Mining Projects | Team Zambia | Mining Investment in Zambia

Mayfair Mining's Zambian licenses include the Funzwe River alluvial gold-platinum project, located on a geological feature called the Mpande Dome that lies between the Mwembeshi Shear Zone and the Mushika Machete Shear Zone. The Company also holds four licenses in the Mapatizya Amethyst producing area, located in the Kalomo District of Zambia, the world's premier amethyst producing area.  

For sixty years, mining has been the backbone of Zambia's economy, during which time the country has established some of the world's largest copper mines and produced 30 million tons of copper metal. Since independence and the decline of its copper industry, other minerals have assumed importance. Gem production, mostly by small scale miners, has put Zambia on the world map as a source of emeralds, aquamarine, amethyst, tourmaline and garnets. Until recently, gold was always in a minority position. The Government of Zambia is totally committed to supporting and promoting the mining sector and has created a highly favourable investment climate to encourage foreign investors to contribute to the expansion of Zambia's mining industry.

In recent years there has been a surge in interest in gold exploration in Zambia that has attracted major operators to the country. Gold occurrences discovered to date are associated with linear belts bounded by major shear zones. The key shear zones are: Kpiri Mposhi Mkushi Shear Zone; Mwembeshi Shear Zone; and, Mushika Machete Shear Zone. Between these zones, many gold occurrences are associated with greenstones, but the most significant occurrences are associated with dome-like features of the basement that have proved prospective for gold and other minerals, including platinum group metals and nickel.  

Zambia is a politically stable country in central southern Africa with 11.0 million inhabitants. It has common borders with Angola, the Democratic Republic of Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana and Namibia. The country achieved independence from colonial law in 1964 when the Federation of Rhodesia and Nyasaland was dissolved and the former British colony Northern Rhodesia became the Republic of Zambia.

Today, Zambia is diversifying its economy. Minerals besides copper and cobalt have gained significantly in importance. The government implemented a new Mining Act in 1995 paving the way for it to withdraw from the mining business by privatizing the mines and easing fiscal pressure on the miners. A well developed electricity and transport infrastructure already exists in the mining centres. Zambia possesses a large pool of skilled workers and has a well-established system of tertiary education providing a qualified workforce to meet the needs of this expanding industry. Both the Ministry of Mines and Development and other Zambian regulatory institutions are working closely with prospective investors.  

Projects

The Zambian licenses consist of three prospective mining projects: 

4        Mapatizya Amethyst concessions

4        Funzwe River alluvial gold-platinum license

The Mapatizya Amethyst concessions encompass over 600 hectares located in the Kalomo District of Zambia, approximately 115 kilometres from Kalomo Town and 415 kilometres from Kafue. Mapatizya is the principal amethyst mining area in Zambia. Access to the area is possible throughout the dry season by a feeder road branching off seven kilometres before Kalomo. The road is maintained by the Government and can accommodate heavy trucks. There is good infrastructure in the region and good road access to the concessions. Mayfair Minings concessions surround the property of Kariba Minerals, which hosts the largest amethyst-producing mine in Zambia and one of the largest in the world.  

The Funzwe River license covers an area of approximately 70 square kilometres located approximately 30 kilometres to the northwest of Kafue, a communications junction and industrial town where the Company's commercial premises are based. The license area is accessible by tarmac and graded bush roads during good weather conditions. An operational base has been created on the property, but administration is coordinated from Kafue.    

Ownership

On January 17, 2005, Mayfair Mining entered into a Joint Venture Agreement with two Zambian corporations owned by the Nyendwa Family of Kafue, Zambia. Pursuant to the agreement, the Company incorporated a new Zambian joint venture company, Mayfair Mining & Minerals (Zambia) Limited. The new Zambian joint venture subsidiary is owned 70% by Mayfair Mining & Minerals (UK) Limited, a wholly-owned subsidiary of Mayfair Mining, and 30% by the Nyendwa Family. In return for their 30% ownership, the Nyendwa Family transferred all of their rights and interests in two prospective mining projects, Funzwe River and the Mapatizya Concessions, to Mayfair Zambia.  

The Nyendwa Familys companies were founded in 1991 and they have considerable experience in the Zambian mining industry.  

Geology of the Projects

Mapatizya Amethyst Concessions

The Mapatizya amethyst concessions consist of a group of mining concessions near Lake Kariba, in the principal Zambian amethyst producing area. These concessions may contain a significant gemstone resource, as indicated by the limited preliminary work of the Geological Survey of Zambia.

The Mapatizya amethyst concessions are underlain by gneisses consisting of quartzo-feldspathic, fine-grained, granulitic gneisses, migmatic gneisses and well banded gneisses. The amethyst mineralization occurs as stockworks in fractures and fault zones within the country rocks. The veins are irregular and may be up to two metres thick and up to 100 metres in length in the host volcanic marbles with a generally northeasterly trend. The depth of mineralization ranges from 20 metres to 50 metres.  

The Mapatizya amethyst concessions are underlain by gneisses consisting of quartzo-feldspathic, fine-grained, granulitic gneisses, migmatic gneisses and well banded gneisses.  The amethyst mineralization occurs as stockworks in fractures and fault zones within the country rocks.  The veins are irregular and may be up to two metres thick and up to 100 metres in length in the host volcanic marbles with a generally northeasterly trend.  The depth of mineralization ranges from 20 metres to 50 metres.  

Funzwe River License  

Mayfair Mining's Funzwe River license is located on a geological feature referred to as the Mpande Dome. This gold prospecting area lies between the Mwembeshi Shear Zone and the Mushika Machete Shear Zone. The geology of the Mpande Dome is dominated by the Basement Super Group consisting of gneiss and quartzite overlain by meta-dolerite, tuff and meta-basalt, which, in turn, is overlain by the Katanga Super Group consisting of schist, carbonate, quartzite and conglomerate. The Mpande Dome is the location of many gold occurrences, 19 of which have been recorded as significant. These occurrences are mostly associated with greenstones, but the most significant occurrences are associated with the dome-like features of the basement, which have proved promising for gold and other minerals such as platinum group metals and nickel   

Work to date on the Funzwe River license has identified limited occurrences of bedrock gold, elluvial gold, alluvial gold, and alluvial PGMs, all of yet-undetermined qualities and quantities. The blacksand concentrates associated with the alluvial gold of the Funzwe River contain PGMs with limited preliminary assayed values of up to 70 grams per ton. The source of the PGM mineralization is thought to be the biotite schist of the Basement Super Group. Limited preliminary chip sampling of the outcrop has yielded preliminary bedrock grades of approximately 2.0 grams per ton. Tropical weathering has resulted in the development of a large area of elluvial lag deposits. Trial pits have been excavated and tested over an area of 10 to 15 square kilometres. Mayfair Mining has identified ten areas of potential alluvial gold bearing sediments within the Funzwe River license area. There is no assurance that any of the results at Funzwe River will be consistent or sustained without further exploration, development and testing.  

Gold Production at Funzwe River

Limited preliminary tests have shown that gold can be recovered from the Funzwe River license by gravity/hydraulic/centrifuge methods, which are low in cost and have a low impact on the environment; therefore, the Company has decided to move forward with a small-scale selective operation.  

Mayfair Mining recently purchased and installed a small scale washing plant on the property. The training of the local staff in the protocols involved in trial mining and environmental protection has already been completed and bulk sampling of the alluvial gravels has already commenced. This operation should assist in the development of a mining system by providing extensive new testing possibilities and a limited cash flow for operations. Later this year, a higher capacity operation with a crushing circuit will carry out bulk trials in the elluvial lag deposits as a means of testing a medium-sized exploration and production program. Recent tests and data on previous copper exploration in the area have also confirmed the potential for an iron oxide, copper, gold prospect in the eastern part of the area covered by the Company's license, with initial preliminary grades of 5.76% to 8.16% copper and 1.25 grams of gold per ton being identified in rock chip sampling.   

At the present time, resources at Funzwe River appear to be sufficient for a six-year operation from the alluvials, depending on the rate of processing. Beyond year six, the operation will be modified to process the elluvial gold, extending projected and anticipated operations for an additional 10 years. These projections are subject to adjustment based on proposed future operations.    

Past Exploration Work

Limited work has been previously conducted on Mayfair Mining's Zambian licenses. Between 1960 and 1983, all of the licenses in the Mapatizya area were prospected by Northern Minerals, although no significant production was undertaken and in 1983, small scale trial production was undertaken by a private individual who later abandoned the licenses after producing approximately 30 tons of amethyst. Between 1992 and 2004, Mwaca Mining and Minerals took over the licenses and conducted exploration and small scale mining. Approximately 400 tons of amethyst was produced and sold.  

The The Funzwe River license area was subject to cursory prospecting by the Geological Survey Department of Zambia. In the 1980's, Anglo American prospected using geochemistry and geophysics throughout the area and reportedly found sub-economic copper with associated gold. 

Amethyst Production and Marketing

Mayfair Mining commenced production of the Mapatizya amethyst in 2005 but was interrupted by a heavy rainy season, restricting operations for approximately five months. The Company anticipates the production of the Mapatizya amethyst to increase during 2007. Mine life is anticipated to be 80 to 100 years.  

Marketing 

Coloured gemstone prices are generally determined by supply and demand. Based on data from the U.S. International Trade Centre, the three largest markets for loose finished gemstones are the United States, Europe and Japan, which account for $1.341 billion, while the markets for rough unfinished stones are Thailand, India and China, which account for $695 million. Thailand and India are the main cutting centres that acquire bulk shipments of rough stones and then export the finished product to the United States and European markets. Hong Kong has become the major stone brokerage centre for mainland China.  

Once production has increased to the anticipated appropriate levels, expected during calendar year 2008, Mayfair Zambia intends to market its rough, sorted and graded amethyst to Hong Kong primarily. Enquiries for product have also been received from India and Thailand. Demand for amethyst is so great that Mayfair Mining expects to be able to sell all of its production, from the low-grade industrial quartz to the high-end gem quality, each month.  

Once proposed operations commence, Mayfair Mining intends to enter into commitments to help the local population in the area by programs such as the building of schools and medical centres, boring water holes and making them available to the community. These initiatives will be modest in corporate terms and expense, but will benefit the local community, with the anticipated benefit to the Company in regard to its relationships within the community and with the local and national government.  

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MADAGASCAR SAPPHIRE PROJECT

Property

Mayfair Mining holds 16 sapphire licenses covering an area of 1,487 square kilometres in the Ilakaka sapphire mining district of southern Madagascar. One of the licenses includes the Benahy-Imaloto sapphire mine, known locally as the Ampasimamitaka mine, a previously operating mine producing sapphire gemstones that has seen limited production since 2005. Mayfair Mining intends to recommence mining at the Ampasimamitaka mine during 2008, subject to adequate funding.  

The Lovokadabo license is another highly prospective sapphire property located just north of the Ampasimamitaka mine. Mayfair Mining also expects to make a decision on production at this mine in the near future, subject to financing.   

Ownership

In May 2006, Mayfair Mining acquired 51% of the outstanding shares of Union Prospection Miniere, a Madagascan private limited company and, in July 2006, Mayfair Mining completed the acquisition of the remaining 49% of the outstanding shares of UPM. Mayfair Mining now owns 100% of UPM. As a result, Mayfair Mining has acquired total control of 16 sapphire licenses, 15 in the Ilakaka sapphire mining district and one in the Esira area in southern Madagascar.    

Project Geology and Mineralization

Ilakaka Sapphire Mining District 

The Ilakaka mining district encompasses approximately 4,000 square kilometres and includes the areas of Ilakaka, Sakaraha, Manambo, Voavoa, Fotiyola, Andranolava and Murarano where large quantities of pink sapphire are produced as well as blue, violet, orange (including Padparadscha), yellow, colorless and other fancy colors.    

The Ilakaka mining district is underlain largely by Mesozoic sedimentary formations and Archaean basement in the east. The sapphire field is closely associated with upper Tertiary (Neogene) and younger alluvial and residual ferricrete deposits on uplifted tablelands or mesas and on younger, lower terraces and erosional remnants, centred on the Col des Tapia-Manombo area and southwards to the Betrandraky Tableland.  

The alluvial deposits of the Ilakaka sapphire field were derived by a number of processes. Tropically weathered, residual lateritic deposits, probably with concentrations of resistant corundum from the metamorphic basement of the Horombe Plateau were eroded and transported generally westward in stable river systems of the late Tertiary period. The Ampasimamitaka and Sakamaty sapphire deposits contain basement type boulders in the gem gravels. It appears that these river systems were disrupted and rejuvenated by at least three periods of uplift, as indicated by the terraced landscape on a north-south axis centred on the Betrandraky Tableland in the middle of the sapphire field. This uplift disrupted, diverted and rejuvenated the drainage system and led to the capture of the upper reaches of the westward flowing Tertiary age rivers draining the Horombe Plateau, by the southward flowing Imaloto River system and the northward flowing Menamaty and Malio river systems.

The Benahy-Imaloto or Ampasimamitaka mine deposit lies immediately east of a steep, northerly trending fault separating steeply dipping crystalline basement rocks to the east from gently dipping, Mesozoic sedimentary rocks to the west. The river systems in this area display sudden course changes related to recent uplift or tilting, stream rejuvenation and river capture. The Benahy-Imaloto deposit appears to have been formed downstream of the fault, just after the start of the stream rejuvenation event which flushed coarse-grained, bouldery, residual corundum bearing gravels from the Benahy system, which were subsequently covered by sterile overburden sands and gravels. Continued uplift, stream incision and the damming effect of the palaeo-tributary deposits appears to have diverted the Benahy confluence upstream of the Benahy palaeo-delta on the Imaloto River. 

Past Exploration Work

During 2005, Sapphire Fields Limited, the 51% owner of UPM at the time, held the 16 sapphire concessions that make up the Madagascar sapphire concessions. SFL/UPM worked only one concession, that which contains the Benahy-Imaloto or Ampasimamitaka sapphire mine. The other concessions have had no physical work carried out and there are no reports of previous work being conducted, other than some small areas of illegal diggings. . 

Future proposed exploration methods Mayfair plans for this area (subject to financing) include:  

4        GIS compilation of all available data, including satellite imagery, topographic maps, and geological maps as an aid to mapping of sapphire diggings and interpretation of sapphire prospectivity.

4        Resistivity sounding surveys to detect subsurface conductors such as wet basal gravel deposits and bedrock channels.

4        Shallow seismic surveys to sound the thickness of alluvium and map bedrock channels.

4        Ground penetrating radar for similar depth sounding purposes.

4        Airborne multi-frequency radiometry for similar depth sounding purposes.

4        Detailed geological mapping to define extent of target gravels.

4        Large diameter shell and auger or cased auger drilling to log and sample overburden and potential gem bearing gravels.

4        Pit sinking to log and sample overburden and potential gem bearing gravels.

4        Bulk sampling and trial mining. 

In October 2005, an independent consultancy was asked to complete a report on the sapphire concessions in Madagascar on behalf of SFL/UPM. At that time, the consultancy supervised a production test of two truckloads of gravel from the Ampasimamitaka mine that yielded three transparent pink sapphire angular fragments, sub-rounded, with dimensions of a few millimetres estimated to weigh 0.2, 0.2 and 0.4 grams, one transparent white sapphire, sub-rounded, centimetre-scale, but flattish estimated to weigh 0.4 grams and two abrasive quality brown, sub-rounded, centimetre-scale, turbid corundums estimated to weigh 0.8 and 1.8 grams.  

The volume of gravel trucked and washed was recorded as 7.0 cubic metres, which indicates for the washed gravel an average grade of 1.06 grams per cubic metre and an average value of US$55.71 per cubic metre. This small scale test should not be regarded as representative of the deposit or of overall production, gem recovery and value.  

 The volume of gravel trucked and washed was recorded as 7.0 cubic metres, which indicates for the washed gravel an average grade of 1.06 grams per cubic metre and an average value of US$55.71 per cubic metre.  This small scale test should not be regarded as representative of the deposit or of overall production, gem recovery and value. 

Sapphire Bearing Gravel and Gem Production

From July to November 2005, SFL/UPM carried out production from the Benahy-Imaloto or Ampasimamitaka sapphire mine.  The cumulative gravel deposit mined to the end of November 2005 was as follows: 

Production in December 2005 and January 2006 was low due to a seasonal closure and plant availability problems. Sales of rough gemstone from the mine from August through October 2005 had a total weight of 1,728.45 grams at an average sale price of US$32.11 per gram. The total amount of gemstone produced far exceeded the amount sold. This small scale operation should not be regarded as representative of the deposit or of overall production, gem recovery and value. 

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OVERVIEW 

AMETHYST MARKET IN ZAMBIA

Amethyst, a popular gemstone found in many countries, is the purple and most valuable variety of quartz. If it were not so widely available, its unparalleled color would make it very expensive. Zambia is one of the leading producers of high-quality amethysts, second only to Brazil. In Zambia, amethyst is currently being mined in the Mwakambwiko Hills near Lake Kariba, where the concessions of Mayfair Mining are also concentrated. It occurs here in veins and stockworks generated during late-Karoo or post-Karoo tectonism. One of the best qualities of this gemstone is that almost all grades and sizes are marketable from high gemstone quality and cabochons to bits and off-cuts sold in bulk, resulting in almost no waste.  

Zambian amethysts are among the most beautiful and valuable in the world. Many expensive amethysts of an intense violet with red flashes come from Zambian mine fields. Zambian amethysts are distributed mainly to the Asian countries of China, India, Japan and Thailand. The growing economies of these regions have increased consumer demand. Consequently, the price for amethysts on the world market should continue to improve. Because larger mining operations concentrate on more valuable diamonds, sapphires and emeralds, the total supply of amethysts remains limited. For the Zambian government these current economic facts have triggered the redevelopment of the Zambian gemstone industry through privatization under the Mining Sector Diversification Program. This process started in 2002 and was financially supported by the European Development Fund. The Ministry of Mines and Mineral Development welcomes the efforts of Mayfair Mining, which is re-designing and modernizing the properties in the Mapatizya area, where one of the biggest amethyst deposits in the world, Kalomo Mapatizya, is located. Kalomo Mapatizya is estimated to have 2.5 million tons of ore with approximately 72,000 tons of run-of-mine amethyst, or more than 2.6 million kilograms of high and middle grade saleable amethyst plus unlimited amounts of low-grade amethyst. Despite this, the annual production of amethyst in Zambia is still relatively low, at about 700 tons of high-grade stones. However, the potential is very substantial as the extent of the high-quality stones becomes apparent.   

The amethyst business, in common with the coloured stone industry, is generally determined by supply and demand and research has shown that the global coloured stone market is valued at approximately US$2.0 billion. Based on data from the United States International Trade Centre, the three largest markets for loose, finished coloured gemstones are the United States, Europe and Japan, accounting for approximately US$1.34 billion. Rough, unfinished stones account for US$695 million, with Thailand, India and China being the largest markets.  

Zambian government statistics show that since 2000, the value of amethyst exports has not fallen below US$3.0 million per annum. This is second only to the value of the export of emeralds. The bulk of available amethysts come from the Mapatizya area where Mayfair Mining's licenses are located.    

Most amethyst producers in the Mapatizya area are small scale and under-funded, unable to service serious overseas markets. An attempt by the Kalomo Miners Association to develop a central processing facility with the help of the Mining Sector Diversification Program is unlikely to create conditions for the servicing of large scale overseas orders. The only real commercial competitor in the amethyst market is Kariba Minerals, formerly state-owned and a large producer of amethyst marketed directly to overseas markets.    

Most small amethyst producers market their product through intermediaries and thus do not gain the full value of their product. The key to profitable operation is large scale production, value enhancement through sorting and grading and direct marketing to major brokers and end users in India, Hong Kong and Mainland China. Mayfair Zambia plans to concentrate on the production of a graded product with the bulk material supplied to the Indian and Chinese markets and the high quality faceting material supplied to Thailand, Europe and the United States. This will be through direct contact and trade fairs. In the medium term, the Company will seek to add value through proposed gem cutting, jewellery production and brand development, all subject to financing.

SAPPHIRE MARKET IN MADAGASCAR

Sapphire is the royal semi-precious stone that has been used in jewellery from ancient times. The special quality of this beautiful gemstone is that it is one of the hardest stone naturally found and second only to that of the diamond. Sapphires are predominantly found in Sri Lanka, Madagascar, Burma, India, Kashmir, the United States, Thailand and Cambodia.

Sapphires are extremely hard and durable, with a hardness of 9 on the Mohs' scale. Sapphires are members of the corundum family of minerals and come in all types of colors from blue to black and all colors in between. The change in color is due to different elements present inside the core of the sapphire crystal. There is no limit to the saturation of colors in a sapphire. The saturation of the color depends on the amount of mineral present inside the crystal. Many times there are combinations of minerals which result in different hues and saturation of the same color. Sapphires come in a variety of colours such as blue, pink, yellow, colorless, black, white, orange, and brown with the blue sapphires being the most well known. Among sapphires, no two look alike. Sapphires can be given heat treatments to make them more commercially valuable and improve the clarity and shine.

Over the past decade, Madagascar has come to be recognized as a world-class source for sapphire, ruby, emerald and aquamarine as well as other minerals. A very small number of gemstones are transformed locally or exported to end-user countries such as the United States, Japan and Europe. Countries such as Thailand, Sri Lanka, India, Israel and increasingly China, benefit the most from Madagascars substantial mineral resources. The great majority of products extracted from Malagasy mines are exported directly to these countries where they are treated, cut and then re-exported to end-user countries. One of the main challenges of the industry is to formalize small-scale mining, which will continue to dominate the sector in the short and medium term and reduce exports of rough gemstones through the active development of a healthy, performing processing industry and bring the marketing process up to international standards.  

Since the discovery of the Andranondambo Sapphire deposit in the early 1990s, closely followed by the uncovering of several other major gemstone deposits, Madagascar's mining sector has experienced a substantial boom.    

In Madagascar, business competition is limited due to the current fragmented structure of the sapphire and gemstone market. As yet, no company has achieved a dominant position in the gemstone industry and it is still rife with illegal mining. Mayfair Madagascar plans to address this problem by seeking to establish infrastructure within the country to regularize the industry, in cooperation with the government of Madagascar.  

SAFE HARBOR STATEMENT 

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