Crusader Resources Ltd (“Crusader”, “the Company”) is an Australian mining company focused on Brazil. It operates the Posse Iron Ore Mine (100%) in Minas Gerais state, cash flow from which is used to advance a portfolio of exploration to development stage gold and lithium assets
Crusader’s gold assets include the Borborema Project (100%), located in Rio Grande do Norte state, and the Juruena Project (100%), located in Mato Grosso state. The Company’s lithium asset is a Joint Venture (50%) incorporating the Manga Project, located in Goias state.
Crusader was incorporated in October 2003, and listed on the Australian Securities Exchange (“ASX”) in February 2004. Prior to June 2008, the Company’s name was Crusader Holdings NL. We estimate issued capital is currently $68million, or $0.29/share.
100% Owned Posse Iron Ore Mine Developed for $5.4M
The Posse Iron Ore Mine (“Posse”, “the mine”) consists of one granted mining license, an open pit mining operation and beneficiation plant in Minas Gerais state, approximately 30km from the capital, Belo Horizonte. The granted license (834.705/1993) covers an area of 1.09km2.
Crusader acquired Posse in September 2007 and advanced it from the exploration stage into an operating mine at a total purchase and development cost of $5.4million.
Posse has been in commercial production since March 2013. Reserves have not been certified. A Resource estimate was prepared in January 2009, however the estimate is not certified to current JORC (2012) reporting standards.
Output from the mine is marketed to a network of surrounding pig iron smelters, which make up Brazil’s “iron quadrangle”. A sealed highway network runs adjacent to the mine gate.
Since commissioning, we estimate the mine has generated free cash flow exceeding $10million and an internal rate of return exceeding 170 per cent.
Crusader has utilised earnings generated by Posse to acquire and advance less developed assets within its portfolio.
Crusader's Juruena Gold Project Consists of 21 Licenses
The Juruena Gold Project (“Juruena”) consists of 21 exploration licenses and applications located in the northwestern part of Mato Grosso state, near its boundaries with Pará and Amazonas states. The project covers 447km2 in a sparsely populated area. The small city of Alta Floresta is located some 250 km east-southeast of the property. Access is via dirt roads or light plane, with the site hosting a gravel airstrip.
Juruena was acquired in May 2014 from Lago Dourado Inc. (TSX: LDN) for $C650,000 plus 2million Crusader shares. All shares issued as part of the acquisition are subject to 12 months escrow, and 1.5million remain to be issued, contingent on development milestones.
Artisanal miners have been active at Juruena since the 1970’s, and it is estimated they have collectively extracted 0.5million oz gold. Prior to Crusader, two systematic exploration initiatives had taken place at Juruena since the 1990’s, delivering ~44,000metres of drilling. Collectively these campaigns represented investment exceeding US$25million.
Image: Aerial View of Juruena. Source: Website of Crusader Resources
Subsequently, Crusader has delineated Juruena’s first certified resource estimate. Across three prospects Crusader has defined a JORC compliant resource of 0.23million ounces at an average grade of 5.6g/t, classified as inferred
Juruena: Scoping Study Nears Completion
Juruena is situated on the western end of the prospective Juruena‐Alta Floresta Gold Belt, which is estimated to have produced ~7Moz from 40 documented discoveries since 1979.
The main project area is centred around a gold in soil anomaly spanning 8km by 4km, the style and scale of which has been compared to Boddington (11Moz, Western Australia) and Las Cristinas (16Moz, Venezuela).
Whilst the scale of Crusader’s landholding and mineralised encounters to date may warrant investigation of Juruena’s potential to host large scale gold project, Crusader is presently focused on prospects capable of hosting a near term, high grade mine development.
A 10,000metre drilling program targeting close to surface ores formed the basis of a maiden 0.23million oz resource estimation in September 2015.
The resources are defined at three prospects within 1km of one another. A scoping study is currently underway to appraise the technical and economic merit of a mine development, whilst applications for trial mining licenses have been lodged.
The scoping study is appraising open pit and underground mining scenarios involving two declines, at Dona Maria and Querosene. Completion, alongside an upgraded resource estimate is scheduled for H1 2016.
Economics of Crusader's Juruena Gold Project
Crusader is planning to develop Juruena as a high grade, open pit and underground mining operation. Two declines, at Dona Maria and Querosene, are being considered as part of the current scoping study.
To support development, the Company has signed a non‐binding option to purchase and install a refurbished plant from Brazilian equipment supplier GNA (Minerales equipamentos e Acos Especiais Ltda).
GNA is an existing supplier of services and products to Crusader’s Posse mine. The plant includes three stage crushing and a single ball mill recently purchased (second hand) by GNA. The option is for the supply and installation on site at Juruena (turn‐key) and comes at a cost of ~US$2million.
The plant is capable of processing 0.1Mt pa and could support a production rate exceeding 30,000oz pa based on Juruena’s high grade, albeit ‘inferred’ resource component.
Whilst the Juruena Scoping Study remains subject to completion, we have benchmarked operating costs against similarly high grade gold mines.
Borborema Gold Project: Excellent Infrastructure
The Borborema Gold Project (“Borborema”) consists of 3 mining leases and one exploration license located in Rio Grande do Norte state. Borborema covers 85km2, approximately 155km from the state capital, Natal.
Borborema was acquired in August 2010 for $2.4million from privately held, MGP Ltda. It has excellent infrastructure with grid power, on site water storage, established buildings and bitumen road access. Natal hosts an international airport.
Artisanal miners had been active at Borborema from 1942. In 1984, the site hosted Brazil’s first ever heap leach mining operation. Historic production is estimated to be 0.3million oz.
During 2007, prior to its acquisition by Crusader, Borborema was subject to a 75hole (~10,000metre) diamond drilling campaign which formed the basis of a non JORC compliant resource estimate.
Image: Entry to Crusader's Borborema Project. Source: Website of Crusader Resources
Since acquiring Borborema, Crusader has completed a Pre Feasibility Study into a 3Mt, 131,000oz pa mining operation, and delineated a proved and probable Reserve in November 2012 of 43.4Mt grading 1.18g/t for 1.6million oz. Note that the Reserve estimate is not compliant with the current JORC (2012) reporting standards.
Crusader targets Completion of Optimised Development Study in H12016
After acquiring Borborema, Crusader investigated its potential to host a large scale open cut mining operation. The Company conducted over 40,000metres of drilling.
A Mineral Resource estimate was prepared in December 2011, however this estimate is not compliant with current JORC (2012) reporting standards. The resources were estimated to depths of 350metres over a 3km strike and remained open in all directions.
These resource estimates formed the basis of a Pre Feasibility Study (“PFS”), concluded in September 2011, and subsequent Reserve estimate in November 2012, which is not compliant to current JORC (2012) standards.
A Bankable Feasibility Study (“BFS”) was initiated, but later paused due to significant declines in the gold price. Subsequently, Crusader has commissioned an Optimisation Study to evaluate Borborema’s development potential under lower gold price scenario’s, leveraging existing PFS and BFS materials.
The Optimised Development Study is targeting a shallower Reserve (~0.8moz) than the November 2012 estimate, which is intended to the reduce strip ratio, capital costs, and project footprint. The Optimised Development Study is scheduled for completion in H1 2016.
The 2011 PFS evaluated the technical and economic merit of a 3Mtpa open cut mining operation, producing 131,000oz pa on average over a nine year mine life.
The PFS was based on a Resource estimate which is not compliant with existing JORC (2012) reporting standards. Start up capital costs were estimated to be US$169million, and operating costs to be $US558/oz. At a gold price of $1,300/oz, Crusader considered such an operation at Borborema was economically viable.
With gold prices trading significantly lower over recent years, Crusader has commissioned an Optimisation Study to ensure development of Borborema is cyclically robust.
By focusing the shallowest part of Borborema’s Reserve estimate, the Optimisation Study is expected to lower capital costs and the overall risk profile.
In addition, the Optimisation Study can account for recently favourable impacts stemming from a weakening in the Brazilian currency and global energy prices.
Financial Performance: Crusader Resources
Crusader generates income from the Posse Iron Ore Mine. Since Posse’s commissioning in March 2013, the mine has generated cumulative revenue of exceeding $33million however income has not been sufficient to eliminate Crusaders reliance on external capital.
During 2015, Crusader reported revenue of $7.3million, a decline of 53 per cent on the prior year due to weaker iron ore prices. Posse delivered a “break even” result, with the Company reporting a gross profit of $0.05million, down from $6.2million in the prior year. Capital demands associated with other projects saw Crusader report a loss of $10.1million, which widened from a $4.1million loss in the prior year.
In addition to cash flow from Posse, Crusader has funded its capital demands via a combination of project debt and equity. As of March 2016, the Company’s borrowings stood at $5million.
The debt facility is supplied by Macquarie Bank and is secured over by a general security agreement over the assets of the Group, and a specific security agreement over the shares of the Australian subsidiaries. The facility bears an interest rate margin of 8.5 per cent over the Bank Bill Swap Rate and matures 31st December 2016.
Crusader’s most recent equity financing initiative was a $6.25million placement at $0.10/share announced in March 2016. The placement expanded Crusader’s shares outstanding by 28.5 per cent. Following the March placement, we estimate issued capital stands at $68million, or $0.29/share.
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