Anooraq reviews Drenthe and Overysel North assessment
2005-03-09 11:07 ET - News Release
Mr. Ronald Thiessen reports
PRELIMINARY ASSESSMENT INDICATES STRONG RETURNS FOR DEVELOPMENT OF DRENTHE & OVERYSEL NORTH PLATINUM GROUP METALS DEPOSITS
Anooraq Resources Corp. has released the results of a preliminary economic assessment of the Drenthe and adjacent Overysel North platinum group metals (PGM) deposits. The Drenthe and Overysel North deposits are being explored and developed under the Boikgantsho platinum mine joint venture agreement (Boikgantsho JV) between Anooraq and Anglo American Platinum Corp. Ltd. Anooraq is the operator of the joint venture. The Boikgantsho JV property is located on the northern limb of the Bushveld complex, about 250 kilometres north of Johannesburg, South Africa.
The preliminary assessment is based on a conventional open-pit mining and milling operation with a 32-year mine life. Currencies used are United States dollars and South African rand (ZAR), with an exchange ratio of 7:1. At expected long-term metal prices of $650 (U.S.) per ounce for platinum, $250 (U.S.) per ounce for palladium, $375 (U.S.) per ounce for gold, $4.00 (U.S.) per pound for nickel and $1.00 (U.S.) per pound for copper used for the base case, the pretax and preroyalty economic model forecasts the net present value (NPV) of the project at a 5-per-cent discount rate of $300.5-million (U.S.) and at 10-per-cent discount is $138.8-million (U.S.) with an internal rate of return (IRR) of 25 per cent. The estimated capital cost is $152.8-million (U.S.) with a payback of 3-1/4 years.
At current metal prices of $850 (U.S.) per ounce for platinum, $180 (U.S.) per ounce for palladium, $400 (U.S.) per ounce for gold, $6.60 (U.S.) per pound for nickel and $1.40 (U.S.) per pound for copper, and an exchange rate of 6:1, the economics for the project are even more robust. The net present value at a 5-per-cent discount rate is $576.7-million (U.S.) and at 10-per-cent discount is $293.3-million (U.S.) with an IRR of 35 per cent.
The preliminary assessment is based on indicated and inferred mineral resources outlined to mid-September, 2004, in the Drenthe and Overysel North deposits. Mineral resources for these deposits at a $20 (U.S.) gross metal value per tonne cut-off were announced in Stockwatch news issued on Nov. 22, 2004, however, the current study indicates favourable financial results using a cut-off grade of approximately $10.50 (U.S.) per tonne. As the preliminary assessment is based, in part, on inferred resources that are geologically speculative, there is no certainty that the economic considerations or results will be realized.
The mine plan for the study encompasses operations in two main pit areas on the Drenthe and Overysel North deposits. The northern pit area is 5,500 metres long and the smaller pit area is 2,000 metres long. The maximum pit shell is 700 metres wide and 300 metres deep. Whittle 4D (an open-pit modelling software) was used to produce an economic pit shell and outline total in-pit resources of 256 million tonnes grading 1.03 grams per tonne 3PGM (0.43 gram per tonne platinum, 0.52 gram per tonne palladium, 0.08 gram per tonne gold), 0.11 per cent nickel and 0.07 per cent copper at a $10.50-(U.S.)-per-tonne cut-off. This pit was then capped for a mine life of 32 years for the study, resulting in an in-pit resource of 160 million tonnes grading 1.05 grams per tonne 3PGM (0.44 gram per tonne platinum, 0.53 gram per tonne palladium, 0.08 gram per tonne gold), 0.12 per cent nickel and 0.08 per cent copper.
The mill feed rate for the preliminary assessment is five million tonnes per year. The average head grade ranges from 1.1 to 1.4 grams per tonne platinum group metals in the first five years of mining and 0.8 to 1.0 gram per tonne in the last five years. Metallurgical studies on core samples show good results for a conventional mill circuit, comprising crushing, grinding and two-stage flotation. From this work, the following head grade driven concentrator recoveries were used in the study: platinum 75 per cent, palladium 75 per cent, gold 75 per cent, copper 80 per cent and nickel 75 per cent.
Mining costs for the study are based on budget estimates provided by South African mining contractors and processing costs are derived from studies by Dowding Reynard & Associates, the company's metallurgical consultants in South Africa. Administrative and environmental costs are based on estimates from contract submissions.
As operator, Anooraq is responsible for exploration and engineering activities. This preliminary assessment has been conducted by in-house and external independent qualified persons employed by Anooraq. Anglo Platinum has not been involved in the preparation of the preliminary assessment nor in the evaluation of the results thereof. The study uses industry standard costs for all phases of the proposed development including the smelting and refining, and makes assumptions about the concentrate to be produced. Industry standard costs are also used in estimates of the cost for socio-economic activities, that is, community involvement, relocation and other related issues, however, until there are final agreements on these and related matters there is no assurance that these costs will not change.
The block model and mineral resource estimate that formed the basis for the preliminary assessment was prepared by Geologix (Pty.) Ltd., under the direction of G.J. van der Heever, an independent qualified person (QP) as defined under NI 43-101. The pit optimization work and in-pit resource estimate was carried out by Thomas Tulp, MAusIMM, of Hatch Australia, also an independent qualified person. A technical report co-authored by in-house qualified person David Reeves, AusIMM, and Mr. Tulp and Mr. van der Heever will be filed on SEDAR.
Property interests
The Drenthe and Overysel North deposits are being explored and developed under the Boikgantsho platinum mine joint venture agreement between Anooraq and Anglo American Platinum Corp. Ltd. Pursuant to the terms of the JV, Anooraq and Anglo Platinum will form an initial 50/50 joint venture to explore Anooraq's Drenthe and Witrivier farms and the northern portion of Anglo Platinum's Overysel farm for a period of up to five years. During that period, Anooraq will operate the exploration programs, and spend up to 12.35 million South African rand on behalf of the JV. Anooraq will then have the option to proceed on a year-by-year basis and to take the project to a bankable feasibility study.
Once the BFS has been completed, the parties, by agreement, may proceed to exploitation subject to relevant regulatory requirements. If both partners decide to proceed, then a joint management committee will be established to oversee development and operations. At commencement of exploitation, the joint venture interest allotted to each of Anooraq and Anglo Platinum will be determined in proportion to the relative value of the metals contained in each contributed property as reflected in the BFS. However, at that time each party has the option to "top up" to bring their interest to 50 per cent. At this early stage, there has been no assessment of the relative value of the metals in the ground contributed by each of the parties.
Current programs
The Boikgantsho JV project is located in a region of sparse water resources but the Department of Water Affairs has already engaged a long-term plan to provide additional water supply. One part of the scheme is due to come on-line in 2006, and the second in 2010. Planning to access these resources will be part of the prefeasibility studies. In the mining scenario used for the preliminary assessment, the open pits were designed with pit walls at a nominal 42 degrees in the near-surface oxide and weathered zones, and 52- to 60-degree walls in the more competent sulphide zones. Under the model used, all of the in-pit material was mined but only the fresh sulphide (unweathered) material was processed. Testing is under way on core samples to determine metallurgical characteristics of the weathered material so that it can be integrated into the mine processing plan.
There is also additional upside potential for the project. There is excellent potential for milling and mining optimization using higher throughputs, which would further enhance the project economics. The mineral resource is open to the north, and down dip, with potential for additional resources to be outlined. Current metallurgical testwork suggests that the recoveries used in this study may be conservative and could increase. Other improvements, such as acid leaching of oxide mineralization within the deposit to enhance recovery of base metals, optimizing cut-off grades to produce a higher grade mill feed, and geotechnical studies aimed at supporting steeper pit wall angles during mining are being assessed in prefeasibility programs that are currently under way. Completion of the prefeasibility study is expected in the third quarter of 2005.
Also as part of prefeasibility studies, the geological models and mineral resource estimates are currently being updated with information from drilling to December, 2004. A 24,000-metre multirig drilling program was initiated in January, 2005, focusing on the Drenthe deposit. Drilling is planned to proceed at 50-metre intervals along 50-metre spaced lines in order to define measured mineral resources within the deposit, and advance the project toward a feasibility study.
