Southern Arc advised to refocus exploration activities at West Lombok

Southern Arc Minerals (CVE:SA) said Thursday it has been advised to drill conservatively on certain areas of its West Lombok project in Indonesia, leading the company's stock to drop over 15 percent as it refocuses its exploration activities at the site.

On the TSX-Venture Exchange, Southern Arc shares plunged 15.38 percent to $0.55, as of 2:14 pm EDT.

In January 2011, the company received a mining business license for its West Lombok property, located on the southwest portion of Wombok Island in Indonesia.

Shortly after, Southern Arc initiated the forestry permit process that allows for advanced exploration activities on the property.

About 1.1 percent of the property is designated 'Protected Forest', meaning that only approved underground mining is allowed, while 55.1 percent is designated 'Production Forest', meaning there are no restrictions on exploration activities that have the appropriate licensing. The remainder of the property has a 'No Forestry' designation, meaning there is a total restriction on mining activities.

In the 1990s, however, the property was clear-cut logged, and so the company decided that, while it waited for the receipt of its forestry permit, it would proceed with its exploration activities, for which it said it had strong support from local governments.

Now, the company said it has been advised to "adopt a more conservative approach" to its activities within areas designated 'Protected Forest', despite the fact that no forested areas exist on the property, Southern Arc added.

As a result, Southern Arc is planning to refocus its drilling activities, and has relocated two of its drills to the Jati and Tanjung targets, located on the Pelangan prospect, until it receives the permit.

Previous drilling at the Tanjung target has found 10.05 metres grading 13.4 grams per tonne (g/t) gold and 8.0 g/t silver, including 2.3 metres at 47.9 g/t gold and 24.0 g/t silver, in hole TDG02.

On the Jati target, hole JDG03 hit 9.2 metres at 5.9 g/t gold and 11.0 g/t silver, including 1.25 metres at 7.1 g/t gold and 2.0 g/t silver.

"Ongoing engagement with the Ministry of Forestry is a top priority for the company's in-country team," said CEO John Proust.

"We have the support of the local authorities and communities and are confident that discussions with the Ministry of Forestry will be productive. We will work diligently to expedite permitting in order to resume full-scale exploration of the West Lombok project.

"We have a strong relationship with the West Lombok Regency, which holds a ten percent stake in the West Lombok project. We are the number one employer in the district, providing significant economic and social benefits to local communities. [And] all of our exploration activities have been implemented based on extensive consultation with the local authorities."

Still, the company said that its stated goal of completing two NI 43-101 resource estimates by June 30, 2012 remains contingent upon the receipt of the forestry permit.

Southern Arc said it expects the remaining 16 holes drilled on the Waterfall target on the Mencanggah prospect to be released in early January, while the eight recently-completed holes on the Bising target of the Mencanggah prospect are expected by late January.