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Southern Arc Minerals ends fiscal Q1 with ample working capital as partnering discussions continue for West Lombok

Last updated: 01:59 28 Nov 2013 AEDT, First published: 02:59 28 Nov 2013 AEDT

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Southern Arc Minerals (CVE:SA) (OTCQX:SOACF) reported Wednesday substantially trimmed first quarter losses when compared to the previous quarter, finishing the period with working capital of $8.1 million as it continues to advance discussions for a potential partnership or outright sale of its West Lombok property in Indonesia, while it also focuses on directing its cash toward buying new high-quality projects in stable regions.

Since releasing a resource estimate for West Lombok earlier this year, the company has maintained a low level of activity as it seeks a funding partner and redirects its treasury to acquiring new assets as a way of building shareholder value more effectively. 

"Southern Arc remains confident that it will find a suitable arrangement, and is working diligently to conclude a transaction that will bring value to the company," it said in its statement Wednesday, which included its fiscal first quarter financials. 

"With the backdrop of a challenging market and significantly decreased valuations for junior mining companies, Southern Arc’s management determined that IFRS rules required the company to write down the West Lombok project, as disclosed in the company’s year-end financials."

For the three months to September 30, the company reported a comprehensive loss of $1.52 million, or 1 cent per share, compared to a loss of $41.9 million, or 38 cents per share, in the fiscal fourth quarter, when it booked a $35 million write down against the West Lombok property. Year-over-year, net loss grew from $757,053 in the third quarter of 2012. 

Total assets at quarter end were $16.68 million, while working capital amounted to $8.1 million, currently sitting at $7.6 million as of November 26. 

In August of this year, the company, as part of its plan to pursue new gold-focused opportunities following a strategic review at the end of 2012, invested $7.3 million to acquire just over a 26% interest in Eagle Hill Exploration (CVE:EAG), whose Windfall Lake gold deposit in Quebec is considered one of the highest-grade development stage gold projects in the world. 

The recent $12 million private placement in Eagle Hill, with $7.3 million contributed by Southern Arc and $4.7 million contributed by Dundee Corporation, has funded an aggressive drill program at Windfall Lake, with three rigs starting drilling in September. The aim is to drill 25,000 metres by the end of this year.

Earlier this month, Eagle Hill announced the first results from the program, discovering an extension to mineralization and confirming the potential to extend the known gold resource. An updated resource estimate is due out in early 2014. Currently, the property holds 538,000 ounces at 10.05 g/t gold in the indicated category, and 822,000 ounces at 8.76 g/t gold in the inferred category.

During the fiscal first quarter, Southern Arc also renegotiated the purchase and sale agreement for its Taliwang project in Indonesia, with the property classified as an "Asset Held for Sale" pending completion of the transaction, which still needs to wrap up due diligence.

Meanwhile, at its other Indonesian property at East Elang, which is held in an option agreement with Vale, there are no plans to begin exploration until the Indonesian forestry moratorium is lifted and the project can be reclassified. Southern Arc said Wednesday that Vale still remains committed to its option to earn an interest in the property.

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