Mwana Africa Plc 3rd Quarter Operations and Exploration Update

 
TIDMMWA 
 
16 February 2015 
 
Mwana Africa PLC 
 
("Mwana", the "Group" or the "Company") 
 
Operations and Exploration Update 
 
Mwana Africa is pleased to provide an update on its operations and exploration 
activity for the third quarter ending 31 December, 2014 (Q3 2015). 
 
 
OPERATIONAL HIGHLIGHTS 
 
GOLD - FREDA REBECCA (ZIMBABWE) 
 
Gold production decreased by 14% to 14,298 ounces from 16,555 ounces (Q2 2015) 
despite greater mill throughput 
 
Tonnes milled rose by 0.8% to 322,216t (Q2 2015: 319,767t) against the backdrop 
of a 1.8% increase in mill throughput made possible by the partial pre-crushing 
of feed material 
 
Tonnes mined were reduced as production was focused on accumulated ore 
stockpiles from the two previous quarters 
 
The average feed grade was 16% below the feed grade for Q2 2015 as the main 
production stopes posted lower than expected grades 
 
Gold recovery rate fell to 78% (Q2 2015: 80%) as the plant had to cope with a 
low-quality replacement carbon batch which resulted in gold being lost through 
fine carbon and being passed to tailings. The defective carbon batch has 
subsequently been replaced 
 
Cash costs for the quarter under review increased by 27% to US$1,118/oz from 
the September quarter's US$880/oz as a result of the 14% decrease in gold 
production and a 10% increase in operating costs 
 
All-in sustaining costs rose by 23% to US$1,304/oz quarter-on-quarter from 
US$1,061/oz in September. Royalties for the quarter decreased by 37% due to 
lower gold production and to lower royalty rates introduced in October. 
However, the benefit was countered by an increase in operating costs mainly due 
to mill shell realignments and clutch replacement costs being realised 
 
 
 
NICKEL - TROJAN NICKEL MINE (ZIMBABWE) 
 
Nickel in concentrate production was 30% lower at 1,383t in the December 
quarter (Q2 2015: 1,989t), as a result of fewer tonnes of ore milled, a lower 
head grade and reduced recoveries. The reduced production is partly 
attributable to the ongoing refurbishment programme referred to below 
 
Equipment taken out for the refurbishment exercise alongside ongoing 
maintenance reduced resources available for mining development which in turn 
restricted access to massives. This resulted in a 23% drop in mill head grade. 
Recoveries were 2% lower than in the September quarter as a result of the lower 
nickel head grade 
 
Magnesium oxide concentrate content was reduced and was within the 
specifications of the Glencore off take agreement 
 
Nickel sales were 31% lower quarter-on-quarter from 2,008 tonnes to 1,395 
tonnes as a result of lower production volumes 
 
Cash costs and all-in sustaining costs both increased by 17% on a per tonne 
basis quarter-on-quarter as a result of the reduced nickel production. The 
refurbishment programme on the mobile equipment continued in the quarter. 
However, these costs should start reducing in Q4 2015 as the programme reaches 
its conclusion 
 
New mobile plant equipment has been purchased and this, together with the 
equipment that has been refurbished, will enable mining to start ramping up to 
steady state monthly targets during Q4 2015 
 
 
 
NICKEL - BINDURA SMELTER AND REFINERY (ZIMBABWE) 
 
Work has continued on the smelter re-start with the delivery of the furnace 
bricks expected during Q4 2015 
 
Manufacturing of key components for the Electrostatic Precipitator is at 
various stages. The ductings from converters to the ESP mixing chamber will be 
delivered this month. The ESP inlet and outlet transition pieces will be 
delivered at the same time 
 
The main component of the cooling system (Evapco cooling tower) has been 
manufactured and is ready for shipping to site 
 
Hardware for the control and instrumentation system is on order. Software 
programming for the Hatch furnace controller will commence during Q4 2015 
 
The removal of the old feed system has been completed as well as the old 
converter to ESP ductings. The furnace to ESP ducting has also been removed in 
preparation for installing new units 
 
Rewinding of two of the four furnace transformers is underway and completion is 
expected in April 2015 
 
Most key members of the project team are now in place 
 
Bindura Nickel Corporation commenced marketing of a US$20 million bond in 
December 2014. The bond has a 5-year term with a 10% semi-annual coupon rate 
 
The closure date for the bond has been extended at the request of prospective 
bond holders to 27 February 2015 
 
 
 
DIAMONDS - KLIPSPRINGER (SOUTH AFRICA) 
 
Throughput of Marsfontein fine residue tailings increased toalmost 50,000 
tonnes during the quarter, an increase of 13% on the previous quarter 
 
Head grade was lower due to planned mining through a low-grade area in October 
2014 
 
Diamond sales were up quarter-on-quarter from 23,150 to 44,200 carats with 
three sales taking place during the period. The sales increase was largely due 
to disposals from stocks accumulated at end-September 
 
Prices per carat of US$19.31, were lower due to a greater proportion of smaller 
gems in the product mix 
 
Difficult marketing conditions are expected for the first half of 2015 
 
The application for the renewal of mining rights continues 
 
 
 
EXPLORATION HIGHLIGHTS 
 
GOLD - ZANI-KODO (DEMOCRATIC REPUBLIC OF CONGO - DRC) 
 
District scale exploration has continued but no drilling was carried out 
 
Our resource estimates remain unchanged 
 
 
 
COPPER/COBALT - SEMHKAT/HAILIANG JV (DRC) 
 
Drilling of five priority targets was completed in November and cores delivered 
to the laboratory for assay 
 
Once the results have been received the next drilling phase will be planned 
 
 
Kalaa Mpinga, CEO of Mwana, commented: 
 
"The third quarter of the 2015 financial year, the three months that ended in 
December, was a particularly challenging period. 
 
 
"The nickel price decreased by 15% during the December quarter to US$15,867/t 
(Q2 2015; US$18,592/t). Although gold's price fell to an average of US$1,195/oz 
in the December quarter, the gold price has somewhat recovered in the first 
month of calendar 2015 and I remain confident in both metals' longer-term 
future. 
 
 
"At Trojan, the refurbishment programme continued. This, in turn, led to slower 
development rates than earlier envisaged, affecting access to the massives and 
their higher grades. With most of the equipment now onsite, the availability 
issue will be addressed in the next quarter whilst also having a positive 
impact on costs. 
 
 
BNC launched a bond to restart the smelter and I am pleased with the progress 
on the restart project. 
 
 
"Despite this challenging period, we remain confident of Mwana's growth 
prospects. The Group's cash balance as of 31 December 2014 was US$5.5 million." 
 
 
Mwana contact details 
 
For further information contact: 
 
Mwana Africa PLC 
Kalaa Mpinga, CEO Tel: + 44   (0) 203 696 5470 
Caroline Mathonsi, Investor Relations 
Nominated Adviser and Broker 
Peel Hunt LLP 
Matthew Armitt / Ross Allister Tel: [phone] 
Public Relations 
Russell and Associates 
Jim Jones/Leigh King Tel: [phone] 
 
 
 
 
OPERATIONS 
 
GOLD - FREDA REBECCA GOLD MINE (ZIMBABWE) 
 
                                    Quarter ending 
 
FREDA REBECCA                       Jan-15 Dec - 14 Sept - 14 Jun-14  Mar-14 
 
Tonnes mined               (t)      62,393 269,085  290,771   370,755 282,078 
 
Tonnes milled              (t)      93,415 322,216  319,767   263,531 279,879 
 
Head grade                 (g/t)    1.66   1.89     2.25      2.07    1.91 
 
Recovery                   (%)      79.8   77.5     80.0      76.8    83.0 
 
Gold produced              (oz)     4,002  14,298   16,555    13,503  13,380 
 
Average gold price         (US$/oz) 1,304  1,195    1,272     1,296   1,303 
received 
 
Cash Cost                  (US$/oz) 1,254  1,118    880       1,078   1,060 
 
All-in sustaining cost     (US$/oz) 1,481  1,304    1,062     1,283   1,331 
 
 
Figures shown are unaudited and may vary upon final audit. Gold ounces produced 
incorporate gold released from or caught in 'lock-up' for each period. 
 
Cash cost per ounce sold includes costs for mining, processing, administration, 
accounting movements for stockpiles and gold-in-circuit, and, net proceeds from 
by-product credits. It excludes capital costs for exploration, mine development 
or processing mill capital works, and, the cost of royalties. 
 
All-in sustaining cost reflects cash costs per ounce sold plus depreciation and 
amortisation, thus incorporating the capital cost of production, plus interest, 
other indirect costs and royalties. All-in sustaining cost represents all costs 
attributable to gold production over the period. 
 
 
 
COMMENTARY 
 
The mill running hours remained stable even though the heavy rains resulted in 
211 hours downtime due to power issues. The stability is as a result of 
improved maintenance and the continuous improvements to the mill realignment as 
reported last quarter. The introduction of pre-crushed feed material has seen 
an increase in mill throughput. 
 
Mining and milling grades were affected by the need to mine through a zone of 
lower grade ore in the new main stope as per the mine plan. The major stope 
reported last quarter had a zone which intersected low grades requiring to be 
worked through the production sequence. The lower grade was compensated for to 
an extent by increasing mining in minor higher-grade stopes. The situation 
should end once the lower-grade ore has been worked through and operations can 
be resumed according to the mining plan during Q4 2015. 
 
Mill recoveries were briefly affected by poor quality carbon being delivered 
for the leach process. The problem was rectified as soon as it was noticed, but 
the result was that some gold passed through the leach process to the slimes 
dam. 
 
These challenges resulted in lower gold production quarter-on-quarter and this, 
in turn, contributed to higher unit costs per ounce of gold. 
 
Modifications to the tailings retreatment plant to treat the run of mine ore 
remain under consideration. 
 
 
 
Gold production for January 2015 was 4,002 ounces and tonnes milled were 93,415 
tonnes. Production was affected by lower running hours and mill throughput as 
the alignment work continued on Mill 2. The average feed grade was lower at 
1.66g/t as a result of the major stope intersecting a low grade zone. Cash and 
all-in sustaining costs for the month were US$1,254/oz and US$1,481/oz due to 
the lower production. All-in sustaining costs were US$1,481/oz. 
 
 
 
The focus remains on grade control, mill throughput and alignment improvements 
arising from the introduction of partial secondary crushing and gold delivery. 
Management expect to start seeing a positive response to the grade by the end 
of February by introducing identified higher grade and remain confident in the 
grade recovery.. 
 
Management forecast production of approximately 14, 000 oz for Q4 with gold 
production for FY15 in line with production recorded for FY14. 
 
Cost control at Freda Rebecca remains a management priority. The Company has a 
short term overdraft facility of $4 million to cover short term working capital 
requirements. 
 
 
 
NICKEL: TROJAN NICKEL MINE (ZIMBABWE) 
 
                                           Quarter ending 
 
TROJAN MINE                      Jan - 15  Dec-14  Sep-14  Jun-14  Mar-14 
 
Tonnes mined             (t)     43,447    155,129 160,741 155,610 161,964 
 
Tonnes milled            (t)     39,904    148,712 161,107 148,882 153,451 
 
Head grade               (% Ni)  1.250     1.156   1.496   1.519   1.621 
 
Recovery                 (%)     81.7      80.5    82.5    84.1    88.8 
 
Nickel in concentrate    (t)     407.6     1,383   1,989   1,902   2,207 
 
Nickel sales             (t)     426.9     1,395   2,008   1,871   2,250 
 
Average nickel price     (US$/t) 14,875    15,867  18,592  17,745  14,075 
 
Off take opportunity cost included 
 
Cash cost                (US$/t) 16,617    16,214  13,900  13,750  11,333 
 
All-in sustaining cost   (US$/t) 17,456    17,039  14,566  14,776  12,220 
 
Off take opportunity costs excluded @ 65% payability 
 
Cash cost                (US$/t) 11,410    10,666  7,392   7,454   8,498 
 
All-in sustaining cost   (US$/t) 12,147    11,491  8,059   8,480   9,329 
 
 
Figures shown are unaudited and may vary upon final audit. 
 
Average nickel price represents the average LME nickel price utilised under the 
terms of the Glencore off-take contract. Under the terms of the offtake 
agreement, BNC is entitled to a defined percentage of the value of nickel 
contained in concentrate. Therefore, as the nickel price rises, both revenue 
and costs attributable to the agreement increase. 
 
Cash cost per tonne includes costs for mining, processing, administration, 
off-take costs and penalties, transport costs, accounting movements for 
stockpiles, and net proceeds from by-product credits. It excludes capital costs 
for exploration, mine development or processing mill capital works, and, the 
cost of royalties. 
 
All-in sustaining cost reflects cash cost per tonne plus depreciation and 
amortisation, thus incorporating the capital cost of production, plus interest, 
other indirect costs and royalties. All-in sustaining cost represents all costs 
attributable to nickel production over the period. 
 
 
 
COMMENTARY 
 
At Trojan, the refurbishment programme had not been completed by the quarter 
close as a result of lower than anticipated dump truck availability for both 
massives transportation (production/grade) and waste movement (development). 
New dump trucks have been delivered to the mine along with a support, 
production and face rig with an LHD and an additional production rig 
outstanding. 
 
 
 
The major reason for the lower recovery and the decrease in head grade 
quarter-on-quarter was attributable to the challenges experienced with mining 
equipment - a combination of rigs, LHDs and dump trucks - resulting in limited 
massives extraction. 
 
Management expects Trojan's production rate to steadily increase to its optimal 
sustainable level in February and March as the injection of new and refurbished 
equipment takes effect. 
 
 
 
Forecast annual nickel sales for the financial year 2015 are expected to end 
the year in line with the prior year 
 
During January, the mine milled 39,904 tonnes of ore to produce 427 tonnes of 
nickel in concentrate. Recoveries and grade showed an improvement in January of 
8.1% and 1.5% respectively, compared to the December quarter. 
 
 
 
Cash costs were US$16,617 per tonne (inclusive of the off take opportunity 
cost) during the first two months whilst all-in sustaining costs have averaged 
US$17,456 per tonne over the same period. Costs exclusive of the off take costs 
were US$11,410 and US$12,147. BNC has secured a short-term overdraft facility 
of US$7 million with a local financial institution which is being utilised for 
bridging finance for the long lead equipment orders required for the smelter 
project and short-term working capital. Management anticipates that all-in 
sustaining costs will recover in Q4, providing the nickel price remains at 
approximately US$15,000 per tonne. 
 
 
 
Diamonds - Klipspringer (South Africa) 
 
                                              Quarter ending 
 
KLIPSPRINGER MINE              Jan 2015 Dec-14   Sep-14   Jun-14   Mar-14 
 
Tonnes treated        (t)      11,022   49,939   44,200   40,350   16,000 
 
ROM diamonds produced (carats) 7 120    31,850   32,425   23,710   14,150 
 
Head grade            (cpht)   64.6     63.8     73.3     58.8     88.4 
 
Recovery              (%)      99.7%    99.7%    98.4%    99.6%    99.8% 
 
Diamond sales         (carats) Nil      44,200   23,150   15,960   12,860 
 
Average diamond price (US$/ct) US$19.50 US$19.31 US$20.93 US$20.00 US$21.03 
 
 
 
 
commentary 
 
The KSR Project produced steadily during the onset of the rainy season. Monthly 
production increased from 14,700 tpm during the second quarter to 16,600 tpm 
for the current reporting period. 
 
Diamond production fell slightly below second quarter production. This was due 
to mining a lower grade area in October. Mining this area was necessary to 
cater to final rehabilitation plans and to ensure that the higher grade areas 
closer to the dam wall could be mined safely due to the wet weather conditions. 
 
The rough diamond market prices softened during the quarter by between 7.5% to 
10% globally. The main reasons for this are: 
 
liquidity constraints in the market 
 
global demand weakening 
 
relative oversupply of diamonds throughout the distribution chain 
 
Three diamond sales took place during the quarter. One parcel was sold locally 
whilst the other two were exported to Antwerp for sale. The average selling 
price for the three parcels was US$19.31 per carat, down just over 7% from the 
second quarter prices. 
 
The KJV share of the revenue for the quarter was US$56,500. 
 
A bulk sample of the lower slimes dams was completed during December. The fine 
residue tailings contained in these dams originate from the Leopard fissure. 
Results from the bulk sample will be available in the next quarter and will 
inform a decision on whether it is economically feasible to mine them in a 
similar manner to the existing operation. 
 
It is planned to take a representative bulk sample of the Klipspringer coarse 
tailings dump during the next quarter. The bulk sample will be treated and 
evaluated during Q4 2015. 
 
Production throughput of Marsfontein fine residue tailings (slimes) at the 
Klipspringer Mine was sluggish due to the shutdown over the December holidays 
 
Head grade was 65 carats per hundred tons (cpht), in line with results achieved 
in the previous quarter 
 
No diamond sales took place during the month. An offer to purchase the current 
stock at US$19.50 was accepted 
 
Tough marketing are conditions expected to endure for the first half of 2015. 
The price received for fine diamonds produced by the mine during the quarter 
fell by 7% 
 
Water which caused the shaft bottom to flood on 26 December has been cleared 
 
In January, diamond production was in line with the previous quarter's results. 
At the end of January a serious incident involving an armed attack on our 
diamond export resulted in the loss of 655 carats. 
 
The diamond market is cautious as trading has stalled on the back of lower 
levels of consumer demand. Dealers are reluctant to buy if they can't sell and 
India has cut production by approximately 30%. Under existing market conditions 
receiving an offer of US$19.50 per carat for our current stock is pleasing. 
 
Dewatering operations have cleared the shaft bottom of excess water. Early 
indications are that the water did substantial damage to stopes on 5 and 6 
level and this will impact on the mine restart operations. 
 
Treatment of the bulk sample from the lower slimes dams has been delayed due to 
the security incident reported earlier. This step was necessary whilst the 
Company reviews procedures and investigates the incident. 
 
Bulk sampling of the Klipspringer coarse tailings dump has been deferred to the 
2016 financial year. Work on this project is expected to start in April 2015. 
 
 
 
EXPLORATION 
 
GOLD - Zani-Kodo (dEMOCRATIC REPUBLIC OF CONGO - drc) 
 
District-scale exploration is continuing. This has produced some interesting 
mineralisation indications, in particular in the Godawizi area, where broad 
zones of sulphide-bearing silicification and quartz veining with a NW-SE 
orientation similar to known mineralised structures have been identified. 
 
 
 
No exploration drilling was carried out during H1 FY2015 and consequently there 
have been no additions to the existing 2.975Moz gold resource estimate. 
 
 
 
 Subarea        Cut off (g/t)  Category  Tonnes (t)  Grade (g/t) Au (oz) 
 
 
 
Kodo Main       0.5            Indicated 4,799,487   3.63        560,075 
 
                0.5            Inferred  10,330,969  3.52        1,169,000 
 
 
 
Lelumodi        0.5            Indicated 1,118,644   2.06        74,260 
 
                0.5            Inferred  8,154,092   1.81        475,072 
 
 
 
Lelumodi North  0.5            Inferred  1,150,062   2.34        86,589 
 
 
 
Badolite        0.5            Inferred  2,806,940   2.34        211,010 
 
 
 
Zani Central    0.5            Inferred  9,683,455   1.28        398,894 
 
 
 
TOTAL                                     38,043,649 2.43        2,974,900 
 
 
 
 
COPPER - HAILIANG JV, KATANGA 
 
 
 
2014 drilling programmes on 5 Priority 1 targets were completed at the end of 
November 
 
A total of 7,044.92 meters core drilling was done 
 
ALS South Africa confirmed the reception of all samples, and assay results are 
pending 
 
A focus of the quarter was on data compilation of 2014 exploration results, 
preparatory for work proposals for 2015 
 
 
 
ABOUT MWANA AFRICA 
 
Mwana Africa PLC is a pan-African, multi-commodity mining and development 
company. Mwana's principal operations and exploration activities cover gold, 
nickel, copper and diamonds in Zimbabwe, the Democratic Republic of Congo (DRC) 
and South Africa. 
 
 
 Includes 4,673 carats of unsold diamonds (stock) 
 
 Adjusted for acid loss 
 
 
 
END