Sennen Resources Ltd (C-SN) - News Release
Sennen clarifies coal deposit estimate details
2005-03-01 19:46 ET - News Release
Shares issued 42,451,165
SN Close 2005-03-01 C$ 0.70
Mr. Ian Rozier reports
CLARIFICATION OF RESERVE/RESOURCE ESTIMATES AT THE MIDDLEMOUNT, OWNAVIEW AND COLLINGWOOD, COAL DEPOSITS IN QUEENSLAND, AUSTRALIA
As a result of a review by the British Columbia Securities Commission, Sennen Resources Ltd. is issuing the following press release to clarify its disclosure.
Ian Rozier, president of Sennen Resources, has clarified the disclosure with respect to the Middlemount, Collingwood and Ownaview coal deposits in Queensland, Australia. Various coal reserve and resource estimates have been reported by the company, previous operators, consultants and government departments for both the original exploration permits for coal (EPC) and the mineral development licences (MDL) covering these three coal deposits. Accordingly, the company is pleased to clarify the status of the company's coal assets and the historical estimates that have been reported, as well as to provide more technical information on the properties.
MDL 282 (Middlemount)
Prior to being granted an MDL, the Middlemount EPC comprised two areas; Booroondara and Foxleigh North. The company has always focused on the Booroondara area. In 1992, McElroy Bryan Geological Services Pty. Ltd. of Australia reported a technical database at the Booroondara block derived from a total of 155 drill holes, comprising 105 open holes, 48 partially cored holes and two large-diameter holes. This database was used by Shell Australia Pty. Ltd. to compute reserves and evaluate mining options using the Minex software system. Shell reported that the Booroondara block at Middlemount contains approximately 335 million tonnes of coal of thermal or coking-blend quality. Of this amountm Shell reported reserves of 254 million tonnes with 68.5 million tonnes having less than 100 metres of overburden cover.
The coal in the Booroondara block at Middlemount is contained within four seam groups: the Roper, Middlemount, Pisces and Girrah seams, with various splits and subsplits. Of these, the Middlemount MI seam and Pisces PI seam were reported by Shell as being of most interest, with average thickness of 4.03 metres and 4.43 metres, respectively. Three areas with open-cut mining potential were delineated by Shell, based on overburden ratio, line of oxidation, the 60-metre isopach and structural features; two areas for the MI seam and one for the PI seam. All three areas were designed for single-seam dragline operations.
In 1998, the company retained J. Karajas, BSc, MAIG, AusIMM, of Kjirt Exploration Services Pty. Ltd. to confirm the status of the historical Shell coal resources and reserves in the Middlemount MI and the Pisces PI seams in the Booroondara block. Using standard coal definitions in accordance with the Australian Institute of Mining and Metallurgy (AusIMM) classifications, Kjirt reported measured reserves in the Middlemount MI seam to be 39.1 million tonnes, and in the Pisces PI seam to be 74.2 million tonnes, for a total estimate of 113.3 million tonnes of measured reserves. This was reported in news in Stockwatch dated Jan. 26, 1998, July 15, 2004, and Dec. 2, 2004.
Certain aspects of the reporting of these estimates require clarification:
The company confirms that these estimates are historical estimates.
In the Dec. 2, 2004, news in Stockwatch, the company reported that " ... an updated feasibility study is required to confirm the measured reserve and until such time as this is complete, the coal at Middlemount has been reclassified as being 367 million tonnes of measured resource." The company should have retained the historical status of the estimates and confirms that the historical measured reserve estimate at Middlemount is 113.3 million tonnes, with a further historical measured resource estimate of 141 million tonnes, resulting in total historical measured reserves and resources of 254 million tonnes of low-to-medium volatile, low-sulphur, bituminous coal.
In a management's discussion and analysis filed on Stockwatch SEDAR filings of Dec. 23, 2004, reference was made to a measured and indicated resource estimate for Booroondara of 159 million tonnes of coal which was cited by the Queensland Department of Mines and Energy (QDME). The company confirms that in the management's discussion and analysis, it should have referred to the historical measured reserve estimate of 113.3 million tonnes and an additional historical measured resource estimate of 141 million tonnes, as stated in the company's news releases.
To clarify disclosure, the estimates at MDL 282, are summarized as follows:
Shell reported resources of 254 million tonnes of coal, of which 68.5 million tonnes has less than 100 metres of overburden cover. This is a historical estimate.
In 1998, Kjirt reported measured reserves in the Middlemount MI seam as being 39.1 million tonnes of coal and measured reserves in the Pisces PI seam as being 74.2 million tonnes, for a total measured reserve of 113.3 million tonnes of coal. This is a historical estimate.
Kjirt reported the remaining 141 million tonnes of coal as a measured resource. This is a historical estimate.
The company clarifies that of the total measured reserve reported by Kjirt, only 31.1 million tonnes occurs at less than 100 metres in depth.
Kjirt estimated that 7.7 million tonnes of coal at Middlemount is amenable to open-cut methods at a strip ratio of up to 10:1, the remainder being amenable to underground mining methods.
The company considers the technical data on which these historical estimates were made to be relevant and reliable, and the estimates reported by Kjirt to be reliable.
There are no more recent estimates or data available to the company.
The Middlemount MI seam has a low raw ash (17 per cent) and low sulphur content (0.4 per cent). The Pisces PI seam has a low raw ash (19.4 per cent) and low sulphur content (0.43 per cent).
In the July 15, 2004, news in Stockwatch, the company reported that the Middlemount deposit had been granted an MDL and stated that, "Under the rules governing mineral leases in Queensland, MDLs are only granted when a deposit is considered to have large 'measured and indicated Class 1 reserves,' in accordance with the classification system used by the Queensland Department of Mines and Energy. Although government publications, technical papers and resource/reserve classification systems are not acceptable sources for reporting of coal resource estimates, the company considers the transfer of the EPCs into MDLs as being significant in that it further demonstrates the validity of the previous work done on the Middlemount coal deposit by Shell company of Australia." The company reiterates that government classification systems are not regarded as being acceptable sources for reporting resource/reserve estimates and although the granting of an MDL by the QDME is a significant event it should not be interpreted as altering the historical status of the estimates.
MDL 283 (Ownaview)
In 1984, Shell estimated "indicated reserves" at Ownaview, based on the modelling of data obtained from 88 drill holes. Shell estimated 140 million tonnes of indicated reserves with a strip ratio of less than 5:1, with an additional 180 million tonnes of indicated reserves at strip ratios between 5:1 and 7.5:1, for a total of 320 million tonnes with a strip ratio of less than 7.5:1. The ash content of this coal was reported by Shell as being " ... approximately 35 per cent in situ, but can evidently be washed to ash levels of under 20 per cent, if required." Most of the coal reserves reported by Shell are contained in the Acland seam, which is generally 12 metres to 15 metres thick, and comprises three seams, designated UA1, UA2 and LA. Most of the coal occurs in the LA unit which is generally seven to 7.5 metres thick.
The Jan. 26, 1998, news in Stockwatch reported a measured resource, estimated by Kjirt using the standard coal resource definitions as defined by the AusIMM, as " ... 172 million tonnes of recoverable, high-volatile, low-sulphur, thermal coal with overburden (strip) ratios of less than 7.5 to one. The average thickness of workable coal ranges from four metres to eight metres. One area in the central part of the (Ownaview) deposit contains 52.6 million tonnes with a strip ratio of five to one and an average seam thickness of 7.1 metres." Of the Kjirt estimate of 172 million tonnes, 97 million tonnes was determined to have less than 10 metres of cover.
Kjirt used standard coal resource definitions as defined by the AusIMM classification system and in the July 15, 2004, news in Stockwatch, the company stated that " ... from the previous work done and the extensive technical database that exists, the company considers the previous (that is, historical), resource estimates to be relevant and reliable and consistent with JORC standards for the reporting of coal resources." The company considers the Kjirt historical estimate to be relevant and reliable. However, irrespective of the company's high regard as to the reliability and relevance of the technical information used to derive the estimates, for the quality of work conducted by Shell and Kjirt, and for the AusIMM reporting standards, these estimates are "historical" estimates and should not be interpreted as being current. There are no more recent estimates or data available to the company.
The Ownaview deposit is located approximately 12 kilometres to the north of Dalby and is connected to Brisbane and port facilities by rail some 210 kilometres. Ownaview is only 80 kilometres from the Tarong Powerhouse and could supply coal to either this station or the Swanbank power station near Ipswich, or alternatively to the export market.
EPC 640 (Collingwood)
Based on data from 58 drill holes, in 1984, Shell reported "in situ reserves" of 140 million tonnes with less than a 7.5:1 strip ratio. Shell reported the coal as having a "moderate ash content (15 per cent to 20 per cent) and high-specific energy, and could be marketed locally as a raw coal or easily beneficiated to a low ash export product." In 1995, resource estimates published in the Queensland Government Mining Journal were reported as 85 million tonnes of measured and 30 million tonnes of indicated open-cut coal reserves with a strip ratio of between five to one and 7.5 to one, for a total measured and indicated resource of 115 million tonnes. The Jan. 26, 1998, news in Stockwatch stated the most recent and lower of these estimates, being " ... 85 million tonnes of measured and 30 million tonnes of indicated, open-cut reserves."
The July 15, 2004, news in Stockwatch stated that " ... the historical resource estimate for Collingwood was reported in the news in Stockwatch dated Jan. 26, 1998, as being a measured coal resource of 85 million tonnes, with a further indicated coal resource of 30 million tonnes." This was a misquote; the Jan. 26, 1998, news in Stockwatch clearly states these estimates as being "reserves" and not "resources." The company considers Shell to be competent operators and both the technical database and derived estimates to be relevant and reliable. However, both the Shell and QDME estimates are historical estimates. There are no current estimates at Collingwood. There are no more recent estimates or data available to the company.
General comment
Under current reporting requirements, the reporting of historical estimates is acceptable, provided that reference is made to them being of a historical nature. The reconciliation of the variously reported estimates at Middlemount, Ownaview and Collingwood from old to new classification systems by various entities since 1984 has resulted in some uncertainty as to the exact status of the coal reserve and resource estimates at the three deposits. The purpose of this news release has been to clarify the company's position with respect to the status of the reported estimates on these coal deposits and to emphasize that all estimates quoted are historical and are not supported by an NI 43-101 technical report, and are therefore not to be relied upon. There are no current estimates.
Under Section 3.4 of NI 43-101 -- Standards of disclosure for mineral projects, it is a requirement that a statement be included " ... that resources which are not reserves do not have demonstrated economic viability." The company cautions that even where historical reserves have been quoted, their economic viability may have changed significantly, either positively or negatively, since the estimates were made.
It is not known to the extent to which any of the estimates may be materially affected by any environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant issues. All three coal deposits occur in areas with existing open-cut and underground coal mines in the Queensland coal fields that have been the subject of massive infrastructure projects that include dams, power stations, rail links, roads and port facilities. The operating costs of Queensland coal mines makes them extremely competitive with some of the lowest production costs in the world.
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