NZX Market Announcement
Investor Briefing: Fondaway Canyon Gold Project
Aorere Resources Limited (NZX:AOR) has secured an exclusive right to purchase American Innovative Minerals LLC (AIM) through its wholly owned subsidiary Nevada Gold Limited (NGL).
AIM holds multiple exploration projects in resource-rich Nevada, including the flagship Fondaway Canyon Gold Project (Fondaway). Fondaway is an advanced exploration project with historical resource estimates of:
· Indicated resources of 562,665 tonnes @ 9.2 g/t gold containing 166,726 oz gold with additional oxide open pit indicated resources of 246,878 tonnes @ 3.1 g/t gold containing 24,760 oz gold.
· Inferred resources of 537,045 tonnes @ 8.8g/t gold containing 152,362 oz gold, with additional oxide open pit inferred resources of 244,710 tonnes @ 2.3 g/t gold containing 18,070 ounces of gold.
AOR has commissioned a Scoping Study (Study) on Fondaway from Michael Norred of Techbase International Ltd (Author). The Study was undertaken on the basis of these historic indicated resources only and estimates a net value of Fondaway of US$37.2M. The key assumptions underlying this estimated net value were advised to the market on 17 May 2016.
Fondaway is a well-explored mineral deposit, with significant potential. In the opinion of the Author a profitable mining operation can be developed at Fondaway.
AOR is now managing a capital raising in NGL to finance the acquisition of AIM and its initial working capital requirement. The investor presentation supporting this capital raising accompanies this announcement and is available from our website www.aorereresources.com.
Please note the capital raising is targeted at wholesale investors only and is not intended to be extended to retail investors at this time.
Fondaway is one of several mineral properties within the portfolio of AIM. The property includes 136 contiguous, unpatented lode mining claims, covering approximately 2,800 acres (1,133 ha), on Bureau of Land Management (BLM) administered land in Churchill County, approximately 43 miles (69 km) northeast of Fallon, Nevada. The claim group is on the western flank of the Stillwater Range.
Fondaway property is surrounded on three sides by the Stillwater Wilderness Study Area (WSA). The WSA boundary overlaps portions of some claims. The WSA has been recommended as non-wilderness by the BLM, but its status is pending final action by the US Congress.
Production from the properties is subject to NSR royalties of 3% to Richard Fisk, and 2% to Hale Capital, for a total of 5%. Each of these royalties can be bought out.
The Fondaway property was originally staked by the Fisk brothers in 1956 for tungsten. The property has been leased, sub-leased, and joint-ventured by a series of mining companies, including Occidental Minerals, Tundra Gold Mines, New Beginnings Resource Corp, Homestake Minerals, Mill Creek Mining, Tenneco Minerals, Consolidated Granby, Stillwater Gold, Agnico Eagle, Royal Standard Minerals, and AIM.
The earliest mine production by the Fisk brothers was approximately 10,000 tons of tungsten ore, recovering 200,000 pounds of tungsten trioxide (WO3). Tenneco Minerals operated an open pit mine that recovered 5,402 ounces of gold from 186,000 tons of ore, and Fisk Mining recovered 2,500 ounces of gold from 25,000 tons of ore.
The majority of the gold mineralization at Fondaway is hosted in steeply dipping, silicified shear zones. Gold values are restricted to the shear zone and are not disseminated into the wall rock.
The previous operators of Fondaway have conducted numerous exploration programs. In addition to drilling, exploration has included extensive surface sampling, underground channel sampling, geological mapping, and geophysical surveys.
Many holes were drilled between 1980 and 2002. Core, Reverse Circulation, and Air-track holes are known to have been drilled by the various mining companies. The Fondaway Canyon database currently contains records for 582 holes, totaling 160,026 feet (48,776 m) of drilling. Drilling in 2002 by NCI found deeper intersections with the mineralized zone, and a possible new target under the pediment.
Metallurgical testing and operations experience have shown that the oxide ores at Fondaway are readily leachable. The sulfide ores have been problematic, however test results show recoveries of up to 95% can be achieved by using an oxidizing pre-treatment followed by CIL leach. A multi-stage flotation process was also promising, with recorded recoveries between 94.3 and 100.6%. Further testing is recommended to find the most cost-effective process for future mining.
Resource estimates have been included in technical reports by previous authors. The resource statements from each report have been examined by the Author, and were found to be in general agreement, in particular in the total contained gold. The resource estimate by Brady (1997) was chosen by the Author for further analysis of the sulfide, underground mineable mineralization, along with an estimate by Cohan (1997), who identified a portion of the oxide, open pit mineable resource that was outside the WSA boundary.
A detailed mine plan and schedule has not been developed for this property, so costs were estimated based on another property with similar size, geometry, and production rate. Using these assumptions, and after deducting costs for further exploration and planning, permitting, capital costs, and operating costs, Fondaway was found by the Author to have a net value of $37.2 million dollars, and a NPV (8%) of $18.8 million.
Fondaway is a well-explored mineral deposit, with significant potential. In the Author’s opinion, some of that potential has not been realized due to multiple changes in management over the life of the project. The available data from the various sources has not been well-integrated, and consequently much of it has not been exploited for maximum exploration success.
Based on the Mineral Resources estimated by previous authors, and based on the relevant assumptions documented in Sections 21, and 22, it was the Author’s opinion that a profitable mining operation can be developed at Fondaway. There are opportunities to significantly increase the resources at Fondaway. Any increase in the mineable portion of the resource would improve the economics by spreading the fixed exploration, planning, and capital costs over a greater tonnage.
AOR commissioned the Author to undertake the Study as part of a due diligence process to provide independent support for the development potential of Fondaway. Details of the Study in this announcement are derived from Fondaway Canyon Project Scoping Report, Churchill County, Nevada, USA; prepared for Aorere Resources Limited, Wellington, New Zealand April 19, 2016 by: Michael Norred, President of Techbase International, Ltd. P.O. Pox 18820; Reno, NV 89511.
The Study is preliminary in nature, it includes indicated mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.
Resource figures used in the Study are based on Historical Estimates from NI 43-101 technical report "Proposals to Upgrade South Pit, Deep Dive, Half Moon, Paperweight, and Hamburger Hill to a Measured Gold Resource, Fondaway Canyon, Churchill County, Nevada (Amended); Prepared by Strachan, D. CPG; September 2003 for Royal Standard Minerals Inc.:
I. As at the date of the Study, Mr. Strachan was a “Qualified Person” as defined by NI 43‐101
II. A Qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves;
III. AOR and NGL are not treating the historical estimate as current mineral resources or mineral reserves
In November last year, AOR through its relationship with local mining consultant Campbell McKenzie (Kenex Knowledge Systems) and Montana based Childs Geoscience Inc, happened across AIMwhich was unexpectedly on the market for sale due to the untimely deaths of its two geologist/prospector principals, Alan Branham and Don Decker.
AOR’s core business is to invest in selected early stage minerals projects and subsequently undertook due diligence on the project.
AIM, and the flagship Fondaway project in particular, fulfilled Aorere’s requirements of:
· an advanced minerals project;
· defined high grade resources;
· excellent infrastructure;
· a constructive regulatory setting for mining; and
· no known environmental issues.
This encouraged AOR to assemble a technical team to expedite the purchase of AIM, with the objective of creating value by overseeing the immediate development of Fondaway. Negotiations have been successful and AOR now holds an exclusive right to acquire 100% ownership of AIM and Fondaway (NZX Announcement - 16 May 2016, Acquisition of Gold Prospect in Nevada).
Mr Simon Henderson, MSc Geology (CODES), an AusIMM Chartered Professional under the Discipline of Geology; is a Qualified Person as defined by National Instrument 43-101 and a Director of the Company, and has reviewed and approved thecontents of this announcement and accompanying presentation.
Aorere Resources Limited
Warning - Forward Looking Statements
This release contains forward looking statements. Forward-looking statements and information are not historical facts, are made as of the date of this release, and include, but are not limited to, statements regarding discussions of future plans, guidance, projections, objectives, estimates and forecasts and statements as to AOR's expectations with respect to, among other things, mineral properties and the matters described in this release.
These forward looking statements involve numerous risks and uncertainties and actual results may vary. Important factors that may cause actual results to vary include without limitation, the timing and receipt of certain approvals, changes in commodity prices, changes in interest and currency exchange rates, risks inherent in exploration results, timing and success, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), changes in development or mining plans due to changes in logistical, technical or other factors, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications, cost escalation, unavailability of materials, equipment and third party contractors, delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets.