3 June 1998Report to all Shareholders
I am pleased to advise you that the outstanding litigation concerning the Parys Mountain property at Anglesey has been settled on very satisfactory terms. This litigation has occupied a disproportionate amount of management time over the past two years and the settlement has removed a cloud that was hanging over the company.
In the meantime we have been continuing with the exploration and drilling programme at our Parys Mountain project. Drilling started last October and the first three holes of a planned first phase five or six hole drilling programme have been completed. Although the drill holes did not hit economic mineralisation, the drilling results are encouraging and we continue to be optimistic. All of the ongoing exploration and geological work at Parys Mountain continue to indicate there is potential for the discovery of substantial additional resources on the property.
The company had been sued in the Canadian courts in early 1996 by Intermine Limited, a holder of a royalty interest in the property, alleging breach of contract and claiming title to the Parys Mountain property or damages of Canadian $96 million. Under an agreement entered into in 1984 Intermine was entitled, together with Parys Mountain Mines Limited, to a royalty of 15% of net profits on production from the Parys Mountain mine and Anglesey had the right to purchase one half of that royalty. Anglesey acquired Parys Mountain Mines Limited in September 1997.
Under a settlement agreement, Anglesey will acquire from Intermine and Parys Mountain Mines Limited, their rights and claims to the old 15% royalty and will issue to Intermine 1.5 million new ordinary shares.
Under a further new agreement Intermine will be entitled to a royalty of 4% of net profits from the operation of the Parys Mountain mine. Anglesey will have the option of buying out this royalty, initially for a price of Canadian $1 million, increasing to Canadian $2 million after five years or, if purchased after Anglesey has committed to put the mine into production, for the net present value of the royalty. Unless the royalty is bought out, Anglesey will make annual payments to Intermine of Canadian $50,000 per annum (approximately £22,000) until the mine is in production.
This is a fair settlement for both parties. Anglesey has reduced the net profits royalty to 4% and has the option to buy it back at anytime. Intermine becomes a shareholder in Anglesey and will participate in the future fortunes of the company both as a shareholder and by means of a reduced royalty interest in the Parys Mountain mine.
Settlement of the litigation on very satisfactory terms has removed a cloud that was lying over Anglesey. We are pleased to be able to put the litigation behind us. Now we can once again focus our efforts on the development of the property.
INTERIM PROGRESS REPORT ON EXPLORATION
The company is currently carrying out an exploration and drilling programme at its Parys Mountain project in Wales with the objective of increasing the overall geological resource base at the property. This programme is designed to explore the potential for additional zones of massive sulphide mineralisation in the area to the east of the known Engine zone (the Engine zone was defined during the 1990-91 underground development programme) and east of the existing Morris shaft.
The target areas are referred to as the South Central zone and the North Central zone. Their location has been indicated by various mineral intersections obtained in a number of widely spaced holes drilled during earlier exploration programmes. The first part of the new exploration programme has focussed on only the near surface portion of the South Central zone.
If these zones prove to be economically viable, they could be worked in conjunction with the Engine zone using the existing Morris shaft and thus would provide the additional underground working areas that would justify and support a larger operation and higher production rate than the 1,000 tonne per day (350,000 tonnes per year) indicated by the Feasibility Study completed in 1991, perhaps as high as 2,000 tonnes per day (700,000 tonnes per year) with the consequent improvement in viability and profitability.
Three widely spaced vertical holes totalling 1,020 metres were drilled to explore the near surface portion of the South Central zone. These holes did not intersect the projected mineralised lenses but geochemical sampling and analysis of detailed core logs and geophysical surveys of all three holes have confirmed the anticipated geological setting and structure. The restricted dimensions of the lenses present small drill targets which are difficult to hit with wide spaced drilling particularly considering the large size of the target area. The potential for massive sulphide lenses remains and further closely spaced drilling in this area is warranted.
Hole AMC 11, located about 500 metres east of the shaft, was drilled to a depth of 207 metres where it intersected the target horizon but it is now believed the hole was drilled too far to the east of the zone.
Hole AMC 12 was drilled about 300 metres northeast of AMC 11. This hole proved very difficult to drill and reached the target horizon at a depth of 450 metres. The zone at this horizon consisted of a succession of intensely altered felsic volcanics and mudstones containing small amounts of galena and sphalerite. Lithogeochemical analysis of core samples taken from this hole shows a strong zinc alteration at the target horizon. The hole was subsequently tested by a downhole electromagnetic geophysical survey which showed a strong off hole response at the target horizon. This has been interpreted to indicate a conductor within 50 metres of the hole. The results of this hole are particularly encouraging and indicate that the zone is present at the anticipated horizon and the low grade mineralisation, together with geophysical results, indicate that a larger ore body may be close by.
Hole AMC 13 was drilled 170m west of AMC 11 and intersected the succession at the target horizon. It was not possible to complete a planned geophysical survey of this hole as the hole became blocked at deeper levels, although weak geophysical conductors were identified higher in the hole.
The results of all three holes have been subjected to lithogeochemical sampling, downhole geophysical surveys and detailed geological interpretation. The results support the new geological interpretation developed by Anglesey last year and continue to demonstrate the potential of locating mineralised lenses in the near surface portion of the South Central zone. Much more drilling is required in this area.
It should be noted that the three holes were drilled in the near surface portion of the South Central zone only. None of the holes were drilled in the deeper portion of the South Central zone or in the North Central zone. These two areas will be tested by further drilling in the next phase of the programme. The fourth hole AMC 14, is being drilled 250 metres north of AMC 12 and is planned to reach a target depth of over 600 metres.
Geological Studies and New Technology
Whilst the diamond drilling programme has been under way, lithogeochemical surveys and geological studies have been continuing. These studies are providing a stratigraphic and structural framework for the many zones of both massive and disseminated sulphide mineralisation which are known to exist on the property and a much more informed assessment of the overall potential of the Parys Mountain volcanic succession. This succession has now been demonstrated to extend over a strike length of 3.5 kilometres. It is estimated that only one third of this area has been tested by drilling and much of this in widely spaced holes.
Meanwhile a joint project was carried out by Anglesey in conjunction with the British Geological Survey and KRJA Systems Ltd. using an innovative mineral exploration methodology based on a newly developed scientific instrument, the PIMA (portable infrared mineral analyser). The results of the PIMA analysis will be integrated with other data within a state of the art three dimensional modelling system (VULCAN) to assist in identifying economic and mineral resources at Parys Mountain.
The PIMA is a portable hand held spectrometer developed recently for mineral exploration purposes. Attached to sophisticated software it is capable of providing important mineralogical information which can assist in determining proximity to mineralisation.
VULCAN is an advanced 3 D computer software modelling and visualisation package which can analyse a variety of spatial, analytical, geological and environmental data sets. These can be manipulated and integrated to produce new models to aid mineral exploration decisions and economic mine planning. All of the historical assay results together with the more recent lithogeochemical sampling results from Parys Mountain have now been input to VULCAN.
The PIMA was successful in detecting distinctive mineral assemblages related to lithology and formed by the alteration of the host rocks during interaction with mineralising fluids at Parys Mountain. This has enabled the drill holes to be coded according to their alteration mineral assemblages, and the resulting alteration pattern to be integrated with geological and geochemical data prior to modelling with VULCAN. The VULCAN modelling shows the clear potential of the methodology and the results are helping to provide new insights for understanding the metallogenesis. This in turn will assist in the delineation of additional targets and ore reserves at Parys Mountain.
It is becoming increasingly clear that the Parys Mountain property requires and justifies a major drilling programme and that the potential is very significant. Subject to available funding, the company has planned a detailed drilling programme comprising a minimum 10,000 metres in at least 10 to 15 holes to be drilled over the coming year.
Financing for the second phase of about 1,000 metres of drilling in two or three holes has been arranged and this will take the programme through the summer months. Further financing will be required to continue the planned programme at the end of that period.
The company has concluded a new financing agreement with Juno Limited, the companys major shareholder which holds 50% of the companys share capital. Under this agreement, which replaces a previous working capital agreement signed in September 1996, Juno will provide up to an additional £200,000 for current liabilities and the companys continuing programmes at Parys Mountain. In addition indebtedness under the existing working capital agreement of £150,000 will be carried forward as part of the new facility.
The loans of up to £350,000 from Juno are denominated in sterling, unsecured, carry interest at 10% and are repayable from any future financing undertaken by the company. Drawdown of the new portion of the facility is scheduled over the period to 31 July 1999.
In accordance with the companys Controlling Shareholder Agreement with Juno the terms of the facility were approved by an independent committee of the board.
I look forward to reporting further progress in the coming months.
John F. Kearney
Contacts : Ian Cuthbertson John F. Kearney Company Secretary Chairman (44)1248 361333 (1)416 362 6686
|Anglesey Mining plc
Parys Mountain, Amlwch,
Anglesey, LL68 9RE, UK
|Phone +44 1248 361333