| Fri 9 Mar 2001, 0:00 | | Gilboa Acquires Controlling Stake In Askari |
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GILBOA PROPERTIES LIMITED
(Registration number 1986/004649/06)
Incorporated in the Republic of South Africa
("Gilboa")
THE KIMBERLITE OCCURRENCES OF THE KARMEL PROJECT IN THE
LADYBRAND DISTRICT OF FREE STATE, SOUTH AFRICA
1. SUMMARY
Diamond exploration by settlers in the early 1900 located various kimberlite
bodies on the farms Karmel and Dundee in the Ladybrand District of the then
Orange Free State. Serious diamond production started soon afterwards with a
kimberlite pipe and two parallel kimberlite fissures being the main target. The
recovery grade and quality of diamonds was sufficient to sustain a medium size
operation. During this period stones allegedly averaging around 10 ct. were
being mined. Although the old records are incomplete, the unwashed tailings
surrounding the kimberlite pipe, bear a stark reminder of the realities of
early diamond mining in South Africa. Apparently the exploitation of the
diamondiferous material continued until late 1920's when the low diamond price
forced the industry to an abrupt stand still.
The excavated pipe (15m deep x 80m wide) was left, as were many other lucrative
mines, throughout southern Africa and their owners pursued new careers in other
places. The next recorded activity which was noted by the present mineral
rights owners, state that an alluvial diamond digger in the early 1970's came
from the diamond fields in the Bloemhof district and tried his hand at mining
kimberlite material. His machinery was ill equipped and not suited for the hard
realities of treating blue ground. Needless to say his show came to an abrupt
halt only some 3 weeks after attempting to make his first million. It is
reported that high quality stones were taken out by our friend but by that time
his high running costs could not be quenched by the few shiny stones he had
produced.
It is believed that the good rains this area had during the mid 1980's caused
the next chapter to be written in the Karmel diamond history book. The
excessive rain washed away tons of top soil and in the process revealed even
more weathered kimberlite material on surface, something that was missed by all
the previous explorers. Weathered diamondiferous kimberlite is present on
surface.
Poplar Resources Ltd. from Canada were the next (1997) role player to step in
to the arena. Under the leadership of their
president, Gennen McDowell they optioned the properties and commenced with the
detailed study of the nearly 7,500 ha. Battling to raise funds on a stock
market that had just come through a gruelling Bre-X gold scandal he and his
company had to leave the project in-tact without any production being done. He
did however, manage to identify the kimberlite type by means of micro probe
analyses and he managed to obtain proof that the kimberlite in question was
regarded as being highly prospective and that diamonds had been recovered
during the analytical process.
The fact that micro diamonds were recovered from only 200 grains of kimberlite
indicator minerals is very significant and could indicate that the pipe is
highly economical. The kimberlite pipe was classified by Poplar as being a
Hypabyssal facies type, indicating that the material came from the deepest
reaches of the earth's mantle (diamondiferous peridotite) and that it was of
high interest with respect to diamond potential. Besides the microprobe
analyses on samples of the main pipe, Poplar also found three new kimberlite
occurrences and proudly mentioned that they had discovered "... a new diamond
field" in the eastern Free State, Poplar Resources also did a diamond recovery
test on a 43.99kg bulk sample of the Karmel fissure. This sample yielded 6
diamonds.
Poplar Resources completed a very thorough and detailed EMP (Environmental
Management Program) for the purpose of obtaining a Prospecting and Mining
Licence from the Department of Minerals and Energy. In discussions with the
authorities they agreed to transfer these rights and obligations to the new
title holders in order to expedite the program
to production.
The area overlies kimberlite pipes and fissures which has a total inferred
resource of at least 40 million metric tons with an inferred grade in excess of
20 carat per 100 metric ton which will yield at least US $300,000,000.
(R2.340 000 000 at rate of US$ 1-00 = R7,80)
2. INTRODUCTION
Mabex Consulting Geologists were commissioned by Askari Mining and Equipment
Limited (AME), to compile a portfolio of lucrative diamond projects. The Karmel
project was amongst others presented to AME as a potential "drill-ready"
project.
Gilboa Properties Limited have concluded an agreement to purchase the majority
share in AME.
Mabex has been appointed by Gilboa to compile a Competent Persons Report. Part
of this report will include a detailed magnetic grid over selective areas in
order to facilitate the drilling program. On completion of the drilling program
and bulk sampling exercise, Mabex will be in a position to announce the
measured reserves of the entire ore body in about 8 months time if exploration
could start now.
It is foreseen that initial production will be by means of open cast production
3. PROPERTY TITLES
The mineral rights are in possession of the Bothma family. AME has acquired the
prospecting rights for a period of 3 years, as well as the mining rights
secured by a notarial mineral lease for a further ten years thereafter. The 13
year period commenced on 5 September 2000. Gilboa Properties Limited in turn
have concluded a Contractual Agreement to acquire the controlling interest in
Askari.
4. LOCATION AND ACCESS
The farms Karmel and Dundee together comprise some 7,500ha and are located in
the district of Ladybrand. The tar road from Tweespruit to Hobhouse passes some
10 km from Thaba Patswa where a good and regularly maintained gravel road winds
its way to the farms.
5. INFRASTRUCTURE AND ECONOMIC SETTING
Karmel is located in a farming community where the main agricultural activity
is sheep and cattle farming. Thaba Patswa is a rural settlement some 5 km away
and is connected to the regional electricity grid. There is abundant water the
Karmel farm bordering on the Thaba Patswa dam. Tweespruit is a small farmers
town but does offer the services of light engineering.
6. PREVIOUS WORK
6.1 Chemical & Micro Probe Analyses
The most noteworthy work done on the Karmel project is that of Poplar Resources
which commenced during 1997.
This entailed the classification of the kimberlite bodies and detail analyses
of indicator grains by means of microprobe analyses.
Poplar Resources report that a leading consulting petrologist, E.M.W. Skinner
classified the Karmel pipe as being a Hypabyssal - facies macrocrystic
phlogopite kimberlite. They state that 2 micro diamonds were recovered from a
sample of 200 grains and that "... the kimberlite is petrographically of high
interest with respect to diamond potential". The 200 grain sample included 125
grains of garnet. Of these 94 grains were classified as peridotitic garnets, 18
eclogitic garnets and 13 megacrystic garnets. The peridotitic garnets included
12 subcalcic, G10 garnets.
A diamond extraction exercise by Lakefield Research laboratories of Ontario,
Canada, was conducted to qualify the presence of diamonds in the Karmel
fissure. Mabex is in possession of all the original assay results claiming the
following:
A bulk sample of 43.99kilogram of kimberlite (Karmel Fissure) yielded 6
diamonds.
6.2 Aeromagnetic Survey
Poplar Resources had contracted Geodass Pty. Ltd. to complete an air-born
magnetic survey over the whole farm.
The resulting map shows numerous anomalies which all need to be tested by means
of a drilling program.
7. REGIONAL GEOLOGY
The lithologies of the lower Clarens and upper portion of the Molteno
Formations of the Karoo Super Group directly underlie the farm. The rock types
vary from mudstone (shale), siltstone, sandstone and various intrusive
lithotypes.
The various intrusive bodies include B3 & B4 type dolerite sills and B8 type
dolerite dykes. Examples of Group II (micaceous) type kimberlite fissures and
Hpabyssal Kimberlite were inspected during the most recent reconnaissance trip.
8. INFERRED RESOURCE
Initial figures concerning the grade of the kimberlite pipe are incomplete.
Mabex is doubtful whether these reports are accurate and would prefer to
conduct its own testing programme as part of the Competent Persons Report. The
recently completed detail magnetic survey completed by Mabex would suggest that
the Karmel pipe is approximately 1 ha in size, which would equate to at least 8
million metric ton of diamondiferous kimberlite.
Johannesburg
9 March 2001
Armstrong & Asscociates
MABEX CONSULTING GEOLOGISTS
No. 6 Flamwood Court
MCC Complex
Central Avenue
KLERKSDORP
2571
Tel.: +27 - 018 - 468 8626
Fax: +27 - 018 - 468 5508
Cel: 083 656 3443
082 854 7677
E-Mail: mabex@gds.co.za
CK 99 32212/23
Directors: F Martens, PGvG Bekker
GILBOA PROPERTIES LIMITED
(Registration number 1986/004649/06)
Incorporated in the Republic of South Africa
("Gilboa")
1. INTRODUCTION
1.1 Following the cautionary announcements on 11 January 2001 and 2 February
2001, Gilboa has concluded an agreement ("the agreement") whereby Gilboa is to
acquire, subject to the fulfillment of certain suspensive conditions, 70,7% of
the issued share capital of Askari for a total purchase consideration of R6 366
650, to be settled as to R4 590 649.44 in cash and by 7 400 000 new Gilboa
ordinary shares.
1.2 The agreement provides for the subscription of 57 383 118 new ordinary
shares in Askari at an issue price of 8 cents per share and the acquisition of
22 200 000 Askari shares already in issue from the controlling shareholders of
Askari, namely the Kobus Hoon Familie Trust, Tashi Familie Trust and Shikari
Familie Trust ("the vendors"), to be settled through the issue of 7 400 000 new
ordinary Gilboa shares, in the ratio of 1 Gilboa hare for every 3 Askari
shares.
1.3 An offer on similar terms and conditions is to be made to the minority
shareholders of Askari, in accordance with the rules of the Securities
Regulation Panel ("SRP")
1.4 The issue of shares does not result in a change in control of Gilboa.
1.5 The agreement is subject to certain conditions precedent, including, inter
alia, a due diligence review on Askari, the conclusion of a loan agreement to
provide funding to Askari for the expansion of its projects, the approvals of
the JSE Securities Exchange of South Africa ("the JSE"), SRP and, where
applicable, shareholders in general meeting.
2. NATURE OF BUSINESS OF ASKARI AND FUTURE PROSPECTS
Askari was incorporated on 5 January 1999 for the purpose of conducting mining
operations using its own unique Askari Mining methods, equipment and
technology. Its first year of operation produced positive results, with audited
revenue, profit before tax and net profit after tax of R21,6 million, R2,75
million and R1,04 million respectively for the year ended 29 February 2000.
Revenues were primarily derived from the profitable recovery of gold ore
reserves using its own patented high-technology mining systems. In addition,
considerable effort and expenditure was directed towards further research and
development in order to acquire new technologies to ensure market leadership,
leading to the design and testing of successful prototypes that have yielded
promising results.
The current year of operations has seen an expansion of its operations into
platinum mines from July 2000 as well as the commencement of a new contract at
a leading Free State gold mine as from February 2001. During the year ended 28
February 2001 losses have been incurred due to Askari expanding its capacity in
terms of both people and projects and further significant expenditure on
research and development. During the year Askari has acquired a 10-year option
for the mining rights for Karmel Diamond Mining in the Free State and
established a joint venture with Kasai Diamond Mining Company in the Democratic
Republic of the Congo (including trading licences for diamonds and gem stones).
In addition, Askari initiated a mining exploration venture in Tanzania together
with Lupa Mining and Exploration and established a small in-house designed
exploration plant in December 2000. A buying and selling operation between
Tanzania and South Africa has been established in January 2001, with the first
"test run" of gold being refined by a leading South African refinery in late
February 2001.
GROUP STRUCTURE
See press for details
As a result of the expenditure and efforts of Askari during the current year,
prospects for the forthcoming period look good.
In particular, Gilboa has already appointed Mabex Consulting Geologists to
compile a Competent Persons Report in accordance with the SAMREC code of the
JSE on the Karmel Diamond Mining Project on which chemical and micro probe
analyses as well as an aero magnetic survey have already been completed.
3. THE FINANCIAL EFFECTS OF THE ACQUISITION
The financial effects of the acquisition, based on consolidating the audited
results of Askari for the year ended 29 February 2000 as audited by Fisher
Hoffman Sithole, with the published audited results of Gilboa for the year
ended 30 June 2000, as though the acquisition had been in effect for the year
then ended, would have been as follows:
30 June 2000 30 June 2000 Percentage
Before After Change
R000 R000 %
Loss before tax (4 414) (1 665) 62,3%
Attributable loss (4 414) (3 368) 23,7%
Attributable and
headline loss per
share (cents) (2,48) (1,71) 31,0%
Net asset value
per share (cents) 3,53 6,20 75,6%
Number of shares in issue (Note 1) 178 089 000 196 466 600
Note 1: The number of shares in issue after the acquisition has been calculated
on the assumption that all the shareholders in Askari, including the minority
shareholders, accept the option to exchange the Askari shares held by them for
new shares in Gilboa on the basis of 3 Askari shares for 1 Gilboa share.
4. RATIONALE FOR THE ACQUISITION
As mentioned in the latest annual financial statements and recent
announcements, it has been the intention of Gilboa to diversify its operations
away from property alone into other areas of activities, particularly mining,
import/export and commodities trading, and to change the company's name to
Gilboa Holdings Limited. The agreement with Askari represents the first step in
this direction, although shareholders are referred to the further cautionary
announcement as mentioned below.
5. APPOINTMENT OF EXECUTIVE DEPUTY CHAIRMAN
Professor Chris Cloete has been appointed as the new executive deputy chairman
of Gilboa with effect from 1 March 2001 and will oversee the mining operations
Gilboa and investigate existing and new mining opportunities on behalf of
Gilboa. Professor Cloete was previously the Managing Director of Sasol Coal and
later a Director of the University of Pretoria's Business School. Further
appointments to the Board of Gilboa resulting from the acquisition of Askari
will be announced in due course.
6. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution when dealing in Gilboa
shares as Gilboa is still involved in negotiations to acquire two companies in
the mining industry as previously announced.
Johannesburg
9 March 2001 E-Mail: gilboa@lantic.net
Corporate Advisors
Kingfisher Corporate Executive
Sponsor
Quaestor Capital
Askari Mining & Equipment (Pty) Ltd.
Auditors
KPMG
GILBOA TO CONCENTRATE ON FREE STATE MINE'S POTENTIAL.
Gilboa has decided to concentrate on exploiting its Karmel mine in the eastern
Free State if investigations prove its consulting engineers, Mabex's estimate
of 40m of kimberlite ore reserves with R2, 34bn in rough diamonds.
"What makes it particularly appealing is that the diamonds can be extracted by
open cast mining at a cost of $23/carat (R170) to realise diamonds worth
$150/carat (R1150)," says Gilboa deputy chairman Chris Cloete. "This makes the
mine very profitable."
But he warns that it will take another eight months to prove the reserves. Then
the project must be properly financed, he adds.
The property, Karmel, was mined early last century but this stopped in the
1920s when diamond prices collapsed. A Canadian company, Poplar Resources,
whose geological surveys and laboratory research are the basis Gilboa
geologists' prediction, bought it 10 years ago. But they could not raise the
money in 1997 because they finished their research and went to the market for
funds as the Bre-X gold scandal that rocked the Toronto stock exchange.
But Mabex says Poplar was able to prove that the kimberlite pipe on the surface
of the property was "highly prospective" A 43,99kg sample yielded six diamonds
which led Poplar to describe Karmel as "a new diamond field." Poplar also
completed a thorough environmental management programme (EMP)
Says Mabex in its report: "The area overlies kimberlite pipes and fissures,
which has a total inferred resource of at least 40m tons with an inferred grade
of 20 carats per 100 tons, which will yield $300m."
The project is "drill ready" but work will only start after thorough
investigation, says Cloete.
ISSUED BY GILBOA PROPERTIES LTD
FOR FURTHER INFORMATION CONTACT CHRIS CLOETE AT 082 651 5000
OR FRANCOIS MARTENS 018 468 8626
