Cougar Metals NL managing director Randal Swick has announced plans to establish a drilling business in Brazil, two weeks after he resigned as a non-executive director of Swick Mining Services Ltd.
Cougar Metals NL managing director Randal Swick has announced plans to establish a drilling business in Brazil, two weeks after he resigned as a non-executive director of Swick Mining Services Ltd.
COUGAR ESTABLISHES MINERAL DRILLING COMPANY IN BRAZIL
Cougar Metals NL (ASX code: CGM) is pleased to announce the establishment of a dedicated mineral drilling company in Brazil to pursue mineral drilling opportunities in the Brazilian resources and mining industry. The Company has rapidly put in place all of the necessary elements to immediately commence operations in Brazil, having:
secured its first long-term mineral drilling contract in Brazil for the provision of surface diamond drilling services;
approved the purchase of a new surface diamond drill rig from UDR in Chile to compliment its existing UDR surface diamond drill rig;
secured the right to acquire an additional six surface diamond drill rigs over the next nine months; and
secured the services of experienced drilling management and personnel and workshop facilities in Brazil.
Cougar believes there is a significant opportunity to develop a new drilling business in Brazil with a strong focus on providing high quality drill rigs with superior rates of productivity. A review of the resources and mining industry in Brazil, including discussions held with the management of a number of mining companies, has confirmed the strong market appetite for the entry of a new player with Australian management and drilling philosophies.
Having secured its first long-term drilling contract in Brazil with Serabi Mineração Ltd, a subsidiary of London listed Serabi Mining plc, Cougar is now actively pursing several other mineral drilling contracts in Brazil. The Company has the personnel, facilities and pipeline of potential new rig purchases to support the awarding of new contracts and the growth of its drilling business.
Background
Cougar owns the Alta Floresta Gold Project in Mato Grosso State, Brazil. To facilitate its gold exploration programs, Cougar imported into Brazil a reconditioned RC rig from Australia and a new diamond rig from UDR in Chile, recognising the difficulty and high cost of securing productive and reliable drilling rigs from contractors in Brazil.
Since April 2006, Cougar has been undertaking its own relatively short drilling programs on a prospect by prospect basis at the Alta Floresta Project, often resulting in gaps of several weeks between drilling programs. As previously announced in the Company's fourth quarter activities report, Cougar took advantage of these gaps to undertake short-term drilling programs for other exploration companies in the region and generate cashflow to partially offset its exploration expenses.
Cougar was subsequently approached by additional companies operating in Brazil, who expressed frustration with the poor quality, high-cost drilling services otherwise available, to establish a dedicated drilling business. Leveraging off the infrastructure and industry contacts the Company has developed over the last three years, Cougar set about establishing a dedicated drilling business in Brazil to exploit these opportunities.
Establishment of Drilling Company
Cougar has built the necessary foundations to launch the new drilling business in Brazil through the Brazilian company GeoLogica Sondagens Ltda, a wholly owned subsidiary of Cougar Brasil Mineração Ltda, Cougar's Brazilian operating company. GeoLogica currently has two drill rigs in its fleet and one new rig under order, with the ability to acquire an additional six new UDR surface diamond drill rigs over the next nine months. UDR Chile is considered to be one of the market leading manufacturers of diamond drill rigs in South America.
GeoLogica Sondagens Ltda will assume Cougar's existing Brazilian drilling infrastructure, including the existing RC and diamond rigs, drill crews (drillers and offsiders) and supervisors, workshop facilities and equipment, and drilling consumables.
Drilling Contract with Serabi Mineração Ltd
The Company has previously provided short-term drilling services to Serabi Mineração Ltd in and around the Palito Gold Mine in Para State, Brazil as part of Cougar's strategy of utilising its own drill rigs during exploration downtime. As a result of the success of the short-term drilling services provided to Serabi, the Company has secured a longer term drilling contract to provide drilling services to Serabi at Palito on the following material terms: Provision of one surface diamond rig. Provision of 25,000m of diamond drilling over a 15 month period from 1 October 2007. Completion date of 31 December 2008.
A formal agreement is being prepared and executed to recognise the terms of the agreement.
Purchase of New Drill Rigs
In order to provide diamond drilling services to Serabi and still be able to undertake drilling trials for other prospective clients, as well as to meet Cougar's own drilling requirements, the Company has approved the purchase of a new surface diamond rig from UDR in Chile, with delivery scheduled in October 2007. The Company has the right to acquire up to six new drill rigs from UDR Chile over the next nine months, thereby providing the ability to service any new drilling contracts awarded to GeoLogica.
The Company is acquiring the new drill rig on the following material terms: Down payment of US$68,000. Financing of the remaining cost of the rig through Sandvik Exploration Equipment Chile at a fixed rate of 8% per annum. Monthly repayments of $US16,157.13 per month for 18 months, totalling US$341,500. Total cost of rig inclusive of interest charges of US$409,500.
In addition, the Company will also incur approximately A$400,000 in further upfront costs relating to tooling, initial consumables, freight costs and import duties for the new rig.
The Company has commenced a review of its on-going funding requirements for the drilling business, on-going
exploration activities and general working capital purposes.
Directorships Update
On 17 September 2007, Cougar's Managing Director Randal Swick resigned from his role as a Non-Executive Director of ASX listed Swick Mining Services Ltd, a company providing surface and underground mineral drilling services in Australia. Mr Swick resigned to concentrate his efforts on Cougar's exploration and drilling activities. Although both companies work in separate markets, Mr Swick resigned from Swick Mining Services to dispel any perceived conflicts of directorship interests between the two companies.
Strategic Direction
Cougar's primary focus will still be its exploration activities in Brazil and Australia. The Company is currently undertaking major soil sampling programs at the Alta Floresta Project in Brazil to identify new targets for drilling. Cougar is confident that the project has the potential to host both large, disseminated gold systems and high-grade, narrow veined gold systems. In addition, the Company is reviewing the alternatives to deliver value from the Pyke Hill Nickel Project in Western Australia, where the Company recently delineated a new laterite nickel-cobalt resource. The alternatives under review include a direct sale arrangement and the establishment of a heap leach treatment operation.
The establishment of the dedicated drilling business provides the Company with an opportunity to
generate cashflow to fund its exploration activities. The initial aim is to grow the drilling business to a position where the Company becomes cashflow neutral, with the profits from the drilling business covering all of the exploration, administration and corporate costs of Cougar.
