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Lionsgold: THE INVESTMENT CASE

Lionsgold going for gold in India

What makes Lionsgold more than "just another gold mine developer" is its partnership with TRAC, which has developed a trading platform that allows investors to acquire and store physical gold and silver rather than buying into exchange traded funds
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INVESTMENT OVERVIEW: LION The Big Picture
Lionsgold and TRAC aim to tap into India’s borderline obsession with the yellow metal

Lionsgold Ltd (LON:LION) and its partner Geomysore Services are putting in place the “stepping stones” for a shift in value of the Jonnagiri gold deposit.

That at least is the belief of Cameron Parry, chief executive of the AIM-listed natural resources group, which owns 20.5% of the project located in southern India.

READ: Lionsgold welcomes former Rio Tinto luminary Alan Davies as global strategy consultant

According to Geomysore’s economic feasibility study (EFS), released in August, the project has the potential to be an economically robust mine.

The plan is to build an open pit gold mine on the East Block, producing 495,000 tonnes of gold ore per annum at a rate of 1,500 tonnes per day.

To support this, part of the East Block JORC-compliant mineral resource has been upgraded to a probable reserve of 2.8 mln tonnes containing 151,020 ounces of gold, with an average grade of 1.68 grams per tonne (g/t) at a cut-off grade of 0.6 g/t.

The life of the mineis seven years, based on these reserves and a projected 92.4% recovery rate.

Overall, the net present value rings in at US$25mln, with all-in costs of gold production per ounce likely to run at US$753 per ounce.

The mine will cost US$39mln to put into operation, including a 7.5% contingency cost buffer.

“These are the stepping stones of what can become a fairly dramatic value shift as you go through these various categories with your gold deposit,” Parry said, referring to the shift of resources from the “indicated” category to the “probable”.

The company, formerly Kolar Gold, has another gold asset in Finland and a 50-50 joint venture with TRAC Technology in India. It also owns a 27.3% direct stake in the business.

TRAC has developed a trading platform called The Real Asset Co (www.therealasset.co.uk) that allows investors to acquire and store physical gold and silver rather than buying into exchange traded funds.

Lionsgold and TRAC aim to tap into India’s borderline obsession with the yellow metal with a platform that should be immediately generate value.

In November, the company was granted an electronic money licence by the UK’s Financial Conduct Authority.

READ: Lionsgold subsidiary receives e-money licence

"As announced to the market on 18 October 2017, Lionsgold has been developing TRAC's physical gold account product offering into ‘Goldbloc’ - a global digital currency that represents direct ownership of physical gold. This approval is an important step to complete in the lead up to the initial product release," Parry said.

In Finland, Lionsgold has been granted government permission to take a 200 tonne initial test sample at the Kalevala gold deposit.

The test sample will be taken in November.

The idea at Kalevala is to process enough ore to generate just over US$4mln at today’s spot price for the precious metal.

What it then does with the cash is open to discussion between Lionsgold and its partner, Mineral Exploration Network (Finland) Ltd.

“We may decide to drill further high-grade targets and there are two other project areas to the south and we might commit to adding them,” CEO Parry said in an early interview.

Helping Lionsgold size up its options will be former Rio Tinto executive Alan Davies, who was recently appointed as global strategy consultant.

Davies was formerly chief executive of Energy & Minerals at Rio Tinto PLC (LON:RIO).

“Davies is deeply experienced in India, having had executive responsibility for Rio Tinto in India for approximately eight years, and over ten years of direct project responsibility in India,” Lionsgold said.

Davies will work, on average, two days a month under an initial 12-month contract for which he will receive 5mln new Lionsgold shares and warrants to subscribe for a further 5mln, half of which are exercisable at 1.1p each and half at 2.2p.

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