9 January 2007
IMX RESOURCES COMMITS TO CAIRN HILL DEVELOPMENT
Highlights
·
First mining operation for IMX Resources NL
·
Low risk project with high rates of return on low
capital investment
·
Simple open pit mining operation
·
Offtake partner for ROM
ore and cornerstone investor secured
·
Low strip ratios with highest grades nearer the top of
the deposit
·
Majority of funding already secured
·
Approvals well advanced
·
Near term expansion opportunities
Diversified resources developer, IMX Resources
(ASX:IXR) has formally committed to advancing its Cairn Hill project in South Australia, and
expects to commence trial mining at the iron ore – gold - copper project
by the end of the first quarter 2008.
Last month, IMX announced it had formed an offtake partnership with Chinese steel company Jilin Tonghua Iron & Steel
(Group) Mining Ltd (Tonghua Mining), signing a
detailed Heads of Agreement and injecting a cornerstone investment of $13.93
million for 9.99% of the Company at 85 cents per share.
IMX resources Managing Director Duncan
McBain said following the offtake and investment partnership with Tonghua
Mining, the Company was now committed to bringing the Cairn Hill project into
production as soon as possible.
“With the offtake
arrangement in place, we can now proceed with confidence on the development of
Cairn Hill, and are aiming to be in full production early in the third quarter
of 2008, with our first shipment before the end of the year,” Mr McBain said.
“We have been active in advancing our
environmental and mining approvals, and are close to finalising all funding
arrangements,” he said.
The Cairn Hill Magnetite
– Copper – Gold project is based on shipping unprocessed ROM ore to
China
for processing into a high grade (over 70% Fe) magnetite concentrate and a
copper / gold concentrate. The low cost, low risk project is expected to
produce a premium niche magnetite product that does not require pelletisation and has a significant Cu revenue stream. It
is expected to produce 7.3mt of ore averaging 50.9% Fe, 0.43% Cu and 0.13g/t Au
over a 5.5 year life, with significant opportunities for further expansion.
IMX Resources is pleased to provide shareholders with
the following project update:
Mining
Approvals and Agreements
IMX Resources is advanced in
its approvals process for the project, which is located 55 kilometres
south-east of Coober
Pedy, South
Australia. The re-offer of the mining lease, by the
South Australian government is expected within the next three weeks. The draft
Early Works Mining and Rehabilitation Plan (“EWMARP”), covering the
trial mining, was submitted to Primary Industry and Minerals SA
(“PIRSA”) in early December to commence the review process. The
draft Mining and Rehabilitation Plan (“MARP”) for the main mining
operation is in final preparation for submission to PIRSA within the next two
weeks.
The
terms for the native title agreements with the two claimant groups within the
mining lease were negotiated in November. The documentation has been finalised and is now waiting on signature by the various
members of the claimant groups and the Company.
Negotiations
with the Department of Defence regarding access to
the Woomera Prohibited Area have yet to be concluded.
Most aspects of the Access Deed have been finalised
and it is not envisaged that the Access Deed will hold up the trial mining,
which IMX Resources envisages commencing towards the end of Q1 2008.
Negotiations
with the pastoral leaseholder will shortly take place in regards to
compensation payable for the Cairn Hill mining and trucking. Early stage
negotiations and feedback on the haul road route and issues involving water for
stock have been discussed
Project
Parameters
The Cairn Hill Magnetite
– Copper – Gold project is predicated on shipping unprocessed ROM
ore to China
where it will be processed into a high grade (over 70% Fe) magnetite
concentrate and a copper / gold concentrate.
The
two pits at Cairn Hill are planned to produce 7.3mt averaging 50.9% Fe, 0.43%
Cu and 0.13g/t Au over a 5.5 year life with annual production of up to 1.39mtpa
of ROM ore after ramp-up, and an average strip ratio of 3.0:1. This is based on
the block model from the diluted Indicated Resource estimated in June 2007 of
10.5mt @ 50.0% Fe, 0.39% Cu and 0.12g/t Au.
It
is envisaged that the waste removal and ore mining will be undertaken by local
contractors under the management of IMX Resources own staff. This reduces the
capital cost requirement of the mine.
Figure
1: Sectional view of the two pits – looking from the WSW
Figure
2: Plan view of the two pits – looking from the south
Unusually,
both the iron and copper grades are highest nearer the subcrop
of the deposit. From mineralogy studies it appears unlikely to be secondary
enrichment as the copper mineralisation is
predominantly chalcopyrite and the iron mineralisation
magnetite through the zones of higher grade.
The
higher grades provide higher revenue in the earlier years when the costs are
highest due to the higher stripping ratios. This should enable early positive cashflow and constant margins through the life of the
project (assuming constant prices). The aim of the mine planning has been to maximise the copper grades and minimise
the stripping ratios in the early years to maximise
early cashflow.
Project
Capital Costs
In its review of the Project,
the Company has considered various logistics options principally around which
port to use for shipping its ore – Darwin or Port Pirie. At this stage
the preferred option is Darwin
for the following reasons:
·
Lowest capital cost option with the
lowest initial equity requirements
·
Delivers the lowest cost ore (CIF)
to a Chinese port
·
Potential to commence shipping
earlier
·
Lower financial risk option
·
More stockpiling flexibility
·
Existing port bulk handling
infrastructure at the Port
of Darwin
Under
the preferred Darwin shipping option, the capital cost estimates for Cairn Hill
are $41.6m, whilst the capital cost estimates through Port Pirie are $53.6m
(both including working capital). The details of these capital cost estimates
are:
Darwin
Port Pirie
Mine
related
Infrastructure
6.7
6.7
Logistics
Infrastructure
19.2
5.0
Port
Infrastructure
5.0
30.1
Contingencies
3.1
4.2
Working
Capital
7.6
7.6
IMX
has been able to significantly reduce capital cost estimates through the use of
Chinese equipment, designed to Australian specifications, for the crushing,
screening and dry magnetic separation. The use of Chinese equipment on the rail
and port infrastructure, to Australian specifications, has the potential to
reduce the capital costs further and potentially reduce operating costs through
reduced leasing costs.
Project
Funding
Extensive discussions have
been held with service providers regarding leasing arrangements of significant
portions of the above, resulting in the following anticipated financing plan
Darwin
Port Pirie
Capital / Working Capital
Costs
41.6
53.6
Lease Financed / Deferred
Capital
(21.4)
(4.7)
Equity Raised from Tonghua
(13.9)
(13.9)
There are further potential
opportunities for specific debt funding or leasing. However, at this stage
these discussions are still at a preliminary stage and have not been included.
It is envisaged that under either scenario the balance will be financed from
debt facilities secured against the project.
Cashflows
The
ROM ore will be sold on a FOB basis with the prices for the iron and copper
being benchmarked to market prices with adjustments being made for processing
and logistics costs. Copper revenue is important to the profitability of the
project, with copper contributing up to 40% of the project revenue during the
first three years.
Over
the initial project life of 5.5 years the FOB costs loaded onto a Panamax vessel in Darwin
are forecast to be A$50 per tonne, after the inland
freight adjustment in accordance with the sales offtake
contract.
Under
either shipping option, Darwin or Pt Pirie, the cumulative operating pre tax cashflow is estimated at $101m (average $18.4m per year)
for the initial 7.3mt of ROM ore in the initial pits – based on current
benchmark prices and exchange rates (copper US$6,715 / tonne,
iron ore fines USc80.42 / dmtu and exchange rates of
A$1 = US$0.873).
Project
Timing
The plan is to commence trial
mining around the end of the current quarter. This will enable a bulk sample to
be taken for Tonghua Mining to finalise
the design work for the processing plant. In addition, the trial mining will
provide an opportunity to optimise the pit design,
define material handling parameters for the ore and waste and assist in
effective equipment selection. The trial mining will facilitate a smooth
ramp up of the mining operations.
Subject
to the finalisation of the necessary mining and
planning approvals, construction of port and logistics infrastructure IMX
Resources plans to commence the mining operation early Q3 2008, with railing of
product to the port commencing in late Q3 2008 and the first shipment in Q4
2008.
Ports
In early 2007, IMX
Resources determined access to Port Pirie was likely to be
easier than Whyalla, with the outcomes more within
the Company’s control. IMX Resources actively pursued the Port Pirie
option engaging Connor Holmes in Adelaide
in October to assist the Company formulate a development application. The
development application for the rail bottom dump, shed and load-out facilities
was lodged with the Port Pirie Council on 21 December.
The
substantial rise in ocean freight rates and the prospect of scheduling
conflicts brought on by an increase in the potential number of users for the
barges and trans-shipper has prompted a re-examination of the option to ship
the Cairn Hill ROM ore through Darwin.
The review commenced in mid October. The aim of the review is to deliver the
cheapest CIF product to Tonghua
Mining’s processing plant.
Meetings
with the Port of Darwin management have confirmed
sufficient capacity exists to handle the ore from Cairn Hill utilising the
existing common user bottom dump receival and
shipping infrastructure. Negotiations are being finalised with the Port of Darwin and other service providers to
firm up costs and shipping capacity. The FOB pricing mechanism in the Heads of
Agreement provides for the additional FOB costs associated with Darwin to be recovered.
The
Board will make a final decision on the shipping port once the costings and capacity are firm for both options, and in
consultation with Tonghua Mining. Should the Company
determine that Port Pirie is the better current shipping option, the Company
believes that alternative barging options can be put in place.
In the longer term, IMX Resources is keen to see a
deep water cape-size minerals port built at Port Bonython in South Australia, with common user
facilities. The Company believes this is the best long term option for the
Cairn Hill project. IMX Resources views barging as a short term solution, and
is pleased by the momentum that Port Bonython is gaining. IMX Resources is very
encouraged by Flinders Ports proposal to commence evaluation studies in early
2008 on
the development of multi-user infrastructure facilities at Port Bonython.
Expansion
Opportunities
While the initial mining operations
are focused on a 5.5 year open cut pit producing ROM ore for export, there are
opportunities to expand the scope and size of the operations.
To
the east of the initial pit area there is a low copper and sulphur
magnetite resource and mineralisation.
Figure
3: Area of Lower Copper & Sulphur Magnetite
Opportunities
exist to mine this low copper ore and process it on site to produce a >70%
Fe magnetite concentrate using low cost dry and wet magnetic separation. Core
from the low copper area will be obtained for further testwork
aimed at maximising the size at which the separation
occurs. Further RC drilling will also be undertaken to extend the current
inferred resource further to the east. The wet magnetic separation process is
environmentally sustainable using no chemicals, and is able to largely recycle
the process water. The preliminary Davis Tube testwork
conducted on RC samples has indicated that the high grade magnetite concentrate
can be produced with Fe recoveries of over 90%.
Beyond
the current resources and immediate extensions to the east, the detailed helimag acquired in 2007 defines the magnetite horizon
along a minimum of 18 km of strike with potentially parallel trends which
appear to be also under shallow cover. The premise of commencing the initial
project is to get into the market with what is a niche product. IMX Resources
believes that it will be easier to expand the project once the ROM ore has been
processed commercially and there is a proven record. The export of ROM ore is
only possible where the copper grades are relatively high.
The
information in the report relating to pit design has been compiled by Jose
Anthony Holub, who is a Member the Australian
Institute of Geoscientists, and is the principal of Geomek.
Jose Anthony Holub has sufficient experience which is
relevant to the style of mineralisation and type of
deposit under consideration and to the activity which he is undertaking
to qualify as a Competent Person as defined in the 2004 Edition of the
‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Jose Anthony Holub
consents to the inclusion in the report of the statements made relating to pit
design in the form and context in which they appear.
All statements
in this announcement, other than statements of historical facts, that address
future production, reserve or resource potential, exploration drilling,
exploitation activities and events or developments that the Company expects to
occur, are forward-looking statements. Although the Company believes the
expectations expressed in such statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual results or
developments may differ materially from those in forward-looking statements.
Factors that could cause actual results to differ materially from those in
forward-looking statements include market prices, exploitation and exploration
successes, capital and operating costs, continued availability of capital and
financing and general economic, market or business conditions. Information in
this announcement are the current best estimates, but are subject to change.
IMX Resources is not able to warrant the accuracy or completeness of any
of the information in this announcement.
Issued by
Purple Communications
Level 3, 28 Kings Park
Road, WEST PERTH
WA 6005
Ph: 08 9485 1254 Fax: 08 6263 0455
purple@purplecom.com.au