Jervois Mining ("Jervois" or the "Company") ended the June 2020 quarter with A$5.8 million in cash and no debt. Despite global upheaval caused by Covid-19 and its impact on capital markets, Jervois retains a strong balance sheet and adequate liquidity to fund its current operational footprint for more than 12 months.
Budgeted activities scheduled within this timeframe include the finalisation and public release of the ICO BFS, continued advancement of the project (debt) finance process in Idaho which includes engagement with lenders and their technical advisers (RPM), the United States government, and customers. Jervois has remobilised in Uganda to drill high priority copper- gold targets identified from its last field reconnaissance activities, but were unable to be drilled prior to Covid-19 forcing a cessation of in-country drilling. Negotiations with potential off-take partners for Jervois's nickel-cobalt project in Australia, Nico Young, also continue.
Expenditure on exploration and development for the quarter was A$1.7 million, with A$1.5 million in Idaho and A$0.2 million in Uganda.
Insider Compensation Restructures
Late in Q1 2020, in light of the escalating global Covid-19 pandemic, Jervois focused on aggressively reducing all cash expenditure not related to advancing the project financing of its United States based ICO. Jervois' Non-Executive Directors continue to waive their fees until 30 September 2020. Executive management has been restructured with salary reductions ranging between 30 and 75 percent.
As a consequence of grandfathering arrangements acquired during the M2 Cobalt merger, during the quarter A$0.1 million was paid to related parties outside their salaried Jervois roles for Ugandan exploration management services (Ms Jennifer Hinton and Mr Thomas Lamb, Ugandan Country Head and Ugandan Operations Manager respectively). The scope of this support included local administration and in-country management, accounting, payroll and treasury services, logistical support, offices including a core shed and sample preparation area, employee accommodation, and exploration staffing as set out in Item 6 of the Appendix 5B Quarterly Cashflow report.
No related party fees were paid to Non-Executive Directors due to the aforementioned waiver.
Acting Chief Financial Officer ("CFO") Appointment
In June, Jervois announced it had appointed Jess Birtcher as its Acting CFO to replace Cameron Knox (previously Group Controller and Acting CFO in accordance with Canadian securities regulations), who resigned to pursue other opportunities. Mr Birtcher is the senior finance executive at Jervois' ICO in the United States and is based in Idaho. He is an experienced resources executive and joined Jervois from the leadership team of Coeur Mining ("Coeur") (NYSE: CDE), a US$1.25 billion precious metals producer which operates five precious metal mines in North America and is listed on the New York Stock Exchange. Prior to Coeur, Mr Birtcher spent seven years as Finance Director in Rio Tinto's North American business unit and was a senior audit manager with Ernst & Young for 10 years.
Mr Knox will be with Jervois until the end of July 2020 to facilitate the transition.
Mr Simon Clarke (Executive General Manager - Corporate Affairs) also left the group at the end of June 2020.
The Jervois Board thanks both Mr Knox and Mr Clarke for their contributions.
Travel was restricted during the period due to Covid-19. Jervois Chief Executive Officer Mr Bryce Crocker presented at a number of investment bank virtual investor conferences during the period, together with the NWR Communications Virtual Small Cap Resources Conference.
Idaho Cobalt Operations ("ICO"), United States
Workstreams on the Jervois' BFS for its ICO in the United States are now largely complete and have undergone extensive peer review and optimization during Covid-19. BFS costing has been finalised with the study leads, M3 Engineering and Technology Corp ("M3") and DRA Global ("DRA"). Final steps are underway in flowsheet optimisation in response to customer product feedback.
Leading global engineering firms Wood and CSA Global were engaged to conduct audits of the permitting status and resource model respectively. RPM was appointed as lender(s) Independent Expert, and commenced an initial review on a desk top basis. RPM will visit the site in Idaho and continue its independent due diligence review in the second half of the year. RPM will prepare a formal Independent Technical Expert report in a form suitable for debt financiers of ICO.
Due to travel restrictions affecting ICO off-take negotiations and laboratory turn-around times for both sample preparation by Jervois and testing by customers, public release of the BFS was delayed. It will now be released before the end of September 2020.
Jervois also carefully reviewed the ICO construction execution plan and schedule in light of Covid-19. As certain ICO site activities were required to be implemented during the Northern Hemisphere's 2020 summer, in light of the uncertainty represented by Covid-19, at the end of April Jervois advised that the schedule would be delayed. Project financing, detailed design and long lead orders (SAG mill, tailings filters) will now occur during Q4 2020. Site construction activities will be largely paused until after the snow melt in Q2 2021, with first commercial production in mid 2022.
Despite the currently weak cobalt prices due to Covid-19, Jervois remains excited by outcomes of the BFS and its ability to move forward project financing during a period when many of its peers cannot. The ICO represents a partly constructed mine site, with the approximately US$100 million invested thus far significantly both reducing and de-risking remaining capital investment requirements, and shortening development lead time. Discussions with potential lenders and off-take partners continue under Non-Disclosure Agreements.
In light of progress on ICO, Jervois is developing a company-wide Sustainability Standard to outline minimum requirements for Environmental Social Governance ("ESG") compliance, an important component relating to climate change risks. At the conclusion of the June quarter, a Preliminary Estimate of Carbon Emissions of ICO was completed by M3 Engineering in accordance with the Greenhouse Gas Protocol ("GHGP") and United States Environmental Protection Authority ("EPA") standards. The assessment provides an important baseline for setting carbon emission objectives and targets for ICO and will be integrated within broader strategies to address climate change risks at operational and corporate levels.
Focus on security of supply chains has been reinforced by Covid-19. United States industry and government are assessing how to secure access to physical cobalt without reliance on China or the Democratic Republic of Congo. Jervois continues its engagement with both customers and government to ensure it can play its part in creating Idaho employment and demand for United States manufactured capital goods at a critical period in the country's economic recovery.
As part of this policy framework and cooperation with the United States government pertaining to developing a secure, competitive domestic supply of identified critical minerals (including cobalt), Jervois is partnering with the Department of Energy ("DOE") Idaho National Laboratory ("INL"), to advance a proposal to fund through the United States Critical Materials Institute development of enhanced leaching methods for ICO cobalt concentrates. The Critical Materials Institute is a DOE Energy Innovation Hub led by Ames Laboratory in Iowa which supports research to advance innovation in United States manufacturing.
The INL, a DOE laboratory, is a leader in advancing energy technology development, and has partnered with Jervois to apply their advanced research in battery materials extraction to Jervois's ICO concentrate.
Jervois and INL have progressed to the final round for consideration for funding under the DOE, Office of Energy Efficiency and Renewable Energy ("EERE") FY2020 AMO Critical Materials FOA: Next-Generation Technologies and Field Validation Funding Opportunity. Final proposals to enhance the capacity of the United States to capitalize on its natural resources of battery materials will be submitted in Q3 2020 with awards over the Northern Hemisphere winter of 2020-21.
Ugandan Exploration Properties
After pausing exploration activities in Uganda due to the Covid-19 global pandemic in late Q1 2020, at the end of Q2 Jervois announced its Board had approved mobilisation of a drill crew to the Kilembe area to test the CC copper-gold ("Cu-Au") target. The CC target is undrilled and contains some of the highest-grade surface copper-gold samples achieved on the Company's Kilembe Area properties to date. The planned Uganda exploration programme follows relaxation of Covid-19 restrictions within the country. A specific start date remains contingent on environmental approvals from the National Environmental Management Authority ("NEMA").
The planned drilling is concentrated on an interpreted structural feature defined from ground magnetics conducted earlier this year. The structural feature is also coincident with high- grade surface rock chip and soil samples acquired in late 2019 and early 2020 (see ASX announcement 22 January 2020).
The programme will be conducted utilising Jervois' in-country geological professionals and regular East African drilling contractor, whom have safely executed Jervois's prior workplans. Jervois looks forward to the commencement of this drilling programme and receiving initial results within three months of first mobilisation.
Since early in the onset of the Covid-19 pandemic, Jervois has implemented enhanced safety protocols in compliance with its own safety standards, government directives and in response to guidance from the World Health Organisation and other public health agencies. Jervois' ongoing Community Engagement program has been modified in accordance with this and Jervois will implement strict Standard Operating Procedures ("SOP's") throughout the drilling programme.
Figure 1: Kilembe Area CC Target - Planned Drill Locations
Nico Young Nickel-Cobalt Project, New South Wales, Australia
Jervois continues to engage potential customers and strategic partners for Nico Young, primarily focused around the award of partial off-take in exchange for funding to complete further drilling and a BFS. As with ICO, these discussions have been impacted by travel restrictions arising from Covid-19.
Kabanga Application, Tanzania
In response to a pre-qualification tender announced by Government of Tanzania, as advised in its December quarterly filed in January, Jervois submitted a revised offer for the Kabanga nickel-cobalt deposit in early January 2020. Prior to Covid-19 affecting travel, Jervois's executives held a number of meetings with the Government of Tanzania to discuss the offer
Jervois's non-core assets are summarized on the Company's website. During Q2 2020, Jervois diluted its interest in the Arunta joint venture JV to 20%. An option to purchase the King Solomon project in Idaho was executed with Hawkstone Mining Limited. Further sale negotiations to rationalize the Company's portfolio continue.
ASX WAIVER INFORMATION
On 6 June 2019, the ASX granted a waiver to Jervois in respect of extending the period to 8 November 2023 in which it may issue new Jervois shares to the eCobalt option holders as part of the eCobalt transaction.
As at 30 June 2020, the following Jervois shares were issued in the quarter on exercise of eCobalt options and the following eCobalt options remain outstanding:
Jervois shares issued in the quarter on exercise of eCobalt options: 619,888
- The number of options represent the number of Jervois shares that will be issued on exercise. The exercise price represents the price to be paid for the Jervois shares when issued.
Approved for release on behalf of the Board
Chief Executive Officer
Investors and analysts:
Chief Executive Officer
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Competent Person's Statement
The information in this release that relates to Mineral Exploration is based on information compiled by David Selfe who is full time employee of the company and a Fellow of the Australasian Institute of Mining and Metallurgy and Dean Besserer, P.Geol. who is the GM Exploration for the Company and a member of The Association of Professional Engineers and Geoscientists of Alberta. Both David Selfe and Dean Besserer have sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. David Selfe and Dean Besserer consent to the inclusion in the release of the matters based on their information in the form and context in which it appears.
Disclosure required for TSX-V Regulations
Qualified Person's Statement
The technical content of this news release has been reviewed and approved by Dean Besserer, P.Geol., who is the GM Exploration for the Company and a Qualified Person as defined by National Instrument 43-101
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release may contain certain "Forward-Looking Statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. When used in this news release, the words "anticipate", "believe", "estimate", "expect", "target, "plan", "forecast", "may", "schedule" and other similar words or expressions identify forward-looking statements or information. These forward- looking statements or information may relate to exploration work to be undertaken at ICO or in Uganda, preparation of studies on the ICO, the reliability of third-party information, and certain other factors or information. Such statements represent the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social risks, contingencies and uncertainties. Many factors, both known and unknown, could cause results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affections such statements and information other than as required by applicable laws, rules and regulations.
Appendix 5B - Mining exploration entity or oil and gas exploration entity quarterly cash flow report
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.
Date: 23 July 2020
Authorised by: By the Disclosure Committee.
(Name of body or officer authorising release - see note 4)
1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.
2. If this quarterly cash flow 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 cash flow 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.
4. If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".
5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
ASX Listing Rules Appendix 5B (17/07/20)
+ See chapter 19 of the ASX Listing Rules for defined terms.
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