Kagara boosts zinc project

KAGARA Zinc Limited has boosted its Mt Garnet Zinc project in North Queensland after reaching agreement to acquire Lachlan Resources NL’s nearby Balcooma project, including the high-grade Surveyor 1 zinc/lead deposit, which Kagara will immediately incorporate in its development plans.

The acquisition – which will significantly enhance the production and value of the Mt Garnet project – marks a major step forward for one of Kagara’s North Queensland strategies – to secure control of other zinc deposits which can be processed through the proposed central concentrator facility at Mt Garnet.

Payment for Balcooma is $3 million and the issue of an 18-month, secured $3 million convertible loan note, convertible at Lachlan’s election into ordinary Kagara shares at a price of 35¢.

The note is redeemable at any time without penalty at Kagara’s election. If converted, Lachlan would have 8.6 million shares, giving it a 15 per cent stake in Kagara.

The cash component of the acquisition will be funded through a placement of 5 million 30¢ shares to raise $1.5 million. The balance will come from a short-term unsecured $1.7 million loan from Kagara chairman Kim Robinson.

The Balcooma project is 120 kilometres south west of Mt Garnet and 230 km north west of Townsville.

ASX-listed Lachlan is an 81 per cent subsidiary of the US-based international gold producer Homestake Mining Company.

The initial focus for Kagara will be the Surveyor 1 deposit, a high-grade polymetallic resource of 659,000 tonnes at 16.74 per cent zinc, 6.70 per cent lead, 1 per cent copper, 142 grams/tonne silver and 1 g/t gold. About 87 per cent of this resource is classified in the measured category with the balance in the indicated category.

The project also includes other significant copper and polymetallic resources, an exploration camp and some 120 square kilometres of granted tenements. The other deposits — including Dry River South and the Balcooma copper deposit — form part of a total resource of 6.2 million tonnes.

“Surveyor 1, which is located on a granted mining lease, is a quality deposit which can be immediately integrated into our current feasibility study and development plans without substantially changing the current timetable for its completion,” Kagara managing director Mark Ashley said.

Earlier this year, Kagara consolidated ownership of the Mt Garnet and King Vol deposits.