Buchans Reports Third Quarter 2019 Results
November 25th, 2019
Toronto, November 25, 2019 – Buchans Resources Limited (the “Company” or “Buchans”), a Canadian base metal mineral exploration and development company, reports its interim financial results and results of operations for the quarter and nine months ended September 30, 2019.
This news release should be read in conjunction with the Company’s condensed interim consolidated financial statements and the notes thereto for the period ended September 30, 2019, which are available on the Company’s website at www.BuchansResources.com or under the Company’s profile at www.sedar.com
Buchans has interests in zinc-lead-silver properties located in Canada, Ireland and the United Kingdom; gold properties in Newfoundland and Labrador; nickel-copper-cobalt properties in Labrador; a battery metal manganese project in New Brunswick; and, indirectly through its 22% shareholding in Xtierra Inc. (TSXV: “XAG”), in base metal and silver projects in Mexico.
On November 4, 2019, the Company announced a proposed group restructuring under a “Plan of Arrangement” whereby the shares of two wholly-owned subsidiaries will be distributed to shareholders and both will become stand-alone, public companies. As a mineral exploration and development company without any producing mines, Buchans must look to and is dependent upon the equity capital markets to secure financing of its ongoing operations. The Board of Buchans has determined that future financing opportunities will be enhanced if the unique aspects and geographical diversity of the Newfoundland projects, the Woodstock manganese project in New Brunswick and the zinc-lead exploration properties in Ireland are held in three public companies, with focused management teams, which can offer direct investment opportunities to shareholders and potential equity investors.
Under the proposed Plan of Arrangement, if approved, the Company will distribute to its shareholders, pro rata: (i) all of the shares of Canadian Manganese Company Inc. (“Canadian Manganese”) on the basis of one share of Canadian Manganese for each share of the Company held; and (ii) exchangeable warrants entitling shareholders to receive one share of Minco Exploration Limited (“Minco Exploration”) or 0.25 additional shares of the Company, at their option, for each share of the Company held. Any exchangeable warrants which remain unexercised on the first anniversary of the date that the Plan of Arrangement becomes effective will be automatically exchanged for shares of Minco Exploration.
Following implementation of the Arrangement, if approved, each of the Companies plans to take steps to apply for separate stock exchange listings, subject to market and trading conditions and obtaining any necessary approvals: Buchans on the TSXV or the Canadian Securities Exchange (CSE); Canadian Manganese on the CSE; and Minco Exploration on the Irish Stock Exchange.
Completion of the Arrangement is subject to a number of conditions, including approval by the shareholders at an Annual and Special Meeting to be held on December 10, 2019 and approval by the Ontario Superior Court.
The Board of Directors of Buchans has concluded that the proposed Arrangement is fair and reasonable to shareholders and is in the best interest of Buchans and has unanimously recommended that shareholders vote for approval of the Arrangement at the Annual and Special Meeting to be held on December 10, 2019.
NEWFOUNDLAND – BASE METALS
Buchans holds an extensive mineral land package in the Buchans district of central Newfoundland with interests in four undeveloped base metal deposits, including the large, lower grade, Lundberg stockwork sulphide deposit, as well as three smaller, higher grade, volcanogenic massive sulphide (“VMS”) “satellite” deposits, each with excellent exploration potential.
On November 12, 2019, the Company announced completion by Stantec Consulting Ltd., of an internal scoping study of the Lundberg deposit as a possible open-pit, zinc, lead and copper mining development, evaluating various development, mining and processing options and scenarios, as well as reviewing tailings disposal options and shipping port alternatives. The purpose of the Stantec study was to prepare a high-level options assessment for use internally by Buchans to assist with planning for future work on the deposit. Results and conclusions of the Stantec study will now be utilised to focus the Company’s approach towards completion of an updated assessment of the Lundberg deposit’s economic potential in the form of a new Preliminary Economic Assessment as the next phase of the project evaluation (see news release dated November 12, 2019 for further details).
It is recognized that further enhancements for mineral development of Lundberg could be achieved through exploration to add additional mineral resources immediately adjacent to the Lundberg deposit that, if successful, may identify new, higher-grade, underground resources that might share common processing and mine infrastructure with an open pit mine development at Lundberg.
Accordingly, Buchans anticipates focusing its ongoing exploration efforts in the Buchans camp on discovery of new Buchans-style high-grade deposits similar to those previously mined at Buchans by ASARCO, who produced more than 16.2 million tonnes from five separate deposits, with a combined average grade of 14.51% Zn, 7.65% Pb, 1.33% Cu, 126 g/t Ag, and 1.37g/t Au, before mine closure in 1984.
Buchans Increases Land Position in Buchans Mining Camp
As part of the Company’s ongoing exploration efforts, Buchans recently expanded its land position in Buchans through the purchase of mineral claims covering the former MacLean mine, a significant past producer of Zn-Pb-Cu-Ag-Au, and competitive staking of the Wiley claims (see news release dated November 15, 2019 for further details).
The MacLean mine claims are comprised of 6 mineral claims covering 1.5 km2, two kilometres northwest of the town of Buchans. The claims include the past producing MacLean mine where ASARCO mined approximately 3.6 million tonnes of ore grading 1.1% Cu, 7.5% Pb, 13.5% Zn, 118 g/t Ag & 0.9 g/t Au from 1959 until mine closure in 1984. More significantly, the claims cover the inferred strike extension of favourable geology extending westward from exploration drilling completed by Buchans Resources on its adjoining claims in 2018. This drilling includes hole H-18-3524 that intersected 1.0 m assaying 14.83% CBM as 8.70% Zn, 4.87% Pb, 1.26% Cu, 133.2 g/t Ag and 0.47 g/t Au (see news release dated November 20, 2018 for further details).
The 10.5 km2 Wiley claims cover underexplored favourable Buchans stratigraphy located approximately 4 kilometres southwest of historical mining sites.
With the addition of these two properties, the Buchans Project land position now exceeds 72 km2, and includes mineral rights covering essentially all previously mined orebodies, undeveloped deposits and prospects, as well as most of the favourable stratigraphy within the Buchans mining camp.
ZINC EXPLORATION IN IRELAND – JOINT VENTURES WITH BOLIDEN
In Ireland, Buchans is continuing exploration for zinc, both in joint venture with Boliden Tara Mines near Navan and on its own licences at Moate. Buchans also entered into a new an exploration agreement with Boliden Tara Mines on twelve Prospecting Licences in Galway.
Zinc Exploration – Navan, County Meath – Joint Venture with Boliden on Licence 1440R
Buchans, through a wholly owned subsidiary, holds a 20% interest in Licence 1440R (Tatestown), which is being explored under a Joint Venture with Boliden Tara Mines Limited (80%), and which hosts part of the small Tatestown–Scallanstown zinc-lead mineral deposit. Licence 1440R is located immediately adjacent to Boliden’s large 130 million tonnes Tara zinc-lead mine at Navan, County Meath, about 50 km northwest of Dublin.
Joint Venture with Boliden on Licence 3373 (Kells) Adjacent to Tara Mine
Buchans, through its wholly owned subsidiary Minco Ireland Limited, has entered into a joint venture agreement with Boliden Tara Mines on Licence 3373, contiguous to the west with Licence 1440R. Under terms of this agreement, Buchans can earn a 75% interest through expenditure of €250,000 in staged programmes, by March 1, 2024. Boliden has the right of off-take to purchase or toll process all ore that may be produced from the Licence area.
Licence 3373, located approximately 10 km northwest of the Navan orebody covers an area of approximately 30 square km and constitutes the north-western quadrant of a contiguous block of ground currently being explored by Boliden Tara Mines. Exploration on Licence 3373 has focused on the search for zinc-lead mineralization within the Navan Group (Pale Beds).
Joint Venture with Boliden on Slieve Dart Licences, County Galway
Minco Ireland, has also entered into a joint venture agreement with Boliden Tara Mines on twelve prospecting licences in the Slieve Dart area of County Galway. Minco Ireland can earn a 50% interest through expenditure of €385,000 in staged programmes, by 31 July 2022. During 2018 the Company incurred expenditures of €108,235 on these licences and earned the right to a 20% joint venture interest. Boliden Tara Mines has the right of off-take to purchase or toll process on all ore that may be produced from the licence area.
During September and October 2019, a 2D seismic acquisition program was undertaken over a length of 21 kilometres, supported in part by the Geological Survey of Ireland, the results of which are being interpreted.
Exploration for zinc-lead at Moate, County Westmeath
The Moate Block located in west-central Ireland, consists of two contiguous prospecting licences held solely by Minco Ireland that cover a surface area of 65.67km2. An adjacent third licence was dropped during 2019.
During the quarter a single hole was drilled on one of the Moate licences to explore for Tynagh-type mineralisation associated with the faulted flank of the Waulsortian Reef margin and was sited to test the northern margin of the Waulsortian Reef north of the Moyvoughly cross fault. This hole confirmed the fault location and constrained the target further to the east-northeast. The primary target remains reef derived breccia systems developed along the reef margin.
BATTERY GRADE MANGANESE IN NEW BRUNSWICK
In New Brunswick, Canadian Manganese Company Inc., a wholly owned subsidiary of Buchans Resources, holds the Woodstock manganese property containing the Plymouth manganese-iron deposit on which a positive preliminary economic assessment (“PEA”) technical report was completed in 2014.
Metallurgical development programs for Woodstock have focused on the production of high-grade electrolytic manganese metal and the intermediate production of purified manganese sulphate solution as an interim step, enabling the add-on production of manganese chemicals, manganese catalyst, battery grade manganese dioxide and high-purity manganese metal for electronics. Electrowinning tests consistently produced electrolytic manganese metal with a metallic manganese content of greater than 99.99% and a total manganese content ranging from 99.70% to 99.76% Mn.
Advancements in electric vehicle manufacturing are transforming the entire global automobile industry driving increased battery demand and NMC (nickel-manganese-cobalt) batteries are becoming the rechargeable battery of choice for next-generation automotive and industrial uses. Manganese is a key component in the formulations of the cathode material used in high-performance lithium-ion batteries and in utility bulk energy storage facilities, which are expected to create strong demand for high-purity manganese products.
Paul Moore, P. Geo. is Buchans’ Non-Independent Qualified Person for the purposes of National Instrument 43-101, Standards of Disclosure for Mineral Projects and has approved the technical disclosures on mineral projects in Canada in this MD&A. Historic mine production figures are derived from historic archived documents of the former operator, Asarco, and have not been independently verified.
Information on base metal properties in Ireland is derived from the Company’s communications with Boliden Tara Mines Limited, Operator of the Tatestown-Scallanstown (Licence 1440R) and Kells (Licence 3373) joint ventures.
The Company recorded no revenue in the periods ended September 30, 2019 or September 30, 2018.
For the three-month period ended September 30, 2019, the Company recorded a loss of $137,843, compared to a loss of $101,276 for the three-month period ended September 30, 2018. The loss for the three-month period ended September 30, 2019 included a gain in fair value of the Xtierra warrants in the amount of $35,531, $61,435 depreciation and $16,250 finance costs in accordance with IFRS 16, Leases.
For the nine-month period ended September 30, 2019, the Company recorded a loss of $755,943, compared to a loss of $321,990 for the nine-month period ended September 30, 2018. The loss for the nine-month period ended September 30, 2019 included a loss in fair value of the Xtierra warrants in the amount of $178,482, $163,827 depreciation and $46,131 finance costs in accordance with IFRS 16, Leases.
The loss for the three-month period ended September 30, 2018 included a gain in market value of marketable securities in the amount of $156,180.
Administrative expenses, excluding foreign exchange, for the nine-month period ended September 30, 2019 amounted to $478,677 compared to $699,008 for the nine-month period ended September 30, 2018.
During the period ended September 30, 2019, Buchans invested $588,913 (2018 – $1,728,799) on exploration of its mineral properties, of which the largest amounts were expended on the Buchans zinc lead project in central Newfoundland.
At September 30, 2019, Buchans held $1,790,863 (December 31, 2018- $2,895,188) in cash and cash equivalents and had a working capital surplus of $1,386,347, net of a $240,818 lease obligation liability, compared to a working capital surplus of $2,760,648 at December 31, 2018.
At September 30, 2019, Buchans held mineral properties with a combined book value of $18,480,508. The balance sheet values for these assets may not represent that which could be obtained if the assets were to be offered for sale.
ABOUT BUCHANS RESOURCES
Buchans Resources currently holds interests in zinc, lead, silver properties located in Canada, Ireland and the United Kingdom; gold properties in Newfoundland and in Labrador; nickel, copper, cobalt properties in Labrador and a manganese project in New Brunswick; and, indirectly through its 22% shareholding in Xtierra Inc. (TSXV: “XAG”), in base metal and silver projects in Mexico.
On November 4, 2019, Buchans announced a proposed group restructuring under a “Plan of Arrangement” whereby the shares of two wholly-owned subsidiaries will be distributed to Buchans Shareholders and both will become stand-alone, public companies. (see news release November 4, 2019 for further details). Under the proposed Plan of Arrangement, if approved, the mineral exploration business and projects now owned and operated by Buchans will be held by three separate public companies, namely:
- Buchans Resources which will retain the base and precious metals projects in the Province of Newfoundland and Labrador and its investment in base metal and silver projects in Mexico through an approximately 22% shareholding in Xtierra Inc;
- Canadian Manganese which will hold the Woodstock Manganese Project in the Province of New Brunswick; and
- Minco Exploration which will hold the mineral exploration projects in Ireland.
Completion of the Arrangement is subject to a number of conditions including approval by the shareholders at an Annual and Special Meeting to be held on December 10, 2019 and approval by the Ontario Superior Court.
John F. Kearney: Chairman & Chief Executive +1 416 362 6686
Paul Moore: Vice President Exploration + 1 709 738-7384
Peter McParland: Director – Ireland +353 (0) 46 907 3709
Additional information about the Company is available on the Company’s website at www.BuchansResources.com.
This news release contains certain forward-looking statements relating to, but not limited to, the Company’s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects and timing of commencement of operations, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, delays in the development of projects changes in exchange rates, fluctuations in commodity prices, inflation and other factors. Forward- looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results. Shareholders and prospective investors should be aware that these statements are subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
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