MLEP_Volume_Summary_180906.pdf

Mine Life Extension Project North Pit - Summary - September 2006 Australian Bulk Minerals 60 Wilmot Street, Burnie Tasmania 7320 AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT ii CUTIVE SUMMARY Study Outcomes A Feasibility Study into the Mine Life Extension Project MLEP for the Savage River iron ore project in Western Tasmania is based on mining a total of 60.4 million tonnes Mt over 14 years from the North Pit mine at an average grade of 52.7 DTR for a total concentrate production of 30.1 Mt at an average rate of 2.5 million tonnes per annum Mtpa. The MLEP is a continuation of the present mining operation based on the North Pit only and is scheduled to commence mining in 2007 and concentrate production in 2009 on completion of the current phase of the operation. There is a two- year ramp-up phase, with production of 2.1 Mt and 2.2 Mt of concentrate in years 2009 and 2010 respectively before reaching the design rate of 2.5 Mtpa of concentrate. The MLEP is based on a continuation of conventional open pit drill and blast; with shovel and truck, mining s coupled to the existing concentrator and pellet plant facilities. The development plan utilises existing infrastructure, technology and mining s. Unit operating costs are initially in the range of A57 to A67 per tonne /t of concentrate recovered, falling to A28 to A49/t of concentrate recovered after 2018. Capital costs of A180 million equate to around A6/t of concentrate recovered. Financial modelling assuming constant 2006 money terms, pellet prices of US62.0/t to 2013 and US56.0/t for the remainder of the project, and an A / US exchange rate of 0.72, indicates that the project has an IRR of 25 and a net present value of A196M at an 8 discount rate after tax. A summary of results is presented in Table 1. Sensitivity analysis carried out by varying the financial model parameters singly or in groups showed that The biggest potential variations upside and downside will arise from variation in pellet price and exchange rate. The project is reasonably insensitive to capital cost. The project is moderately sensitive to operating costs. The operational and financial model presented in the MLEP document represents a standalone viable solution for continued economic operations for Australian Bulk Minerals ABM to the year 2021. The initial mine design was based on a pellet price of US50/t, while the financial analysis summarised in Table 1 uses an average pellet price of US58.45/t. The initial assumptions were conservative compared with the financial analysis, and were chosen to develop a financially robust plan. AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT iii The financial analysis is presented using the current market assessment. Time constraints have prevented re-optimisation and re-scheduling of the mine design at this stage to the level of accuracy that the MLEP requires i.e to an operational plan status. The initial estimated capital requirement is sufficient to establish the US50/t open pit operation. This design has the flexibility to accommodate any further extensions to the open pit, within the available resources outlined in the MLEP. Ongoing detailed engineering as part of the business planning process will determine whether there is sufficient benefit from additional capital expenditure to take advantage of the current market conditions. While different scenarios can be generated to accommodate different production and financial criteria, the MLEP is not intended to necessarily represent an optimal solution in terms of potential corporate and commercial arrangements that might be considered with parties external to ABM. Any other commercial arrangements would be presented as a standalone document. Location and Tenure The Savage River Mine and concentrator plant are located approximately 100 km south- west by sealed road from Burnie in North-Western Tasmania. The pelletising plant and dedicated port facilities at Port Latta are located 70 km north-west by sealed road from Burnie ABM operates under the conditions of Mining Lease 2M/2001, which stands for 30 years from 2001 unless surrendered. The mining lease encompasses a total of 4975 hectares and covers the Savage River Mine and concentrator, and the pelletising plant, wharf and shipping facilities located at Port Latta. In late 2005, ABM applied for and was granted Exploration Lease EL19/2005 over the northern portion of the Long Plains Deposit. Consideration was given to mining the other existing reserves, Centre Pit South and South Deposit, by traditional open cut techniques as either stand alone or in combination with North Pit. Although these reserves add to the total concentrate available, the economics are not as attractive as mining North Pit alone. They will be considered after North Pit is in production in the context of long term resource exploitation. The resource in North Pit can still accommodate further cutbacks depending on the market. ABM has recently acquired the magnetite deposits at Long Plains, located 19 kilometres km south of Savage River. While there is a potential magnetite resource at Long Plains and preliminary investigations have been undertaken, this area is being treated as an exploration target. AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT iv Mineral Resources and Ore Reserves Mineral Resource and Ore Reserve estimates have been generated using the data from recent work, together with historical ination and are detailed in Table 2. The ination contained within these tables has been prepared and reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves The JORC Code, 2004. Project Description The development plan has been designed to utilize existing infrastructure, proven technology and conventional mining s. All the unit operations of the process including mining, concentrating and pelletising have been successfully applied at Savage River since ownership by ABM. The project operating costs have been calculated on an owner-operator basis and the minor capital infrastructure is based on an cution strategy that relies on an engineering / procurement / construction management EPCM project cution approach. The project start date is 2007 Year 1, dependent upon the acquisition of mining equipment and commissioning on site. The latest date for project start is September 2007 which allows for continuous pellet production at a nominal 2.2 Mtpa, however the clay removal on the northern and eastern sides of North Pit must start in January 2007. The clay removal is not dependent upon acquisition of mining equipment as it will be undertaken as a stand alone contract and project but is dependent upon project approval to allow for contractor selection and mobilisation. The operational philosophy is for owner operated mining, concentrating and pelletising processes. The current management systems and processing such as mine design, mine operations, maintenance and OH a detailed report is provided in Feasibility Study Volume 3. Diamond drilling is the dominant drilling type. Recent geotechnical drilling has used HQ triple tube s producing oriented core. Reverse circulation RC has been used recently in resource definition programs. Blast hole drilling is used in the grade control process for detailed definition of ore block boundaries. Diamond holes are surveyed down-hole using both magnetic camera and non-magnetic Maxibor and more recently gyroscope s. A detailed geological log is recorded for every hole and is transferred to the drill hole database. Magnetic susceptibility is recorded for all mineralised intervals. New drill core is boxed and stored on-site at the Savage River core yard. Core is photographed, with much of the photography stored digitally. Samples of every metre of RC drill holes are stored on-site in chip trays. Geotechnical core is logged to a high level of detail including defect properties and structural domains and their properties. Core is cut using a diamond saw, with one half ted for sample preparation and assay, and the other retained for reference. RC drill chips are collected from the cyclone in bulk plastic bags for each one metre interval. Each bulk sample is split by riffle to obtain a 2m composite sample for assay. Bulk samples are generally discarded once results from the assay sample have been received and validated. Sample preparation is either carried out at the on-site laboratory at Savage River or sent to a commercial laboratory in Burnie, which must comply with an ABM Standard Appendix 1D, Samples are dried and representative pieces taken for dry bulk density determinations, the remainder being crushed and pulverized to 98 -75 microns for processing at the Savage River Laboratory by Davis Tube. The David Tube Recovery DTR or “weight recovery“ simulates the recovery of magnetite in the Savage River concentrator. Most of the material recovered in the Davis Tube is magnetite but small amounts of impurities are also recovered where they occur as grains composite with magnetite. Other important impurities occur within the magnetite crystal lattice. AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT 13 ABM routinely assays for total iron, ferrous iron, nickel, titanium, magnesium, phosphorus, vanadium, sulphur and silicon, using s described in Appendix 1D. Some of the elements or metals are important in determining the quality of magnetite concentrate used for pellet production for different customers. Prior to the recent geotechnical drilling program which commenced in early 2005, QA/QC programs were restricted to regular duplicate samples taken by the on-site laboratory on a semi-random basis. An in-house standard was set up in 2001 from material collected from North Pit, but has been used only sporadically. ABM has periodically used external laboratories to provide a cross check on the Savage River in-house laboratory. A more rigorous set of procedures were implemented for the geotechnical drilling campaign, including routine insertion of standards and re- submission of 10 of coarse reject samples, The target drill hole spacing for Measured Resources is 50m due to the high geological continuity of the mineralisation. This is achieved in most mining areas, however the base of the current design for North Pit is only defined by 100m spaced holes in some areas. The concentrator and production records give an ongoing check on grade estimates, and historically, product grades and production reconciliation figures give confirmation that the sampling and DTR values are generally satisfactory. 2.2.4 Mineral Resource Estimation Geological interpretations are carried out on 50m spaced sections, sliced horizontally every 10m and reinterpreted to ensure three-dimensional integrity. The flitch interpretations are digitized into Surpac string files, which are amalgamated into three dimensional wireframes representing geological domains based on grade and lithology. The main domains are Main Ore Zone ZAZM, Main Ore Zone ZS, Western Lens ZAZM and Western Lens ZS. Two metre composites for bulk density, bulk density x DTR, Fe2, Total Fe, Ni, TiO2, MgO, P, V, and S are extracted from the database inside the respective ore zones. Snowden Snowden Mining Industry Consultants Snowden was commissioned to analyse the data and to make recommendations with respect to estimation parameters for North Pit. A block model is constructed based on a cell size of 10 mN x 10 mE x 5 mRL. Ordinary Kriging is applied to estimate bulk density, density x DTR and elements / metals into cells, using a three pass approach to a statistical basis for resource classification. The statistical classification is reviewed in cross section and long section to derive surfaces for controlling final resource classification. Periodically the tonnes and DTR predicted from the Mineral Resource model are compared with the actual tonnes of produced concentrate. Reconciliation on an annual basis is within a 10 tolerance of actual production across all sources. AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT 14 2.2.5 Further Work Future work in North Pit will progressively upgrade the confidence in the resource model by decreasing the drill spacing. There will be several stages including the upgrading of Inferred Resources within the planned pit design to Indicated Resources, and a longer-term staged process of converting Indicated Resources to Measured Resources. The proposed Centre Pit design requires drilling in two areas; the east wall and the base of the pit to increase confidence in the geological interpretations. The only drilling required at South Deposit are several holes to define the plunge of each lens to the south. Centre Pit Southern Extension is a small magnetic anomaly located approximately 500m south of Centre Pit South. A reverse circulation drilling program has been designed to define the extents of the mineralisation zones and to potentially increase the Mineral Resource. Ongoing work at Long Plains is initially aimed at establishing the potential for the deposit to host an Ore Reserve. Planned work includes a detailed ground magnetics survey, followed by compilation of available data to generate a geological model. This will allow the development of a long term drilling strategy. 2.3 Mine Geology The current ore type classification has is based on magnetite grain size, ore hardness and gangue mineralogy. Hard ores are generally massive magnetite with low proportions of gangue minerals. Soft ores are generally of lower grade, with massive to disseminated magnetite containing higher proportions of gangue minerals such as tremolite, talc and serpentine. They are often associated with shearing. Grade control of the digging operations is achieved by logging blast hole chips and taking magnetic susceptibility readings. All waste rocks are classified according to their acid-ing potential to assist in the planning and implementation of waste disposal strategies. 2.4 Ore Reserves See Feasibility Study Volume 1, Section 3 for details. Table 2.2 summarises the Ore Reserves available as at the end of ABM’s current operation in 2009. AUSTRALIAN BULK MINERALS Mine Life Extension Project - Summary DRAFT 15 Table 2.2 Savage River Ore Reserves as at 2009, Cut-off Grade 15 DTR Total Savage River Category Tonnes M Grade DTR Contained Concentrate Mt Proved 39.62 46.9 17.7 Probable 39.65 50.9 19.2 Total 79.27 48.9 36.9 North Pit Deposit Proved 20.81 52.8 10.4 Probable 34.95 52.8 17.5 Total 55.76 52.8 27.9 Inferred Resources included in MLEP Mine Schedule Inferred 4.66 49.1 2.2 Savage River Centre Pit