Lionsgold Limited (“Lionsgold”, “LION” or the “Company”), the gold-focused exploration company with assets in India and Finland, and significant shareholder of a physical gold holding and trading exchange, provided the following update regarding its most advanced projects in India and Finland, represented through its equity interests in Geomysore Services India Pvt Ltd (“Geomysore”) and Kalevala Gold Oy (“Kalevala”) respectively.
Further to the update on 31 May 2017, completion of the economic feasibility study (“EFS”) is now expected to be at the end of July/early August 2017. This follows changes to the Indian tax system that sees the implementation of a comprehensive goods and services single tax (GST) across the country (the details of which and the impact on the previous central excise and VAT system only became known in late May 2017). The impact of these changes is currently being factored in to the cashflow model of the EFS which then requires cashflow analysis by an independent tax specialist before the current draft of the EFS can be updated and signed off.
In respect of the Mine Developer and Operator (“MDO”) discussions, bid documents have been sent to all parties that registered an expression of interest, with technical bids expected to be received in August. Once these have been received, it is estimated that it will take two months to finalise an MDO contract with the preferred bidder.
The impact of these revised timelines means that, subject to the EFS resulting in a decision to mine, signing an MDO contract and the purchasing of relevant land, the anticipated timing for gold production to commence at Jonnagiri will move from the end of 2018 into 2019.
Preparatory work is underway ahead of the targeted bulk sampling programme at Kuikka by our Finnish JV company, Kalevala Gold. The proposed bulk sampling was originally anticipated to commence in Q3 this year. Part of the work required involves obtaining environmental permitting to carry out the programme. The environmental permitting application was submitted in May, following confirmation that all relevant prospecting licences and applications had been transferred to Kalevala. Whilst the exact timeline for approval cannot be known, following recent dialogue with the consultant handling the environmental application on behalf of Kalevala, the Board believes it prudent to revise its expectation that the earliest it is likely that Kalevala may obtain environmental permitting approval is Q4 2017 and depending on timing, this may see gold production from bulk sampling move into 2018.
Following discussions between Lionsgold and its JV partner, it has been agreed that the optimal level of bulk sampling targeted will be circa 5,000 tonnes and it has been agreed between the two shareholders of Kalevala that no other third party investors will be sought by the JV company. Lionsgold will be given time to consider and decide over the course of Q3 how much more equity, if any, it may choose to take up through the injection of additional working capital upon receipt of the environmental permitting approval.
It has further been decided to use the extra time to conduct grade confirmation drilling on site as we refine the bulk sampling area to reduce waste and refine production processes.
Cameron Parry, Chief Executive Officer of Lionsgold, commented:
Following discussions with our partners in India, and recent meetings with our permitting consultant in Helsinki and JV partners on site in Finland, Lionsgold is able to provide shareholders with revised timelines regarding our two most advanced projects, Jonnagiri and Kuikka.
Whilst we were hopeful the Jonnagiri EFS would be ready for release by the end of June, it is now expected to be available around the end of July/early August.
Regarding Finland, we originally envisaged that bulk sampling could occur at Kuikka in Q3 this year but the earliest that appears likely now is Q4 and depending on the timing of the environmental permit approval, gold production may move into 2018.
Whilst these delays are frustrating, they do not affect the fundamental qualities of the Jonnagiri and Kuikka projects, and we remain highly confident about the potential financial result that can be achieved for Lionsgold.
At Jonnagiri, through Geomysore, we have exposure to 361,000 ounces (74,000 ounces, net to LION) of a JORC compliant resource at a project with a granted 30-year mining licence. At Kuikka we have high grade gold deposits that we expect can support small-scale high-grade underground gold mining with manageable modular capex requirements.
Further, with regard to our Finnish JV the extra time has resulted in LION and its JV partner agreeing that bulk sampling of circa 5,000 tonnes is the optimal level of production, reducing the overall working capital required (and any potential dilution) in seeing Kalevala produce gold and become self-funding.
With regards to India, Lionsgold continues to discuss ways that work programmes can be accelerated on the ground and LION can possibly enhance the upside potential of Geomysore’s unique India gold portfolio.