Cluff Gold PLC
AIM : CLF
TSX : CFG

Cluff Gold PLC

February 03, 2012 09:30 ET

Cluff Gold plc: Acquisition of New Burkina Faso Gold Project

LONDON, UNITED KINGDOM--(Marketwire - Feb. 3, 2012) - Cluff Gold ("Cluff Gold" or the "Company") (AIM:CLF)(TSX:CFG), the dual AIM/TSX-listed West African focused gold mining company, is pleased to announce that it has entered into a legally binding, conditional sale and purchase agreement (the "Agreement") with Orezone Gold Corporation ("Orezone") for the acquisition of the licences and associated property comprising Orezone's Sega Gold Project ("Sega"), located approximately 20km by road from Cluff Gold's Kalsaka project in Burkina Faso (the "Acquisition").

HIGHLIGHTS

  • Acquisition of new gold licences located within trucking distance of Kalsaka, hosting NI 43-101 compliant gold resources comprising 450,366oz Indicated (8.3Mt at 1.69 g/t) and 147,344oz Inferred (2.9Mt at 1.58g/t)
  • Consideration comprises 11 million new Cluff Gold ordinary shares and US$15 million cash
  • Opportunity to significantly increase the Kalsaka mine life with limited upfront capital expenditure
  • Detailed metallurgical test work completed by Orezone has indicated average heap leach recoveries of 85% for oxide and transitional ore with favourable agglomeration properties
  • Preliminary Economic Assessment to commence immediately to confirm the feasibility of a heap leach operation processing Sega's oxide and transitional resources while maintaining a throughput at Cluff Gold's Kalsaka plant in line with existing capacity of 1.6Mtpa
  • Acquisition financed from Cluff Gold's existing cash resources which, as at 31 December 2011, total US$28.9 million
  • Completion remains conditional on standard closing conditions including the approval of the Government of Burkina Faso and the approval of the TSX.

Peter Spivey, Chief Executive of Cluff Gold, commented:

"The acquisition of the Sega gives Cluff Gold the opportunity to significantly increase the Kalsaka mine life with limited upfront expenditure, and enhances the potential for our Burkina Faso operations to continue to provide significant cash flow through the development and early production from our flagship development asset, Baomahun in Sierra Leone. This transaction brings us closer to establishing Cluff Gold as a leading West African focused gold producer."

Ron Little, CEO of Orezone, commented:

"This transaction adds significant value for both Orezone and Cluff Gold and will provide more immediate cash flow for the government of Burkina Faso. The sale provides Orezone with a significant non-dilutive financing to advance the development of its Bomboré gold project while still allowing the opportunity to participate in the upside at Sega through an equity interest in Cluff Gold."

The Company will be hosting a conference call to discuss the Acquisition. The dial-in details are as below:

Call date/time: 3 February 2012, 09:30 GMT
UK participant dial in: 0800 358 5271; +44 20 8515 2306
Conference ID: 4512644#

The conference call replay will be available shortly after the live call and remain available for one week at the following numbers:

UK dial-in: 0800 358 3474; +44 20 7154 2833
North America dial-in: 1-800-406-7325; +1 303 590 3030
Conference ID: 4512644#

The Sega Gold Project

The Sega project is located 20km north of Cluff Gold's operating Kalsaka heap leach operation in Burkina Faso and comprises the Tiba and Namasa exploration permits over a total area of approximately 313km2. Currently defined resources are located on the Tiba exploration permit, approximately 20km by road from Kalsaka.

The project hosts current NI 43-101 compliant Indicated Mineral Resources totalling 450,366oz (8.3Mt at 1.69 g/t) and Inferred Resources totalling 147,344oz (2.9Mt at 1.58g/t) as set out in Table 1 below.

A 10,000m RC drilling programme has recently commenced at the Sega project with the aim of defining additional oxide resources.

Table 1 - Sega Project 43-101 Compliant Mineral Resources(i)

Indicated Tonnes
('000t)
Grade
(g/t)
Contained Au
(Ounces)
Ox-LAT Contact 17 1.52 829
Oxide 3,279 1.67 175,630
Transitional 1,594 1.58 81,113
Total Oxide and Transitional 4,890 1.64 257,572
Sulphide 3,399 1.76 192,794
Total Indicated 8,289 1.69 450,366
Inferred Tonnes
('000t)
Grade
(g/t)
Contained Au
(Ounces)
Ox-LAT Contact 9 1.75 505
Oxide 740 1.50 35,764
Transitional 422 1.47 19,989
Total Oxide and Transitional 1,171 1.49 56,258
Sulphide 1,737 1.63 91,086
Total Inferred 2,908 1.58 147,344

Detailed metallurgical test work completed by Orezone(ii) has indicated recoveries of 85% using a 12.5mm crush size and agglomeration using 5 kg/t of lime and 4 kg/t of cement which compares favourably to Cluff Gold's existing operations at Kalsaka.

In addition to its proximity to the existing Kalsaka operation, the Sega project benefits from favourable infrastructure, being close to well maintained roads and sufficient water to sustain a mining operation.

The Sega project is 100% held by a wholly owned subsidiary of Orezone. In line with the Burkina Faso Mining Code, the Government of Burkina Faso has the right to a 10% free carried interest when a mining licence is granted. In addition to standard government royalties, currently 5%, a net smelter royalty of 3% is held by Royal Gold Inc. which can be reduced to 1% for an up-front payment of US$2 million. The Company currently intends to make this payment before the commencement of mining.

Strategic Rationale

The acquisition of the Sega project brings Cluff Gold a significant increase in oxide and transitional resources suitable for processing at Kalsaka, in addition to the anticipated resource increases which may result from the ongoing exploration programme at Kalsaka and Yako and the programme commenced by Orezone at Sega.

Cluff Gold intends to commence a Preliminary Economic Assessment immediately to confirm the feasibility of an operation whereby ore would be trucked from Sega to Kalsaka and processed at the Kalsaka plant, at a throughput in line with the existing operation at Kalsaka of approximately 1.6Mtpa.

Preliminary analysis suggests that capital costs associated with the commencement of production from the newly acquired resources at Sega would be approximately US$8 million, including the cost of additional crushing capacity, new leach pads, site civil works, road upgrade works and fleet mobilisation costs.

In addition to the heap leach opportunity, both the Kalsaka and Sega properties host sulphide mineralisation that would be suitable for processing through a CIL plant. The acquisition of the Sega project will further enhance the opportunity for a long term sulphide processing plant to be built by Cluff Gold in Burkina Faso.

Acquisition Consideration

The consideration payable by Cluff Gold comprises:

  • the issuance to Orezone of 11 million new ordinary shares in Cluff Gold (the "Consideration Shares"), and
  • US$15 million in cash.

Upon completion, Orezone will hold approximately 7.7% of the Company's issued share capital as so enlarged by the issue of the Consideration Shares.

The Consideration Shares issued to Orezone are subject to a minimum hold period of 4 months. Thereafter, any disposal of the Consideration Shares would be subject to orderly marketing arrangements for a period of two years from closing as set out in the Agreement. Orezone has indicated that it has no present intention to dispose of any of the Consideration Shares.

Subject to completion of the Acquisition, in addition to the Acquisition consideration, Cluff Gold will be responsible for the costs of the 10,000m drilling programme currently ongoing at Sega, budgeted at approximately US$800,000.

Completion

Completion of the Acquisition remains conditional upon the formal approval of the Government of Burkina Faso for the transfer of the Tiba and Namasa permits, together with standard closing conditions for a transaction of this nature, including there being no material adverse change in relation to Sega.

Funding

The cash component of the Acquisition consideration is to be funded from the Company's existing cash resources, which as at 31 December 2011 amounted to US$28.9 million.

About Kalsaka

The existing heap leach operation at the Kalsaka project represents an important cash generative asset for the Company, producing 71,505oz at an average head grade of 1.45 g/t in 2011 and with guidance for production of 60 - 70,000oz in 2012.

As at 31 December 2010 Kalsaka had estimated proven and probable oxide and transitional reserves of 186,000oz (1.5Mt at 1.8g/t of proven reserves, and 1.9Mt at 1.6g/t of probable reserves). Inclusive of the mineral reserves as at that date, it hosted oxide and transitional resources of 135,000oz (2.3Mt at 1.7 g/t) in the measured category, 267,000oz (4.5Mt at 1.5g/t) in the indicated category, with a further 44,000oz of inferred resources (1.0Mt at 1.3 g/t).(iii)

An aggressive exploration campaign is ongoing at Kalsaka with the primary aim of extending oxide mine life, which is delivering promising results. A total of 36,546m of RAB and 39,859m of RC drilling was completed in 2011, and a further programme of 88,000m of RAB, RC and diamond drilling is planned for 2012 at Kalsaka and the Yako concession, located 25km to the South East of Kalsaka.

About Cluff Gold

Cluff Gold is a gold developer-producer with assets in West Africa. The Company generates significant cash flow through its Kalsaka gold mine in Burkina Faso, and is rapidly exploring the significant sulphide potential at its Yaoure project in Côte d'Ivoire. The Company remains focused on its objective of becoming a mid-tier producer through the development of its wholly-owned Baomahun project in Sierra Leone, which is expected to contribute an additional 135,000oz of gold per annum, with significant exploration potential along strike. With its experience of bringing new mines into production and a project pipeline spanning Burkina Faso, Côte d'Ivoire and Mali, the Company aims to further increase its production profile with its highly prospective exploration work across all assets.

Baomahun is Cluff Gold's defining development gold project in Sierra Leone. Definitive feasibility study work is progressing in the immediate resource area, where 2.1Moz of indicated resources (25.6Mt at 2.5g/t) and a further 0.9Moz of inferred resources (comprising 9.6Mt at 2.8g/t) have been delineated to date(iv). The current resource base is limited to only 1.5km of a total 12km strike length. Exploration drilling is on-going, targeting the 4km northerly strike extension of the current resource area.

(i) Mineral resources estimates effective as of January 11, 2010. Stated cut-off grade of 0.5g/t Au. Further details of Sega's mineral resources are contained in the technical report entitled: Technical Report on the Mineral Resource of the Sega Gold Project, dated January 11, 2010, filed by Orezone Gold Corporation and available on SEDAR. This technical report was reviewed by Peter Brown, a "Qualified Person" on behalf of Cluff Gold. To the best of Cluff Gold's knowledge, information and belief, there is no new material scientific or technical information that would make the disclosure of the mineral resources inaccurate or misleading.

(ii) As per Orezone's press release titled Orezone Confirms Positive Metallurgical Results for Sega Gold Deposit, dated 11 April 2011.

(iii) Further details of Kalsaka's mineral reserves and resources were previously disclosed in the Company's NI43-101 report Technical Review of Kalsaka Gold Mine, Burkina Faso, as prepared by SRK Consulting, dated October 2008 and available on SEDAR. Resource estimation has been subsequently updated for production and exploration changes in Cluff Gold's 2010 Annual Report.

(iv) See news release dated 5 September 2011 entitled "Cluff Gold: Significant Resource Increase at Baomahun".

This report includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation.

All statements other than statements of historical fact included in this report, including, without limitation, the positioning of the Company for future success, statements regarding exploration, drilling results, resource calculations and potential future production at Kalsaka and Sega, the completion of a PEA, the buyout of the NSR royalty, the completion of the Acquisition, and future capital plans and objectives of Cluff Gold, are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Cluff Gold's expectations include, among others, risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined as well as future price of gold. Although Cluff Gold has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Cluff Gold does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

Peter Brown is a "Qualified Person" within the definition of National Instrument 43-101 and has reviewed and approved the technical information contained within this announcement. Mr Brown (MIMMM) is Cluff Gold's Group Exploration Manager.

NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS PRESS RELEASE.

Contact Information

  • Cluff Gold plc
    Peter Spivey
    CEO
    +44 (0) 20 7340 9790

    Cluff Gold plc
    Pete Gardner
    Finance Director
    +44 (0) 20 7340 9790

    Cluff Gold plc
    Carrie Lun
    Investor Relations Manager
    +44 (0) 20 7340 9790

    GMP Securities Europe LLP
    David Wargo
    Financial Advisor to Cluff Gold
    +44 (0) 207 647 2800

    GMP Securities Europe LLP
    Richard Greenfield
    Financial Advisor to Cluff Gold
    +44 (0) 207 647 2800

    Pelham Bell Pottinger
    James Henderson
    Investor Relations (Global)
    +44 (0) 20 7861 3232

    Pelham Bell Pottinger
    Philippe Polman
    Investor Relations (Global)
    +44 (0) 20 7861 3232

    Collins Stewart Europe Limited
    John Prior
    Corporate Broking
    +44 (0)20 7523 8350

    Collins Stewart Europe Limited
    Adam Miller
    Corporate Broking
    +44 (0)20 7523 8350

    Collins Stewart Europe Limited
    Sebastian Jones
    Corporate Broking
    +44 (0)20 7523 8350

    Farm Street Communications Limited
    Simon Robinson
    Press Relations (U.K.)
    +44 (0) 7593 340 107