Kemin Resources Regulatory News (KEM)

11 Jan 2006 07:00

GMA Resources PLC11 January 2006 GMA Resources Plc ("GMA" or "The Company") 11 January 2006 Trading Update Highlights New DirectorsDouglas Perkins, Executive Director and CEODavid Netherway, Non Executive Director New Management TeamCOO Ken NorrisLogistics Manager Richard BlaisMore announcements forthcoming Construction finance in placeBoth Joint Venture partners have approved their respective share of financingEnhancements to feasibility- test work under way to improve economics Algerian partners consolidated48% minority shareholder position in operating company acquired by the Stateowned oil and gas company Sonatrach (GMA holds 52%) Extensive Exploration plannedAeroMag survey planned for concession in Q1 2006Regional stream sediment program planned in 2006 Emergence of AlgeriaOil & Gas revenue allows State to invest heavily in infrastructure projectsNew Mining & Investments codesDomestic manufacturing capacity enhancedInflux of foreign companiesAlgeria becoming a favourable investment location Corporate GovernanceNew Board members to lead development of governance during 2006 by adoption ofAudit Committee, Health & Safety Committee and Remuneration Committee at Boardlevel Rising Gold priceGold sales in Algeria attract a 10% premium over spot gold price at time of saleBroad market expects gold price to increase during next year Introduction by Douglas Perkins, CEO This is my first communication to shareholders since taking over the CEOposition at GMA Resources as of 1 November 2005. During this period I have beenin London to meet with our various advisers. I have spent five weeks in Algeriawhich included a visit to Tirek and Amessmessa to review current operations anda review of the exploration potential at these locations. Considerable time wasalso spent in Algiers assessing the availability of local suppliers forequipment and fabrication facilities. At this point in time, Algeria appears to be at the beginning of a rapid periodof development aided by petroleum prices and also a change in mentality towardsdevelopment and business. In my experience, I have never seen a better localenvironment to support our endeavors. Whilst bureaucracy in Algeria can still beheavy and cumbersome, steps are being taken to improve the banking system and Iam encouraged that the infrastructure will continue to improve. Local businessis booming in support of the increased efforts by the Algerian government todevelop a divided highway , a national communications grid and significant newresidential units. The infrastructure figure for the medium term isapproximately $51 billion and local banks have surplus cash to put into debtwith local companies and Enterprise National des Mines d'Or ("ENOR") isexploring those possibilities at present. Sonatrach Consolidation Since my first visit to Algeria, Sonatrach has announced a new representative onthe ENOR board. Mr Ayache was responsible for operations at Beni Massoud forSonatrach. Sonatrach has also consolidated the local shareholders and that ofthe Bank of Algeria so that Sonatrach now owns 48% of ENOR. Going forward, thisconsolidation will lead to greater efficiency by only having two joint venturepartners. Sonatrach has also approved the increased level of capital expenditureat both Tirek and Amessmessa, up to the amounts cited in the recent bankablefeasibility study. As we begin to tap into the local supplier market, a partnerlike Sonatrach will aid in adding credibility to achieve local fabrication ofequipment in a respectable time. Communication Communication is key to a remote operation. At Tirek there is very limitedcommunication ability. We have recently put out requests for tenders for asatellite based communication system between Algiers, Tamanrassett and Tirek andhave received quotes from three Algerian sources. We will also be improving theinternet accessibility for operations and purchasing. Inefficiencies of theAlgerian Plan Comptable method of accounting has lead to difficulties inreconciling actual accounting costs to production. Once the satellite basedcommunication system is in place, we will put in a modern Enterprise ReportingPlatform ("ERP") financial reporting system and will change the methods ofaccounting to daily, real time basis. Management at site will have access tothis information to assist them in their management decisions. Thisimplementation is planned for Q3 2006. An implementation team has already beenidentified, both consultants and employees who are eager to get started on thisproject. We are also redesigning the web site and will have a trilingual web site in thenear future. We believe it is important to keep shareholders up to date and forthat reason the inclusion of a French/Arabic language site is to encourageAlgerians to be aware of developments in the Company. Personnel Our goal is a complete integration of Algerian employees and a strategicinjection of ex-patriates who excel in knowledge transfer in the developingworld. Human Resources is one of the biggest problems facing the mining industrytoday and for long term success, we believe it is imperative to develop a localstaff resource in conjunction with the level of competence and willingnessrequired to operate a modern gold mining operation successfully. There are currently about 100 ENOR staff at site at any time. The security isprovided by the local government. We do not pay the military and there arecurrently no expatriates employed by the Company in country. I was appointed Chief Executive Officer and Executive Director of GMA on October17, 2005 and took up my position as of November 1, 2005. I will also serve onthe Board of the operating subsidiary ENOR in Algeria. I have been involved inthe development of gold exploration and mine operations for 20 years in bothAfrica and Latin America. Most recently I was Vice President and Chief FinancialOfficer of Orezone Resources Inc, a TSX and AMEX listed company. David Netherway was appointed to the Board of GMA (the "Board") on 20 December2005. He has a long history of successful gold mine development in West Africaand China, and will be contributing towards the development of CorporateGovernance, something which he has extensive prior experience in. David willprovide the Board with valuable operational insight given his experience. Ken Norris was appointed Chief Operating Officer of GMA as at 1 January 2006.Ken has 20 years experience in gold, silver and base metal mines and undergroundexperience in EPCM, bankable feasibility studies, project permitting andconstruction start up of gold and copper hydrometallurgical plants in North andSouth America and Africa. Significantly, he has spent considerable timedeveloping and operating heap leach mines in many countries including thenorthern desert region of Chile. Ken has performed a site visit that includedTirek and will be seconded to ENOR for the next twelve months. Richard Blais was appointed Manager of Supply and Logistics for ENOR on 1January 2006. Richard has extensive gold experience in Africa and in LatinAmerica and has recently completed an assignment with High River Gold in BurkinaFaso and a gold construction project at Ato Chicamo for Barrick in Peru.Previous to that, Richard was Manager of Logistics for the Construction andoperation of Bulyunhulu in Tanzania and the construction of Sadiola in Mali.Other assignments have included 3 heap leach gold operations in Latin America,Aredor Diamonds in Guinea, 10 years at CBG Guinea and Northern Coalfields inIndia. Richard's first task will be a complete audit of the supply anddistribution chain that supports operations in Algeria. Richard has a trackrecord of knowledge transfer to local staff at every operation he has worked at. Management has identified the need for a Manager of Exploration and a Chief MineEngineer and the Company will make a further announcement when appropriate.Preferred candidates have been identified having the same type of track recordas Richard and Ken. Capital Investment We have met with all equipment suppliers representatives in Algiers. Recentlythere has been a supply problem for large rigid frame trucks and the earliestavailability we have found is late 2007 upon immediate order. Consequently, werequested each supplier to consider what machinery could be offered on a timelybasis. The delivery for excavators, loaders, graders is estimated at 3 to 5months and delivery of 40 tonnes articulated trucks within 90-120 days of order.We estimate that at least three trucks are required for the Tirek operations inthe short term. A processing change to the development case towards heap leaching at Amessmessais being considered to enhance the overall project economics. This is based uponrelevant experience in the past of Ken Norris. Testwork is underway to assessthese options. Management plans to present the new processing scenario to theBoard for consideration in February instead of CIL processing. There is adistinct possibility of quicker cash flow and better economics in the BankableFeasibility Study ("BFS"). We are currently recreating heap leach results fromthe BFS to support the hypotheses. We have also shipped a large representativeore sample to Germany for specialised crushing. The material will be returned toAlgeria and run through column leach tests at Tirek in January. This has thepotential to improve recoveries above the BFS rate of 70%. Current Operations Production from Tirek for 2005 was influenced by many mill shut downs.Production for the year was 18,775 ounces of gold at an average price of USD$502( including the 10% Algerian premium on gold sales). There were also 3,294 ounces of silver refined for a contribution of $29,865.81.The December total is only up to the gold pour on 11 December and there has beenanother pour prior to year end. However these bars were not refined before yearend. ENOR Management have prepared a 2006 operating budget for the existing Tirek CILplant for approval at the next GMA Board meeting. Assuming that the supplyproblems for spares are solved and the fleet is replaced, this plant shouldproduce approximately 24,000oz Au in 2006 at a planned head grade of 12.5 gramsper tonne. This budget is before consideration of adding a heap leaching circuitto the Tirek operations. A recent review at site indicated that the realbottleneck in the plant is the mill capacity, even when it is available 100 % ofthe time. The crushing circuit is only working 8 hours per day to supply run ofmine ("ROM") and the gold circuit is under utilized as well. We have designed a heap leach circuit to be added to the existing plant at Tirekto take advantage of the excess crushing capacity of the existing plant.Assuming metallurgical testwork is positive we hope to obtain Board approval forthis enhancement at Tirek in February. The plan is that we can crush high gradeore (greater than 12 gram) in the ROM for mill feed with the remaining ore beingplaced on heaps. We are currently designing columns to be constructed locallyand have confirmed the local availability of necessary liners, pipes and tubing.We aim to deliver gold on carbon into the existing gold circuit at Tirek forrefining. Exploration Jan van Graan has spent some time on site and in Algiers in order to bring me upto speed to understand the exploration potential of the permit We have commenced the legal process in Algeria to engage a company for an AEROMAG geophysical survey of the property. The security concerns of the governmentgiven that the property is so close to the border of Mali may delay this surveyhowever we are confident we will obtain the necessary authorizations. Therecruitment of an Exploration Manager will aid in developing the overallexploration strategy going forward. Future Direction I plan to spend approximately two weeks per month in Algeria in order to assurethe advancement of Company goals and a smooth and timely administration incountry. It is clear that there is long term potential for an undergroundscenario. We currently have enough surface ore for about four years of100-130,000 oz per year heap leach operation combined with a continued CILoperation at Tirek. Management believes we will find more surface ore in new andexisting veins so that the heap leach and CIL operation will run for many years.We aim to begin the underground development as soon as the new Tirek andAmmessmessa plants are operating. We believe it is Algeria's turn to emerge inthe world and it is also time for GMA to emerge as a serious, profitable juniorproducer. For more information:Richard LinnellGMA ResourcesTel: +61 8 9226 1885Philip Secrett/Fiona OwenGrant Thornton Corporate FinanceTel: +44 (0) 207 383 5100 This information is provided by RNS The company news service from the London Stock Exchange