Full Year Statutory Accounts
Brisbane, Sep 30, 2016 AEST (ABN Newswire) - Sayona Mining Ltd (
ASX:SYA) (DMNXF:OTCMKTS) Directors present their report on the consolidated entity (group) consisting of Sayona Mining Limited and its controlled entities for the financial year to 30 June 2016. The information in the following operating and financial review and the remuneration report forms part of this directors' report for the financial year ended on 30 June 2016 and is to be read in conjunction with the following information.
PRINCIPAL ACTIVITY
The consolidated group's principal activity during the financial year has been the identification, acquisition and evaluation of mineral exploration assets, focusing on lithium and graphite. During the period the Company undertook exploration activity on a number of projects.
There were no significant changes in these activities during the financial year.
BUSINESS MODEL AND OBJECTIVES
The Company's primary objective is to provide shareholders with satisfactory returns.
This is to be achieved through implementation of the Company's business model of identifying, evaluating and developing its portfolio of exploration assets.
Operating Results
The entity's consolidated operating loss for the financial year after applicable income tax was $2,511,415 (2015: $566,530). Exploration and evaluation expenditure during the year totalled $2,712,521 (2015: $310,394).
Review of Operations
During the year, the Company focused on sourcing and developing projects capable of supplying the raw materials required to construct lithium-ion batteries for use in the rapidly growing new and green technology sectors.
This has entailed:
- the strategic entry into the large flake graphite market by securing a large ground position in the East Kimberley region of Western Australia, together with the Itabela Graphite project in Brazil;
- securing a package of lithium prospective exploration tenements in Western Australia; and
- the acquisition of the Authier lithium project in Canada.
The market for large and jumbo flake graphite is highly concentrated and potential synthetic graphite substitutes are comparatively very expensive to produce. Both the US and EU Governments have classified graphite as a "critical material" for industrial and national security purposes.
Lithium is a high-value product which is anticipated to be in tight supply as the demand for lithium-ion batteries continues to experience transformational growth due to use in the new green technology sectors.
East Kimberley, Western Australia
The Kimberley region is a proven province for high purity, large flake graphite.
The project area is located within the East Kimberley region of Western Australia, 240 kilometres south of Wyndham Port and 220 kilometres south-south-west of the regional centre, Kununurra.
The project includes one granted tenement and three separate tenement applications, subject to two option-topurchase agreements. The project covers 278 km2 and has not previously been explored for its graphite potential.
Terms of the two option-to-purchase agreements, include:
- Attgold Pty Ltd ("Attgold") - Sayona paid Attgold $5,000 on signing and a further $30,000 on 4 August 2015. Sayona is required to issue shares to the value of $170,000 to acquire a 100% interest in tenement E80/4949 and other tenement applications. Sayona issued shares to the value of $50,000 on 7 September 2016 and is required to issue shares to the value of $120,000 in January 2017.
- Western Iron Pty Ltd ("Western Iron") - Sayona paid Western Iron $5,000 on signing and $200,000 in January 2016 to exercise its option to acquire 100% of the graphite interests in tenement E80/4511.
Western Iron retains a 1% gross production royalty. Western Iron also retains a back-in right to the nickel, copper and iron mineralisation by the payment of $100,000 by January 2017.
During the year, the Company drilled 33 reverse circulation holes totalling 2,949 metres in six prospect areas within the Corkwood tenements. Every hole intersected visual flake graphite mineralisation, with significant zones of over 50 metre downhole widths in several holes, including an intercept of 64 metres. Some holes also intercepted multiple horizons of graphite mineralization.
The drilling program identified graphite mineralization over 7 kilometres within the 25 kilometre strike extent of the Corkwood geochemical and geophysical anomaly.
Highlights from the drilling program, included:
- Delineation of broad zones of shallow flake graphite mineralisation, including;
-- 16m @ 5.03% Total Graphitic Carbon (TGC) from 13m in SKRC006, Windrush,
-- 22m @ 3.8% TGC from 9m in SKRC008, Windrush,
-- 36m @ 3.39% TGC from 7m in SKRC015, Snowbird,
-- 54m @ 3.05% TGC from14m in SKRC016, Snowbird,
-- 109m @ 1.84% TGC from 22m in SKRC017, Flying Ant,
- Mineralisation is open at depth and along strike;
- Assays up to 12.2% TGC;
- Mineralisation from surface, with shallow dip and good geometry, characteristics amenable to low cost open-cut mining; and
- Visible coarse graphite - graphite study underway to help characterise the quality of the mineralisation.
Petrographic study has been undertaken on drill material from the Snowbird, Windrush and Firefly prospects.
Rock fragments, sieved from the drill cuttings were examined as well as the finer powdered rock which comprises the bulk of the drill sample.
The RC drilling method has resulted in many of the graphite flakes being broken into smaller pieces and diamond drilling will be required to finalise the actual flake size distribution. Observations give encouragement that the project is host to high value coarse flake graphite. Diamond drilling is being planned to gain metallurgical information and to provide graphite concentrate for off take evaluation.
The Company has also completed flotation test work on both surface and RC chip samples. The best flotation results were achieved in surface rocks from the Snowbird prospect, where a floatation concentrate grade of 96.2% TGC was achieved, with 43% above 180 mesh size. The metallurgical results provide encouragement that the Corkwood coarse flake graphite can deliver a high purity graphite concentrate using simple flotation technology.
Itabela, Brazil
In August 2015, the Company signed an option-to-purchase contract with Brasil Grafite S.A. ("Brasil Grafite") for the advanced Itabela graphite project in Brazil.
Brasil Grafite is a privately owned Brazilian exploration and development company which owns 100% of the Itabela graphite project, comprising 13 exploration permits with a total area of 13,316 hectares. Sayona has signed a four-month, exclusive binding term sheet to acquire the Itabela project.
During the initial option period, the Company's due diligence activities confirmed the potential for Itabela to be established as a near-term, globally competitive, low capital and operating cost development opportunity.
However, the Company concluded that further drilling was required to validate historical drilling data to complete a resource estimate and scoping study.
The Company subsequently agreed to amend the option-to-purchase terms with Brasil Graphite on 30 November 2015. The new agreement extended the option period to 30 June 2016 and provided for an exercise payment of US$1.5 million on exercise of the option and further payments based on delineating JORC resources. The new agreement provided a closer alignment of resource definition success with the future payment schedules.
Following an extensive exploration program in early 2016, drilling was unable to define a resource of sufficient scale to meet the Company's financial return objectives. Coupled with the moderation in graphite concentrate prices, the Company was not able to negotiate suitable new contractual terms to justify extending the purchase option. The Company withdrew from the project after spending A$1,055,123.
Western Australian Lithium Projects
During the second half of the year, the Company secured a package of lithium prospective exploration tenements in Western Australia. The projects have excellent regional infrastructure, and are close to the Asian markets for downstream processing and battery manufacturing.
Western Australia is a premium lithium province with world-class, high-grade lithium deposits associated with rare metal pegmatites. The Company has secured two regional project areas covering a total 1,065 square kilometres as part of its strategic move into lithium exploration.
Pilbara Lithium Project, Pilgangoora district
The project areas host tantalum mineralisation within complex rare metal pegmatites. This class of fractionated pegmatite includes prospective lithium-cesium-tantalum ("LCT") pegmatites, and especially albite-spodumene pegmatites, the target for the Company's high grade lithium exploration strategy.
The projects have had little or no past lithium focussed exploration and the Company is encouraged that its initial reconnaissance work has been positive, identifying lithium minerals and geochemistry indicative of fractionated rare metal pegmatites.
Tabba Tabba Area - E45/2364 (pegmatite rights only) and ELA45/4703.
The Tabba Tabba project, located north of Pilgangoora is prospective for spodumene bearing pegmatites, similar to those located at Pilgangoora and Mount Cassiterite at Wodgina.
Sayona has focused its exploration over granted E45/2364, where it has an option to acquire 100% of the pegmatite rights. The tenement covers a 10 km strike extent of the greenstone stratigraphy to the south of the Tabba Tabba tantalum mine and has not been explored for its lithium potential in the past.
Within E45/2364 and adjoining ELA45/4703 the Company has carried out geochemical orientation with collection of a total 69 pegmatite rock samples, 88 soil samples and 11 stream samples.
Results define three new zones of anomalous pegmatites within greenstone, (maximum 357ppm tantalum, 428ppm cesium and 3,000ppm rubidium). The peak lithium value in sampling is 387ppm Li2O. The Company is encouraged by the discovery of previously unidentified target rare metal pegmatites within the project area.
A second trend of pegmatites and geochemical anomalism, marginal to granite along the Tabba Tabba shear, has also been noted by explorers to the south west and remains to be systematically sampled. Historic stream sampling in this area recorded up to 5,000ppm tantalum and 1,700ppm tin.
A large number of target areas have been identified for systematic follow up exploration.
Red Rock Area - ELA45/4716, ELA45/4775
The Red rock project (415km2), is located to the east of Tabba Tabba and covers the northern extension of the Pilgangoora belt, securing the Red Rock pegmatite as well as greenstone remnants and old dredging claim areas, indicative of past tin-tantalum prospecting.
A new application ELA45/4775 was made following processing of magnetic and radiometric data. This work suggests remnant greenstone lithologies adjacent to a favourable granite contact may host lithium prospective pegmatites. The bedrock geology is obscured over much of the application area. The Company intends applying its developing exploration methodology to identify those areas of highest prospectivity.
Cooglegong Area - (ELA45/4738)
The Cooglegong project is a new application for the quarter. It covers 140 km2 of the northern part of the Shaw River tin field, an area of historic tin mining. The area is host to albite pegmatites associated with younger, post tectonic granite with lithium potential.
First pass geological traversing and broad spaced sampling (75 pegmatite samples collected) has identified a large number of pegmatites. Assay results define three areas of elevated Ta-Rb-Cs-Nb, indicative of more fractionated, rare metal pegmatite. The maximum lithium result of 166ppm Li2O is also elevated. Further reconnaissance and detailed sampling over the three target areas is planned.
Wodgina Area - (Friendly Creek, ELA47/3475 and West Wodgina ELA45/4726)
The project areas at Friendly Creek (ELA47/3475) and West Wodgina (ELA45/4726) cover 339km2, and secure areas of past tin and tantalum prospecting activity. The bedrock rare metal pegmatite hosts have not been subject to modern exploration or assessment for their lithium potential. The project areas show similarities with the tin pegmatites at Mt Cassiterite in the Wodgina field which host spodumene bearing albite pegmatites, the Company's target exploration focus.
Mount Edon Project
Mount Edon covers the southern portion of the Paynes Find greenstone belt, South Murchison, which are host to an extensive swarm of pegmatites. The pegmatites have not previously been assessed for their lithium potential but have been variably prospected and mined for tantalum, mainly within an excised mining lease.
The Mt Edon pegmatites range from simple microcline feldspar dominated occurrences to evolved rare metal albite types, mineralised with tantalum niobium and lithium. The Company is exploring the project for its potential to host the albite - spodumene class of rare metal pegmatite, similar to other greenstone hosted occurrences in the Yilgarn.
Pegmatites range from five metres to over 100 metres in surface width, arranged in swarms of up to 1 kilometre in strike extent. The pegmatites have variable outcrop and are in part obscured by colluvium.
Over 70 pegmatites have been identified during reconnaissance mapping, spread out over a 4km zone. Others are present further to the north and west but outcrop in these areas is poor and these systems are poorly defined at present.
A total of 95 pegmatite rock samples have been collected during reconnaissance work and have returned a peak assay of 1.57% Li2O. The pegmatites also contain anomalous tantalum, rubidium and cesium, indicative of rare metal pegmatites. Other anomalous lithium results nearby define a 400metre wide package of pegmatites which is a high priority target.
Rubidium assays to 2.6% Rb have been returned in association with lithium and cesium. Since rubidium is radiogenic, high-quality airborne radiometrics data has been reprocessed to help identify minerals with rubidium that occur in association with lithium mineralisation. This data is being used as a low-cost exploration methodology to cover the large project area, but is only effective in areas of outcrop.
Authier Lithium Project - Canada
In May 2016 the Company announced it had entered into a binding term sheet to acquire 100 per cent of the Authier lithium deposit in Quebec, subject to completion of a 60-day due diligence, Canada. The Company subsequently arranged a three week extension for completion of the acquisition to 21 July 2016 to allow the vendor to satisfy Canadian regulatory requirements.
The project area comprises 19 mineral claims totalling 653 hectares, and extends 3.4 kilometres in an east-west, and 3.1 kilometres in a north-south direction, respectively. It is situated 45 kilometres northwest of the city of Val d'Or, a major mining service centre in the, Province of Quebec. The project is easily accessed by a rural road network connecting to a national highway a few kilometres east of the project site.
The deposit is hosted in a spodumene-bearing pegmatite intrusion. The deposit is 825 metres long, striking eastwest, with an average thickness of 25 metres, minimum 4 metres and maximum 55 metres, dipping at 40 degrees to the north. The deposit is modelled down to 200 metres depth.
The project has more than 15,000 metres of drilling in 123 diamond holes, and 2,143 assay samples. The project was initially drilled between 1991 and 1999, and then by the vendor between 2010 and 2012.
The project has been subject to two metallurgical test work programs in 1999 and 2012. Bumigeme Inc, processing consultants, conducted metallurgical testing on a 40 tonne sample and produced Li20 concentrate grades between 5.78% and 5.89% at metallurgical recoveries between 67.52% and 70.19%, with an average head assay of 1.14%Li20. At an average head grade of 1.35%Li20, test work demonstrated a recovery of 75% and a concentrate grade of 5.96% Li20. In 2012, Glen Eagle completed further metallurgical testing and designed a flow sheet based on the concept of producing a 5-6% Li20 concentrate at an 85% recovery rate using conventional processing routes.
Subsequent to the end of the quarter, part of its due diligence on the proposed Authier acquisition, an independent JORC Mineral Resource estimate, totalling 9.12 million tonnes containing 87,302 tonnes of Li2O was reported. The Company has independently undertaken a detailed audit of all the available data to verify the previous work and convert the foreign estimate to a JORC 2012 compliant Mineral Resource estimate, tabulated below at a 0.5% Li20 cut-off grade.
The key attractions of the Authier lithium project acquisition, include:
- Extensively drilled - mineralisation hosted in a spodumene-bearing pegmatite intrusion with more than 15,000 metres of drilling in 123 holes;
- Simple deposit - 825 metres long with an average thickness of 25 metres dipping at 40 degrees, amenable to low-cost, open-cut mining techniques;
- Defined resources - foreign measured and indicated resources totalling 74,000 tonnes of contained Li20, with demonstrated economic viability. Additional inferred resources total 14,899 tonnes Li20 - see Appendix A for details and cautionary statement;
- Simple metallurgy - extensive metallurgical testing and flowsheet designed to produce a 5-6% Li20 concentrate at an 85% metallurgical recovery;
-- Well studied - a NI43-101 Technical Report - Preliminary Economic Assessment - completed in 2013, demonstrated the technical and commercial viability of developing the deposit, and selling lithium concentrates;
-- Excellent infrastructure - situated 45 kilometres from mining support services, and links to road and rail networks, including the Quebec export port; and
-- Large sunk cost - significant investment in drilling, geophysics and development studies.
Subsequent to the end of the quarter, the Company completed the Authier due diligence and entered into formal transaction documents for the CAD$4 million acquisition of the Authier lithium Project. The acquisition was completed on the 20 July 2016.The Company's strategy going forward, includes:
- Exploration and further drilling to target expanding the existing mineral resources;
- Identifying other resources in the tenement package and in the surrounding district to potentially expand the scale of the project; and
- Studying options for improving the project economics including, metallurgical optimisation and downstream processing options.
Corporate
In July 2016 the Company appointed Mr Corey Nolan as Chief Executive Officer. Mr Nolan is an experienced public company director and senior executive with more than 23 years' experience in advisory, commercial and business development roles focused on the acquisition, funding, and development of resource projects.
During August and September 2015, the Company completed a fully underwritten, accelerated rights offer to raise $2.6 million. The terms of the capital raising, included:
- a 1 for 4 entitlement offer at an issue price of $0.025 per share;
- 1 free attaching option, exercisable at $0.03 and expiring 30 December 2016, for every new share applied for;
- the placement of 1,224,115 shares and listed options in respect of underwriting oversubscriptions; and
- the issue of 1,603,522 shares and 6,808,666 listed options in part settlement of raising management and underwriting fees.
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About Sayona Mining Limited
Sayona Mining Limited (ASX:SYA) (OTCMKTS:SYAXF) is a North American lithium producer with projects in Quebec, Canada and Western Australia. In Quebec, Sayona's assets comprise North American Lithium together with the Authier Lithium Project and its emerging Tansim Lithium Project, supported by a strategic partnership with American lithium developer Piedmont Lithium Inc. (ASX:PLL). Sayona also holds a 60% stake in the Moblan Lithium Project in northern Quebec.
In Western Australia, the Company holds a large tenement portfolio in the Pilbara region
prospective for gold and lithium. Sayona is exploring for Hemi-style gold targets in the world-class Pilbara region, while its lithium projects include Company-owned leases and those subject to a joint venture with Morella Corporation (ASX:1MC).
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