AMEX RESOURCES LIMITED
Annual Report 2016
An iron ore focused, mineral resources development company. Core focus the Mba Delta Ironsand Project in Fiji.
www.amex.net.au
Annual Report | 2016
LETTER FROM THE CHAIRMAN
I am pleased to deliver the Chairman's annual report to shareholders for 2016. This year has seen the Company engage
a new construction contractor to build our Mba Delta project in Fiji, raise debt funding for the project, renew our Special Prospecting Licence in Fiji, obtain a transit base lease, appoint a FIDIC engineer, build a sonic drill rig for exploration, continue to pursue MCC Overseas Ltd (MCCO) and survive the worst cyclone in the Southern Hemisphere.
The Company appointed CCCC First Harbor Consultants Co., Ltd (FHC) to build the power plant, wharf, unloading, washing, storage and ship loading infrastructure at our port facility in Lautoka in Fiji. FHC will also provide the bulk of the marine fleet we require to dredge, process and transport by pusher tug and barge our concentrate product from the Mba Delta dredging site to Lautoka port.
The Company has developed an excellent working relationship with FHC which has helped immensely during the technical review phase of this construction project. Amex and FHC personnel have reviewed hundreds of drawings to agree engineering and design interpretations. I commend all personnel involved for their diligence, patience and tolerance in circumstances where language differences have sometimes exacerbated technical differences of opinion.
This phase is almost complete and we are looking forward to heavy mobilisation of FHC personnel and equipment on the ground in Fiji.
Your board negotiated a USD80 million debt funding facility prior to signing the construction contract with FHC. In the circumstances of the day it was the best arrangement we could obtain, but it is expensive.
Nevertheless, we are continually examining alternative options and should a realistic alternative become available we will take it.
A local Fijian engineering firm, WesEng Consulting Limited, was appointed FIDIC engineer in December 2015. The FIDIC engineer performs technical supervision, inspection and construction management as required under the contract.
I commend our team in Fiji for the excellent work they did in obtaining local consents for our Special
Prospecting Licence renewal. This renewal secures our potential to add substantially to the existing resource over the next three years. In addition, they have been able to secure a transit base site at Nailaga which the Company will upgrade as part of the terms of the lease.
A sonic drill rig was commissioned during the year based on a German designed and manufactured sonic drill head which will be mounted on a barge to be built locally in Fiji. The rig will be used for resource extension, infill drilling and exploration in the Special Prospecting Licence zone and for grade control in the mining lease.
MCCO and their continuing recalcitrance continues to frustrate your Board. We are now taking action against them under the auspices of the International Chamber of Commerce, but always mindful of the costs of pursuit.
Category 5 Cyclone Winston caused significant and widespread damage to parts of Fiji in February 2016. Winston was recorded as the most powerful cyclone ever in the southern hemisphere, with particularly severe damage to villages in the Western Division. It was heartening to see the delivery of aid to Fiji from nations around the world, including significant aid from Australia and New Zealand.
From Amex's perspective we only lost a roof from our base camp in Sorokoba, yet our people were still able to offer shelter to nearby villagers in our ground floor sample storage area on the night of the cyclone.
Our Fiji team was able to deliver food, water and school supplies to villages in the following days during the state of emergency.
My thanks to our shareholders for your continued support. We can all look forward to an interesting 2017 and to seeing some substantive progress on the ground in Fiji.
RICHARD ALSTON
Non-Executive Chairman
Annual Report | 2016
OPERATIONS
REPORT part one
EXECUTIVE SUMMARY
The Company has engaged a replacement construction contractor CCCC First Harbor Consultants Co., Ltd (FHC) to build the port infrastructure at its Lautoka port site in
Fiji. FHC has also been engaged to procure and deliver a marine fleet consisting of dredge, floating processing plant, pusher tug and work boat. A refuelling vessel and crew boat will be manufactured in Fiji by Amex appointed manufacturers. FHC has mobilised a management team to Fiji to attend to local registrations, supplier
and Amex liaison, establish a branch office in rented premises in Lautoka and start a recruitment process for local employees to staff the branch operation. The contractors technical team and subcontractors are working intensively with Amex engineering personnel to finalise design and engineering details prior to heavy site mobilisation.
Amex personnel are assisting FHC with government department liaison including the Immigration Department for visa applications for Chinese workers, Lautoka City
Council for an accommodation lease near site and Fiji Revenue and Customs authority for VAT and provisional tax matters.
In December 2015 the Company engaged a local Fijian Engineering group, WesEng Consulting Limited, to fulfil the role of FIDIC Engineer for the project to perform technical supervision, inspection and construction management as required under the contract.
In September 2015 the company executed a USD80 million funding agreement for development of the Mba Delta Ironsand Project. The facility consists of a USD30 million loan and a USD50 million underwriting agreement.
The Company has continued its legal action against MCC Overseas Ltd (MCCO) after obtaining a judgement in favour of the Company from a Dispute Adjudication Board hearing in Singapore in August 2015. As a result of MCCO's refusal to recognise the judgement and remit the award to the Company, Amex has initiated proceedings under the auspices of the International Chamber of Commerce (ICC). The action is ongoing.
In Fiji, Mr Emori Toloi, the Company's In Country Manager responsible for community and government liaison along with Mr Alivereti Tuidravuni, the Company's General Manager of Operations - Fiji and designated Mine Manager under the Mining Act, have jointly led the local team in a very busy year. As well as assisting FHC with numerous local matters they have engaged in extensive consultation with local villages as was required prior to the renewal of Special Prospecting Licence 1463, which has been awarded for a further three years, and the granting of the Nailaga transit base lease for a 99 year period.
Additionally, Mr Tuidravuni meets weekly with FHC and the FIDIC engineer to deal with the myriad minutiae of a construction project of this nature. Mr Tuidravuni is also preparing his existing team for imminent expansion during the construction and training period to production.
Amex Resources Limited
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Annual Report | 2016
OPERATIONS REPORT
MBA DELTA IRONSAND PROJECT
Overview
The Company's Mba Delta ironsand orebody occurs as a simple flat lying blanket of fine to coarse magnetite-bearing black sand, approximately 15 kilometres long by up to 4 kilometres wide, located on the tidal and sub-tidal flats of the delta. It lies at the mouth of the Ba River in the northwest of Fiji's main island, Viti Levu, and is bordered by a sparsely-populated agricultural area.
Amex's ironsand concentrate is a high-quality and low impurity magnetite product which can be readily extracted at low cost by dredging of unconsolidated sediments, without the expensive crushing and grinding required by hard rock magnetite sources.
The deposit lies in a shallow lagoon which has minimal current and wave activity and is ideally suited to extraction by conventional dredging methods, planned at a rate of 12 million tonnes annually. From the dredge, the sand will be pumped to a nearby barge-mounted process plant along a 500m long floating pipeline.
Simple chemical-free magnetic separation at the process plant will recover the magnetite concentrate, and a fleet of four barges and a pusher tug will carry the product daily to the Company's sole-use facilities nearby at Lautoka Port. The host sand will be rehabilitated immediately to the delta floor. By adopting a marine based transportation route, the building and maintenance of costly rail or road transport infrastructure will be avoided. At port, the concentrate will be unloaded as a slurry and then rinsed with fresh water to remove sea salt, followed by drying and stockpiling in a fully enclosed purpose built storage facility of 75,000 tonne capacity.
Bulk carrier vessels of Handimax size will berth at Amex's sole- use wharf facility at regular intervals to accept cargoes of up to 60,000 tonnes capacity via the purpose-built shiploader facility, for export to China.
Following an initial six-month ramp up period, annual production of 750,000 tonnes of magnetite concentrate targeting 58% Fe will be sold primarily to steel mills in China. Plans are being considered by the Board for potential doubling of production to
1.5 million tonnes per year during the second year of operation.
The Company's Mba Delta Project is ideally situated, close to a major port and the international airport at Nadi. A large deposit of magnetite-rich ironsand has been defined by Amex and secured by grant of a long term mining lease, with a surrounding extensive special prospecting licence. The
Lautoka port site is held under a long-term lease with Fiji Ports Corporation Limited, a Government Commercial company, and all approvals are in place for construction.
Update
In October 2015 the Company executed a construction and marine procurement contract with FHC under the auspices of the International Federation of Consulting Engineers (commonly known as FIDIC, an acronym for its French name Fédération Internationale Des Ingénieurs-Conseils). FHC is a replacement contractor which the Company appointed after terminating the original contractor MCCO.
The contract is for a total of USD76.3 million dollars comprising a USD12.8 million advance payment, a series of milestone payments over an 18 month build period and a final delayed payment in the amount of USD15 million which becomes due for payment when a twelve month defects rectification period has been completed. The Company agreed to an amended Commencement Date of 1 May 2016.
On receipt of a bank guarantee for the advance payment amount and after the Company lawyers and bankers reviewed and approved the form of the bank guarantee supplied, the
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