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Chromex expands to Zimbabwe with acquisition of Waylox Mining

South Africa focused Chromex Mining PLC (AIM: CHX) said it has concluded the acquisition of Waylox Mining  (Private)  Ltd,  a chrome mining  company operating in Zimbabwe  and a wholly owned subsidiary  of TransAfrika Resources Ltd for a total of  US$1.15 million.

The deal was signed on April 15 2010, and all conditions have now been fulfilled. Chromex is paying US$300,000 in cash, with the balance of US$815,000 in 3,465,247 new Chromex shares at a price of 15.83 pence per share.

The acquisition is in line with the company's strategy of building a solid portfolio of chrome production assets across southern Africa.

Waylox  has been operating in Zimbabwe since August 2008 after acquiring the 683 hectares Trixie and Prince of Wales claims located  in the prospective Darwendale area.  The Darwendale area is located on the Great Dyke of Zimbabwe which is host to significant chrome resources.

The Trixie and Prince of Wales claims contain economic grades of alluvial chrome resources.  The current mineral resource estimated on the 388 ha Trixie project stands at approximately 1.9 million tonnes at an average modelled grade of 13.8 percent chromium oxide Cr2O3.  The estimate was calculated on the basis of the results of an exploration programme comprising 245 exploration pits across the five Trixie claims.  The 216 ha Prince of Wales claims require further exploration which Chromex plan to conduct over the next six months.

Chromex has initiated a feasibility study on the Trixie claims which is expected to be completed in Q4 2010.  Similar chrome operations on the Great Dyke are producing chrome concentrates with Cr2O3 grades ranging from 47 to 50 percent and Cr:Fe ratios in excess of 1.9:1.

CEO Russell Lamming said: "This acquisition represents a significant opportunity for Chromex as we expand our position as a leading chrome company in southern Africa.  With  resource estimation  and metallurgical  testwork almost complete  we should be in a position to start the development  of the Trixie claims in Q4 of this year,  and  fast-track the project towards production, unlocking value for shareholders."

Astaire Securities featured Chromex in its Morning Report, saying that the acquisition of Waylox Mining moves the company another step towards becoming one of southern Africa’s leading chromite miners.

A feasibility study at Trixie is underway, and it will also be fairly straightforward to bring the Prince of Wales to production. "These operations should give Chromex significant additional production and cashflow, from limited capex and quickly," the broker added.

Chromex currently has two key mining assets located on the Bushveld Complex in South  Africa, which between them have total resources of approximately 41  million tonnes of  chromite.  The Mecklenburg mine lies in the east and the Stellite mine in the west. Both are owned and operated by South African registered Chromex Mining Co, which is 74% owned by Chromex and 26% owned by their Black Economic Empowerment (NYSE:BEE) partner Umnotho WeSizwe.

In line with its strategy, it is expanding its operations to Zimbabwe. In addition to the acquisition of Waylox, Chromex has signed a binding heads of agreement for acquiring a 49 percent stake in Falvect Mining (Private) Ltd in Zimbabwe.

The company’s flasgship Stellite mine is currently ramping up production. It will initially produce approximately 20,000 run of mine (NYSEARCA:ROM) tonnes per month, increasing to 40,000 ROM tonnes per month once a dense media separation circuit (DMS) is installed at the plant. The DMS is expected to be completed during the third quarter of 2010. Stellite should reach full capacity by the first quarter of 2011 - producing approximately 500,000 run-of-mine tonnes in the year.

Disclosure: The author holds no positions in the company