All
Year end results
Nora Exploration Inc NXI
Shares issued 21,290,682 Mar 12 close $0.90
Fri 13 Mar 98 Company Review
Mr Pierre Leveille reviews the company
NAMIBIA
On November 21,1996, Nora's shareholders approved the $4.7 million
participation in Otjua Minerals, a Namibian diamond mining company. The
purchase of 47% of the company's shares entitles Nora to 51% of Otjua's
profits. Otjua has been in production since 1990 and generated $2 million
in revenues during 1995-1996. Otjua's subsequent revenues were the primary
source of Nora's income this year.
Otjua's contractual concessions are on the eastern shores of the Atlantic
Ocean and stretch 140km along the Namibian coastline. They include the
beaches from North Rock in the south to Grosse Bucht in the north, are 100
metres wide above the high water mark, and extend 5km into the ocean. Under
contract to Namdeb Diamond Corporation, Otjua's mineral rights are valid
until 2019.
Namdeb is jointly and equally owned by the Namibian government and De Beers
Consolidated Mines. With yearly output estimated at about 1.3 million
carats Namdeb is Namibia's leading diamond mining company. Namdeb holds the
mineral rights to what is known as diamond area No. 1, extending from the
Orange River north past Hottentot Bay, surrounding the Otjua concession.
The central coastline south of the Orange River has been called the world's
largest and richest gem diamond deposit.
Prior to the acquisition, Nora had contracted Placer Analysis to conduct a
technical due diligence review and report on the Otjua concession's
potential. The geologist noted that there was a substantial shortfall
between the potential of Otjua's contracted areas and the actual
production. With a single production plant, Otjua had concentrated the bulk
of its limited manpower resources on a 20km stretch of the much longer
coastline. The remainder of the area was essentially untried. The
geologist's report concluded that sampling and mining along the present
coast has shown mineralization along its entire length with very high
quality diamonds. The diamond resource in the area could amount to 3.0 -
3.5 million carats with a total inferred value of $510 million or more.
Pursuant to contractual obligations with Namdeb, no quotas are imposed on
production from the Otjua concession and Namdeb is required to purchase all
production in a timely manner. This arrangement assures early cash flow
while avoiding the need for a costly marketing infrastructure.
To further evaluate the resource and identify future mine sites,
preparatory work to explore the concession off the coast was conducted by
Nora following the acquisition. Bulk sampling work in the richest areas
identified - the shallow water segment will begin in March.
The production plant configuration, inherited in the acquisition, allowed
treatment of eight tons of material per hour. Through a production plant
upgrade and purchase of land moving equipment costing $700,000, the amount
of material treated at the plant will increase to 50 tons per hour early in
the next fiscal year.
Nora intends to have a second 50 ton per hour production plant in operation
within the next fiscal year and to add two more the following year.
Additional bulk sampling units will also be acquired as well as diver
support platforms.
Nora is confident that production for fiscal 1998 will attain 50,000
carats. This translates into revenues in excess of $7 million with an
expected net income of $2 million. Furthermore, production and income
should quadruple by the year 2000.
MARINE JEWEL
Nora's latest acquisition in Namibia is referred to as the second largest
offshore diamond marine concession in southern Africa. The property
consists of 23 deep water concessions, each with an area of 1,000 sq km.
They are considered a single block starting on the Namibian South African
border and extend northward along the outer edge of the continental shelf
and on the continental slope. The southern part of the concession is
adjacent to the western border of Namdeb's main set of concessions from
which the great majority of DeBeers' offshore production is derived.
In July 1997, Nora acquired a 10% interest in the property from Namibian
Gemstones Mining at $552,000. Subsequently, Nora entered into an option
agreement whereby it can obtain an additional 70% interest in the property.
By financing a detailed geophysical survey on the concession - at US$1.2
million - Nora, as operator, is entitled to obtain an additional 20%
participation.
Upon completion of the survey, Nora will have until May 15 1998 to exercise
its option on the remaining 50% at US$3.6 million payable in five equal
monthly instalments of US$720,000 beginning at that time.
These Namibian initiatives combined with various licence applications are
moving Nora a long way towards becoming a significant player in the world
marine diamond business.
GHANA
Ghana possesses enormous diamond resources and recovery potential. Nora
holds a majority interest in the Kade concession, in the Birim River
diamond fields. Geological reports indicate deposits of significantly
higher quality than the great majority of Ghanaian diamonds with estimated
reserves of 540,000 carats.
Minimal work is now being conducted.
CHILE
During fiscal 1997, Nora entered into an agreement with Dania Gold SA to
purchase 100% of a gold concession in the Maricunja district of Chile.
Subsequently, Nora sold an option enabling Orex Exploration to acquire a
75% participation in the concession.
Taking into consideration the underdeveloped stage of exploration on the
concession as well as the recent situation prevailing in the gold market,
it has become more and more apparent to Nora that allocating the necessary
resources towards its diamond mining interests is definitively more
profitable. With this in mind, management is presently reassessing its
future plans for the concession in Chile.
During fiscal 1997, the company's activities were focused on closing a
major acquisition and on the further development of its Namibian assets.
OTJUA MINERALS
The company's first ever revenues result from the 51% revenue and profit
interest participation in Otjua, (subsequently increased to 100% from
December 1 1996 to November 30 1997). Revenues fell during the last quarter
of the year as Otjua finished the scheduled upgrade of the production
plant. Apart from this planned interruption, operations at the mine
continued smoothly during the year. Diamond recovery for 1998 is projected
at 50,000 carats as the 50 ton per hour plant upgrade and equipment
modernization is finalized.
Results reflecting the company's 100% interest since the acquisition are as
follows:
Nine months ended August 31
1997
Total mining revenues 1,435,000
Total production costs
and expenses 1,287,000
Income taxes 8,000
Otjua net profits after
taxes 140,000
Included in the $1,287,000 of production costs and expenses the sum of
$360,000 was used to pay for the production plant up-grade. Available cash
is being retained in the business to increase production capacity and to
improve productivity.
NORAGEM (PTY) LIMITED
The fully owned Namibian subsidiary Noragem was created in 1996. Through
this entity, the company acquires the required production equipment and
leases them to the company's affiliated companies.
Up to August 31 1997, Noragem was financed through interest free loans from
the company. There are no fixed terms of repayment for the loans, totalling
$378,000.
Administration and Management expenses for the year ended August 31 1997
total $772,833 compared to $333,668 for the year ended August 31 1996, an
increase of 131.6%. The significant increase is a direct result of the
company's growth and increase in its overall activity. The company's
acquisitions and expanded activities as well as an emphasis placed on
investor relations, resulted in a substantial increase in travel and
related expenditures. The company has been represented at most of the
important mining conferences throughout North America and abroad. The
hiring of additional personnel in the Canadian office combined with the new
corporate offices in Namibia are responsible for the increase in salaries
and office expenses.
Exploration expenditures on the Otjua contractual concessions were
considered as normal production costs and expenses and, as such, were not
capitalized or segregated in Otjua's financial information.
Having acquired a certain expertise in Africa, management believes that
there are significant diamond exploration and mining opportunities on the
continent. During the coming years, the company intends to continue its
approach to property acquisition and exploration in Africa.
The company has decided to writeoff its Canadian (East Leitch) deferred
exploration and development expenses. While management considers the
project viable, it is not included in the company's future development
plans. The company will therefore seek to sell its interest in the
concession.
In Ghana, environmental work was conducted following the issuance of a
mining lease, for the Kade concession, to the company in 1996.
The company's major investment, its 47% interest holding in Otjua Minerals,
was valued at $4,892,366 as of August 31 1997.
The company acquired a 10% interest in an offshore diamond marine
concession in Namibia for an amount of $552,000. The company can obtain an
additional interest of 70% by spending US$1.2 million in exploration work
and making cash payments or issuing shares of the company for US$3.6
million before September 15 1998.
On November 21 1996, the shareholders of the company approved the issuance
of 2,000,000 shares of its share capital to Elizabeth Bay at US$0.50 for
the transfer by Elizabeth Bay of an option to acquire additional assets and
mining rights.
Under the terms of a memorandum dated November 22 1996, the company agreed
to grant 2,000,000 shares for the transfer of the option and in retainer
fees for the acquisition of concessions in Namibia including, but not
limited to the Namibian Gemstone concessions.
This issuance at a cost of $1,340,000 was accounted for under mining
property Namibian Gemstone.
The company significantly increased it capital base during the year by
completing a major acquisition, two private placements and through other
sources. The number of shares issued increased from 11,450,682 (valued at
$6,107,214) at the beginning of fiscal 1997 to 22,239,275 (valued at
$13,722,607) at the end of the fiscal year. The most significant issues
were:
1. The November 21 1996 shareholders approval of the Elizabeth Bay
Diamonds transaction. The company issued 9,000,000 shares valued at
$6,027,750 as payment in the transaction.
2. The company closed private placements in September and October 1996,
resulting in the issuance of 450,000 shares in exchange for $810,000
in cash.
3. During the fiscal year the company received $853,144 from the exercise
of 1,338,593 options and warrants.
As of August 31 1997, the company had $56,430 in cash. For the period from
September 1 1997 to December 31 1997 the company increased its cash
position by $1,104,975 through the exercise of options, warrants and by
private placements.
STATEMENT OF EARNINGS
Year ended August 31
1997 1996
Income
Share in results
of a company
subject to
significant
influence $ 140,000 $ -
----------- -----------
General and
admin expenses 772,833 333,668
----------- -----------
Others
Writeoff of
deferred
exploration
and development
expenses 814,170 3,478
Bad debts 65,265 -
Writeoff of
a mining
property - 25,000
Interest
income (11,079) (4,017)
Gain on
disposal of
investment - (71,964)
----------- -----------
868,356 (47,503)
----------- -----------
Net loss for
the year $(1,501,189) $ (286,165)
=========== ===========
Loss per share $(0.08) $(0.03)
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
regards
gmweber |
