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African Copper, Avocet Mining, Colt Resources, Galileo Resources news briefs

Contributed by Fox-Davies Capital

African Copper has withdrawn its cautionary announcement over the potential disposal by ZAI of its 84.9% stake in African Copper.

In this news:
- ZCI has elected to suspend the process
- ZCI received a number of proposals which it believed did not reflect the value of African Copper
- ZCI continuing to work towards realising the full value of its investment in African Copper
- African Copper continues to evaluate options to enhance the output and life of its operations through increasing the confidence in its resource base and production.

FD Comment:
African Copper made a loss before tax during 1H'12 of US$8.983M and since then production has fallen to 2,577Mt of copper in concentrate during 3Q down from 2.882Mt in 2Q as the grade fell as mining shifted to the lower grade split orebody from the western end of the Thakadu pit, making it difficult to achieve a valuation ZCI would deem acceptable in the current weaker market.

Avocet Mining has released its FY'12 results and resource and reserve update.

In this news:
- Gold production from continuing operations of 135,189 oz. (2011: 166,744 oz.), in line with revised guidance
- Total cash cost of US$1,000 per oz. (2011: US$693 per oz.)
- Average realised gold price: US$1,491/oz
- EBITDA US448.383M (Fy'11: 83.145M)
- Profit before tax and exceptional items from continuing operations US$18.3m (2011: US$40.3m)
- Discussions are ongoing with Macquarie and other financiers on the restructuring of Group finances
- Considering options to address our hedge position, including funding from existing sources, equity and debt
- Ongoing development at Souma successful with 38% increase in Mineral Resources to 0.78m oz., and favourable results received from initial metallurgical testwork
- Tri-K project feasibility study underway with Mineral Resource expanded to 3.22m oz
- Group Mineral Resource expanded with a total of 8.7m oz. across three main projects, Ore Reserve confirmed 0.92m oz

FD Comment:
This has been an atrocious year for Avocet. Today's news won't help with the revised reserve estimate at the bottom of expectations and well below the 1.85Moz announced at the end of FY'11. With restricted cash in the operating Company and a ~£85M outstanding hedge book, the Company needs to reach agreement regarding restructuring the debt and there are little short term catalysts to improve the situation. Although Tri-K is progressing through feasibility, until the group is restructured it is difficult to see how it will be financed. The only light at the moment is the potential at Souma, which isn't included in today's reserves figures, but this is still someway off production.

Colt Resources has executed a binding letter of intent to purchase land on which to build surface mining infrastructure at the recently awarded Tabuaço experimental mining license that includes the Tabuaço (São Pedro das Águias) and Aveleira tungsten deposits in northern Portugal.

In this news:
- Passa Frio is mostly vacant land of approximately 1,000,000m2
- Land will be used to establish the necessary surface mining infrastructure, namely the processing plant, dams, dumps and adjoining warehouses, and is zoned to permit such construction
- Property is situated away from residential areas such that it is mostly unnoticeable from the surrounding roads and nearby villages
- Colt will pay €100,000 for the three-year option and an additional €350,000 to purchase the property should the Company decide to exercise the option.

FD Comment:
The Company will spend the next few months to survey the property and verify legal title. If suitable this is very positive as it will enable the Company to locate all the surface infrastructure close to where it announced at the end of February it plans to excavate both an access adit and a vertical shaft into the São Pedro das Águias deposit to test the proposed mining method, gathering further information on the rock mechanical conditions, and extracting a bulk sample for pilot ore concentration work.

Galileo Resources  has released the results of a Preliminary Economic Assessment ("PEA") of its Glenover Rare Earth Project in South Africa.

In this news:
- Net Present Value ("NPV") of US$ 512m using a rare earth oxide (REO) basket price 2 of US$60.79 per kg of 99% REO and a discount rate of 8
- Project IRR 34.5%
- REO production of 167,100t in mixed REO chemical product over 24-year mine life based on current resource estimate
- Ore production rate from 2.7 Mt stockpiles at 400ktpa from years 1-7
- Open-pit-mine ore production from 7.1 Mt at 400ktpa from year 8
- Waste to ore mine stripping ratio of 2.1 to 1 from year 8
- Initial capital investment US$233M, including a contingency of US$34M but excluding
- $57M for deferred and sustaining capital.

FD Comment:
This is a positive PEA for the Company, which will now look to upgrade the stockpiles resource category to indicated/measured before starting a pre-feasibility assessment. In the mean time the Company is also looking at the potential to recover phosphate products, ammonium sulphate and scandium from process waste streams and has commissioned rare earth recovery testwork in China in order to investigate the use of nitric acid in the process as an alternative to the sulphuric acid studied for this PEA.