morocco tdeal - manganese

Aquisition of 80% interest in 6 “mining convention” areas and 100% interest in 13 other exploration concessions

- Excellent manganese grades, early stage exploration with potential upside

- Skilled Moroccan based team will create opportunity for more acquisitions in French speaking Africa

Callabonna Resources Limited (“Callabonna”) has entered into a binding, conditional Memorandum of Understanding ("MOU") with Mr Gregor Theiser in which it has agreed, subject to satisfaction of certain conditions, to enter into a sale agreement to acquire 100% of Element Morocco Limited, a Hong Kong incorporated company with an interest in 19 mineral exploration tenements in Morocco of which 12 are prospective for manganese ("Tenements"), held through its Moroccan subsidiary Element Commodities Morocco SA.
In respect of the Tenements, 6 of the concessions are valid until December 2016 as ‘Mining Convention’; 7 are research permits valid until May 2013 and 6 are research permits in the process of being renewed.

Element Commodities Morocco SA holds a 100% interest in the research permits and an 80% interest in the mining conventions, with the other 20% being owned by ONHYM, the Moroccan National Organisation for Hydrocarbon and Mining, pursuant to a joint venture agreement.

Overview

The 19 Concessions total 306 km2 (each being 16km2) and are located in two regions, one near Marrakech in the south and the other near Oujda in the north (Figure 1). The main work to date has been on the southern areas where the 6 ‘mining concessions’ are located near the old
Tasdremt manganese mine. The Tasdremt concessions are well located with good road access 150km from the Port of Agadir and potential for extracting manganese oxide by open pit mining.

The known deposits at Tasdremt are stratiform and occur close to the unconformity below the mid Cretaceous rocks. As at the IMINI manganese mine 80km to the north east, they occur in three sedimentary layers but have lower manganese grades and have a higher lead (and silver)
content. Exploration in the mid 1970’s reported manganese grades typically in the range of 30-40% Mn. Trench samples from 2012 have confirmed these grades and have also reported lead values in the range of 3-6% along with silver contents of around 20g/t.

Exploration potential exists in two areas on the Tasdremt concessions; 1) ore at or near surface over a large flat area near where Element Commodities Morocco SA (ECMSA) conducted limited trenching in 2012 and, 2) the ‘middle horizon’ at depth of around 20 meters over an area of
500x300m defined by previous drilling and adits in 1975-76.

Morocco is emerging as a significant manganese producer exceeding 60,000 tonnes per annum of exports to established markets including China, USA, India and Spain (based on the Vendor’s internal sources). The Vendor (and the affiliated Element Commodities group) is exporting Mn
ore from Morocco on a regular basis.

The IMINI mine is one of the most important producers. It is located in central Morocco (45km from the city of Ouarzazate) and produces three products: 1) metallurgical grade for the steel industry in the, 0-100mm size range; 2) a size range of 75-500 micron that can be sold either as
metallurgical grade 30-42%MnO2 or chemical grade 53-70%MnO2; 3) chemical grade MnO2, size from 0-75micron.

High quality and high value ore in the range from 70-92%MnO2 is sold into the chemical industry for use in batteries and paint. This grade is IMIN’s main product by value and as it is quite rare and as such commands a high price.

Because of the price advantage of back load shipping, containerized freight rates to China are very low so the CIF price to China is extremely competitive. In some modern smelters high Pb (and silver) content can be an added benefit.