Thoughts of Fiji conjure up the tropics, beaches and sunshine, but the
island nation is also noted for its mineral production. The Vatukoula
mine, in operation for over 80 years, has produced more than seven
million ounces of gold.
Vying to join its ranks on the politically stable and mining friendly
island are Lion One Metals Limited and Thunderstruck Resources Ltd.,
two companies at opposite ends of the spectrum.
Thunderstruck Resources is an early stage exploration company with an
extensive portfolio of properties on Viti Levu, the main island of Fiji.
The company is conducting exploration activities at its large land
package—covering 4% of Viti Levu—of “100% owned high grade zinc, copper
and gold assets,” it reported in mid-May. According to Thunderstuck, it
is “building on extensive prior results that point to the potential for
large mineralized systems.”
At the end of May, Thunderstruck closed an oversubscribed private
placement, raising over $200,000, selling 2.2 million units at $0.09
each. Each unit contained one common share and one share purchase
warrant, with the option to buy a common share for $0.15 until May 2021.
Lion One’s 100%-owned Tuvatu project is at a much more advanced stage
and is on track to put into production Fiji’s next mine. The company
just announced a US$40 million debt financing package to develop the
mine and build a processing plant for its fully permitted project. The
financing is with Sinosteel Equipment & Engineering Co. Ltd. and
Baiyin International Investment Inc. Sinosteel will be the EPC
(Engineering, Procurement and Construction) contractor for the project,
and Baiyin will be the gold doré offtaker.
The agreement is for a five-year term at a 7.5% interest rate. There
will be a principal holiday and capitalized interest for either the
earlier of two years from first draw, or three months after achieving
commercial production. There also will be a Net Smelter Return (NSR)
royalty of 2.25% on the first 350,000 ounces of gold produced. There is
also an option to increase the financing by US$10 million.
Analyst Derek Macpherson of Red Cloud Klondike Strike Inc. noted on June
4 that with the debt financing in place, Tuvatu construction is
expected to ramp up and views this as “very positive.”
Macpherson also noted that the “PEA (2015) outlines initial capital
investment (excluding working capital) for Tuvatu at US$48.6M. With
exploitation permits in-hand and C$21.6M (US$16.6M) in cash, the company
is well positioned to continue on the path to construction and
production.”
Analyst Mike Niehuser of Scarsdale Equities wrote on June 6, “The PEA
assumed modest capital costs and efficient mining of high-grade gold
resources, resulting in significant cash flow, which may rapidly repay
capital and fund mine development and additional exploration of
prospective gold targets.”
Niehuser also stated, “We expect that Lion One will announce an updated
capital cost budget that should be within expected variances of the PEA.
It appears that the facility should be adequate to cover the
construction and capital costs with cash on hand. The terms appear to be
competitive and do not include hedging or prepayment fees. Lion One
continues exploration activities for which we believe could be a
long-lived mine.”
Scarsdale Equities maintains a Buy rating and a target price of CA$1.40
on Lion One, which is currently trading at around CA$0.63.
While Lion One has been securing financing for the project, it also has
continued exploration activities. Following the release of an
off-the-charts surface sample of 502 g/t gold over 0.70 meters in
February, on June 7, the company announced that follow-up work has
mapped “more than 20 previously undefined mineralized structures at the
Jomaki-Ura Creek prospect areas and identified potential geological
extensions on the main mineralized zones inside the Tuvatu Mining
Lease.”
Stephen Mann, Lion One’s managing director, stated, “In the Tuvatu
resource area, approximately half of the 40 veins identified to date
have sufficient sample data from drilling to merit inclusion in a
resource estimate. We’ve now identified more than 20 mineralized veins
at surface in the Jomaki-Ura Creek area where strong multi-element
anomalism suggests potential scale and signature comparable and possibly
larger than the main resource area at Tuvatu.”
Lion One has about 102 million shares outstanding, 109 million fully
diluted. Management owns 22% of the shares and Donald Smith & Co
owns 14%, Franklin Precious Metals Fund 9.99% and JP Morgan Asset
Management UK 6%.
Two projects on a mining-friendly tropical island are moving forward,
one in the final ramp-up to production and one at a very early stage.