In a noteworthy development within the mining sector, Metals One (AIM: MET1, OTCQB: MTOPF), a company renowned for its exploration of precious metals, has announced a strategic investment of up to US$1.8 million in Lions Bay Resources (LBR) through convertible loan notes. This collaboration marks an essential step towards enhancing gold production capabilities in South Africa, a country historically recognized for its rich mineral resources.
Lions Bay Resources, established earlier this year, is a private entity based in South Africa. It operates as a partnership between Lions Bay Capital Inc. (TSX-V: LBI) and the management team from Salamander Mining. The latter is led by Graham Briggs, the former CEO of Harmony Gold, and Lloyd Birrell, founder and former CEO of Theta Gold. The partnership combines extensive industry experience and strategic foresight to unlock potential in the gold sector.
Investment overview and operational plans
The investment is intended to facilitate LBR’s acquisition of a substantial cogeneration plant in Karbochem Industrial Park, located in Newcastle, South Africa. This facility can potentially produce power and steam while also processing refractory gold concentrates, a common byproduct of mining operations in the area. Recent due diligence conducted by both Metals One and LBR has revealed the plant’s impressive specifications and infrastructure, which include:
- Two Thermax combustion boilers with a capacity of 30 tonnes per hour
- 6 MW GE-Triveni steam turbine
- Capability to utilize coal and biomass as feedstock
- Comprehensive boiler house and control systems
- Compressed air facilities and electrical sub-station
- Inclined conveyor system connected to multiple silos
Following an inspection by Terravista Solutions P. Ltd, the plant was valued at approximately US$39.6 million. To recommence operations, an estimated US$4.5 million will be required, which will be funded through the proceeds from the loan notes.
Future initiatives and market potential
In addition to revamping the plant for power generation, LBR is exploring the implementation of a gold roasting complex. This alternative processing solution aims to mitigate the need for exporting gold-bearing concentrates to Asian smelters, thereby enhancing local revenue streams. The roasting process could allow LBR to serve as a central facility, processing materials from smaller mines in the vicinity that lack the resources to operate independently.
The region surrounding the plant is rich in gold deposits, with numerous multi-million-ounce reserves located within a 300-kilometer radius. These deposits generate concentrates that could be processed at the LBR facility, providing a crucial opportunity for smaller mining operations to benefit from a centralized roasting setup. The near-term strategy will focus on acquiring regional gold mining and tailings assets, which will serve as raw material for the roasting process.
Conditions and structure of the investment
Metals One’s investment will be disbursed in tranches, conditional upon the successful completion of due diligence and other regulatory requirements. The initial tranche is set at US$175,000, followed by a second tranche of US$1.625 million. Key conditions include satisfactory technical reports confirming the plant’s value and legal agreements that secure LBR’s acquisition of the facility.
In exchange for the investment, LBR will issue new shares to Metals One, amounting to 5% of the total issued share capital on a fully diluted basis. The convertible loan notes carry a 10% annual coupon, which can be redeemed in cash or converted into shares at Metals One’s discretion.
Leadership insights and future outlook
Dan Maling, Managing Director of Metals One, expressed optimism regarding the venture, stating, “South Africa has historically been a powerhouse in gold production. Our investment in LBR is a strategic move that leverages the region’s abundant resources and mining expertise to build a vertically integrated gold company.” He added that with a solid financial base of over £9 million in cash, Metals One is well-positioned to capitalize on growth opportunities in the mining sector.
As this partnership unfolds, the implications for gold production in South Africa could be significant, potentially revitalizing local mining operations and contributing to the region’s economic development.