South Star Mining’s Santa Cruz graphite project in Bahia State, Brazil. Source South Star Mining Corp.
South Star Mining Corp. [STS-TSXV; STSBF-OTCQB] said Friday March 1 that it has completed the first tranche of a previously announced $500,000 private placement that will be used to advance the company’s flagship Santa Cruz graphite project in Brazil.
South Star shares were active on the news, rising 44% or $0.04 to 13 cents on active volume of 1.14 million. The shares trade in a 52-week range of 8.5 cents and 52 cents.
The Santa Cruz Project is located in Bahia State, Brazil, second largest flake-graphite producing district in the world. The project consists of 13 approved exploration licenses, covering approximately 13,000 hectares. South Star says the project benefits from at-surface mineralization, containing large and extra-large graphite flakes. Work completed to date includes 7,000 metres of drilling and a pilot plant test on over 30 tonnes of mineralized material, which was completed in 2015 and produced high quality concentrates, the company said.
Pilot plant tests indicated premium graphite granulometry, including 35-40% of extracted at +50 mesh (jumbo flakes) and 65-75% graphite at +80 mesh (large flakes). Testing also proved that the company could produce ultra-pure +99-97% graphite.
A preliminary economic assessment completed in mid-2017 for the Santa Cruz Project outlined an indicated resource of 14.9 million tonnes at 2.70% with 404,741 tonnes of Graphitic Carbon (CG), and an inferred resource of 3.57 million tonnes at 2.90% with 103,591 tonnes CG.
Mine planning for the existing graphite resource outlines a 12 million tonne mineable resource with a diluted grade of 2.63% CG, providing support for a 19-year open pit mine. South Star foresees average yearly production of 15,800 tonnes at an operating cost of US$413 per tonne.
The current PEA estimates free cash flow at US$15.8 million annually in years one through five from potential future production, and US$10.4 million annually over the projected 19-year mine life.
On Friday, the company said first tranche proceeds were $405,000 for a total of 4.05 million units of the private placement. Proceeds will be used to advance the Santa Cruz project on its road to production. Uses will include engineering, testing, environmental permitting and licensing.
The closing date for this first tranche was February 28, 2019.
The private placement consists of 5.0 million units priced at 10 cents per unit. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to buy one additional common share of South Star at an exercise price of 15 cents per common share for a period of two years from the date of issue.
“We welcome our new investors and are grateful to our existing shareholders and insiders for the continued support,” said South Star CEO Eric Allison. “This financing will help maintain the steady progress on key elements of our Santa Cruz Graphite Project. We anticipate completion of this work and the awarding of our 5,000 tonnes-per year trial mining license during the third quarter of this year,” he said.