African Pioneer Plc is preparing to develop a 720,000-tonne-a-year processing operation at its Ongombo copper-gold project near Windhoek under a financing agreement that could eventually give Chinese partner Xinhai a 73.68% interest in the company holding its Namibian projects.
The company said in its interim results released on Tuesday that preparations are underway for 7,000 metres of drilling across Ongombo and the nearby Ongeama project, marking the first stage of a development programme backed by Hong Kong Xinhai Mining Services Limited.
African Pioneer currently owns 85% of the Namibian projects.
The Xinhai agreement sets out four development milestones, beginning with financing sufficient to complete the initial drilling programme. Xinhai would then undertake detailed engineering design for Ongombo before delivering construction equipment to Walvis Bay.
The final milestone provides for Ongombo to reach commercial operations through a processing plant designed to handle at least 720,000 tonnes of ore a year, together with the first phase of an underground decline to access the orebody.
Commercial operation would be considered achieved once the plant operates above 75% of its design capacity for 30 consecutive days.
African Pioneer executive chairman Colin Bird said work is now moving towards implementation.
“Operations are now being established and planning for the substantial drilling programme at Ongombo and Ongeama is well advanced,” Bird said.
“The drilling is designed to provide additional geological and technical information required for mine planning, while also seeking to expand and further define the existing mineral inventory.”
The initial 7,000 metres will be divided between Ongombo and Ongeama, while another 3,000 metres could be drilled at Ongeama depending on the results of the first programme.
The financing structure could eventually result in Xinhai taking a controlling interest in the holding company that holds the Namibian projects.
Xinhai will finance agreed development milestones through loans carrying interest of 10% per annum, while African Pioneer will provide security over its shareholding in the project holding company until the financing is repaid.
Instead of repaying in cash, Xinhai may elect to convert its financing into a 53.68% interest in the holding company after the third milestone.
That interest could rise to 73.68% once the fourth milestone is achieved.
The third milestone includes delivering construction equipment to Walvis Bay and transferring ownership of the equipment to the project holding company. It also provides for another 3,000 metres of drilling at Ongeama if results justify further work.
All conditions precedent to the definitive Xinhai agreement were satisfied in September.
African Pioneer also received a £712,786 share subscription from Xinhai on 28 September under the agreement.
Ongombo is located about 40 kilometres northeast of Windhoek in the Khomas Region and is covered by Mining Licence 240, which remains valid until March 2045.
The company says the Namibian government has granted all required approvals for the mining project.
Ongombo has a gross indicated mineral resource of 5.7 million tonnes grading 1.1% copper equivalent, comprising 0.94% copper and 0.23 grams per tonne gold.
African Pioneer also reports what it describes as 23 million tonnes of inferred underground potential resources grading 1.1% copper equivalent, 0.95% copper and 0.24 grams per tonne gold.
The project lies within the Matchless Belt and about 15 kilometres northeast of the Otjihase mine. African Pioneer says the mineralised zone at Ongombo extends for approximately seven kilometres.
Bird said the company sees Ongombo and Ongeama as the foundation for building a copper business in Namibia.
“We believe that Ongombo, together with the exploration potential at Ongeama, provides African Pioneer with an excellent opportunity to establish a meaningful copper business in Namibia,” he said.
African Pioneer is also evaluating additional opportunities in Namibia’s Northern Matchless Belt that could complement the two projects.
The company said its immediate focus for the remainder of the year is to start and execute the Namibian drilling and development programme.
