LionOre gobbles gold producer

Former iron ore miner LionOre Mining International (LIM-T) has acquired control of Australian gold producer Forrestania Gold.

LionOre presented Forrestania shareholders with two options: one LionOre share for each Forrestania share held or A$1.675 plus half a LionOre share for each Forrestania share. The takeover cost will be roughly US$141 million.

Based on the closing price of LionOre shares on March 17, both options represent a premium of 63% on the closing price of Forrestania shares prior to the bid announcement.

Directors of Forrestania Gold have unanimously recommended that their shareholders accept the takeover. LionOre Secretary Douglas Coate told The Northern Miner his company has passed the 51% mark and will have no difficulty acquiring at least 90% of Forrestania’s shares.

Forrestania has interests in two producing gold mines in Australia: Bounty (38%) and Mt. McClure (36.5%). It also holds interests in the Maggie Hays and Emily Ann nickel exploration projects.

The Lake Johnston joint venture, which discovered and identified the Maggie Hays deposit, is shared equally by Forrestania and South Africa-based Gencor, with the former assuming managing and operating responsibilities.

The Lake Johnston partners also have a 75% stake in the Roundtop joint venture (giving Forrestania a 37.5% indirect interest), which is itself the owner of the Emily Ann prospect, 3 km north of Maggie Hays. The balance is held by Capricorn Resources of Australia.

Forrestania recently discovered a new zone of significant zinc mineralization at Emily Ann. Core assay results include 14.7 metres grading 1.9% nickel and 0.9 metre of 8.9% nickel in hole 16; 1.1 metres of 9% nickel and 5.8 metres of 6.3% nickel in hole 17; 9.8 metres of 0.9% nickel and 2 metres of 6.8% nickel in hole 18; 16.1 metres of 1.4% nickel in hole 19; 3 metres of 1.2% nickel and 0.6 metre of 3.2% nickel in hole 23; and 3 metres of 0.6% nickel and 0.8 metre of 9.3% nickel in hole 24.

The above intervals were found between 164 and 312 metres below surface.

Diamond drilling at Emily Ann indicates mineralization occurs in two parallel zones which have a strike length exceeding 600 metres. The mineralization remains open along strike, updip and downdip.

Current indications suggest a deposit similar to Maggie Hays but with higher grades. LionOre notes, however, that diamond drilling is far from complete and that the potential size of the deposit is as yet unknown.

Maggie Hays has an indicated resource of 13.4 million tonnes grading 1.5% nickel and 0.05% cobalt (based on a cutoff grade of 0.7% nickel), equivalent to more than 200,000 tonnes of contained nickel. LionOre officials expect the new discovery at Emily Ann to add a significant amount to the resource base but note that confirmation of the full extent of the deposit will require further stepout and closely spaced drilling.

The geology of a large part of the Roundtop joint venture area is obscured by transported overburden. Drill targets will be determined by surface electromagnetic surveys.

Similar surveys at the Emily Ann prospect have located several conductors, which, based on follow-up drill results, are related to a new nickel sulphide deposit.

The US$6-million exploration budget for the Maggie Hays nickel project, which is shared equally by Gencor and Forrestania, has been increased by US$2 million. A prefeasibility study is expected by May, with a final study scheduled to follow.

In a news release, LionOre says the combination of an underground nickel mine on the Maggie Hays nickel sulphide deposit plus the utilization of Gencor’s proprietary “BioNIC” technology will allow for ferronickel to be produced in an environmentally sound manner, eliminating the cost of resorting to conventional smelting and refining.

Drilling to the south of Maggie Hays has intersected a new zone of nickel sulphides with intersections of 11 metres grading 1% nickel in hole 77 and 22 metres grading 1.1% nickel in hole 71W2. The zone is about 100 metres wide and requires more more drilling before its full extent can be determined.

LionOre geologists believe that if the zone proves to have a strike extent of 500 metres, it could link up with the Maggie Hays deposit, thereby providing an additional resource of up to 2 million tons grading 1-1.5% nickel.

In addition to the above, a core hole drilled north of Maggie Hays intersected 10 metres of 2.91% nickel. Follow-up drilling north and south of the intercept failed to intersect mineralization. However, based on the latest work and interpretations in the area, the intersection could represent remobilization from the primary source of mineralization. More drilling is planned.

LionOre was formed in 1958 under the name Liberian Iron Ore. It operated an iron ore business in Liberia that produced more than 250 million tonnes of iron before closing in 1989. LionOre’s primary asset is a 41% interest in the producing Tati nickel mine in Botswana.