The program substantially completed the first phase of an option agreement with Antofagasta.
Argonaut, via its 90% held subsidiary, Mwombezhi Resources Ltd, has been successful in generating broad copper intercepts at the Nyungu deposit within the Lumwana West project and has defined several large, prospective
Project setting
The Lumwana West project is located on the western lobe of the Mwombezhi Dome in the Central African Copperbelt. The
Mwombezhi Dome is one of several domes in an area of the Copperbelt known as the Domes Region.
The Domes Region is host to the new generation of Copperbelt mines, with copper production
in the area set to reach 870,000 tonnes per annum. Nearby mines include Barrick Gold Corporation's Lumwana Mine on the eastern lobe of the Mwombezhi Dome, First Quantum Minerals Ltd's Kansanshi mine and the recently commissioned Sentinel Mine,
also owned and operated by First Quantum.
Overlying agreement
In April 2014, Argonaut announced the execution of the Overlying Agreement with Antofagasta for the exploration and development of the Lumwana West project in Zambia.
The Overlying Agreement covers all phases of the project's development from regional exploration to the completion of a feasibility study and, in the event the project is feasible and Argonaut elects not
to fund its pro-rata share of the project, Argonaut will either be carried into production or bought- out at the value of its interest.
regional targets.
During the period, phase one of an option agreement (the Overlying
350,000 mE 400,000 mE
DEMOCRATIC REPUBLIC OF CONGO
Location
ZAMBIA
Agreement) with a subsidiary of Antofagasta plc (Antofagasta) was substantially completed. Under the terms of the Overlying Agreement, a US$3.9M exploration spend in the first period earns Antofagasta a 25% interest in the project.
8,650,000 mN
First Quantum SENTINEL 1.2Bt at 0.50% Cu
300,000tpa copper from 2015
Argonaut
LUMWANA WEST
Nyungu Deposit and target areas
16121-HQ-LPL
Barrick
LUMWANA
First Quantum KANSANSHI 1.1Bt at 0.81% Cu
Under expansion to 400,000tpa copper
ZAMBIA
0 25
kilometres
Road
Nyungu Deposit and targets
1.1Bt at 0.50% Cu
170,000tpa copper - nameplate
Tenement boundary
Mineral deposit projected to surface
Target areas
Lumwana11
Figure 1 The Domes region is host to the new generation of Copperbelt mines
Principal commercial terms
The Overlying Agreement between Antofagasta and Argonaut Resources NL is in five phases. The principal commercial terms are described below.
Phase I involves the input by Antofagasta of US$5M within the first period in exchange for a 25% interest in the project. The funding is in two parts: US$3.9M for exploration works nearing completion plus a US$1.1M placement in Argonaut completed by the companies in May 2014. Placement funds were used by Argonaut to secure an additional 39% interest in the project via the underlying Lumwana West Joint Venture. This increased Argonaut's interest in the project to 90%.
Phase II involves expenditure of US$15M by Antofagasta within four years of the completion of Phase I at a minimum expenditure rate of US$2.5M per year. Antofagasta can earn an effective 51% interest in the project by completing Phase II.
Phase III involves the completion of a feasibility study to international standards. Antofagasta may conduct additional work necessary to commence the feasibility study, such as a preliminary feasibility study, prior to electing to commence the definitive study. Antofagasta will have up to two years to complete additional work and four years to complete
the feasibility study. Antofagasta can earn an effective 70% interest in the project by completing the feasibility study.
Phase IV is the period following the delivery of the feasibility study, but prior to a development decision. Argonaut may elect not to contribute during this period provided it reimburses Antofagasta from future dividends.
Phase V is the period after a development decision when, if Argonaut decides not to fund its pro-rata share of the project, Antofagasta may elect to either carry Argonaut into production, with Argonaut's development costs being funded by 60% of future dividends, or buy-out Argonaut's interest for its pro-rata share of the project's net present value1.
Antofagasta may elect to stop contributing at certain stages in which case various provisions including standard dilution and drag-along/tag-along rights will apply.
Argonaut will be the operator under the Agreement during Phase I and part of Phase II. Antofagasta may elect to become operator at any stage during Phase II.
1 Using a discount rate of 12%.
The underlying agreement
The Lumwana West Joint Venture, executed in July 2011 (the Underlying Agreement) involves large scale prospecting licence 16121-HQ-LPL. Under the terms of the Underlying Agreement, Argonaut's 100% held subsidiary, Lumwana West Resources Ltd, earned a 90% shareholding in Mwombezhi Resources Ltd, the
Zambian registered company which holds 16121-HQ-LPL.
Exploration
The exploration program executed during the period was jointly planned by Argonaut and Antofagasta. It aimed to
considerably increase the extent of known copper mineralisation at Lumwana West. The program focused on testing major target areas with surface geochemical anomalism and favourable structural geology settings.
The first phase exploration program was completed in July 2015 and included 36 drill holes, for a total of 8,129m of Diamond
core, plus the collection and analysis of approximately 12,947 soil samples.
Of the total drill meterage, 6,123m were drilled during the 2014 field season (May to November 2014) with holes targeting the following areas: West Mwombezhi, Kavipopo, ZNS, LMW, Mufuka, and Kabikupa prospects plus the Nyungu deposit.
An additional 2,006m were drilled between May and July 2015 targeting geochemical anomalies and structural targets at Kabikupa, Kamafamba, Mufuka, Sharamba and Luamvunda prospects.
Kabikupa prospect
The Kabikupa prospect was defined in 2014 by soil sampling and drilling. The soil geochemistry anomaly strikes south-east and measures approximately 1,000m by 500m. The peak soil sample is 0.13% copper, which is the highest copper-in-soil value returned within the licence area to date.
Four holes for 903m were completed at the Kabikupa prospect. Significant intercepts from drilling include:
• KBDD001: 17.4m at 1.18%
copper from 102.6m within a broader intercept of 39m at 0.61% copper from 81m2.
KBDD003: 25m at 0.22% copper from 12m and 10.7m at 0.29% copper from 52m.
• KBDD004: 20.4m at 0.67%
copper from 151m including 7m at 0.92% copper from 154m.
Drilling completed at Kabikupa prospect between May and July 2015 sought to extend the
mineralised strike extent to 1,800m. Significant copper mineralisation was not intercepted by this drilling outside of the main surface anomaly, meaning subsurface copper mineralisation is likely confined to a strike length of approximately 1,000m.
Kamafamba prospect
The Kamafamba target sits near the southern margin of a large granite body. The prospect is defined
340,000 mE 350,000 mE 360,000 mE
8,650,000 mN
Kavipopo Prospect
by a 1,100m soil geochemistry anomaly. Structural interpretation indicates the geochemical anomaly is coincident with a thrust system
related to the granite margin. This
West Mwombezhi Prospect
wo M
Nyu
ngu Deposit
ZNS
Prospect
Sharamba Prospect
m b e z h i
Kabikupa Prospect
Kamafamba Prospect
LMW
D o m e
Prospect
ospe
Lua
Pr
mvunda ct
kezhi spect
Pro
Shi
Pr
Mufuka ospect
8,640,000 mN
8,630,000 mN
geological relationship enhances the prospectivity of the target.
Three drill holes for 409m were drilled at the Kamafamba prospect. Highlights from this drilling included:
• KMDD001: 15.85m at 0.30%
copper from 41m
• KMDD003: 17.6m at 0.40%
copper from 134.5m, including 5.6m at 0.67% copper from 146.5m
2 By weighted average. Cut-off grade not applied.
16121-HQ-LPL
LumwanaW_13
0 5
kilometres
ZAMBIA
Location
ZAMBIA
ZAMBIA
Licence boundary Drainage path (Dambo)
Road
Track
Prospect (+40ppm Cu soil sampling)
Figure 2 Lumwana West large-scale prospecting licence and prospect locations.
AUSTRALIA
Alford, South Australia
(Argonaut 100%)
The Alford Project on South Australia's Yorke Peninsula lies 20km north-east of Wallaroo within the geological province known
as the Olympic Domain. The tenement is prospective for iron oxide copper-gold mineralisation as found at Prominent Hill, Olympic Dam and Hillside.
Mineralisation at the Netherleigh Park prospect is interpreted to be comparable to skarn-style
mineralisation but is noted to contain IOCG mineral assemblages.
Exploration program
During the period, Argonaut's partner, Sandfire Resources NL, completed a two-hole, 750m Diamond drilling program at the Netherleigh Park area on the Alford licence.
Sandfire geophysically modelled the magnetic and gravity from the Netherleigh Park area and sited the drill holes on the basis of these models and existing drill data. Drill hole ALDDH027
targeted a down-dip extension of
mineralisation intercepted by Argonaut in drill hole ALDDH04.
Assays of samples for the drilling completed in April 2015 reported the intercepts shown in Table 1.
Sampling was hampered by significant core loss in
mineralised zones. Core loss occurs when drilling through zones of incompetent rock. The drilling pulverises weak rock leaving gaps in the core sample. It is not clear whether lost core contained elevated or depleted levels of copper and silver mineralisation.
Previous exploration results Argonaut previously reported the following drill intercepts from Netherleigh Park:
• ALDDH01: 76m at 0.95%
copper from 138m;
• ALDDH04: 20m at 0.75%
copper from 131m;
• ALDDH09: 122m at 0.63%
copper from 95m including 14m at 2.26% from 111m; and
• ALDDH10: 98m at 0.64%
copper from 138m.
These previous drill intercepts relate to both copper oxide and copper sulphide mineralisation and were reported under the JORC Code 2004.
Alford Farm-in Joint Venture
On 9 November 2012, Argonaut announced it had signed a farm- in joint venture letter agreement with Sandfire Resources NL (ASX: SFR) for the exploration of the Company's 100% owned
exploration licence 5212 (previously EL 3969), Alford, on the Yorke Peninsula in South Australia.
Under the terms of the letter agreement, Sandfire may earn a 49% interest in the Alford tenement by sole funding $4,000,000 of exploration within three years (the First Earn-in).
In the event conditions of the First Earn-in are satisfied, Sandfire
has the right to either form a joint venture with Argonaut's subsidiary, Kelaray Pty Ltd, to jointly explore the tenement or to proceed to earn an additional 26% interest in the project by spending a further $4,000,000 on exploration within an additional three years (the Second Earn-in).
Table 1 Alford significant drill intercepts.
|
Hole
|
Width downhole (m)
|
Depth from
|
Cu
(%)
|
Ag
(ppm)
|
Core recovery (%)
|
Comment
|
|
ALDDH026
|
5.0
|
131
|
0.11
|
-
|
99
|
|
ALDDH027
|
10.04
|
180
|
0.32
|
6.69
|
93
|
Core loss of 0.7 m between 187 and 189m
|
|
ALDDH027
|
10.37
|
216.9
|
0.28
|
66.64
|
70
|
Core loss of 0.4m between 216.9 and 217.6m and 2.3m between 222.3 and 225.7m
|
|
ALDDH027
|
12.3
|
258.3
|
0.09
|
6.67
|
93
|
Core loss of 1m between 259.5 and 261.6m
|
|
ALDDH027
|
3.9
|
287.3
|
1.19
|
6.7
|
87
|
Core loss of 0.6m between 287.3 and 289.2m
|
Torrens, South Australia
(Argonaut 30%)
The Torrens Joint Venture
The Torrens Joint Venture is between Argonaut Resources NL and Straits Resources Limited (ASX: SRQ) and relates to
the Torrens Project, EL 5614 (previously EL 4296).
The Torrens Joint Venture is exploring for iron oxide-copper-gold systems in the highly prospective Stuart Shelf region of South Australia. The Torrens Project is located near the eastern margin of South Australia's Gawler Craton (Stuart Shelf), within 50 kilometres of Oz Minerals' Carrapateena copper- gold deposit and 75 kilometres from BHP Billiton's Olympic Dam mine.
On 27 August 2014, the parties to the Torrens Joint Venture resolved to appoint Argonaut's wholly owned subsidiary, Kelaray Pty Ltd, as manager of the Torrens Joint Venture. In its role as manager,
Kelaray is working to secure access to the tenement for the purpose of a planned seven-hole drilling program targeting areas which have been geophysically modelled as having the physical properties of large iron oxide-copper-gold deposits.
Litigation
The Company previously announced that the Full Court of the Supreme Court of South Australia had set aside the decision of 14 January 2011 by the Environment, Resource and Development Court of South Australia (the ERD Court) that Mining Operations (exploration)
may not be conducted on EL 5614.
A date for the ERD Court retrial has not been set. It is important to note that in overturning the original decision, the Full Court provided considerable guidance for the purpose of an ERD Court retrial including disallowing the original ERD Court Judge from re-hearing the matter.
In the meantime, the Federal Court of Australia commenced an overlap proceeding over the area of Lake Torrens, including the area of EL 5614. This proceeding aims firstly to determine which of three Aboriginal groups with claimed interests over the lake may seek rights to the area and secondly, determine at trial which claimed rights, if any, can be granted.
During the period, the Torrens Joint Venture was an active participant in the overlap proceeding and
engaged an expert anthropologist to
provide opinion on anthropological matters that relate to Lake Torrens and tests under the Commonwealth Native Title Act.
The Torrens Joint Venture partners remain open to a negotiated settlement with regard to land access for the purposes of proposed drilling activities on Andamooka Island and Lake Torrens.
Kroombit
(Argonaut 100%)
In the period, applications were lodged to secure a Mineral Development Licence over the area of the Kroombit deposit. Argonaut amended the Environmental Authority for ML 5631 to include the area of the Mineral Development Licence application. The work program submitted as part of
the application for the Mineral Development Licence has also been approved.
No field based work was undertaken.
Aroona
(Argonaut 100%)
EL 4358 and EL 5336, Aroona, are subject to a joint venture agreement with Perilya Limited. No field based work was undertaken at Aroona during the period.
Outlook
-
Funding is in place for all of Argonaut's major projects.
-
A comprehensive program of works was recently completed at the Company's flagship Lumwana West project in Zambia.
-
Current low asset valuations is providing a unique opportunity to secure additional high quality exploration projects.
Directors' report
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'group') consisting of Argonaut Resources NL (referred to hereafter as the 'company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2015.
Directors
The following persons were directors of Argonaut Resources NL during the whole of the financial year and up to the date of this report, unless otherwise stated:
P J D Elliott L J Owler
A W Bursill
M R Richmond
Principal activities
Argonaut Resources NL is a mineral exploration and development company with operations in Zambia, Australia and Laos. The consolidated entity's prime commodity focus is copper, and to a lesser extent gold. In addition, the consolidated entity holds a 100% interest in a zinc-copper Resource in Queensland, Australia.
During the year, the principal activities of the consolidated entity were expanding on and defining the extent of copper-cobalt mineralisation at the Nyungu Deposit on the Group's Lumwana West project in Zambia.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the group after providing for income tax and non-controlling interest amounted to $6,750,798 (30 June 2014: $2,194,508).
A review of operations report is presented on pages 3-7.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the group during the financial year.
Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect the group's operations, the results of those operations, or the group's state of affairs in future financial years.
Likely developments and expected results of operations
Likely developments in the operations of the consolidated entity to the extent they would not result in unreasonable prejudice to the consolidated entity are included in the review of operations report.
Environmental regulation
The group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
P J D Elliott
NON-EXECUTIVE DIRECTOR AND CHAIRMAN
B.Com, MBA
Experience and expertise
Mr Elliott has been an Independent non-executive chairman of Argonaut Resources NL for over 10 years. Mr Elliott is an investment banker who has over 40 years experience in financial management and resource investment and development.
Other current directorships
Cap-XX Limited, Global Geoscience Limited and Variscan Mines Limited
Former directorships (last 3 years)
Cuesta Coal Limited
Special responsibilities
Member of remuneration committee
Interests in shares
192,001
Interests in options
1,510,666
L J Owler
EXPLORATION DIRECTOR
B.Sc, MAusIMM
Experience and expertise
Exploration Director of Argonaut Resources NL since 27 March 2005. Mr Owler is a geologist and
geophysicist with over 20 years' experience in mineral exploration and development. Mr Owler holds a Bachelor of Science and is Member of the Australasian Institute of Mining and Metallurgy.
Other current directorships
None
Former directorships (last 3 years)
None
Special responsibilities
None
Interests in shares
1,200,000
Interests in options
2,566,666
A W Bursill
DIRECTOR, COMPANY SECRETARY AND CFO
B.Agr. Ec, CA
Experience and expertise
Mr Bursill is a chartered accountant with more than 15 years' experience as a director and company secretary of numerous publicly listed entities. In addition to his appointment at Argonaut, Mr Bursill is currently the company secretary of Aguia Resources Limited, Austral Gold Limited, MOKO Social Limited, Eagle Nickel Limited, Elk Petroleum Limited, and several other unlisted public and private companies.
Other current directorships
None
Former directorships (last 3 years)
Reproductive Health Science Limited (formerly AO Energy Limited / Australia Oriental Minerals NL)
Special responsibilities
Member of remuneration committee
Interests in shares
3,049,438
Interests in options
1,636,080
M R Richmond
NON-EXECUTIVE DIRECTOR
B.Sc Hons (Metallurgy) and B.Comm. Merit (Econs) New South Wales
Experience and expertise
Professor Richmond is a qualified metallurgist and economist with extensive senior executive and board experience in the resource and technology industries. He is a fellow of the Australian Academy of Technological Sciences & Engineering and the
Australian Institute of Mining and Metallurgy. Professor Richmond spent 30 years with the Rio Tinto and CRA Groups including the position of managing director of research and development and vice president strategy and acquisitions. Immediately prior to his retirement he held the position of managing director of development at Hamersley Iron Pty Limited. Professor Richmond served as a visiting professor at the University of Western Australia until January 2012, teaching in the MBA programme.
Other current directorships
Strike Resources Ltd
Former directorships (last 3 years)
Water Resources Group Ltd, Cuervo Resources Inc (listed on CSE) and Advanced Braking Technology Ltd
Special responsibilities
Member of remuneration committee
Interests in shares
None
Interests in options
1,500,000
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships in all other types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships in all other types of entities, unless otherwise stated.
Company secretary
A W Bursill
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended
30 June 2015, and the number of meetings attended by each director were:
|
Full Board
|
|
Attended
|
Held
|
|
P J D Elliott
|
6
|
6
|
|
L J Owler
|
6
|
6
|
|
A W Bursill
|
6
|
6
|
|
M R Richmond
|
5
|
6
|
Held: represents the number of meetings held during the time the director held office.
There were no meetings of the remuneration committee during the year although the members of the remuneration committee do have discussions on remuneration matters. Any matters are resolved by way of circular resolution.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and executive remuneration arrangements for the consolidated entity and the company, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings: