AIC Mines Limited : - Transformational Acquisition AIC to Acquire the Eloise Copper Mine

Published: 2021-09-01 11:02:58 ET A1M.AX

AIC Mines Limited (ASX: A1M) is pleased to announce its wholly owned subsidiary AIC Copper Pty Ltd has entered into an agreement to acquire the Eloise Copper Mine ('Eloise') from FMR Investments Pty Ltd ('FMR') (the 'Transaction').

The Transaction is subject to conditions precedent, which include AIC obtaining shareholder approval of the Transaction and receiving conditional approval from ASX for re-admission of AIC's securities to official quotation.

OVERVIEW

Eloise is a high-grade operating underground mine located 60 kilometres southeast of Cloncurry in North Queensland. It commenced production in 1996 and has since produced approximately 339,000t of copper and 167,000oz of gold.

The mine is currently producing at an annual rate of 11,500t of copper and 7,000oz of gold in concentrate.

AIC will pay approximately $27 million to acquire Eloise subject to certain inventory adjustments on closing. The consideration comprises: A payment of $5 million in cash and $20 million in AIC shares payable on completion and A contingent payment of $2 million in cash payable six months after completion if certain production milestones are achieved.

On completion, FMR will hold approximately 28-30% of the issued capital of AIC1.

Capital raising of up to $35 million being undertaken to fund the Transaction as well as hold sufficient capital for working capital movements, accelerated exploration expenditure and environmental performance bonds.

Commenting on the acquisition, AIC Managing Director Aaron Colleran said: 'This is a tremendous development for AIC. Our acquisition strategy has been to target late-stage Australian gold and copper projects where we can add value through exploration and development. We are confident that we can add significant value at Eloise as we ramp-up exploration and extend the mine life. Eloise is an excellent first acquisition for AIC as it provides immediate positive cashflow and entry into a prolific base-metals region that is ripe for consolidation.'

ABOUT THE ELOISE COPPER MINE

The Eloise Copper Mine is located in North Queensland, 60 kilometres SE of Cloncurry and 155 kilometres ESE of Mt Isa. The mine has an extensive production history. It was commissioned in 1996 and has since mined approximately 12.5Mt of ore grading 2.8% Cu and 0.8g/t Au to produce 339,000t Cu and 167,000oz Au in concentrate. Current operations consist of an underground mine accessed via decline. The upper levels of the mine (above 1,190m below surface) are extracted by longhole open stoping and the lower levels are extracted by sublevel caving, together producing approximately 700,000tpa ore. Eloise is an owner-miner operation with a mining contractor used only for underground development. Processing is via conventional crushing, grinding and sulphide flotation with capacity to treat 750,000tpa. Power for the processing plant is provided by an on-site diesel power station. Metallurgically the ore is very consistent as the ore mineralogy at Eloise is almost exclusively chalcopyrite. Processing achieves high copper recoveries (generally 94% - 95%) and produces a clean concentrate. The concentrate has significant byproduct credits from gold and silver. The concentrate is currently sold under contract with Trafigura Pte Ltd.

Infrastructure included in the acquisition includes a 750,000tpa copper concentrator, offices, warehouse, mobile plant, 220 room accommodation village for FIFO workforce, bore-field and diesel generators with 12MW total generating capacity.

Mineralisation is hosted within a strongly foliated meta-sedimentary sequence comprising arenites and schists. The metasediment sequence also contains a coarse-grained amphibolite body possibly representing an early intrusion of gabbroic composition. Mineralised zones occur as steeply plunging lenticular bodies with strike lengths between 100m and 200m and attaining a maximum width of 25m. The main zone of mineralisation (Levuka-Eloise Deeps) demonstrates continuity down plunge over 1,500 m and remains open at depth. The copper at Eloise occurs predominantly as chalcopyrite. Copper mineralisation occurs as either massive sulphide lenses or stockwork veins. Gold is located on the grain boundaries or as inclusions in sulphides and is associated with chalcopyrite, pyrite, pyrrhotite and magnetite.

Significant Exploration Upside

The exploration potential of the Eloise tenement holding was one of the main features that attracted AIC to the acquisition. Exploration expenditure has been constrained over the past 3 - 5 years. AIC plans to reinvigorate the exploration effort at Eloise and is very confident that it will be able to increase the resource and reserve base. AIC's exploration strategy for Eloise will focus on both extensions to the known resource areas and the discovery of new satellite lodes within the Eloise mining tenements. Previous geophysical surveys have identified electromagnetic conductors in the Far West Corridor, the West Corridor (including Macy North, TD Prospect, Emerson and Wynberg), the East Corridor (including LevukaElrose extension and Nobbies) and Far East Corridor (Jericho lode extensions

Historic Production Results

The mine has an extensive production history. It was commissioned in 1996 and has since mined approximately 12.5Mt of ore grading 2.8% Cu and 0.8g/t Au to produce 339,000t Cu and 167,000oz Au in concentrate. Current annual production is approximately 40,000dmt of high-quality copper concentrate containing approximately 11,000t Cu and 6,000oz Au. Recent performance has improved upon this position and in the June 2021 Quarter the mine produced approximately 10,500dmt of concentrate containing approximately 2,900t Cu and 1,770oz Au (equivalent to an annualised rate of 42,000dmt of concentrate containing approximately 11,500t Cu and 7,000oz Au). AIC believes it can increase the annual production rate to approximately 45,000dmt of concentrate containing approximately 12,500t Cu and 6,500oz Au through improved operational reliability and higher mined grades 2 . AIC is targeting a C1 operating cost of approximately A$3.30/lb Cu (equivalent to US$2.50/lb Cu at A$:US$ exchange rate of 0.75) after gold and silver credits2 .

AIC intends to undertake an equity capital raising to raise a minimum of $30 million and up to $35 million (before associated costs) (the 'Capital Raising'). The Capital Raising will be comprised of a priority offer to AIC shareholders and a general offer to the public. The Capital Raising is expected to be conducted in midOctober following the lodgement of a Prospectus with ASIC. It is expected that the Capital Raising will be priced at 25 cents per share. The Company has entered into a Joint Lead Manager mandate with Canaccord Genuity (Australia) Limited and Argonaut Securities Pty Ltd. The Company does not expect that the Capital Raising will be underwritten. Funds raised from the Capital Raising will be used to fund the cash acquisition price of $5 million to be paid to FMR, to provide sufficient funds for working capital movements, to fund exploration expenditure on the Company's exploration projects and to fund cash-backed environmental bonds at Eloise.

Contact:

Aaron Colleran

Email: [email protected]

Forward Looking Statements

This announcement contains forward looking statements about AIC Mines and Eloise. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as 'may', 'will', 'expect', 'intend', 'plan', 'estimate', 'anticipate', 'continue', 'target' and 'guidance', or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates, expected costs or production outputs, the outcome and effects of the proposed Transaction and future operation of AIC Mines. To the extent that these materials contain forward looking information, the forward looking information is subject to a number of risk factors, including those generally associated with the gold industry. Any such forward looking statement also inherently involves known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements to be materially greater or less than estimated. These factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves, political and social risks, changes to the regulatory framework within which AIC Mines and Eloise operate or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation. Any such forward looking statements are also based on current assumptions which may ultimately prove to be materially incorrect. Investors should consider the forward looking statements contained in this announcement in light of those disclosures. The forward looking statements are based on information available to AIC Mines as at the date of this announcement. Except as required by law or regulation (including the ASX Listing Rules), AIC Mines undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise. Indications of, and guidance on, future earnings or financial position or performance are also forward looking statements.