Update on Boa Fé, Tabuaço and Middle East initiatives of Colt Resources
Colt Resources
(TSXV:GTP.V) is a Canadian junior gold exploration company with numerous mineral exploration properties in Portugal, including two advanced stage projects in Portugal: the Boa Fé gold project and the Tabuaço tungsten project. Colt Resources has also successfully incubated, incorporated and launched Colt Resources Middle East (or ColtME). Since Colt Resources holds a significant equity ownership stake in ColtME, it gives shareholders of Colt Resources upside exposure to project initiatives that are being derived from the many potential near-production-stage mining opportunities in the Middle East that have come to the attention of management.
Top officers of Colt Resources have assumed key roles in ColtME. The Executive Chairman of Colt Resources, Richard Quesnel, was appointed CEO and President of ColtME in January 2014, and Shahab Jaffrey, the recently appointed CFO of Colt Resources, became the CFO and a Director of ColtME in March 2014. Prior to being elected Executive Chairman of Colt Resources in 2013, Richard Quesnel was CEO of Consolidated Thompson Iron Mines Limited, where he contributed to and was largely responsible for the successful development of the Bloom Lake iron ore deposit in Quebec. Soon after achieving commercial production in early 2010, Consolidated Thompson was acquired by Cliffs Natural Resources (CLF:NYSE) for CDN $4.9 billion (including net debt) in first half of 2011. Shahab Jaffrey has extensive accounting experience, particularly in Pakistan and the Middle East. In addition, the CEO of Colt Resources, Nikolas Perrault, is a Director of ColtME.
Thus far, Colt Resources has indicated that areas of interest in the company?s Middle East initiative may be in Pakistan, Afghanistan and Saudi Arabia. In Pakistan, ColtME is focusing on deposits in the Tethyan Metallogenic Belt and is currently targeting the Chagai District of Baluchistan. The Tethyan Belt is a major porphyry-related mineralized zone extending from central Europe (Hungary, Romania, Bulgaria) through Turkey, Iran and Pakistan, continuing through the Himalayan region into Myanmar, Malaysia, Indonesia and terminating at Papua New Guinea. The area was explored by the Geological Survey of Pakistan in the 1970s, and in the process, the Reko Diq copper-gold deposit discovered in 1978-1979. The agency has conducted and published ground magnetic surveys, aeromagnetic surveys and geological mapping of the Chagai Hills area. The two major copper-gold deposits in the Chagai District are Reko Diq and Saindak, the latter of which is being operated by Metallurgical Corporation of China. Copper and gold ore resources at Reko Diq are estimated to be 837 million tonnes (MMT) Cu and 9 million ounces Au and 412 MMT Cu and 2.24 million ounces Au at Saindak. The $3.3 billion Reko Diq mining project for a world-class copper-gold open-pit mine was halted in November 2011 by the JV partners of Canada?s Barrick Gold (ABX:NYSE) and Chile?s Antofagasta Minerals (ANFGF:OTC).
During the last week of February, representatives of ColtME, including Richard Quesnel (CEO) and Nikolas Perrault (Director), visited Pakistan, where they engaged in discussions and meetings with senior government officials, including Finance Minister Senator Mohammad Ishaq and the Special Envoy to Prime Minister for Overseas Investment Ambassador, Javed Malik. During the press conference, Richard Quesnel stated that ColtME has the intention of investing over $4 billion in mining sector of Pakistan and also has the capacity to invest $1 billion annually in Pakistan for the next 50 years.
In Afghanistan, a privately-owned investment company, Colt Nimroz Mining Afghanistan, was incorporated in September 2013 for the purpose of investing in mining projects in the province of Nimroz in Afghanistan. Shahal Khan (Strategic Advisor to the Colt Resources and Chairman of the Board of ColtME) and Malik Shah Baluch (Strategic Advisor to the Colt Resources and Executive Director of ColtME) are officers of Colt Nimroz Mining Afghanistan. Malik Shah Baluch is a prominent man in Baluchistan as a leader of the Baluch tribes in the region, which inhabitant particular areas of interest for ColtME. Colt Nimroz has leased property near three villages in Nimroz for the purpose developing mineral projects.
During the first quarter of 2014, Colt Resources announced two closings of a private placement for the purpose of funding ColtME. On February 18th, the initial closing of 20,666,667 shares provided proceeds of CDN$3,100,000 while the second for 6,833,333 shares occurred on March 4th providing CDN$1,025,000. Both offerings were priced at a price of CDN$0.15 per share. The net proceeds from both offerings provide the working capital to support management?s initiatives to secure exploration and mining licenses in the Middle East region.
The Boa Fé gold project in southern Portugal continues to be fast-tracked. In May 2013 a Preliminary Economic Assessment (PEA) was filed. On February 20th, Colt Resources announced that the first phase of a drilling campaign that began in November 2013 had been completed. The total infill drilling program (all phases) is comprised of 10,000 meters divided between Boa Fé and Tabuaço projects. At Boa Fé, a total 32 holes totaling 1,813 meters have been completed, and the samples are underway to an assay laboratory in Spain. The infill drilling program is designed to improve confidence in the estimated resource. Work continues to advance the project, including further completion of the full mining permit application, along with environmental data collection and monitoring to support the EIA. Mining and processing methods are being studied to ensure the optimal recovery of precious metals. The project continues to advance towards a feasibility study and mine development with production expected to commence in 2015.
The Tabuaço tungsten project in north-central Portugal is also an advanced-stage project advancing towards production. A trial mining license was awarded in February 2013, and a PEA was filed in October 2013. Also on February 20th, Colt Resources announced the completion of the first phase of the Tabuaço tungsten project?s drilling campaign, which was comprised of 22 holes totaling 2,575 meters. Management expects incremental exploration and drilling results to upgrade the inferred resources to the indicated category, along with potentially identifying additional resources. A feasibility study and an updated NI 43-101 compliant resource estimate are targeted for completion during the fourth quarter of 2014. The company expects to receive full mine permitting in 2015, complete mine construction in 2016 and achieve initial production in 2017. Colt Resources is seeking a partner for the development of Tabuaço, which we would expect to be structured in a manner similar to the company?s Santo António joint venture with the partner providing capital and further developing the project in order to earn a substantial stake in the project. In this manner, Colt Resources would be able to focus its capital resources on the development of the Boa Fé gold project.
We reiterate our Outperform rating and price target of $1.63, which is based on an estimated share value of attributable resources indicated by Colt?s NI 43-101-compliant mineral resource estimates and utilizes the current prices of gold and tungsten. We consider our valuation model to be conservative in that it also includes prospective developmental costs of both the company?s advanced stage projects in Portugal: the Boa Fé gold project and the Tabuaço tungsten project.
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