Black Fire Minerals enters option to acquire 70% of Longonjo Rare Earth Project in Angola

Black Fire Minerals (ASX: BFE) due diligence on the Longonjo Rare Earth Project in central Angola provided some 'highly encouraging' results, with the company entering into an option to purchase agreement for a 70% equity interest.

As part of the due diligence process, Black Fire conducted an 88 sample trenching, pitting and rock chip geochemical sampling program, which returned highly encouraging results.

The primary target was the Longonjo Carbonatite REE Prospect.

Black Fire said the prospect comprises a large rare earth element, niobium and phosphate soil geochemical anomaly with 0.5% cerium, and is in excess of 2 kilometres by 1.5 kilometres, and is currently open to the southeast.

Trenching results included:

- 17 metres at 3.72% total rare earth oxide (TREO), 4.3% phosphate and 0.29% niobium;
- 19 metres at 3.54% TREO, 4.3% phosphate and 0.30% niobium; and
- 16 metres at 1.60% TREO, 6.6% phosphate and 0.33% niobium.

The best bedrock pit samples included; 18.91% TREO, 11.54% phosphate and 0.32% niobium, and 18.06% TREO, 7.77% phosphate and 0.8% niobium.

Black Fire said that although the assays are dominated by light rare earth elements, the tenor of the results are highly significant.

Of the 88 samples, they averaged 1.5% cerium oxide (peak 9.48%), 0.7% lanthanum oxide (peak 5.17%), 0.6% neodymium oxide (peak 2.77%), 0.2% praseodymium oxide (peak 0.87%) and 0.1% samarium oxide (peak 0.24%).

Adding to the potential for more encouraging results, a further 575 soil samples collected on a 100 metre by 100 metre spacings and covering the “open” southeast extension of the current soil anomaly are still pending, and are expected within two weeks.

Importantly, the project is close to infrastructure including the regional city of Huambo and road networks, as well as the recently recommissioned railway to the port city of Benguela, which passes less than 3 kilometres from Longonjo Carbonatite.

In addition to the Longonjo REE Prospect, copper‐gold‐uranium‐iron mineralisation and historical mine workings have been discovered at the Cassenha Hill Prospect which is located within the project.

The best rock chip assay results include 9% copper and 6g/t gold.

To move the project forward quickly, Black Fire intends to immediately commence an aggressive systematic exploration program with early stage drilling at Longonjo planned to commence in July.

The option agreement

Under the agreement, Black Fire has made a A$100,000 option payment to Australian company Sable Minerals Pty Ltd (Sable), for an exclusive 18 month option to acquire a 70% equity interest in Longonjo.

Sable’s holds the interest from a joint venture agreement with Angolan private company, Discovery Group Lda, who hold title to the project.

Under the agreement Sable have a 70% equity interest and are project managers while Discovery Group holds a 30% equity interest, and is being free carried to a decision to undertake a Bankable Feasibility Study.

Consideration

In February 2011 Black Fire negotiated an option to acquire 100% of Sable Minerals and thereby their interests in Longonjo.

Under the terms of the agreement with Sable, Black Fire was granted:

-A 100 day exclusive due diligence period in return for a cash payment of US$175,000 directly to the Angolan Ministry of Mines on behalf of Sable to cover project licence fees.

- At the completion of due diligence Black Fire was then able to exercise its right to acquire an 18 month option to purchase by making to Sable a cash payment of A$100,000 whilst agreeing to pay on behalf of Sable, ongoing licence fees and Government performance bonds during 2011 totalling US$268,000.

- Upon payment of these licence fees Black Fire will be granted a non-dilutable 25% shareholding in Sable.

- At any time before the end of the 18 month option period, which now expires on 31st October, 2012, Black Fire may acquire the remaining 75% shareholding in Sable by paying A$1,750,000 in Black Fire ordinary shares to be issued in two tranches, subject to obtaining relevant Black Fire shareholder approvals.

Tranche 1 will comprise A$1,250,000 worth of Black Fire shares to be issued at the VWAP for the 20 day period prior to the announcement by the company of its election to enter into the option agreement after due diligence.

Tranche 2 will comprise A$500,000 worth of Black Fire shares to be issued at the VWAP for the 20 day period prior to the announcement by the company of its election to exercise its option to acquire the remaining 75% equity in Sable.

Investors are supporting Black Fire shares in morning trade, with the company trading 28% higher.