Chalice Gold, Sub-Sahara will merge for Eritrea project...

Chalice Gold, Sub-Sahara will merge for Eritrea project

6/04/2009 - Junior gold explorers Chalice Gold Mines Ltd and Sub-Sahara Resources NL have announced plans to merge and pursue the development of cash-strapped Sub-Sahara's high grade Zara project in Eritrea, East Africa.
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Chalice is offering one of its shares for every 10.73 Sub-Sahara shares, valuing the target at $6.7 million, based on Chalice's share price of 14.5 cents on Friday, after rising 2.5 cents, or 20.83 per cent.

Shares in Sub-Sahara jumped 0.2 cents, or 14.29 per cent, to 1.6 cents on Friday.

"It's about pairing our cash with their deposit," Chalice managing director Tim Goyder told reporters.

Chalice currently had about $10 million in cash while Sub-Sahara had just under $600,000 at the end of December.

However, Sub-Sahara's coffers got a $900,000 boost last month through the $6.25 million sale of its Tanzanian assets to Western Metals Ltd.

The remainder will be paid after certain milestones are met but is not expected in the near future.

Sub-Sahara managing director Michael Griffiths said his company favoured a merger because it did not want to do an equity raising, which would dilute existing shareholdings.

If the deal goes ahead, Sub-Sahara shareholders will hold 39 per cent of the merged entity, which will retain the Chalice name.

"Sub-Sahara has probably suffered for a number of years of not being able to get any traction in the Australian market," Griffiths said.

"That will hopefully, with the merger, fade away and the resultant company will get what it has really deserved to be valued at."

Goyder said the companies would be solely focused on gold, with the conceptual target of mining 100,000 ounces per annum of the precious metal from the 1.04 million ounce Zara project for six to eight years.

He said there was potential for both initial open pit and future underground mining development, with exploration targets at depth.

The feasibility study for the Zara project is expected to be complete by April next year, he said, while the merger should be finalised by mid-July 2009.

Griffiths said Sub-Sahara's largest shareholder with a 19 per cent stake, Anvil Mining Ltd, had not indicated whether it supported the merger but he was confident it would.

Chalice abandoned its copper mining plans in October, terminating an agreement to buy the Mount Oxide project in Queensland from the then cash-poor Perilya Ltd, citing the slump in the metal's price.