press releaseCaussa And Mountain Lake To Consolidate South African Diamond Operations
TORONTO, ONTARIO--Caussa Capital Corporation(TSE-CAU) and Mountain Lake Resources Inc.(CDNX-MOA) report the signing of a letter of intent which will result in the consolidation of both companies' South African diamond properties in the Ventersdorp district into one operating unit, an initiative aimed at achieving significant economies of scale. Under the terms of the letter of intent, the companies will merge through the exchange of 100% of the issued and outstanding shares of Mountain Lake for Caussa shares at an exchange ratio to be determined. The proposed transaction is subject to due diligence and board, shareholder and regulatory approvals and should be completed in the fourth quarter of 2000.
Commenting on the proposed transaction, Caussa Chairman and CEO Anthony de Werth said ``This is a positive and exciting development for the shareholders of both companies. The economies of scale created from increasing the size of the overall Ventersdorp project will result in significantly enhanced cash flow within the short term.'' Allen Sheito, President and CEO of Mountain Lake Resources stated that ``the merger is a win-win situation for both companies which will have the capabilities of achieving the production objectives that the properties merit''.
The resulting merged company will be the dominant mineral rights owner in the Ventersdorp diamond district with over 260 square kilometres of ground encompassing both producing alluvial deposits and significant unexplored ground. The new company will be the largest single diamond producer in the Ventersdorp district with projected annual production of over 25,000 carats. The close proximity of the properties to each other will allow for the centralization of mine support services and the final diamond recovery and sorting process, thereby improving recoveries through the use of the most advanced x-ray technologies and security. Because of their large size, in excess of one carat on average, and high aesthetic appeal, diamonds from the Ventersdorp district typically attract sales values ranging from US$350 to US$450 per carat. Market conditions for such diamonds are reported to be buoyant.
Mountain Lake's South African Diamond Operations
Mountain Lake currently controls mineral rights to seven alluvial diamond properties in the Ventersdorp district. Three of these properties, namely the Nooitgedacht, Hartebeeslaagte and Zwartrand properties, which exceed 130 square kilometres in area, lie immediately east of Caussa's Witkrans diamond property, where Caussa is currently completing a 50,000 tonne bulk sampling program. Mountain Lake's Nooitgedacht, Hartebeeslaagte and Zwartrand properties encompass two alluvial gravel deposits, namely the Western Run, which is the southeastern extension of Caussa's Witkrans deposit, and the Eastern Run, which is a parallel deposit that extends over a distance of approximately 12 kilometres. Exploration completed by Mountain Lake and Ashton Mining (Pty) Ltd. has indicated that the Eastern Run contains a gravel resource of 14,616,375 tonnes, with diamond grades ranging between 1.00 and 1.50 carats per 100 tonnes.
Diamond production is currently underway on two of Mountain Lake's properties. The Zoutpan Group of South Africa signed an agreement with Mountain Lake in January 2000 for the development of the Hartebeeslaagte property, which provides Mountain Lake with a 9% gross sales royalty on diamonds produced from the Eastern Run of this property. Since the agreement has been signed, Zoutpan has erected a dense media diamond recovery plant and has committed to process 50,000 tonnes of gravel each month. To date, a total of 447 diamonds with a total weight of 488.05 carats have been recovered. The average size of the diamonds recovered is 1.09 carats. Diamond sales of 408.50 carats have generated an average sales price of U.S.$363 per carat.
Diamond production commenced this month on Mountain Lake's Zwartrand property through a production agreement with Maroun Civils c.c. of South Africa. Under the terms of the agreement, Maroun Civils will pay Mountain Lake a production royalty equal to 10% of the gross sales value of diamonds recovered from the Zwartrand property. Maroun Civils is currently commissioning a new diamond recovery plant on the Zwartrand property capable of processing 200 tonnes of alluvial gravel per hour. During the last eight days, production has yielded 20 diamonds weighing 13.6 carats, with the largest diamond recovered to date weighing 5.2 carats.
On Mountain Lake's Nooitgedacht property, Caussa plans to commence a trial mining program that is designed to evaluate the economic potential of the Western and Eastern Runs. To date, a total of 161 diamonds with a total weight of 224.1 carats have been recovered by Mountain Lake as a result of the limited bulk sampling programs that have been completed on this property, an average of 1.39 carats per stone. These diamonds have been sold at an average sales price of U.S.$360.87 per carat.
Mountain Lake also controls four diamond properties in the Mooi River area of the Ventersdorp district. These properties, totaling 78 square kilometres in area, are situated some 35 kilometres east of the Witkrans-Nooitgedacht properties, and encompass alluvial gravel deposits along the Mooi River, an important tributary of the diamond-bearing Vaal River. Alluvial gravel deposits along the Mooi River drainage are reported to have yielded over 260,000 carats of diamonds since 1920. Bulk sampling completed on one of Mountain Lake's Mooi River properties resulted in the recovery of 1,213 diamonds with a total weight of 1,484.15 carats. The average size of the diamonds recovered was 1.22 carats per stone and were sold at an average sales price of U.S.$414.85 per carat. The largest stone recovered to date weighed 13.45 carats.
Caussa's South African Operations
Caussa recently re-commenced its bulk sampling program on its 100% owned Witkrans property following the expansion of its diamond recovery plant. Caussa has installed additional processing equipment at the Witkrans property which will improve production rates and diamond recoveries. To date, a total of 189 diamonds with a combined weight of 143.39 carats has been recovered during the bulk sampling program on the Witkrans property, the largest stone recovered to date being 5.4 carats.
At Caussa's 66.7% owned Barberton Gold operation, gold production has been steadily increasing following Caussa's purchase and expansion of the operation earlier this year. Barberton Gold is engaged in the treatment and reclamation of slime dams and calcine dumps located at Avgold's Fairview Mine in the Province of Mpumulanga. Over the period of April through July 2000, a total of 685 ounces of gold has been produced at Barberton Gold at a cash cost of U.S.$171 per ounce.
In addition to the foregoing amalgamation, both Caussa and Mountain Lake are in preliminary discussions with a third company regarding the possible merger of this company with Caussa and Mountain Lake, to provide further complementary diamond properties to the combined entity. Discussions are also underway with various brokerage firms concerning the provision of additional financing to the combined entity.