SA's recent MD&A states the truth and nothing but RECENT DEVELOPMENTS
Indonesian Properties
Since releasing a resource estimate for the West Lombok project in July 2013, Southern Arc has maintained low-level activities at West Lombok while continuing to advance discussions with a number of companies for a potential farm-in, partnership or outright sale of the property. While Southern Arc believes the West Lombok project holds great potential, the
Company has determined that it can more effectively build shareholder value by identifying a funding partner for West Lombok and redirecting the Company’s treasury to high-quality projects in stable jurisdictions. Southern Arc remains confident that it will find a suitable arrangement, and is working diligently to conclude a transaction that will bring value to
the Company. With the backdrop of a challenging market and significantly decreased valuations for junior mining companies, Southern Arc’s management determined that IFRS rules required the Company to write down the West Lombok project, as disclosed in the Company’s year-end financials.
During the quarter, Southern Arc renegotiated the purchase and sale agreement for its Taliwang project whereby an individual will purchase Taliwang in exchange for US$3,500,000, of which US$100,000 has been received as a nonrefundable
deposit. The Taliwang property has been classified as an Asset Held for Sale pending completion of this transaction, which remains contingent on completion of due diligence and other requirements.
Vale remains committed to its option to earn an interest in the East Elang property. The partners do not plan to commence exploration at East Elang until the Indonesian forestry moratorium is lifted and the property can be reclassified. In the
interim, Southern Arc continues low-key community engagement and has applied for a suspension of the mining business licence until the reclassification process has been completed, ensuring that Southern Arc and Vale have adequate time to evaluate the property once exploration commences
Eagle Hill Investment
On August 14, 2013, the Company invested $7,324,050 (inclusive of a $865,000 deposit paid in June 2013) to acquire a 26.14% equity interest in Eagle Hill (TSX-V: EAG). As part of its investment, Southern Arc received 48,827,000 warrants entitling Southern Arc to acquire a further common share of Eagle Hill at a price of $0.10 per share for a period of four years.
Dundee Corporation (TSX: DC.A) also participated in the private placement by investing $4,675,950 to acquire an additional 62,346,000 shares and 31,173,000 warrants of Eagle Hill, thereby increasing its ownership of Eagle Hill from 18.8% to 26.14%. The $12 million private placement allowed Eagle Hill to consolidate 100% ownership of the Main Zone on the
property, which hosts the majority of the gold deposit. The $12 million private placement also funded an aggressive drill program. Three rigs started drilling on September 12, 2013
with the expectation of drilling 25,000 metres by year-end 2013. The first round of drilling tested a large, sparsely drilled anomaly to the southwest of the Main Zone. Three sections discovered new mineralization 150, 300 and 500 metres along strike to the southwest of the Main Zone, confirming the potential to extend the known gold resource as much as 500 metres.