june 2018 quarterly activities report · it is a permitted, conventional copper-cobalt leaching...

Winmar Resource Ltd Ground Floor, 20 Kings Park Road, West Perth, WA, 6005

P: (08) 6426 1421

www.winmarresources.com.au

ASX ANNOUNCEMENT 31 July 2018

June 2018 Quarterly Activities Report

HIGHLIGHTS

Figure 1: The Luapula Processing Facility located in the DRC

During the quarter, the Company introduced a new Board and management and rapidly progressed and implemented its plan of identifying advanced and highly prospective cobalt projects and operations in the DRC for outright acquisition and joint venture as part of its ‘Cobalt Strategy’.

• In May, the Company strengthened its Board of Directors with the appointment of highly experienced mining and finance professionals, Mr Thomas Durr and Mr Michael Fry.

• At a General Meeting held on 20 June 2018 shareholders approved all resolutions demonstrating shareholders strong support for the Company’s ‘Cobalt Strategy’.

• In June, the Company commenced exploration activities at the Bloom Lake Cobalt Project in Canada, one of three blocks of mining claims secured in January 2018 and covering 2,240ha within the historic high-grade silver-cobalt mining district of Cobalt-Gowganda.

Subsequent to end of quarter, Cobalt Strategy significantly advanced with the execution of a Heads of Agreements to acquire a 50% interest in the Luapula Cobalt Processing Facility and a portfolio of several highly prospective exploration licenses that are considered suitable by the Company’s technical consultants to potentially supply the run-of-mine feed to the Facility.

• On completion, the acquisitions will amount to a significant change in the nature and scale of Winmar’s current activities, and as such, Winmar has been advised that it will be required to satisfy Listing Rules 11.1.2 and 11.1.3 and obtain approval from its shareholders, and to re-comply with Chapters 1 and 2 of the ASX Listing Rules in order to complete the acquisitions.

• Winmar’s securities are currently in suspension and will remain in suspension whilst the Company finalises for release a more detailed announcement on the acquisitions.

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(ASX:WFE) Winmar Resources Ltd (Winmar) is pleased to provide its activities report for the

quarter ended 30 June 2018.

Shareholders Support for DRC Cobalt Strategy

On 20 June 2018, at an Extraordinary General Meeting, shareholders overwhelmingly

demonstrated their support to the Company’s strategy to acquire advanced and highly

prospective cobalt projects and operations in the Democratic Republic of Congo – what is

termed the ‘DRC Cobalt Strategy’.

All resolutions were carried at the on a show of hands and with validly appointed proxies of

between 93% - 98% in favour of each resolution.

Shareholders ratified the issue of shares for the A$3.1m funding that was secured to advance

the Company’s ‘DRC Cobalt Strategy’ (refer ASX Announcement 20 March 2018). This comprised

the issue of 425,256,922 shares at a price of $0.005 to Professional and Sophisticated investors

on 23 March 2018 under Listing Rule 7.1 and 7.1A to raise A$2,126,285 and the issue of

200,000,000 shares at a price of $0.005, to the principals of Singapore-based specialist corporate

advisory group Airguide International Pte Limited (Airguide) to raise A$1,000,000, which was

conditional on shareholder approval and the Company entering into a binding agreement to

acquire exploration and/or mining licences in the DRC that are both prospective for cobalt and

capable of being rapidly advanced towards production.

Shareholders also approved the issue of Performance Rights to Airguide, who were appointed in

the previous quarter as Strategic Advisors to the Company (refer ASX Announcement 20 March

2018), to help facilitate and advise on key relationships and a broader strategic work program

aimed at securing value-adding commercial agreements with relevant counter-parties with

specific emphasis on cobalt off take agreements and associated funding structures and

investment.

Board Strengthened to Deliver Shareholder Returns

During the Quarter, the Company appointed two highly-experienced mining and finance

executives to its Board of Directors, with Mr Thomas Durr and Mr Michael Fry, both assuming

Non-Executive Director roles with the Company.

Mr. Tom Durr is a qualified Mining Engineer with over 30 years’ experience of managing major

capital projects and leading strategic management initiatives within the international mining and

process industries.

During his career, Mr. Durr has held senior positions at the Chief Executive Officer, Managing

Director, Vice President, Project Director, Business Development Director and General Manager

levels within owner operator, top 4 blue-chip consulting and various international EPC and EPCM

contracting businesses.

Mr Michael Fry is an experienced company manager across a broad range of industry sectors.

Mr Fry has a background in accounting and corporate advice having worked with KPG (Perth,

Manchester), Deloitte (Melbourne), and boutique corporate advisory practice Troika Securities

(Perth). Mr Fry is currently the Chief Financial Officer and Company Secretary at Force

Commodities Limited (ASX: 4CE) and Globe Metals & Mining Limited (ASX: GBE), and a non-

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executive director of VDM Group Limited (ASX: VMG). Mr Fry previously served as Director,

Chief Financial Officer and Company Secretary at Swick Mining Services Limited (ASX: SWK)

(2006-2011).

The appointments of Mr Durr and Mr Fry follow the resignation of Mr Noel Halgreen as a Non-Executive Director, and the departure of Mr. Rod Sainty as Managing Director and Mr. Andrew Bray as General Manager.

Following the changes to the Board of Directors and management, the Company elected to relocate its Registered Office and Business Address to 20 Kings Park Road, West Perth, WA 6010.

Exploration Program Approved for Bloom Lake Cobalt Project in Canada

Figure 2: Location of the Bloom Lake Cobalt Project in Gowganda, Ontario, Canada

During the Quarter, the Company approved the

Phase 1 cobalt exploration budget for the Bloom

Lake Cobalt Project.

The Bloom Lake Cobalt Project is one of three

blocks of mining claims that the Company

announced it had reached agreement with

CBLT Inc. to acquire the 100% rights to.

These claims which also include the United

Reef Cobalt Project and Calcite Lake Cobalt

Project, cover 2,240 ha within the historic high-

grade silver-cobalt mining district of Cobalt-

Gowganda in eastern Ontario, Canada (refer

ASX Announcement 22 January 2018).

The three projects are located peripheral to a

cluster of former high-grade silver-cobalt mines

at Gowganda, 85km northwest of Cobalt, which

operated from 1910 to 1989.

During the quarter, the Company appointed key technical consultants to commence the Phase 1 cobalt exploration program at the Bloom Lake Cobalt Project to comprise mapping and sampling of the historical trenches, adits, and shafts located on the project site.

Phase I is largely completed with assay results scheduled to be received shortly..

Events Subsequent - Heads of Agreement: Cobalt Production Joint Venture

Subsequent to the end of the quarter, the Company announced that it had entered into a Heads of Agreement with African Holding Investment Company Limited (AHIC), to establish a new 50/50 joint venture to operate the existing Luapula Processing Facility located near the town of Likasi in the Democratic Republic of Congo (refer ASX Announcement 23 July 2018).

The Company further announced that it had entered into two further Heads of Agreement to acquire a portfolio of highly prospective cobalt exploration licenses, located close to the Luapula Cobalt Processing Facility and was continuing to review other acquisition opportunities including nearby cobalt tailings projects and the purchase of third party high-grade cobalt feed.

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The acquisitions are considered by the Company to have the potential to transform the Company

as it aims to become one of the world’s leading, publicly listed, primary producers of high grade

cobalt concentrates.

On completion, the acquisitions will amount to a significant change in the nature and scale of

Winmar’s current activities, and as such, Winmar has been advised that it will be required to

satisfy Listing Rules 11.1.2 and 11.1.3 and obtain approval from its shareholders, and to re-

comply with Chapters 1 and 2 of the ASX Listing Rules in order to complete the acquisitions.

The Company’s securities are currently in suspension and will remain in suspension whilst the

Company finalises for release a more detailed announcement on the acquisitions and to satisfy

ASX that all relevant information required under Guidance Note 12: Change to Activities. This

announcement will be released as soon as possible in consultation with ASX. Once released, it is

anticipated that the Company’s securities will re-commence trading and continue trading up

until the date of an Extraordinary General Meeting at which Shareholders will be asked to

consider and approve the acquisitions.

An overview of the acquisitions is as follows.

a. Luapula Processing Facility

The Luapula Processing Facility is located on the outskirts of the DRC Copperbelt town of Likasi.

It has been constructed on Land Plot 2008-2040 on an area of 125,000m2.

Likasi is located in the heart of the DRC Copperbelt, mid-way between the main mining towns of

Kolwezi to the west and Lubumbashi to the south-east. Likasi is the technical headquarters for

DRC state copper and cobalt mining company, La Générale des Carrières et des Mines

(Gécamines).

Figure 3: Location of the exploration licenses and Luapula Processing Facility in the centre of the DRC Copperbelt, the

world’s largest cobalt producing region.

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Figure 4: The Luapula Processing Facility located in Likasi in the Democratic Republic of Congo

The processing facility is approx. 400m off Route Nationale N1, the country’s main roadway which links the capital Kinshasa to its second largest city Lubumbashi.

The Luapula Processing Facility was constructed in 2014 at an estimated cost of US$80m.

It is a permitted, conventional copper-cobalt leaching plant, built with a design throughput of 250,000tpa of run-of-mine feed and capacity to produce up to 12,000tpa of a high grade, 30%-40% cobalt hydroxide product and a 15%-20% copper hydroxide product for sale into the international markets.

The Luapula Processing Facility has been designed with the following distinct processes/sections:

• ROM feed and primary and secondary crushing circuit • Final product drying section

• Milling and slurry storage circuit • Leach tailings storage section

• Leaching and solid-liquid separation circuit • Utility and services

Figure 5, 6 and 7: The Luapula Processing Facility Milling and Slurry Storage Sections

Figure 8, 9 and 10: The Luapula Processing Facility Leaching and Leach Filter Sections

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Figure 11, 12 and 13: The Luapula Processing Facility Precipitation Section

Figure 14, 15 and 16: The Luapula Processing Facility Warehouse and Product Stockpiling

Figure 17, 18 and 19: The Luapula Processing Facility Offices and Accommodation

The Luapula Processing Facility was initially operated to produce a predominantly copper hydroxide concentrate that was sold into the domestic and international markets. 100% of the ore feed to the facility was previously purchased from third parties, including local Congolese mining companies and co-operatives.

In late 2016, AHIC elected to cease production of copper concentrates and complete further feasibility study work on process flowsheet upgrades to produce a high grade cobalt hydroxide saleable product for the international markets and the establishment of a SX-EW process to produce copper cathodes, also for sales into the international markets.

In May 2018, the Company appointed DRC based metallurgical consultants Groupe EJKK (EJKK) to complete an independent audit and assessment of the Luapula Processing Facility.

EJKK are a well-established and highly experienced independent consultancy group based in the DRC, with a particular focus on copper-cobalt extraction plants and the production of cobalt hydroxide concentrates and production of copper cathodes by electro-winning processes.

The independent audit and assessment completed by EJKK, included several site visits, a full audit of the processing facility and installed plant and equipment to determine its operating capabilities.

It further included a detailed capital, working capital and operating cost analyses and scheduling of the work required to re-commence operations and complete a US$0.5m upgrade of the

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crushing and leaching circuit in order for the Luapula Processing Facility to operate at sustained levels to process 250,000tpa of run-of-mine feed with the capacity for initial production of 8,000tpa of high grade concentrates rising to 12,000tpa of a high grade cobalt hydroxide product at grades of 30% - 40% Co and a copper hydroxide product at grades of 15% - 20% Cu.

The audit review and process facility assessment confirmed the Luapula Processing Facility’s operating capabilities and robust financial and technical fundamentals.

It has further confirmed the low capital costs to recommence operations and forecast operating costs and a 4 to 6 month timetable to complete the recommended capital upgrades necessary to recommence production of high grade cobalt hydroxide.

b. Exploration Licenses and Cobalt Tailings Project Acquisitions

The Company has executed two binding Heads of Agreement with Congolese companies for Winmar to acquire 100% interests in 6 granted and contiguous Exploration Licenses located on the DRC Copperbelt and in close proximity to the Luapula Processing Plant.

These licenses which extend over approx. 500km2 are underlain by the main Roan Group which is the host to a number of large sediment-hosted copper-cobalt deposits located along structures to the west and east of the license areas.

The licenses are at various stages of exploration and development, with historical exploration activities including airborne geophysics, geochemical surveys, detailed geological mapping, trenching and pitting and both RC and DD drilling programs.

This historical work has defined several project areas where the Company’s consultants have proposed further activities. Winmar aims to undertake resource definition work, including metallurgical bulk sampling and mine planning to establish a JORC (2012) compliant resource.

These license areas are also subject to current artisanal cobalt and copper mining activities that have extended over a number of major structures identified on the license areas.

The Company is further completing legal and technical due diligence on a number of nearby cobalt tailings projects. A review of the historical records of the tailings dams, including volumes and cobalt and copper grades of the material deposited in the tailings are underway and being assessed. Surveys of the tailings dams are underway, as is sampling and metallurgical testwork. Detailed resource definition drilling programs, budgets and schedules have also been prepared.

In addition, the Company has commenced early stage negotiations for the supply of third party feed to the Luapula Processing Facility. The Company seeks to acquire feed at a rate of 10,000t per month and at grades of approx. +1.00% Cobalt. In the event that these negotiations are successful, the purchase of this material will be subject to it meeting the Company’s cobalt responsible sourcing policies and production practices that it is in the process of implementing.

The exploration licenses secured under the Heads of Agreements and material from the tailings projects under review are considered suitable by the Company’s technical consultants to potentially supply 100% of the run-of-mine feed to the Luapula Processing Facility.

c. Cobalt Offtake and Pre-Payment Funding

The Company is working with its Strategic Advisor, Airguide in order to develop and finalise a cobalt and copper concentrates offtake and related prepayment funding strategy for the Luapula Processing Facility.

Singapore-based Airguide has a proven track record of successfully advising ASX-listed battery materials companies with regard to investment funding and off-take partnerships in China.

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Airguide’s principals have been actively involved in the China commodity space for more than 15 years and the global industry for more than 20 years individually. In that time, they have established a clear track record for investing-in and advising companies across multiple commodities with respect to successfully completing agreements for off-take, joint-venture partnerships and investment.

Airguide has commenced discussions with a number of European and Asian based global commodity trading groups and end-users of cobalt in this regards. Meetings with a number of these groups has taken place in China, Europe, South Africa and the DRC, and several technical site visits already completed to the Luapula Processing Facility and Exploration Licenses.

d. Key Terms of the Acquisitions and Consideration Payable

The key terms and consideration is set out in the Company’s ASX announcement of 23 July 2018.

e. Capital Raising

To fund the up-front acquisition costs and initial capital and working capital requirements of the Luapula Processing Facility and the acquisition costs and exploration and development activities on the Exploration Licenses, the Company is proposing to complete a capital raising to raise A$8.0m by way of the issue of 333,333,333 new shares in the Company at the last closing price prior to the trading halt, of A$0.024 per share (Capital Raising).

Winmar has already received firm commitments exceeding the amount sought under the Capital Raising from institutional and sophisticated investors, including commitments from the Company’s Chairman for A$0.5m and the Company’s strategic advisor Airguide and its principals for A$1.7m.

The Company will seek shareholder approval for the issue of the shares under ASX Listing Rules 7.1 and 10.11.

The new shares will rank equally with all existing fully paid ordinary shares on issue.

The Capital Raising is being managed by Sixty Two Capital Pty Ltd (62 Capital). The Company and 62 Capital entered into a formal mandate agreement under which 62 Capital will be paid a total fee of 6% of moneys raised.

Shares will be issued to participants in the Capital Raising upon the Company satisfying Listing Rules 11.1.2 and 11.1.3 and obtaining approval from its shareholders for the proposed acquisitions and joint venture, and any applicable ASX waivers.

Interests in Mining tenements as at 30 June 2018

Project Lease Commodity Location Interest

Bloom Lake Cobalt-Silver Ontario, Canada 100%

United Reef Cobalt-Silver Ontario, Canada Option for 100%

Calcite Lake Cobalt-Silver Ontario, Canada Option for 100%

Hamersley M47/1450 Iron Ore Western Australia 70%

Winmar’s interest in the Hamersley Iron Ore Project is by way of an unincorporated joint venture with Lockett Fe Pty Ltd, a

subsidiary of Cazaly Resources Ltd.

END

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

+ See chapter 19 for defined terms 1 September 2016 Page 1

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

WINMAR RESOURCES LIMITED

ABN Quarter ended (“current quarter”)

80 085 905 997 30 June 2018

Consolidated statement of cash flows Current quarter $A’000

Year to date

(12 months) $A’000

1. Cash flows from operating activities

- - 1.1 Receipts from customers

1.2 Payments for

(89) (336) (a) exploration & evaluation

(b) development - -

(c) production - -

(d) staff costs (128) (465)

(e) administration and corporate costs (194) (632)

1.3 Dividends received (see note 3) - -

1.4 Interest received 4 8

1.5 Interest and other costs of finance paid (1) (1)

1.6 Income taxes paid - -

1.7 Research and development refunds - -

1.8 Other – GST refunds 59 71

1.9 Net cash from / (used in) operating activities

(1,687) (1,355)

2. Cash flows from investing activities

- -

2.1 Payments to acquire:

(a) property, plant and equipment

(b) tenements (see item 10) - (70)

(c) investments (661) (661)

(d) other non-current assets - -



Consolidated statement of cash flows Current quarter $A’000

Year to date

(12 months) $A’000

2.2 Proceeds from the disposal of:

- - (a) property, plant and equipment

(b) tenements (see item 10) - -

(c) investments - -

(d) other non-current assets - -

2.3 Cash flows from loans to other entities - -

2.4 Dividends received (see note 3) - -

2.5 Other (provide details if material) - -

2.6 Net cash from / (used in) investing activities

(661) (731)

3. Cash flows from financing activities

50 2,668 3.1 Proceeds from issues of shares

3.2 Proceeds from issue of convertible notes - -

3.3 Proceeds from exercise of share options - 60

3.4 Transaction costs related to issues of shares, convertible notes or options

- (159)

3.5 Proceeds from borrowings - -

3.6 Repayment of borrowings - -

3.7 Transaction costs related to loans and borrowings

- -

3.8 Dividends paid - -

3.9 Other (provide details if material) - -

3.10 Net cash from / (used in) financing activities

50 2,569

4. Net increase / (decrease) in cash and cash equivalents for the period

1,921 478 4.1 Cash and cash equivalents at beginning of

period

4.2 Net cash from / (used in) operating activities (item 1.9 above)

(1,687) (1,355)

4.3 Net cash from / (used in) investing activities (item 2.6 above)

(661) (731)

4.4 Net cash from / (used in) financing activities (item 3.10 above)

50 2,569

4.5 Effect of movement in exchange rates on cash held

- -

4.6 Cash and cash equivalents at end of period

961 961



5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter $A’000

Previous quarter $A’000

5.1 Bank balances 267 1,915

5.2 Call deposits - -

5.3 Bank overdrafts - -

5.4 Other (provide details) – Trust accounts 694 6

5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)

961 1,921

6. Payments to directors of the entity and their associates Current quarter $A'000

6.1 Aggregate amount of payments to these parties included in item 1.2 79

6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3

-

6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

7. Payments to related entities of the entity and their associates

Current quarter $A'000

7.1 Aggregate amount of payments to these parties included in item 1.2 -

7.2 Aggregate amount of cash flow from loans to these parties included in item 2.3

-

7.3 Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2



8. Financing facilities available Add notes as necessary for an understanding of the position

Total facility amount at quarter end

$A’000

Amount drawn at quarter end

$A’000

8.1 Loan facilities - -

8.2 Credit standby arrangements - -

8.3 Other (please specify) - -

8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

9. Estimated cash outflows for next quarter $A’000

9.1 Exploration and evaluation 150

9.2 Development -

9.3 Production -

9.4 Staff costs 180

9.5 Administration and corporate costs 280

9.6 Other (provide details if material) -

9.7 Total estimated cash outflows 610

10. Changes in tenements (items 2.1(b) and 2.2(b) above)

Tenement reference and location

Nature of interest Interest at beginning of quarter

Interest at end of quarter

10.1 Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced

10.2 Interests in mining tenements and petroleum tenements acquired or increased



Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which

comply with Listing Rule 19.11A.

2 This statement gives a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: 31 July 2018 (Director)

Print name: Michael Fry

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

june 2018 quarterly activities report · it is a permitted, conventional copper-cobalt leaching...

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