Zambezi Resources Limited (ASX: ZRL)
ZAMBEZI ANNOUNCES A$4M RIGHTS ISSUE AND STRATEGIC RE-DIRECTION
- Non-renounceable rights issue at A$0.124 (or �0.06) per share to raise up to A$4.1 million.
- Funding to support interim exploration strategy in response to current global financial markets.
- Core objective of interim exploration strategy is to focus exclusively on what the Directors believe to be the potentially world-class Kangaluwi copper discovery with most other drilling activities in Zambia to be suspended.
- The Directors consider that, given the potential of the Kangaluwi discovery, it is in shareholders' interests to maintain 100% of the project rather than joint venturing with others.
- Strong support from existing shareholders for the interim exploration strategy going forward.
- Target and reconnaissance exploration to continue in Zambia pending ramp-up of major drill-out and PFS at Kangaluwi.
Zambezi Resources Limited ("Zambezi" or the "Company") (AIM:ZRL; ASX:ZRL) today announces a strategic redirection of the Company's copper exploration activities in Zambia as well as funding arrangements through a non-renounceable rights issue to raise up to A$4.1 million.
In the opinion of the Directors, the revised corporate strategy is in the best interests of shareholders and the Company has had strong indications of support from existing shareholders for the interim exploration strategy.
The Company's Board has resolved to implement this revised strategy in light of ongoing uncertainty in global financial markets. The key element of the revised strategy is the suspension of all drilling operations in Zambia except for one drill rig that will continue target drilling at the Company's 100% owned Kangaluwi Copper Project until the end of the field season in November 2008.
Zambezi remains confident that issues arising from the recently introduced changes in windfall and variable taxes in Zambia will be resolved to the satisfaction of all stakeholders. This will provide certainty for the significant investment required to drill out and develop the Kangaluwi Project.
Exploration & Development Strategy
The current rights issue is designed to provide interim funding to enable the Company to maintain lower-level exploration activities and target drilling in Zambia over the next 12 months. It will also enable the Company to continue processing existing drilling results and to compile a more complete picture of the geology and possible mining method at Kangaluwi. Zambezi intends to retain 100% of the Kangaluwi asset at this time, rather than pursuing a possible joint venture, as the Company believes the discovery is of major importance. However, until there is a significant improvement in the tenor of financial markets and the fiscal environment for copper companies operating in Zambia improves, the Company does not believe that shareholders will support a fundraising to drill out the resource and progress towards a full feasibility study.
The Company believes that the Kangaluwi project is of potentially significant size and grade and that the discovery may represent a major new copper deposit in a hitherto unexplored part of Zambia. Kangaluwi was discovered by Zambezi in 2006 and is one of Zambia's most significant copper discoveries over the past 25 years. The mineralisation discovered to date is part of an emerging major IOCGU province east of Lusaka, an area in which Zambezi holds 16,300km2 in nine contiguous licences.
In 2007, Zambezi drilled 20,000m at Kangaluwi and so far this year has drilled a further 20,000m at Kangaluwi and the neighbouring Chisawa prospect, where visual mineralisation has been intersected in drill holes consistent with the geological model.
At Kangaluwi, recent 2008 RC drill results include 13m at 2.36% copper from 158m to 171m in hole KNGRC0156 (787702E 8289770N, dip -50o, azimuth 360o magnetic). This hole was drilled on the eastern end of the main Kangaluwi soil geochemical copper anomaly (>500ppm copper) and extends the mineralisation defined to date along strike to the east.
During the remaining part of the 2008 field season, Zambezi intends to retain a single RC drill rig on the project to test the majority of the remaining four priority target areas within the 28km mineralised Kangaluwi trend.
Cheowa and Uranium Projects Update
In line with the revised strategy, the last remaining Diamond drill rig will be demobilised from the Company's Cheowa Project at the end of July. Glencore's funding of the Cheowa and CCB joint ventures is expected to meet the minimum US$16 million required for Glencore to earn a 51% interest in the joint venture by the end of September 2008.
Assay results from the remaining 50 recent drill holes are expected by the end of September 2008. The Company is also currently optimising the process flow sheet based on ongoing metallurgical test work which is expected by the end of September 2008. All of this work is being funded by Glencore and is therefore no burden on the current finances of Zambezi.
The recent resource update announced in June 2008 comprised 6.5Mt @ 1.13% Cu & 0.30g/t Au. Once an expanded resource has been determined and the flow sheet optimised, a Pre-Feasibility Study ("PFS") is expected to be completed in the December quarter of 2008. A decision to develop Cheowa is expected to be contingent on the results of the PFS and the fiscal environment for copper companies operating in Zambia. The completed work at Cheowa has addressed both environmental base line studies and infrastructure issues such as roads, power and water supply. The mining studies have addressed the issues of hydrology, structure and optimised mining methods. No fatal flaws in any of these studies have been identified. Assuming the PFS is positive, then very little work or time is expected to convert it into a full Feasibility Study.
Zambezi's two uranium joint ventures with Lithic Metals and Energy Limited ("Lithic") and Rio Tinto are progressing well. Lithic is currently drilling the second uranium anomaly at Mvula East while an update on the 30km long VTEM anomaly which is the subject of the Rio Tinto earn-in was announced by Zambezi on 14 July 2008.
Rights Issue
The non-renounceable rights issue will be priced at A$0.124 (or �0.06) per share and will include one free attaching 12 month option with a strike price of A$0.19 for every 3 shares issued. This price represents an approximate 30% discount to the weighted average price over the past month and an approximate 40% discount to the weighted average price over the previous 3 months.
Summary of Important Dates*
Announcement of Rights Issue 31 July 2008
Lodge Prospectus with ASIC 31 July 2008
Shares quoted ex-rights 6 August 2008
Record Date to determine Entitlements 12 August 2008
Opening Date and dispatch of Prospectus 18 August 2008
Closing Date 1 September 2008
Notification to ASX of Shortfall 4 September 2008
Allotment of New Shares and free attaching New Options 9 September 2008
Trading on ASX in the New Shares and New Options to commence 10 September 2008
Trading on AIM in the New Shares to commence 15 September 2008
*These dates are indicative only. The Directors reserve the right to vary the key dates, without prior notice and subject to compliance with the ASX Listing Rules and the AIM Rules.
Managing Director Comments
Commenting on the announcement, Julian Ford, Managing Director of Zambezi Resources, said: "The Board has moved decisively and swiftly to implement a revised strategy in the light of current market conditions. The new strategy is designed to protect shareholders' interests, ensure that the Company is fully funded for the next 12 months, respond proactively to the current exploration environment in Zambia, and maintain 100% ownership of our most valuable copper asset in Zambia. Results from recent drilling at the Kangaluwi project area have yielded 13m at 2.36% copper, confirming our belief that we have so far only scratched the surface of this exciting discovery.
"We remain confident that the investment environment in Zambia will improve over the next six months" he continued. "As a result of our active Corporate Social Investment Programme, Zambezi has a very good reputation with the Zambian Government and amongst the public, and remains well placed to move forward as a key player in the Zambian copper industry.
"The drilling success we have had at Kangaluwi has reinforced its potential to continue to develop as a world-class copper asset, and we are committed to progressing this project as rapidly as possible," Mr Ford added. "The new assay result from 2008 RC drilling of 13m at 2.36% copper continues to support this view. It is also important to note that, in the next six to nine months, two new copper smelters will be commissioned in Zambia, effectively doubling its copper smelting capacity. This will give the Company a very strong position with the ability to bring on new low-cost copper concentrate production to feed this additional smelting capacity, and the opportunity to negotiate favourable treatment and refining rates or joint venture terms in the coming years.
"Under these circumstances we believe that the interim funding and exploration strategy represents a prudent business strategy and the best strategic outcome for the Company," Mr Ford concluded.
For more information contact:
Julian Ford, Managing Director Jeremy Wrathall, Non-Executive Director
Zambezi Resources (Australia) Zambezi Resources (London)
+61 (08) 9216 9000 Mob: +44 7712 776 100
+61 (0) 418 949 580
Fiona Owen Simon Edwards / Adam Lloyd
Grant Thornton UK LLP Evolution Securities Ltd
+44 20 7383 5100 + 44 20 7071 4300
Nicholas Read / Kate Bell Laurence Read / Graham Herring
Read Corporate Threadneedle Communications
+61 (08) 9388 1474 +44 20 7936 9600
+61 (0) 419 929 046
ADDITIONAL INFORMATION
Zambezi is listed on London's AIM market and the Australian Securities Exchange (ASX & AIM Ticker: ZRL) and currently has two main projects, Cheowa and Kangaluwi. Zambezi is one of Africa's most active exploration companies with a large, in-house, exploration execution capacity consisting of approximately 20 geologists and up to eight contracted drill rigs. The Company is focused on discovering and developing large Copper-Gold projects in southern Zambia. At Kangaluwi, which is 100% owned, Zambezi is conducting extensive exploration drilling, as the company believes that the Kangaluwi project has the potential to be a world class open pit copper deposit. The Company also has entered into two Uranium Joint Ventures on approximately 50% of its tenement area, one with Rio Tinto and the other with Lithic Metals and Energy.
The information in this report that relates to Exploration Results is based on information compiled by Exploration Director Geoffrey Johnson BSc (Hons), PhD, Grad Dip Env Sc. Dr Johnson is a full-time employee of Zambezi Resources, and a Fellow of the Australian Institute of Geoscientists. Dr Johnson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Johnson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
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