MINNEAPOLIS--(BUSINESS WIRE)--Wits Basin Precious Minerals Inc. provides the following updates from China Global Mining Resources (BVI) Limited (“CGMR”):
1. Beginning photo and current photo at the Xiaonanshan Iron Ore Mine (“XNS”) demonstrating consolidation of three pits into one pit:
2. Significant update of information regarding the newly issued mining license.
3. Q1 revenue through February 28, 2014.
Photos of the mine property: before safety work commenced and current
For the reader to note: comparison of the before photo to the current photo shows the relationship of widely disturbed and disorganized mining material and separate pits in 2012 and the current single pit in 2014.
This progress takes form most readily in the removal of large quantities of lose mining material left behind before Anhui Zhonghai Mining and Trading Company, the contractor (“AZH”) began safety work. This safety work is ongoing and shall continue until complete. Full production will only resume once the safety work has been completed. AZH reports that it has maintained the schedule for this work and expects completion by June 30, 2014.
Issuance of additional two year mining license
The significance of the issuance of a new two year permit, is the fact that future renewal applications and deeper rights can only be submitted by the holder of the license, The Ma Anshan Xiaonanshan Mining Company and this is CGMRs’ wholly owned company.
Revenue and costs during January and February 2014
The safety and mining rehabilitation work continues in earnest during this current quarter. AZH has reported this work program remains on pace with completion by June 30, 2014. The focus has been on this required and critical work and full production will only resume once this work has been completed.
In the interim, as a natural by-product of moving ore and selling it, CGMR has been able to generate revenue sufficient to begin the repayment process of startup costs and initial contractor repayments. The revenue for January and February however is lower than any of the prior four months. This is representative of four factors:
1. First, there was an abundance of earthwork and overburden “peal-back”
performed. This material is classified as “waste.”
2. In addition, at the margins of the mine where benching is now being performed, the mine contains more earth (waste) than ore.
3. The mine was not operational during the first two weeks of February due to the celebrations of the Chinese New Year.
4. The region has been experiencing ongoing rain and wet weather conditions that does not allow work to be performed due to safety conditions.
Concerning available cash distributions, CGMR and Wits Basin are requiring an invoice-by-invoice audit of all startup costs and contractor claimed advances. The third party audit firm engaged by CGMR for the review of all invoices and billings is a Nanjing firm whose partner is affiliated with one of the “big 5” audit firms. Once this audit work is completed, then the determination of remaining balances, if any, which are due to the contractor can be finalized and CGMR will be able to review what funds are available to be distributed as dividends. This determination will include amounts and timing.
Revenues for this two month period as reported by AZH from selling 62% iron ore concentrate was approximately USD $2,181,000. Costs, including additional costs of added waste and safety work as reported totaled approximately USD $2,040,000 thus there were incremental profits of approximately USD $141,000.
The November 2013 operator agreement with AZH allows charges of 350RMB per ton and the invoice audit review will include all attempted extra contractor charges for waste materials. Once full production commences, it is expected that overburden costs and excess waste removal cost will have in large part been eliminated.
About Wits Basin Precious Minerals Inc.
Wits Basin is a minerals exploration and development stage company that owns a 75% equity interest in CGMR, which owns the XNS. To find out more about Wits Basin Precious Minerals Inc. visit our website at www.witsbasin.com.
Forward-Looking Statements and Risk Factors
Certain statements included in this press release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. Such statements are valid only as of today, and we disclaim any obligation to update this information. The risks and uncertainties relate to the Company and its subsidiaries, and include, among others, the risks relating to the completion of mine rehabilitation work and ongoing mining activities; market pricing of iron ore; the ability to obtain necessary financing; and other risks and uncertainties described in the Company's prior press releases or other filings.