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Continental Coal, Chaarat Gold, Touchstone Gold news briefs

Contributed by Fox-Davies Capital

Continental Coal has agreed a strategic financing agreement with Village Main Reef.

In this news:
- Village Main Reef ("VMR")to acquire up to a 19.9% strategic cornerstone interest through private placement, acquisition of minority shareholders with a holding of <A$500 and through subsequent on market share purchases
- Placement of 100m shares to VMR at A$0.08ps subject to shareholder and South African Reserve Bank approval
- VMR to acquire Minority Members shares at a minimum sale price of A$0.051ps
- VMR to receive 25M unlisted options at A$0.1 ps expiry 31 March 2016
- VMR advanced A$2M of A$8M placement as secured interim loan
- VMR to nominate one board member
- Funds raised to be applied to debt reduction, working capital and strengthen balance sheet.

FD Comment:
This is very good news for the Company, as the share price was under pressure since the start of the year on expectation the Company would have to raise additional working capital and meet its debt obligations. VMR, although listed on the JSE (since 1944) have a private equity investment model and being a South African Company obviously see value in COOL's asset base and revenue growth going forward as it looks to bring in its fourth coal mine, De Wittekrans into production.

Chaarat Gold has released an update on the Tulkubash Project Update.

In this news:
- Changed processing method from CIL to heap leach
- Production still planned for 2H'13
- Reduces capital cost and power requirements
- Approximately 2.7 Mt of resource at a grade of 2.06 g/t are suitable for heap leaching
- Initial production reduced from 30Koz pa to 21Koz pa
- However will still need to raise $20 million to cover initial mining costs due to changes in change in the Kyrgyz tax regime
- Tax payments are now accelerated as revenue based rather than profit based
- Unbudgeted payment of tax was also due on the registration of the Kiziltash project resource with the Kyrgyz Government.

FD Comment:
This has not been a good start to the year for the Company, which still needs to raise US$20M to bring the project into production, and given the scale of changes we believe the Company will struggle to reach production by the end of the year at the earliest. The Company has not published details of the revised capex or recoveries, but the net result is that for the same total cost, initial production will be reduced from 30Koz to 21Koz pa, equivalent to a loss of US$14.4M in revenue before tax. This is caused by a reduction in head grade by further lowering the cut-off grade and lower recoveries by using heap leach rather than CIP. The changes in the tax code announced in January means that rather than the government taking 20% of the project and tax being profit based, the tax regime at the current gold price will mean the Company will have to pay ~17% of revenue in royalties and taxes.

Touchstone Gold has released an update on its Segovia Gold Project in Antioquia, Colombia.

In this news:
- Results from metallurgical tests conducted on two composite samples: Pepas #1 and Pepas #2
- Samples amenable to each of the gravity concentration, cyanide leaching and flotation methods
- Initial results indicated recoveries from 87.9 to 95% gold in flotation concentrate
- Cyanide leaching provided recoveries ranging from 40.5 to 90.7%
- First phase of a 15,000-metre diamond drilling programme currently underway at the project, with first assay results expected in April 2013.

FD Comment:
Although encouraging, the Company will have to do much more work given the range of results and is planning a much larger bulk sample. No date has been given for this work to be complete other than it will be carried out in parallel to the drilling programme.