(SBLM) Sable Mining Africa

 Sable Mining Africa Ltd / Index: AIM / Epic: SBLM / Sector: General Financial

21 December 2011

Sable Mining Africa Ltd ('Sable Mining' or 'the Company')

Interim Results

Sable Mining Africa Ltd, the AIM listed company focussed in the mining sector in Africa, announces its results for the six month period ended 30 September 2011.

CHAIRMAN'S STATEMENT

In the six months under review, Sable Mining continued to develop its multi staged portfolio of assets in Southern and West Africa, focussed primarily on coal and iron ore.  With the completion of a number of acquisitions during the period, the Company has expanded its mineral footprint and acreage across the continent in line with its original strategy.  Importantly, and particularly relevant in the current economic environment, we are well funded and therefore well positioned to progress our assets up the value curve. 

In West Africa, the Company has various assets across Liberia, Sierra Leone and Guinea.  In Liberia, of particular note are three potentially world class iron ore exploration projects, with multi-billion tonne potential, being Timbo, Bopolu and the Kpo Range.  Considerable work has been undertaken at these licences, which has defined two exploration targets at Timbo, four at Bopolu and six at the Kpo Range with a combined strike length per project of 22km, 17km and 57km respectively.  With exploration programmes underway, we anticipate the release of the first drill results during Q1 2012, ahead of publishing maiden resources at all three projects. 

The Board recognises the importance of infrastructure for bulk tonnage project development.  In Liberia, all our concessions are close to rail infrastructure and port facilities.  Timbo is 60km from the Nimba Rail Line with access to the Port of Buchanan, while the Kpo Range and Bopolu are 60km from the Bong Rail Line, which runs directly to Monrovia.  In Guinea, we are advancing the Kakoulima project, which is adjacent to infrastructure and only 50km from Conakry.

The coal portfolio already has a current attributable resource in excess of 2.3 billion tonnes across near-term production and exploration/development assets primarily in South Africa and Zimbabwe.  We have expanded the asset base in Zimbabwe and the Board believes that additional drilling will demonstrate upside potential in excess of 4 billion tonnes of coal, which would transform Sable Mining into one of Southern Africa's largest coal explorers and developers.  At Rietkuil in South Africa, there is potential for near term production, although this remains subject to the grant of the relevant water licences, rail and port allocation and the reappraisal of the bankable feasibility study ('BFS') by Peet Snyder, the new Chief Operating Officer of our coal division. 

The Board believes we have now aggregated a portfolio of potentially world class assets and accordingly our acquisition strategy is close to completion.  Although we continue to evaluate a small number of opportunities, our efforts will now focus on proving up the value of our existing portfolio.

To assist in this process, we have strengthened our Board and management with the appointment of a number of senior industry professionals including, as mentioned earlier, Peet Snyders who joined as an Executive Director and Chief Operations Officer of the Company's coal division and Mark Biddulph as Head Geologist in Liberia.  Peet's arrival on the Board is a key development, as he brings with him 30 years experience in the mining industry, having held senior positions at miners including Anglo Platinum, Kumba Coal, Iscor Mining and Anglo Coal.  Notably, he worked at Keaton Energy, which is contiguous to the Rietkuil Coal Project in South Africa.  Mark previously worked as senior geologist at Anglo Gold and was most recently COO of African Aura Mining.

Notwithstanding the strategy of maximising the value of individual assets, for the full value for our current portfolio to be reflected we are considering splitting the assets into two companies: one focusing on iron ore in West Africa; and the other on coal in Southern Africa and Zimbabwe.  A decision on this has not been finalised and obviously we would need to gain shareholder approval for such a process.  However, with two major commodities often attracting varied investment interest, we believe that such a move has the potential to provide increased visibility for both asset classes.

Financial Review

Sable Mining is reporting for the six months ended 30 September 2011 a pre-tax loss on continuing activities of US$11.9 million (2010: pre-tax loss on continuing activities of US$3.7 million).  Included within this loss is US$3.3 million of amortisation and depreciation, US$3.2 million of non recurring expenditure mainly related to acquisition costs and an FX loss of US$0.3 million.  The Group has a strong treasury and as at 30 September 2011 cash balances were U$79.7 million (2010: US$132.2 million).

Outlook

Sable Mining controls a sizable portfolio of multi-commodity assets in recognised world class resource districts, and benefits from a strong treasury through which to advance its key projects through the value curve.  I believe that the Company is well positioned to significantly enhance the actual and attributable value of its assets and become a major new player in the sub-Saharan resource exploration and development industry.

I would like to thank our dedicated staff and partners for their continued commitment towards achieving Sable Mining's strategic objectives and building further value across our portfolio.  I would also like to thank our shareholders for their ongoing support and I look forward to providing the market with further updates on our development over the coming months.

Phil Edmonds

Chairman

21 December 2011

OPERATIONS REVIEW

The Company has been extremely active in both advancing its existing portfolio of projects as well as adding to this through selective acquisition. 

Iron Ore Assets

Liberian Iron Ore

Sable Mining has interests in three highly prospective project areas in Liberia: the 532 sq km Kpo Range concession, the 308 sq km Bopolu licence and the 349 sq km Timbo licence.  All three licence areas are located in the metamorphosed Archaean granitoid-gneiss-greenstone terrain of the Kenema-Man domain on the West African Shield in Liberia, and aeromagnetic surveys have highlighted the licences' strong iron ore prospectivity.  The licences form part of a widely recognised world-class iron ore province in Liberia which include major iron projects such as the 2.3 billion tonne Yekepa Project, owned by Arcelor Mittal; the 3.24 billion tonne Putu Range, owned by Severstal; and the 290 million tonne Bong Project, owned by China Union/Wisco. 

A 13,260 line km high resolution airborne geophysical survey (aeromagnetics and radiometrics) has been completed on the licences, which has defined 12 high priority targets. 

4,980 line kilometres were flown across the Timbo iron ore project resulting in two iron ore exploration targets being identified with a combined strike length of 22km.  The Timbo North target area lies within the Kaba mountain range and mapping undertaken to date indicates that the Timbo North ridge comprises an approximately 11km long, discontinuous iron rich ridge.  Initial ground mapping across Timbo North has also been completed during which 68 grab samples were collected.

At the Bopolu licence, 5,000 line km were flown resulting in the identification of four iron ore exploration targets with a combined strike length of 17km.  The Bopolu iron ore target areas are situated at the southern end of the Kpo mountain range and the target areas are associated with a historically mapped itabirite iron formation.

3,280 line km flown over the Kpo iron ore prospects resulted in six iron ore exploration targets being identified with a combined strike length of 57km.  The target areas delineated by the high resolution airborne geophysical survey are associated with historically mapped bearing itabirite iron formation within the Kpo mountain range.

A 34 hole, 12,000m Phase 1 drilling programme is due to commence before the end of the year with first drill results expected in Q1 2012.  25 of the holes totalling 8,000m are planned at Timbo North where 11km strike coincides with a prominent ridge. 

The licences benefit from strong supporting infrastructure with the Kpo Range and Bopulu licences being situated within 60km of the existing Bong railway line which accesses the Port of Monrovia.  The Timbo licence is within 60km of the Nimba road and rail line, which directly accesses the Port of Buchanan.  Additionally 150km of access roads have been built or refurbished to date, and 100 river crossings have been constructed, four of which are major river crossings.

To spearhead development in Liberia, Mark Biddulph has been appointed as Head Geologist, to assist primarily in advancing the Company's Liberian projects.  Mark is a geologist with 17 years experience in the African mining arena and has led and managed a number of diverse business operations and geological teams in remote, highly challenging parts of the African continent and has a demonstrable track record of achievement.  Amongst other companies he has worked for AngloGold Ashanti and more recently he was Chief Operating Officer for African Aura Mining.

Guinean Iron Ore

Sable Mining owns a 1,107 sq km iron ore Prospecting Licence, covering three permits in the Kissidougou area of south east Guinea.

The acquired permits are positioned in what is widely recognised as one of the world's largest underdeveloped iron ore and bauxite provinces.  They are located between Bellzone Mining plc's multi billion tonne Kalia Project and Rio Tinto's world class Simandou Iron Ore Project, which is expected to commence production in 2013.  

Preliminary work conducted on the permits has focussed on high level aeromagnetic surveys and spectrometry, targeting banded iron formations ('BIF') deposits located within a Lower Proterozoic greenstone belt.  Results have already identified significant anomalies and extensive trenching has been conducted with samples ranging from 30.86% Fe up to 57.78% Fe.

The Company believes that Guinea represents a highly suitable location in which to develop a portfolio of iron ore assets.  Rich deposits have been found in the Mount Nimba area along the Liberian border and the Simandou mountain area, with the iron content of these BIF deposits estimated to be between 63% and 68%.

The Guinean Government is encouraging the development of iron ore projects to diversify from the country's traditional bauxite mining.  Mining is the single largest economic activity in Guinea based on its contribution to exports and government revenue.  Power supply is available with the two major sources of supply being thermal and hydro.  Infrastructure is improving, especially when considering the Guinean Government's intention to build a 1,012km railway from Simandou in the south east to Conakry (the Trans-Guinean railway).  Importantly, shipping from West Africa to China is comparable in distance and voyage time from Brazil to China.

Zimbabwean Coal Assets

Lubu Coal Project, Zimbabwe

The Lubu Coal Project ('Lubu') covers 19,236 hectares of the highly prospective Karro Mid Zambezi coal basin in the established Hwange (Wankie) mining district in north-western Zimbabwe and has initial modelled in-situ seam tonnage of 786 million tonnes.

An intensive 36 hole drilling campaign at Lubu commenced in October 2010, results from which have already emphasised the quality and continuity of Lubu's shallow deposit, the grade parameters, as well as the high coking coal deposits across multiple seams.  The results have been incorporated into the existing seam correlation work and when used in conjunction with the borehole geological logs and the downhole geophysical logs, have enabled Sable Mining's geologists to better understand the lithological sequences and correlate and model the seams more accurately.

The model for the Main Seam has been updated and new models constructed for the laterally consistent 1B Lower and 1C seams within the blocks that have been drilled to date.  There are a number of seams that occur inconsistently, including the 1B Upper and the 1A seam, which are currently being analysed and will also be modelled in due course.  The Company believes that these seams have the potential to add further tonnage to the project.

Analytical work is progressing with identification and quantification of the coal products that can be best derived from these seams.  This will be incorporated into the geological model and will lead to the establishment of a SAMREC/JORC/43-101 compliant resource statement.

Lubimbi Coal Project, Zimbabwe

The Company owns a significant interest in the 16,545 hectare Lubimbi Coal Project in the Gwaai area of the Kariba Coal Basin ('Lubimbi').  Historical work has indicated an in-situ coal tonnage in excess of 1 billion tonnes, and an ongoing drilling campaign conducted by the Company on a small area of the licence has suggested an initial in-situ tonnage of 550 million tonnes contained within the six main seams.  With approximately 90% of the licence area remaining untested, the Company believes that there is strong potential for the total tonnage of the entire area to be considerably increased.

30 boreholes of the 64 borehole Phase 1 drilling programme have been completed to date.  A total of 3,820m has been drilled and 226 samples weighing 2.88 tonnes have been submitted to the ALS Laboratory Group in Witbank, South Africa, for testing and initial results provide early confirmation of the open cast potential contained within the project. 

South African Coal Assets

Sable Mining's interests in the South African coal sector are held through Delta Mining Consolidated Limited ('DMC').

Rietkuil Coal Project, South Africa

Rietkuil provides the Company with a near term production opportunity, although this remains subject to the grant of the relevant water licences, rail and port allocation and the reappraisal of the BFS, which was published in May 2011.  The reappraisal is being conducted by Peet Snyder, the new COO of our coal division, who is extremely familiar with the district having been Director of Operations at the adjoining Keaton Energy project.

The project, which was granted a Mining Licence in December 2010, has a current SAMREC compliant gross in-situ tonnage resource of 199 million of coal (156.9 million tonnes in Measured and 42 million tonnes in Indicated categories).  It is located 80km east of Johannesburg, 8km south of Delmas and is adjacent to Exxaro Resources Limited's Leeuwpan Colliery and Kuyasa Mining (Pty) Limited's Delmas Colliery, in the Mpumalanga Province of South Africa.  Considerable progress has been made developing the project and other advancements include the lodging of a rehabilitation guarantee with the Department of Mines and Energy.

In addition, exploration activities have been initiated on the adjacent Matjiesgoedkuil 266IR farm ('Matjiesgoedkuil').  Matjiesgoedkuil represents the southern extension of the Rietkuil seam and historic drill holes show good coal continuity.  A 25 borehole drilling programme is underway to provide further information regarding the coal seams.  Initial indications look promising for Matjiesgoedkuil, and this asset is being advanced towards resource definition stage, with the objective of lengthening the mine life of its neighbour, Rietkuil.

Springbok Flats Coal Project, South Africa

DMC has exposure to the Springbok Flats Coal Project in South Africa through its agreement to acquire a 70% interest in the 9,948 hectare prospecting right held by the Bakgatla Ba Seabe Traditional Authority (the 'Ba Seabe Title') and the 24,753 hectare prospecting right held by the Bakgatla Ba Mocha Traditional Authority (the 'Ba Mocha Title').  The aforementioned titles have current non-JORC estimated coal resources of 342 million tonnes and 998 million tonnes respectively, which, on completion of the agreement (which is subject to regulatory approval in South Africa), will provide DMC with a total attributable tonnage of 938 million tonnes.  The remaining 30% interest in the Ba Seabe and Ba Mocha Titles will be held by the Bakgatla Ba Seabe Traditional Authority (15%) and the Bakgatla Ba Mocha Traditional Authority (15%). 

Exploration at Springbok Flats is an important strategic step as the district remains one of a few undeveloped coalfields in South Africa.  The area has been the subject of various exploration campaigns in the 1970s and 1980s and a database of some 300 boreholes drilled in the immediate vicinity acquired has been evaluated and modelled.  These formed the basis for an independent geologists' report in 2009 which tabulated 1.34 billion gross tonnes in situ ('GTIS') that underlie the combined Ba Seabe licence and the Ba Mocha licence. 

Additional Interests

Mount Kakoulima, Guinea

Sable Mining has a majority interest in a new 298 sq km exploration permit on the Mount Kakoulima mafic-ultramafic igneous complex, 50km north-east of Conakry, Guinea ('Mount Kakoulima').  This is prospective for nickel ('Ni'), copper ('Cu'), cobalt ('Co'), chromium ('Cr') and platinum group elements ('PGE'), in addition to having significant grades of iron ('Fe'), as seen in the table below. 

The Mount Kakoulima project benefits from established infrastructure, with a railway running through the property linking it to the Port of Conakry.

The Company's current focus is to examine mineral accumulations in the overlying laterite and saprolite horizons.  Studies thus far have been focussed on the south-east flank of Mount Kakoulima intrusive, concentrating on an area of highly anomalous magnetics extending approximately 13km in a north east direction.  This includes an area newly identified by Sable Mining's reinterpretation of both satellite imagery and existing geophysical data as a further ultra-mafic intrusive known as Kakoulima 2. 

A reconnaissance drilling programme using a 160mm auger is currently underway with 50 holes having been completed over the 20km² area.  A further 17 holes are planned to complete this initial programme.  All analyses are being undertaken ALS Global's ISO certified laboratory in Brisbane, Australia.

Encouraging initial results have been received from the Kakoulima 2 area with significant intersections tabulated below:

(Applying cut-offs of 30% Fe for iron, 2.4% Cr₂O₃ for chromite and 0.5% Ni for nickel)

A mineralogical study by ALS, including QEMSCAN, has been initiated to characterise mineralisation in the different lateritic layers, as a first step to scoping a metallurgical process to produce saleable products.  Hand-panning of the lower saprolitic clays, where anomalous magnetic susceptibility was observed, has shown significant quantities of magnetite and chromite in panned concentrates.  It is currently assumed that the magnetite is a secondary product of the decomposition of the underlying dunite (olivinite) ultramafic rock.  In the lateritic sequence above the saprolite the magnetite has altered to hematite, goethite and maghemite.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2011

Condensed Consolidated Income Statement

For the six month period ended 30 September 2011

Condensed Consolidated Statement of Comprehensive Income

For the six month period ended 30 September 2011

Condensed Consolidated Balance Sheet

As at 30 September 2011

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

For the six months to 30 September 2011

Notes to the Unaudited Interim Consolidated Financial Statements

Sable Mining Africa Limited is incorporated in the British Virgin Islands under the British Virgin Islands Business Companies Act 2004.  The address of the registered office is Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, British Virgin Islands.  The Company was incorporated on 27 April 2007. 

The Company is listed on the AIM Market of London Stock Exchange plc.

The unaudited interim consolidated financial statements for the six months ended 30 September 2011 were approved for issue by the board on 21 December 2011.

The figures for the six months ended 30 September 2011 and 30 September 2010 are unaudited and do not constitute full accounts. The comparative figures for the period ended 31 March 2011 are extracts from the annual report and do not constitute statutory accounts.

The interim consolidated financial statements have been prepared in US Dollars as this is the currency of the primary economic environment in which the Group operates.

The basis of preparation and accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2011 have been applied in the preparation of these interim condensed consolidated financial statements. These are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU") and with those of the Standing Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the International Accounting Standards Board ("IASB"). References to "IFRS" hereafter should be construed as references to IFRSs as adopted by the EU

The accounting policies and methods of calculation adopted are consistent with those of the financial statements for the year ended 31 March 2011.

The directors consider that the Group's continuing activities comprise one business segment, exploration and other unallocated expenditure in one geographical segment, Africa.

The segment items included in the income statement for the period are as follows:

The segment assets and liabilities at 30 September and the capital expenditure for the period then ended are as follows:

Segment assets comprise intangible assets, property, plant and equipment, trade and other receivables and cash and cash equivalents.

Segment liabilities comprise operating liabilities.

Capital expenditure comprises additions to intangible assets and to property, plant and equipment.

The calculation of basic and diluted loss per share is based on the following data:

Due to the loss incurred in the current and prior interim period, there is no dilutive effect of share options and warrants.

On incorporation on 27 April 2007, the company had an authorised share capital of 500,000,000 ordinary shares of no par value.

Between incorporation and 18 February 2008 20,000,000 ordinary shares were issued for nil consideration to Ely Place Nominees Limited to be held in trust to be allocated at the discretion of the Board as incentives to employees or in connection with future transactions by the Company. 

Between 21 February 2008 and 12 August 2008, a further 58,425,600 ordinary shares were issued fully paid for cash at a price of 12.5 pence per ordinary share constituting the pre IPO funding round.

On 21 July 2008 at an extraordinary general meeting the authorised share capital was increased to 1,000,000,000 ordinary shares of no par value.

On 12 August 2008, 185,180,000 ordinary shares were issued fully paid in consideration for the acquisition of 94% of the issued share capital of Procana Limitada.

On 1 September 2008, 68,825,600 ordinary shares were issued fully paid for cash at 12.5 pence per ordinary share.

On 15 December 2009, 270,000,000 ordinary shares were issued fully paid for cash at 10 pence per ordinary share.

On 22 January 2010, 25,334,822 ordinary shares were issued fully paid for cash at 11 pence per ordinary share.

On 16 April 2010, 299,707,452 ordinary shares were issued fully paid for cash at 28 pence per ordinary share.

On 21 January 2011, 20,000,000 ordinary shares held in trust by Ely Place Nominees Limited were issued to consultants to the Company for services provided relating to acquisitions of intangible exploration interests during the year.

Share capital is stated net of share issue costs of $7,447,000 (2010: $2,465,000).

The Company has one class of ordinary share which carries no right to fixed income.

Share Options

At 30 September 2011, the following options over ordinary shares of no par value have been granted to directors and employees and remain unexercised:

Warrants

At 30 September 2011, the following warrants over ordinary shares of the Company had been granted and not yet exercised:

Equity-settled share option plan

The Group unapproved share option scheme was established to provide equity incentives to the directors of, employees of and consultants to the Company.  The scheme is administered by the Board.  Awards to directors are recommended by the Remuneration Committee.  The options are exercisable during a period (being not less than one year), such period to commence on a date determined by the Board, but not longer than five years from the date that they first become exercisable.  Options are forfeited if the employee leaves the Group before the options vest.

At 30 September 2011, the following options over ordinary shares of the Company had been granted and not yet exercised:

At 30 September 2011, the weighted average remaining contractual life of the options outstanding was 3 years (2010: 3.2 years)

Equity settled warrants

At 30 September 2011, the following warrants have been issued and remain unexercised:

(a) On 10 December 2010, the Company constituted a warrant instrument (the "Instrument") with a view to granting warrants under the Instrument as incentives to the Group's employees, consultants and agents or in connection with future transactions by the Company. The instrument provides that the Company may issue up to 100 million warrants to subscribe for ordinary shares at an exercise price of 2 pence per share. On 11 May 2011, 50 million warrants were granted to employees and consultants of the Group.

Ely Place Nominees Limited holds an additional 2,000,000 warrants to be distributed among the employees of, directors of and consultants to the Company as instructed by the Board.

At 30 September 2011, the weighted average remaining contractual life of the warrants outstanding was 3.6 years (2010: 4.3 years).

The fair value of the options and warrants was determined using the Black-Scholes option pricing model using the following assumptions:

Risk free interest rate is based on the 5 year gilt rate at the date of grant. Annual dividend yield is based on management's immediate intention to re-invest operating cash flows. Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous year. The expected period until exercise is based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

On 3 October 2011 the Group formally completed the acquisition of the 27.5% stake in Delta Mining Consolidated Ltd ("DMC') previously held by Rannerdale Limited, a wholly owned subsidiary of London Mining plc, following receipt of all necessary approvals for completion of the transaction.  The Group now holds a 63.5% interest in DMC.