Southern Arc Minerals (TSX VENTURE:SA)(OTCQX:SOACF) ("Southern Arc" or "the
Company") today announced the results of its third quarter ended March 31, 2012,
along with an update on exploration activities at its portfolio of projects.
Details of the Company's financial results are described in the unaudited
condensed consolidated interim financial statements and Management's Discussion
and Analysis ("MD&A"), which will be available on the Company's website at
www.southernarcminerals.com and on SEDAR at www.sedar.com. All amounts are in
Canadian dollars unless otherwise stated.
-- Increased ownership to 90% in the West Lombok and Taliwang projects
-- Completed Cooperation Agreement with West Sumbawa Regency Government,
ensuring collaboration as the Taliwang project advances
-- Terminated Heads of Agreement with Newcrest Mining Limited for the
Taliwang project
-- Completed drilling of third hole at the Sabalong project, targeting
copper-gold porphyry mineralization, with results pending
-- Completed drilling at the West Lombok project pending issuance of Pinjam
Pakai permit, with 3,501.5 metres of drilling completed year to date
-- Mapping and sampling at the West Lombok project ongoing, with 472.5 line
kilometres completed year to date
-- Initiated micro-credit schemes at village level as part of Company CSR
efforts
FINANCIAL SNAPSHOT
Summary of Quarterly Results
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March 31, December 31, September 30, June 30,
2012 2011 2011 2011
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Total assets $ 62,872,227 $ 61,274,365 $ 62,268,305 $ 62,706,114
Exploration
properties 35,680,748 29,634,073 25,502,244 22,796,908
Working capital 22,901,030 29,897,586 35,017,284 37,957,778
Net loss (1,272,920) (1,569,848) (285,270) (1,224,222)
Basic and
diluted loss
per share (0.01) (0.01) (0.00) (0.01)
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EXPLORATION UPDATE AND OUTLOOK
West Lombok Property (Lombok Island)
The West Lombok Project covers a 13km by 7km structural corridor of
mineralization and alteration hosting porphyry copper-gold, high-sulfidation
gold-copper and epithermal gold deposits. Two of the prospects on the property
host a combined proven strike length of more than 26 kilometres of mineralized
epithermal breccias, with individual bodies ranging in thickness from 2 to 66
metres, with a strike length of up to 1,000 metres and a vertical extent of
greater than 300 metres. Southern Arc has completed more than 22,000 metres of
drilling to date focused on the epithermal gold mineralization, confirming
high-grade events typical of epithermal boiling zones and identifying several
high-grade shoots. In addition, the Company has completed an airborne
geophysical survey of the West Lombok project at 50-metre spacings to define
both near-surface and buried copper-gold porphyry targets, identifying 17
porphyry targets on the property. A number of the targets have already had a
limited amount of drill testing that demonstrated host zones of high-grade
gold-rich porphyry copper mineralization, supporting the outcome of the
prospectivity analysis.
On May 17, 2012, Southern Arc announced that it has increased its interest in
the West Lombok project from 85% to 90%. Southern Arc simplified the ownership
structure and increased its equity interest in the West Lombok project through
the acquisition of additional shares in PT Indotan Lombok Barat Bangkit, the
subsidiary that holds the mining business license ("IUP") to explore the West
Lombok project, from Southern Arc's Indonesian partner, PT Permata Puri Mega
("PT PPM"). In consideration for transferring its 5% interest in both the West
Lombok and Taliwang projects, PT PPM will receive US$1,500,000 and 2,250,000
Southern Arc shares, subject to TSX Venture Exchange acceptance.
On December 29, 2011, Southern Arc announced the decision to focus its near-term
drilling activities on targets within areas without forestry designation. As
described in the press release issued on August 26, 2010, approximately 1.1% of
the West Lombok property is designated Protected Forest (no open-pit mining
allowed; underground mining allowed with the appropriate forestry permits),
55.1% is designated Production Forest (open-pit and underground mining allowed
with the appropriate forestry permits) and 43.8% has no forestry designation (no
restriction on mining activities). Since the property had been clear-cut logged
in the 1990s, Southern Arc decided to proceed with exploration activities, with
strong local government support and encouragement, while awaiting issuance of
its forestry permit, known as a Pinjam Pakai (borrow to use) permit. Year to
date Southern Arc has completed 14 holes on areas in the northwest section of
the property, focused on epithermal gold mineralization, and 2 holes in the
southeast section of the property, focused on porphyry copper-gold
mineralization. Southern Arc has completed its current drill program and does
not plan to resume drilling until the Pinjam Pakai permit is received. To
conserve its treasury during this period, Southern Arc has reduced its
in-country technical team. While some employees were laid off, a number of
technical personnel were seconded to other exploration groups in the area to
ensure Southern Arc has the technical capacity to resume exploration activities
upon issuance of the Pinjam Pakai permit. Permitting is progressing as expected,
and Southern Arc will continue to update the market of any material events at
the property.
In late 2011 Southern Arc completed an airborne geophysical survey of the West
Lombok project at 50-metre spacings to define both near-surface and buried
copper-gold porphyry targets. Dr. Steve Garwin, Southern Arc's Senior Technical
Advisor, modeled and interpreted the results of the survey in conjunction with
the Company's geological and geochemistry database, and identified 17 porphyry
targets on the property. A number of the targets have already had a limited
amount of drill testing that demonstrated host zones of high-grade gold-rich
porphyry copper mineralization, supporting the outcome of the prospectivity
analysis. In early 2012 Southern Arc initiated an exploration program to drill
porphyry targets located in the south of the property in areas without forestry
designation, and will continue to test the other targets when the Company
receives the Pinjam Pakai permit and is able to resume full-scale exploration.
In early 2012 the Belikat and Blongas East targets of the Selodong prospect,
where previous exploration returned significant porphyry-grade intersections,
were tested by two drill holes totaling 974.0 metres.
Exploration activities on West Lombok in 2011 and the first calendar quarter of
2012 have focused on Phase 2 exploration at the Pelangan prospect and Phase 1
exploration at the Mencanggah prospect. Initial activities on Mencanggah focused
on the Waterfall target, where Southern Arc completed 27 holes for a total of
6,634 metres of drilling, with 17 of the 27 holes encountering gold
mineralization (www.SEDAR.com). Southern Arc also completed eight holes on the
Bising target, for a total of 2,286 metres. All eight holes encountered
mineralization (www.SEDAR.com) and Bising remains a high-priority drilling
target when Southern Arc is able to resume full-scale exploration.
Southern Arc completed 6,643 metres of drilling in 35 holes at the Pelangan
prospect earlier in 2011, and results from all holes have been released
(www.SEDAR.com). Drilling to date has confirmed the Company's geological model
for the prospect and identified three high-grade shoots that will be explored
further with the next phase of drilling. Two rigs were operational this period
at the Jati, Tanjung and Kayu Putih targets on the Pelangan prospect, where
previous exploration identified a continuous 1.5km-long mineralized epithermal
breccia, hosting at least one high-grade lode structure. At May 25, 2012, the
Company had completed 2,527.5 metres in 14 holes (including one re-drill).
Surface mapping has continued on the West Lombok property and the team has to
date identified 18.5 km of mineralized structural breccias ("MSBs") on the
Mencanggah prospect with an additional 1.3 km of epithermal structural breccias
("ESBs") with geochemical testing ongoing to determine mineralization, and 8.0
km of MSBs on the Pelangan prospect with an additional 1.7 km of ESBs.
Encouraging assay results (+5.0 g/t Au) from continuous rock chip channels
collected across the strike of MSBs have been received from a number of Pelangan
and Mencanggah prospect localities.
Southern Arc has engaged SRK Consulting (Canada) Inc. ("SRK") to complete a
National Instrument 43-101("NI 43-101") technical report for the property.
Completion of the technical report requires more exploration and drilling data,
and the timing of the report is contingent on Southern Arc's ability to resume
full-scale exploration. The Company will provide additional guidance on the
timing of this report as more information becomes available.
Sabalong Property (Sumbawa Island)
The Sabalong property is being advanced in partnership with a wholly-owned
subsidiary of Vale under an option and joint venture agreement whereby Vale has
an option to earn a 75% interest in the property by funding all project
expenditures through to completion of a bankable feasibility study. Southern Arc
is the operator of the property. Geomapping along with geochemical and
geophysical surveying activities at the Sabalong property have defined a number
of potential porphyry intrusive targets. Southern Arc commenced drilling in
October 2011 and has completed two holes to date, for a total of 1,342 metres.
Although no significant assay results were returned, the geology and wallrock
alteration recognized in the drill core provided sufficient encouragement to
drill a third hole targeting potential porphyry copper-gold mineralization below
a lithocap. Drilling of the third hole has just been completed with final target
depth of 468.85 metres. . Vale has exceeded its US$1 million Phase 1 funding
obligations with the current drilling program. Results will be released when
Phase 1 exploration is deemed complete, at which point Vale has the option to
carry on to Phase 2 and complete US$2 million of funding within two years.
East Elang Property (Sumbawa Island)
The East Elang property is located adjacent to Newmont's Elang copper-gold
deposit (25 Moz gold, 16 Blb copper - Newmont February 2011 press release).
Aerial photography and lithographical studies suggest that the Elang mineralized
structure extends onto Southern Arc's East Elang property. While the property is
considered highly prospective due to its location and results from aerial
surveys, exploration of this property has been deferred pending reclassification
of the property's forestry status. Application has been made to the Regency
authorities for suspension (back-dated for two years) of the IUP license until
the reclassification process has been completed, ensuring that Southern Arc has
adequate time to evaluate the property once exploration commences. The East
Elang property is included in the Vale option and joint venture agreement. Vale
can earn a 75% interest in both the Sabalong and East Elang properties by
advancing either property to bankable feasibility study.
Taliwang Property (Sumbawa Island)
Located adjacent to Newmont's world-class Batu Hijau copper-gold mine, the
Taliwang property covers 31,200 hectares prospective for gold, silver and copper
mineralization. Exploration to date has identified a gold-silver bearing
epithermal vein system in which 56 drill holes have confirmed both lateral and
vertical persistence of the mineralized structures, near-surface porphyry
copper-gold targets with associated surface high-sulphidation epithermal
signatures, and sedimentary gold-hosted targets. Surface exploration activities
during 2011 focused on detailed lithological and alteration mapping of
epithermal and porphyry prospect areas, as well as clay spectral analysis
studies.
In March 2012, Newcrest Mining Limited ("Newcrest") terminated a Heads of
Agreement with Southern Arc whereby Newcrest could have earned a 63.75% interest
in the project by funding exploration expenditures through to bankable
feasibility study or US$50 million in expenditures. Despite best efforts by
Southern Arc and Newcrest, certain conditions precedent under the non-binding
Heads of Agreement could not be met in the required timeframe, and accordingly
the Heads of Agreement lapsed.
On May 17, 2012, Southern Arc announced the completion of a Cooperation
Agreement with the West Sumbawa Regency, ensuring collaboration and support as
the project advances. Under the terms of the agreement, Southern Arc has granted
the West Sumbawa Regency a 10% free-carry equity interest in the project. Also
on May 17, Southern Arc announced that it has increased its ownership in the
Taliwang project from 85% to 90%. Southern Arc simplified the ownership
structure and increased its equity interest in the project through the
acquisition of additional shares in PT Indotan Sumbawa Barat (Taliwang Project),
the subsidiary that holds the IUP to explore the Taliwang project, from Southern
Arc's Indonesian partner, PT PPM. In consideration for transferring its 5%
interest in both the West Lombok and Taliwang projects, PT PPM will receive
US$1,500,000 and 2,250,000 Southern Arc shares, subject to TSX Venture Exchange
acceptance.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2012
During the nine-month period ended March 31, 2012, the Company had a loss of
$3,624,672 compared to loss of $5,359,131 for the comparable period ended March
31, 2011. Significant fluctuations occurred in the following categories:
a. Share-based compensation of $837,053 (2011: $3,679,906) decreased as a
result of fewer stock options granted during the period. Share-based
compensation expense is accounted for at fair value as determined by the
Black-Scholes Option Pricing Model using estimates that are believed to
approximate the volatility of the trading price of the Company's stock,
the expected lives of awards of stock-based compensation, the fair value
of the Company's stock and risk-free interest rate.
b. Consulting fees of $333,573 (2011: $281,113) increased as more
consultants were engaged during the period.
c. Foreign exchange gain of $473,267 was realized during the period ended
March 31, 2012 (2011: $17,583) primarily due to the effect the
fluctuation of the $US/$CAD exchange rate had on the Canadian equivalent
of the Company's holdings and transactions in its $US bank balance and
$US payables balance.
d. Management fees increased to $458,000 compared to $301,500 in 2011 and
are discussed in detail in the Related Parties section.
e. Office and miscellaneous expense increased to $872,108 (2011: $405,748)
as a result of staffing up to support the increased exploration
activity, inclusive of increased administrative charges from a related
party.
f. Professional fees of $434,670 (2011: $448,296) decreased slightly with
similar levels of corporate legal activity during the period.
g. No property investigation costs were expensed during period ended March
31, 2012 (2011: recovery of $94,500).
h. Travel expenses of $172,967 (2011: $223,662) decreased as a result of a
reduction in executive travel during the period.
i. Interest income of $217,710 increased significantly during the nine-
month period ended March 31, 2012 (2011: $3,711) due to higher cash
balances from equity financings.
j. Under other items in 2012, the Company recorded its share of the equity
loss of Nickel Oil & Gas of $52,289 and recorded an impairment charge
related to Nickel of $305,582. In 2011, other items included a $54,852
gain on the sale of the Company's MAV II notes.
k. During the nine-month period ended March 31, 2012, the Company invested
$10,288,639 (2011: $1,831,429) on exploration properties and $206,090 on
property, plant and equipment (2011: $104,301).
l. During the nine-month period ended March 31, 2012, the Company received
$1,090,307 (2011: $407,555) of exploration advances in relation to its
joint venture on the Sabalong and East Elang properties and expended
$1,038,624 on exploration activities related to this joint venture
(2011: $127,033).
On behalf of the Board of Southern Arc Minerals Inc.
John Proust, Chairman & CEO, Director
About Southern Arc
Southern Arc Minerals Inc. is a Canadian mineral exploration company with an
aggressive exploration, acquisition and growth strategy. The Company's portfolio
includes four exploration projects with epithermal gold and copper-gold porphyry
prospects on the Lombok and Sumbawa islands in Indonesia, three of which are
being advanced in partnership with major mining companies Vale and Newcrest. The
Company's key exploration property is its West Lombok project, with several
gold-rich copper porphyry and epithermal gold vein prospects. Southern Arc is
listed on the TSX Venture Exchange under the symbol SA and on the OTCQX
International under the symbol SOACF. More information is available at
www.southernarcminerals.com or by emailing info@southernarcminerals.com.
Forward-looking Statements
This news release contains forward-looking statements relating to expected or
anticipated future events and operations, timing of projects and anticipated
results that are forward-looking in nature and, as a result, are subject to
certain risks and uncertainties, such as general economic, market and business
conditions, the regulatory process and actions, technical issues, new
legislation, competitive and general economic factors and conditions, the
uncertainties resulting from potential delays or changes in plans, the
occurrence of unexpected events, and the company's capability to execute and
implement future plans. Actual results achieved may vary from the information
provided herein as a result of numerous known and unknown risks and
uncertainties and other factors. There is no representation by the company that
actual results achieved during the forecast period will be the same in whole or
in part as that forecast.
Qualified Person
The technical information in this document has been reviewed by Southern Arc's
Chief Geologist, Andrew Rowe, B. App. Sc. Geology, MAusIMM. Mr. Rowe has over 18
years of international mineral exploration experience throughout Southeast and
Central Asia and Australia. During this time he has held such positions as Chief
Geologist - Feasibility Studies, Senior Geologist and Consulting Geologist. The
technical information in this document has also been reviewed by Southern Arc's
President & Chief Operating Officer, Dr. Mike Andrews, PhD, FAusIMM, who has
sufficient experience relevant to the style of mineralization under
consideration and qualifies as a Qualified Person as defined by National
Instrument 43-101.
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