holds a 15-per-cent interest in ENSA -- will be obligated to contribute to the financing of ENSA including its proportionate share of historic expenditure.
The Alpala deposit is the main target in the Cascabel concession. Alpala has produced some of the greatest drill hole intercepts in porphyry copper-gold exploration history, as exemplified by hole 12 (CSD-16-012) returning 1,560 metres grading 0.59 per cent copper and 0.54 gram per tonne gold including 1,044 m grading 0.74 per cent copper and 0.54 g/t gold.
Over 180,000 m of diamond drilling have been completed on the project. With 12 rigs currently active on the project, Solgold produces up to approximately 10,000 m of core every month. Solgold is encouraged by recent drilling results, expected to further expand and enrich the existing resource base at Alpala. The company is also excited about notable drill hole results outside the previous resource area which promise further growth for the 2019 drilling campaign ahead.
Since the publication of the Alpala maiden mineral resource estimate in January, 2018, which outlined a contained metal inventory of 5.2 million tonnes of copper and 12.6 million ounces of gold, the company has nearly doubled both drilled and reported metreage.
The November, 2018, Alpala MRE update, dated Nov. 15, 2018, was estimated from 68,173 assays, with 66,739 assays representing diamond drill core samples, and 1,434 assays representing rock-saw channel samples cut from surface rock exposures. Drill core samples were obtained from a total of 133,576 m of drilling comprising 128 diamond drill holes, including 75 drill holes comprising 34 daughter holes, eight redrills and 11 overruns, and represent full assay data from holes 1 to 67 and partial assay data received from holes 68 to 75. Rock-saw samples were obtained from 2,743 m of rock-saw cuts from 262 surface rock exposure trenches. In contrast, the December, 2017, maiden MRE was estimated from 26,814 assays obtained from 53,616 m of drilling comprising 45 drill holes, including 10 daughter holes and five redrills.
There now exists approximately triple the amount of drilling and assay information since the maiden MRE of December, 2017, and this has resulted in significant growth in tonnage (approximately 273 per cent) and contained metal (approximately 108 per cent) and a far greater proportion of the MRE now being in the indicated mineral resource category (2018: 77 per cent, 2017: 40 per cent).
The November, 2018, Alpala updated mineral resource estimate (MRE) totals a current:
- 2,050 million tonnes at 0.60 per cent copper equivalent (at 0.2-per-cent CuEq cut-off) in the indicated category, and 900 Mt at 0.35 per cent CuEq (at 0.2-per-cent CuEq cut-off) in the inferred category;
- Contained metal content of 8.4 Mt Cu and 19.4 million ounces Au in the indicated category;
Contained metal content of 2.5 Mt Cu and 3.8 Moz Au in the inferred category.
Drill testing of the Aguinaga and Trivinio target has commenced, whilst the numerous other untested targets, namely at Moran, Cristal, Tandayama-America and Chinambicito, are flagged for drill testing as overall program demands allow.
Three-dimensional modelling of key geological parameters for the Alpala deposit has resulted in completion of dynamic models for geology, veining, alteration, and copper and gold grades, all of which are constantly updated as drilling progresses.
A number of studies have been completed in anticipation of future requirements for economic assessment including:
- Landform assessment -- identifying suitable locations for processing plant and other infrastructure;
Weathering, swelling clay, fault condition, fracture count modelling and RQD assessments -- providing a basis for geotechnical parameters to feed into minability characterization;
Hydrogeological data collection.
A 3-D airborne laser scanning, light detection and ranging (lidar) topographic survey was completed in November, 2018, by SAI -- Servicos Aereos Industrias. Processing and approval of final data are under way and final data are expected to be available for use by Q1 2019. The lidar survey will provide high-resolution topographic control for future studies planned for the advancement of the Cascabel project.
The company believes there remains strong potential for further growth with the 2019 drilling campaign to continue to expand the deposit at Alpala SE, Alpala NW, Trivinio and Alpala Western limb.
Other projects (Ecuador)
A comprehensive, nationwide desktop study has been undertaken by the company's independent experts to analyze the available regional topographic, geological, geochemical and gravity data over the prospective magmatic belts of Ecuador, with the aim of understanding the controls to copper-gold mineralization on a regional scale. The company has delineated and ranked regional exploration targets for the potential to contain significant copper-gold deposits. As a result of this study, the company formed four new 100-per-cent-owned subsidiary companies in Ecuador: Carnegie Ridge Resources SA, Green Rock Resources SA, Cruz del Sol SA and Valle Rico Resources SA. These subsidiaries currently hold 73 mineral concessions over approximately 3,200 square kilometres.
Based on the results of this initial exploration, 11 priority targets have been identified for second phase exploration in Ecuador. Continuing exploration will focus on advancing these priority projects, through geophysical surveys and detailed soil geochemistry, with a view to progress to drill testing as soon as permissions are in place. The 11 priority projects are as follows:
Cisne Loja target 15;
The continuing exploration program on these projects will focus on:
- Delineation of geochemical anomalies;
- Mapping of alteration phases to understand the probable location of metals in the system;
- Aeromagnetic surveys to support sampling programs.
Queensland projects (Australia)
Solgold continues to hold tenements across central and southeast Queensland through its wholly owned subsidiaries Central Minerals and Acapulco Mining.
EPM 25300 -- Cooper Consolidated;
EPM 19639 -- Goovigen Consolidated;
EPM 19243 -- Lonesome;
EPM 18760 -- Westwood;
EPM 18032 -- Cracow West.
- EPM 19410 -- Normanby;
- EPM 25245 -- Mount Perry.
No exploration activities were conducted on the Queensland tenements during this period.
Exploration activities have been planned for Central Minerals EPM 18760 including soil sampling and follow-up drilling northeast of drill hole WWD001. A renewal of a land access agreement is required for this work to be completed (the current access agreement expires in March and the proposed program will not be completed before it expires).
Further details on exploration programs on other Queensland tenements will be finalized in the coming months with a commitment to maintain and progress the concessions.
Solomon Islands projects
The Kuma project lies just to the southwest of a series of major northwest-southeast-trending arc parallel faults, associated with numerous Cu and Au anomalies in streams and soils. The project area overlies a 3.5-kilometre-wide, annular, caldera-like topographic feature. Annular and nested topographic anomalies in the region suggest the presence of extensive batholiths of the Koloula diorite beneath the volcanic cover of the Suta volcanics. The prospect geology is dominated by a four km by one km lithocap. This extensive zone of argillic and advanced argillic alteration is caused by hydrothermal liquids that emanate from the top of porphyry copper-gold mineralizing systems, and thus provides a buried porphyry copper-gold target.
The geochemically anomalous portion of the Kuma lithocap (northwest end) lies within the annular topographic anomaly. Kuma has a spectacular oxidized float boulder trail along the Kuma River and was traced to Alemba and Kolovelo Creeks which led to discovery of broad hydrothermal alteration zones and lithocap.
Previous exploration at Kuma included extensive geochemical sampling (BLEG, rock chip and channel samples), geological mapping, a magnetic survey and an electromagnetic survey. Geochemical results define a central zone of manganese depletion (Mn less than 200 parts per million) inferred to indicate the destruction of mafic minerals by hydrothermal alteration. Zinc of over 75 ppm forms an annulus to this zone, and molybdenum of over four ppm lies along the margins of the manganese low indicating potential for porphyry Cu-Au mineralization at depth. TerraSpec spectral analysis of sieved coarse fraction soil samples covering the Kuma lithocap in integration with known geology in the prospect area has highlighted a primary porphyry target centre in the northern portion of the lithocap that Solgold plans to drill test upon granting of tenure.
Solgold received notification of the grant of the permit to explore the Kuma prospect on July 26, 2018.
On Oct. 4, 2018, the company issued an additional 550,000 shares at 28 pence as a result of the exercise of options previously issued to contractors of the company in 2016.
On Oct. 11, 2018, the company issued an additional 9,795,884 shares at 14 pence to raise $2.51-million (Australian) (1.37 million pounds sterling) in cash as a result of the exercise of Maxit Capital LP's options.
On Oct. 11, 2018, the company issued an additional 9,795,884 shares at 28 pence to raise $5.03-million (Australian) (2.74 million pounds sterling) in cash as a result of the exercise of Maxit Capital LP's options.
On Oct. 17, the company issued an additional 100 million shares at 45 pence to raise $83.02-million (Australian) (45 million pounds sterling) in cash to BHP Billiton Holdings Ltd.
On Oct. 29, 2018, the company issued an additional 20,624,553 shares at 28 pence as a result of the exercise of options previously issued to employees of the company in 2016. Of this total 19.95 million were financed through the company's financed loan plan and 674,553 were paid for in cash.
On Nov. 6, 2018, the company issued a total of 82,875,000 unlisted options to employees and contractors. The options have a strike price of 0.60 pound sterling each and are exercisable through to Nov. 5, 2021.
On Nov. 8, 2018, the company issued an additional 2,596,826 shares at 0.3888 pound sterling to BHP pursuant to top-up rights held by BHP pursuant to its share subscription agreement. The allotment price was based on the 10-day VWAP (volume-weighted average price), in accordance with the terms of the share subscription agreement.
On Nov. 26, 2018, the company issued an additional 6,712,200 shares at 0.3714 pound sterling to Newcrest International Pty. Ltd., a wholly owned subsidiary of Newcrest Mining Ltd., pursuant to top-up rights held by Newcrest International pursuant to the Newcrest subscription agreement (as varied). The allotment price was based on the 10-day VWAP, in accordance with the terms of the Newcrest subscription agreement.
On Dec. 20, 2018, the company issued a total of 11,375,000 unlisted options to directors. The options have a strike price of 0.60 pound sterling each and are exercisable through to Dec. 20, 2021.
At Dec. 31, 2018, the company had a total of 1,846,321,033 ordinary shares and 162,512,000 options in issue.
The group achieved several milestones during the half year ended Dec. 31, 2018. These included:
- Entering into an agreement with BHP Billiton Holdings Ltd. to successfully complete a placement of 100 million shares at 45 pence to raise $83.02-million (Australian) (45 million pounds sterling);
- The completion of an updated mineral resource estimate at the company's Alpala porphyry copper-gold deposit increasing the resource to 2,050 Mt at 0.60 per cent copper equivalent (at 0.2-per-cent CuEq cut-off) in the indicated category and 900 Mt at 0.35 per cent CuEq (at 0.2-per-cent CuEq cut-off) in the inferred category;
Recognized as explorer of the year at the Mines and Money Outstanding Achievements Awards London for the second consecutive year.
Matters subsequent to the half yearly financial period
On Jan. 3, 2019, the company announced the filing on SEDAR of an independent National Instrument 43-101 technical report on an updated mineral resource estimate for the Alpala deposit completed by SRK Consulting (U.K.) Ltd. The MRE No. 2 comprises 2,050 Mt grading 0.60 per cent copper equivalent of indicated mineral resources for a contained metal content of 8.4 Mt copper and 19.4 Moz gold, and 900 Mt grading 0.35 per cent CuEq of inferred mineral resources for 2.5 Mt Cu and 3.8 Moz Au, using a 0.2-per-cent CuEq cut-off grade.
On Jan. 31, 2019, the company announced that it intends, subject to various conditions, to make an offer to purchase all of the issued and outstanding common shares of Cornerstone Capital Resources Inc. for consideration consisting of ordinary shares of Solgold. If the offer is successfully completed, holders of Cornerstone shares who tender their shares under the offer will receive 0.55 of a Solgold share in exchange for every Cornerstone share tendered.
The directors are not aware of any other significant changes in the state of affairs of the group or events after balance date that would have a material impact on the half year consolidated financial statements.
Information in this report relating to the exploration results is based on data reviewed by Jason Ward (BSc honours Geol), the chief geologist of the company. Mr. Ward is a member of the Australasian Institute of Mining and Metallurgy, holds the designation MAusIMM (CP), and has in excess of 20 years of experience in mineral exploration and is a qualified person for the purposes of the relevant London Stock Exchange and Toronto Stock Exchange rules. Mr. Ward consents to the inclusion of the information in the form and context in which it appears.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the half year ended Dec. 31, 2018
(in Australian dollars)
Three months ended Six months ended
Dec. 31, Dec. 31,
2018 2017 2018 2017
Exploration costs written off $4,033 $(890) $(36,589) $(1,877)
Administrative expenses (32,815,442) (3,919,250) (38,107,408) (9,756,742)
Operating (loss) (32,811,409) (3,920,140) (38,143,997) (9,758,619)
Finance income 9,070 - 17,281 66
(Loss) before tax (32,802,339) (3,920,140) (38,126,716) (9,758,553)
Tax expense (benefit) (712,735) 1,953,474 234,425 1,953,474
(Loss) for the period (33,515,074) (5,873,614) (37,892,291) (11,712,027)
Items that may be
reclassified to profit and
Change in fair value of
financial assets 1,629,814 (1,737,559) 3,902,855 (4,305,207)
Exchange differences on
translation of foreign
operations 4,307,979 1,952,266 7,328,857 1,119,011
net of tax 5,937,793 214,707 11,231,712 (3,186,196)
Total comprehensive (loss)
for the period (27,577,281) (5,658,907) (26,660,579) (14,898,223)
(Loss) for the half year
Owners of the parent
company (33,494,576) (5,840,273) (37,797,531) (11,655,001)
Non-controlling interest (20,498) (33,341) (94,760) (57,026)
(Loss) for the period (33,515,074) (5,873,614) (37,892,291) (11,712,027)
Total comprehensive profit/
(loss) for the half year is
Owners of the parent company (28,134,673) (6,297,138) (27,766,725) (15,026,549)
Non-controlling interest 557,392 638,231 1,106,146 128,326
Total comprehensive (loss)/
income for the period (27,577,281) (5,658,907) (26,660,579) (14,898,223)
Basic earnings per share
(cents) (1.8) (0.4) (2.2) (0.8)
Diluted earnings per share (1.8) (0.4) (2.2) (0.8)
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