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FCR - Ferrum Crescent Limited - Abridged pre-listing statement
Ferrum Crescent Limited
(Previously Washington Resources Limited)
(Incorporated and registered in Australia and registered as an external
company in the Republic of South Africa)
(Registration number A.C.N. 097 532 137)
(External company registration number 2011/116305/10)
Share code on the ASX: FCR
Share code on AIM: FCR
Share code on the JSE: FCR ISIN: AU000000WRL8
("Ferrum Crescent" or "the company" or "the group")
ABRIDGED PRE-LISTING STATEMENT
Abridged pre-listing statement relating to the listing of Ferrum
Crescent on the JSE Limited ("JSE") with effect from the commencement of
business on Friday, 11 November 2011
This pre-listing statement is not an invitation to the general public to
subscribe for shares in Ferrum Crescent but is issued in compliance with
the JSE Listings Requirements for the purposes of providing information
to the public with regard to Ferrum Crescent.
The information in this abridged pre-listing statement has been
extracted from a full pre-listing statement ("the detailed pre-listing
statement") issued by Ferrum Crescent on Friday, 4 November 2011, copies
of which are available as set out in paragraph 13 below.
1 INTRODUCTION
Ferrum Crescent currently has a primary listing of its ordinary shares
on the Australian Stock Exchange ("ASX") and a secondary listing on the
AIM market operated by the London Stock Exchange ("AIM").
The JSE has granted the company a secondary listing of 298 691 705
shares, representing the entire issued ordinary share capital of Ferrum
Crescent, in the "Basic Materials - Basic Metals - Industrial Metals &
Iron - Iron & Steel" sector under the abbreviated name "Ferrum", share
code "FCR" and ISIN: AU000000WRL8, with effect from the commencement of
trading on the JSE on Friday, 11 November 2011.
2 BACKGROUND AND HISTORY
The company was incorporated in Australia in 2001 as Witkop Mining
Limited. It subsequently changed its name to Washington Resources
Limited and in November 2005 was admitted to the official list of the
ASX as a minerals exploration and development company, with a focus on
interests in several mineral exploration tenements in Western Australia
and the Northern Territory of Australia. In December 2009 the company
acquired Ferrum Metals Proprietary Limited ("Ferrum Metals") (formerly
Ferrum Crescent Limited) by way of a reverse takeover and changed its
name to Ferrum Crescent Limited. In November 2010, the company entered
into an agreement pursuant to which it disposed of its Australian
interests and the group`s focus is now on developing its iron ore
interests in southern Africa. In December 2010 the ordinary shares of
Ferrum Crescent were admitted to trading on AIM.
Through Ferrum Metals, the company has a controlling interest in
Turquoise Moon Trading 157 Proprietary Limited ("TMT"), a South African
company, which holds the prospecting rights over two separate areas of
iron ore mineralisation in South Africa; being the Moonlight deposit
("the Moonlight iron ore project") and the De Loskop prospect ("De
Loskop") in the Limpopo Province of South Africa.
The company owns an effective 81.4% of the Moonlight iron ore project,
through its direct 74% interest in TMT and its 28.46% interest in
Mkhombi Investments Proprietary Limited ("Mkhombi"). Mkhombi, which is
the company`s Black Economic Empowerment ("BEE") partner, acquired 26%
of TMT with effect from 23 December 2011 ("the BEE acquisition"). Mr
Kofi Morna, who is a director of Mkhombi is also a director of Ferrum
Crescent. Mkhombi is owned 60% by Mkhombi Amamato Proprietary Limited
("AmaMato"), 28.46% by Nelesco 684 Proprietary Limited ("Nelesco") and
11.54% by a trust representing local Limpopo communities impacted by the
Moonlight iron ore project.
As part of the BEE acquisition it is envisaged that the BEE
participation in the company will be restructured. This BEE
restructuring involves putting in place a BEE share exchange or "flip"
mechanism whereby AmaMato will be able, in the future, to exchange its
participation at the project level for new ordinary shares in the
company ("the BEE share exchange").
3 NATURE OF BUSINESS
TMT holds the prospecting rights over the Moonlight iron ore project and
De Loskop in the Limpopo Province of South Africa. Since April 2008, the
group has been developing and defining the resource potential of the
Moonlight iron ore project.
3.1 Project information
3.1.1 Tenements
The company`s focus is on the Moonlight iron ore project which is based
upon the development of the Moonlight deposit which is located 360km
north of Johannesburg and 150km northwest of Polokwane. An application
for a mining right pertaining to iron and manganese ore, nickel, marble
and limestone, over the Moonlight deposit, has been submitted, and the
application formally accepted by the Department of Mineral Resources
("DMR") on 25 June 2010. The DMR has indicated that it expects to
process the mining right application by the end of December 2011 for an
initial period of 30 years. The Moonlight mining right application
covers a combined area of approximately 53km2 across the following three
farms:
- Moonlight;
- Gouda Fontein 76LR, portions 2 and 3; and
- Julietta 112LR.
The De Loskop prospect is located approximately 50km north of Polokwane,
and the relevant prospecting right covers a combined area of
approximately 120km2 across the following farms:
- the farms Lekkerlach 206LS, Zandput 202LS, Van Wyks Put 201LS,
Westheim 191LS and Trieste 192 LS;
- remaining extent and portion 1 of the farm Soho 204LS;
- remaining extent of the farm and remaining extent of portions 1, 2 and
3, portions 4 to 8 of Meanderthal 188LS; and
- remaining extent and portions 1 and 2 of Persie 200LS.
3.2 Geological background
3.2.1 Moonlight deposit
The Moonlight deposit is situated within the Archaean Limpopo Mobile
Belt ("LMB"), which lies between the greenstone and granite terrains of
the Kaapvaal and Zimbabwe Cratons.
The LMB is subdivided into three domains, termed the Central Zone, the
Southern Marginal Zone, and the Northern Marginal Zone. The Moonlight
deposit is located in the Central Zone of the LMB, within which the
major rock types are gneiss, granulite, quartzite, marble, and
metamorphosed banded iron formation ("BIF") of the Beit Bridge Complex.
The iron mineralisation is within multiple BIF units of the Mount Dowe
Group.
Within the Moonlight farm the BIFs are present over an east-west
distance of 3km and a north-south distance of 2km. The BIF units vary
from a few metres to 40 metres in thickness.
3.2.2 De Loskop prospect
As with Moonlight, mineralisation at De Loskop is present within BIF
horizons. The BIFs are within the Zandrivierspoort Formation, which is
flanked by granitic gneisses and which contains BIFs, schists,
amphibolites, quartzites, and calc-silicate rocks.
4 SUMMARY OF EXPLORATION WORK DONE BY ISCOR
Exploration at Moonlight commenced in 1981, when the integrated steel
manufacturer, ISCOR (now part of ArcelorMittal South Africa Limited),
evaluated the economic potential of a number of relatively low-grade,
but favourably located, iron ore deposits.
Between 1983 and 1986, ISCOR drilled 244 holes on the Moonlight farm in
the vicinity of the mineralisation, for a total of 12 154m of diamond
core drilling and 9 951m of percussion drilling. Analyses of magnetic
concentrates of mineralisation and intersections from this drilling,
confirmed at a grade of 20% Fe or higher.
Beneficiation testwork carried out by ISCOR indicated that a simple
process of low intensity magnetic separation is suitable for optimum
concentration.
ISCOR undertook several estimates of the tonnes and grade of the in situ
mineralisation, which were not at that stage reported in accordance with
the JORC Code.
In 1993, ISCOR`s exploration focus shifted to evaluate mineralisation on
the farms Julietta and Gouda Fontein adjacent to the Moonlight section
of the project. From 1993 to 1997, some 80 diamond core holes for 14
500m were completed and additional mineralisation intersected and added
to ISCOR`s resource inventory.
5 SUMMARY OF EXPLORATION WORK DONE BY THE GROUP
The group has to date incurred in excess of A$3.0 million in exploration
costs which has enabled it to significantly advance its technical
knowledge of the Moonlight iron ore project.
During 2008, the group drilled 20 vertical reverse circulation holes on
the Moonlight farm for a total of 2 087 metres. The group`s drilling
programme verified the tenor, position and width of significant
intersections of both partially oxidised and fresh BIF mineralisation
reported by ISCOR. A comparison of all of the intersections, gave a
total of 657m at a grade of 33.2% Fe in the 20 holes drilled by the
group.
During December 2009 and January 2010, the group carried out a second
reverse circulation drill program of 66 vertical holes for a total of 3
748m. The programme was designed to infill-drill areas of near surface
mineralisation at sufficient density to enable the estimation of an
indicated resource that would form the basis for the initial 20 to 25
years of mining at the project and confirmed both the continuity and the
tenor of the mineralisation.
In addition to the work to date in relation to the Moonlight deposit, in
the 1990s ISCOR drilled outcrops in the Zandrivierspoort Formation on Mt
De Loskop which lies to the east of the De Loskop prospect and reported
an in situ grade of 37.8% Fe for the mineralisation in the vicinity of
Mt De Loskop. This formation also hosts Kumba Iron Ore Limited`s
("Kumba") Zandrivierspoort iron ore deposit about 35km to the southeast,
which contains an indicated resource of 447Mt at a grade of 34.9% Fe. As
a result, the competent persons estimate an exploration target at the De
Loskop prospect with a range of 200Mt to 1 000Mt at a grade of between
30% Fe and 40% Fe.
5.1 JORC resources
Continental Resource Management Pty Limited ("CRM") completed a resource
estimate for the Moonlight deposit in April 2010 (which it reconfirmed
on 26 October 2010), reported in accordance with the 2004 edition of the
JORC Code.
The magnetite grains within the BIF are partly altered to hematite
within the oxidised zone and CRM has therefore reported the resource in
two classifications, an upper Oxidised Zone and a lower Fresh Zone.
Resource Zone and Classification Tonnes Grade
(kt) (Fe%)
Indicated
Oxidised 34,000 30
Fresh 40,000 35
Total Indicated 74,000 33
Inferred
Oxidised 45,000 30
Fresh 180,000 29
Total Inferred 225,000 29
Total Oxidised 79,000 30
Total Fresh 220,000 30
Total Resources 300,000 30
Note: Totals may differ from sum of individual items due to rounding.
Source: The table is extracted from table 4.1 of the competent persons`
report ("CPR") in Annexure 1 of the detailed pre-listing statement.
For the upgrading of the resource classifications from Inferred to
Indicated Resource and from Indicated to Measured Resource, further
infill drilling will be required. CRM is of the opinion that, for the
Indicated Resource to be converted to a probable ore reserve, systematic
metallurgical test work will need to be carried out on a full range of
samples of mineralisation, in order that recoveries of Fe to concentrate
can be quantified for the relevant portions of the deposit.
6 STRATEGY
The company intends to develop its evaluation of the Moonlight iron ore
project, in order to advance towards commercial production. This will
involve carrying out a definitive feasibility study, which was commenced
in January 2011.
The planned programme, which is to be financed and implemented in
discrete stages extending into 2012, will include the following:
- work aimed at increasing the confidence and size of the current JORC
compliant resource estimate;
- carrying out studies to determine the final product form and/or
secondary beneficiation process;
- conducting more metallurgical testwork;
- finalising a social and labour plan;
- finalising environmental studies in respect of the project and its
activities;
- endeavouring to establish alliances to secure technology supply
agreements;
- finalising processing plant design and location, including plans for
a slurry pipeline;
- identifying and preparing for all necessary permitting for the
project; and
- identifying sources of finance for the project.
6.1 Key strengths
The company believes that its key strengths detailed below form a strong
basis for the company to achieve its targets as well as enhance its
market position:
6.1.1 Magnetite resource with large upside potential
More detailed drilling at the Moonlight deposit and exploration work at
the De Loskop prospect is expected to increase the group`s iron ore
resource. The competent persons responsible for the CPR included in the
detailed pre-listing statement, believe that the De Loskop prospect
represents an exploration target of 200Mt to 1 000Mt at a grade of
between 30% Fe and 40% Fe.
6.1.2 Oxidised Zone at surface with a low strip ratio
The oxide mineralisation, which is close to the surface, represents a
potentially low stripping ratio target with consequential mining cost
benefits. A mine pit optimisation based on utilising the Oxidised Zone
indicated an average strip ratio of 1:1 and a mining rate of 4.3Mt/pa
for 24 years of mine production and also uses the entire Oxidised Zone`s
Inferred and Indicated Resource.
6.1.3 Favourable metallurgical characteristics
Based upon the analyses of magnetic concentrates of mineralisation
recovered from Moonlight by ISCOR the directors believe the Moonlight
Iron Ore Project to be capable of producing magnetite with a high Fe
content, low phosphorous content and low residuals.
6.1.4 Ability to yield a premium quality concentrate
As indicated in the CPR, further test work will need to be undertaken to
optimise the beneficiation process and to enable the company to
understand the variability of the ore within the deposit.
6.1.5 Support of stakeholders
The company enjoys good working relationships with the South African
Government, landholders, BEE partners and neighbouring communities.
These relationships have been developed as a result of the company`s
firm commitment to excellence in its social and environmental
performance. This support lays solid foundations for the group to grow
in South Africa. The community that is impacted most by proposed mining
activities at Moonlight has an ownership stake in the project through
its shareholding in Mkhombi.
6.1.6 Strong management
The board and the company`s management team have, in aggregate, more
than 280 years of mining and/or iron-making experience, having managed
and operated development stage and production stage mining and
processing operations, with in-depth knowledge of South Africa and the
iron ore market.
7 OVERVIEW AND PROSPECTS OF THE IRON ORE MARKET
7.1 Overview of the iron ore
Approximately 98% of all iron ore mined is used in the production of
steel. The mining of iron ore globally is highly capital intensive, and
requires significant investment in infrastructure such as rail in order
to transport ore from the mines to industry. The main constraints are
the position of the iron ore mines relative to market, the cost of rail
infrastructure to get the product to market and the energy cost required
to do so, rather than the grade or size of the deposits. For these
reasons, iron ore production is concentrated in the hands of a few major
players.
World production averages approximately two billion metric tons of raw
ore annually. The world`s largest producer of iron ore is the Brazilian
mining corporation Vale S.A., followed by Anglo-Australian companies,
BHP Billiton plc and Rio Tinto Group. A further Australian supplier,
Fortescue Metals Group Ltd has helped bring Australia`s production to
second in the world, behind Brazil.
7.2 Iron ore qualities
Pure iron is denominated as Fe on the periodic table and metal compounds
containing iron are known as ferrous metals. These metals are magnetic
in nature, which differentiates them from non-ferrous metals, they have
a high tensile strength and they are prone to oxidation, which can be
seen as a reddish brown deposit on the surface.
Iron ore refers to rocks and minerals from which metallic iron can be
economically extracted. The ores are usually rich in iron oxides and
vary in color from dark grey, bright yellow, deep purple, to rusty red.
The iron itself is usually found in the form of magnetite, hematite,
goethite, limonite or siderite. Currently most of the iron ore mined in
the world comes from large deposits of hematite rock which are most
commonly found in banded iron formation.
There are three basic types of commercial iron ore: 70%-80% of iron ore
produced globally is fine powdered iron ore ("fines"), and the remainder
is comprised of lump or pellets. Lump and pellets are known as "direct
charge" materials, which means that they can be poured directly into a
blast furnace with no further processing and they therefore trade at a
premium to fines. Pellets are more costly to produce, however, the
availability and quality of lump ore is declining worldwide and the
market for pellets is therefore likely to become stronger to compensate.
World pellet production rose by 32% in 2010 to 388.1Mt from the 295.7Mt
produced in 2009, a new record level.
High-grade ore refers to ore which contains more than 60% Fe. Low-grade
ore is a term applied to iron-rich rocks with cut-off grades in the
range of 25-30% Fe. The dominant iron mineral in low-grade economically
mineable ore is magnetite.
7.3 Iron ore in South Africa
South Africa is the seventh largest producer of iron ore in the world.
The six largest producers ahead of South Africa, in order, are Brazil,
Australia, China, India, Russia and the Ukraine.
The South African mining company, Kumba, is the largest producer of iron
ore in Africa. It was spun off from previously state owned ISCOR, the
largest South African steel producer, in November 2001. Kumba owns two
iron ore mines, Sishen and Thabazimbi; together these two mines account
for 76.3% of the country`s total production. Sishen, having produced
41.3Mt of iron ore in 2010 is by far the largest iron ore mine in
Africa.
8 RATIONALE FOR LISTING
The main purposes of the listing are to:
- facilitate the BEE share exchange and the investment by BEE
shareholders at a listed company level;
- provide Ferrum Crescent with an additional source from which permanent
capital can be obtained, if required, to fund the company`s expansion
programme and working capital requirements and to facilitate future
growth;
- enhance South African investor and general public awareness of the
group and its activities, thereby enlarging Ferrum Crescent`s investor
base and increasing trade in its shares;
- have the flexibility of JSE listed shares in order to allow Ferrum
Crescent to take advantage of potential South African and African
acquisition opportunities; and
- facilitate direct investment by South African residents in Ferrum
Crescent.
9 DETAILS OF DIRECTORS
Details of the directors of Ferrum Crescent and its subsidiaries are set
out below:
Full name, age Business address Designation
and nationality Ferrum Crescent -
Edward Francis Unit 2, Level 1 executive chairman
Gerrard Nealon Churchill Court
(61) 331 - 335 Hay Street
Australian Subiaco WA 6008
Australia
Robert Hair (58) Unit 2, Level 1 Ferrum Crescent -
Australian Churchill Court managing director,
331 - 335 Hay Street Ferrum Metals,
Subiaco WA 6008 Batavia, Nelesco,
Australia TMT - director
Kofi Morna (53) 24 Crescent Drive Ferrum Crescent -
South African Melrose Arch non-executive
Melrose, 2196 director
South Africa
Theodore Carl 14 Judy Crescent Ferrum Crescent -
Droste (70) Morningside Manor independent non -
South African Sandton, 2191 executive director
South Africa
Klaus Borowski 11 Serino Terrace Ferrum Crescent -
(71) Hueveld Road independent non-
German Somerset West, 7130 executive director
South Africa
Grant Michael 22 Coral Tree Avenue, Ferrum Crescent -
Button (49) Subiaco WA 6008 finance director
Australian Australia
Kevin Scott Palazzo Towers West Batavia, Nelesco,
Huntly (49) Montecasino Boulevard TMT - executive
South African Fourways, 2055 director
South Africa
Ayanda Laura 24 Crescent Drive TMT - non-
Ngubane (31) Melrose Arch executive director
South African Melrose, 2196
South Africa
10 MAJOR SHAREHOLDERS
The current major shareholders of Ferrum Crescent are as follows:
Name Number of Number of Percentage
shares shares shareholding
directly indirectly in Ferrum
beneficially beneficially Crescent
held held
National Nominees 24 527 954 - 8.2
Limited
Goldman Sachs 21 101 341 - 7.1
Securities
(Nominees) Ltd
45 629 295 15.30
11 SHARE CAPITAL
Ferrum Crescent`s authorised and issued share capital at the date of
listing will be as follows:
A$
Authorised
Unlimited number of ordinary shares with no
par value
Issued
298 691 705 ordinary shares with no par
value 27 392 728
12 DIVIDENDS AND DIVIDEND POLICY
The board anticipates that, following the JSE listing, the group`s cash
resources will be used for investment in the development of the group`s
assets and will not be available for distribution until such time as the
directors consider it has an appropriate level of distributable profits.
The declaration and payment by the company of any dividends and the
amount thereof will depend on the results of the group`s operations, its
financial position, anticipated cash requirements, prospects, profits
available for distribution, and other factors deemed to be relevant at
the time.
13 COPIES OF THE PRE-LISTING STATEMENT
Copies of the detailed pre-listing statement will be available for
inspection during business hours from Friday, 4 November 2011 until
Friday, 18 November 2011 from:
- Ferrum Crescent`s registered office in South Africa, Palazzo Towers
West, Montecasino Boulevard, Fourways, Sandton; and
- Ferrum Crescent`s corporate advisor`s offices, Sasfin Capital, a
division of Sasfin Bank Limited, 29 Scott Street, Waverley.
Corporate advisor and sponsor
Sasfin Capital
A division of Sasfin Bank Limited
Attorneys
Falcon & Hume Inc
Australian auditors
Ernst & Young Incorporated
Competent persons
ProMet Engineers Pty Ltd
Competent persons
Continental Resource Management Pty Ltd
Johannesburg
4 November 2011
Date: 04/11/2011 12:41:01 Supplied by www.sharenet.co.za
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