Pre-feasibility on ML 111 complete
AfriCan Marine Minerals (AJF1.F) has successfully completed the prefeasibility study (PFS) on Mining Lease 111 (ML 111).The study indicates it is technically feasible to start mining in Q314, subject to financing, with production revenues beginning in Q414. Project economics appear attractive with an NPV of US$20.2m (US$0.22 or C$0.24 per share) attributable to AFA. Initial operating costs of US$3.7m per month (US$278 per carat) will be funded by AFA. Funding has not yet been concluded.
ML 111 mining could start in Q314
The PFS outlines a timetable for the exploitation of the ML 111 resource, with mining beginning on the Marshall Fork deposit in Q3 and Q414, then moving to the Diaz Reef deposit in Q414/Q115. Indicated resources with a grade in excess of 0.126 carats per square metre may be mined economically. At this economic cut-off grade, the estimated probable reserve is 319,000 carats at an average grade of 0.24 carats per square metre over 1.3m square metres. The mining rate is expected to average c 40,000 carats per quarter resulting in a two-year life of mine.
Project economics: PFS NPV US$20.2m
The PFS indicates that Afri-Can’s after-tax share of the NPV of the project is US$20.2m with an IRR of 31%. These figures are derived using an average diamond price of US$484 per carat (based on an escalated price of actual diamond sales from ML 111 in 2008), average annual production of 159,500 carats and operating and overhead costs of US$125,500 per day.
AFA committed to three months operating costs
The mining method will be a seabed crawler system with vessel operating costs estimated at US$3.7m per month, which will be met by AFA for the first three months of operations. Thereafter, operating costs should then be covered by revenues. AFA has no capex commitment.
Valuation and financials: Cash required
AFA will require a total of US$11.1m over the first three months to fund the vessel’s operating cost. The cost of preparing the vessel will be met by JV partner, IMDH (as outlined in the MoU, see our QuickView published on 13 December 2013). AFA does not currently have sufficient cash to meet this commitment and financing arrangements have not yet been concluded.
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