Dutwa economic model update
14.03.2011 | Globenewswire Europe
African Eagle Resources plc("African Eagle" or the "Company")
UPDATED ECONOMIC MODEL FOR THE
DUTWA NICKEL PROJECT, TANZANIA
African Eagle Resources plc (AIM: AFE; AltX AEA) announces that it has received
the second iteration of the feasibility study economic model for its Dutwa
nickel project in Tanzania from independent engineering consultant Simulus. The
latest economic model evaluates both of the ore process routes available to the
Company, heap leaching as well as atmospheric agitated tank leaching ("tank
leaching") and includes ore throughputs of up to 5Mt per annum.
In this announcement, the currency is US dollars and all net present values
("NPVs") are at a 10% discount rate.
Key headlines:
------------------------ ------ ------------ ------------
| Ore Throughput - 3Mtpa | | Heap Leach | Tank Leach |
------------------------ ------ ----- ------ ----- ------
| Nickel price | $/lb | $10 | $8 | $10 | $8 |
------------------------ ------ ----- ------ ----- ------
| NPV post-tax | $M | 705 | 260 | 870 | 385 |
------------------------ ------ ----- ------ ----- ------
| IRR post-tax | % | 26 | 17 | 29 | 20 |
------------------------ ------ ----- ------ ----- ------
* Capex estimates for heap leach of $550M and for tank leach of $600M
* Capital payback for both methods is between 3 and 5 years
* Cash operating cost estimates of $3.37/lb for tank leach and $3.56/lb for
heap leach
* Throughput boost from 3Mtpa to 5Mtpa improves economics but increases
logistics challenge
African Eagle's Managing Director Mark Parker commented:
"This latest economic modelling indicates that atmospheric tank leaching, rather
than heap leaching, will give a better economic return at Dutwa. Our final
selection of the best process option will be based on the outcome of bench-scale
and pilot-scale metallurgical testwork now commencing in Perth, WA, leading to a
pre-feasibility study, scheduled for completion by end Q3 2011.
A higher throughput of 5Mt per annum would improve the project returns, but
under present conditions, logistical challenges are likely to make 3Mt per annum
a more realistic production target. The throughput could be scaled up if
proposed infrastructure developments allow."
The results reported here represent an expansion of the economic model announced
in December 2010, to include heap leaching as well as agitated tank leaching and
ore throughputs between 2Mt per annum and 5Mt per annum. In all cases, the model
assumed that a mixed nickel-cobalt hydroxide intermediate product would be
generated.
The mining and processing schedules used in the model were developed by Snowden
Mining Industry Consultants (Perth, WA) from the Whittle pit optimisations, as
recently announced.
The capital and operating cost estimates were made by AMEC Minproc (Perth, WA),
to approximately ±20%, using the best data currently available. The estimates
indicate that the initial capital cost of a tank leach operation is not likely
to be more than 10% greater than the cost of a heap leach operation for 3Mtpa or
5Mtpa throughputs. The capital intensity values for both process routes are far
lower than those published for comparable projects which use the more expensive
high pressure acid leach process.
The full results of the modelling for tank and heap leach, for throughputs of
3Mtpa and 5Mtpa are given in the tables below, on a 100% project ownership basis
with debt financing not considered.
Over the coming months, the Dutwa economic model will be further developed and
refined to take into account the results of the current metallurgical testwork
and to assess the impact of producing a mixed sulphide intermediate product
rather than a hydroxide and of using rail transport rather than road.
The next major milestones for the Dutwa Project are:
* Commencement of the Environmental and Social Impact Assessment (Q2 2011)
* Completion of JORC indicated resource estimation (Q2 2011)
* Completion of Pre-Feasibility Study (Q3 2011)
* Commencement of Definitive Feasibility Study ("DFS") (Q4 2011)
* Completion of DFS (end Q4 2012)
* Seek project financing during 2012
* Construction of the plant and other infrastructure (2013-2014)
* First production (Q1 2015)
---------------------------------------------------------------------------
|Economic model results: Tank Leach |
------------------------------------------------------- --------- ---------
|Ore Throughput | 3Mtpa | 5Mtpa |
--------------------------------- --------------------- ---- ---- ---- ----
|Nickel price | $lb |$10 | $8 |$10 | $8 |
--------------------------------- --------------------- ---- ---- ---- ----
|NPV post-tax | $M |870 |385 |1125|475 |
--------------------------------- --------------------- ---- ---- ---- ----
|IRR post-tax | % | 29 | 20 | 31 | 20 |
--------------------------------- --------------------- ---- ---- ---- ----
|Payback period | Years |3.1 |4.9 |2.7 |4.2 |
--------------------------------- --------------------- ---- ---- ---- ----
|Capital expenditure | $M |600 |600 |840 |840 |
--------------------------------- --------------------- ---- ---- ---- ----
|Capital intensity | $/lb nickel/yr |11.7|11.7|10.4|10.4|
--------------------------------- --------------------- ---- ---- ---- ----
|Cash operating costs, $/lb contained nickel | $/lb | $/lb |
------------------------------------------------------- --------- ---------
|Consumables | 0.08 | 0.09 |
------------------------------------------------------- --------- ---------
|General & Admin | 0.20 | 0.16 |
------------------------------------------------------- --------- ---------
|Labour | 0.12 | 0.08 |
------------------------------------------------------- --------- ---------
|Maintenance | 0.26 | 0.23 |
------------------------------------------------------- --------- ---------
|Mining | 0.23 | 0.22 |
------------------------------------------------------- --------- ---------
|Power | 0.01 | 0.01 |
------------------------------------------------------- --------- ---------
|Reagents | 1.63 | 1.65 |
------------------------------------------------------- --------- ---------
|Transportation | 0.99 | 1.01 |
------------------------------------------------------- --------- ---------
|Cobalt credits | -0.15 | -0.15 |
------------------------------------------------------- --------- ---------
|TOTAL | 3.37 | 3.30 |
------------------------------------------------------- --------- ---------
|Model assumptions and parameters | | |
--------------------------------- --------------------- --------- ---------
|Mine life |Years | 26 | 17 |
--------------------------------- --------------------- --------- ---------
|Ore mined and processed |million tonnes | 78.2 | 82.2 |
--------------------------------- --------------------- --------- ---------
|Strip ratio |waste/ore | 0.43 | 0.45 |
--------------------------------- --------------------- --------- ---------
|Intermediate Product | | MHP | MHP |
--------------------------------- --------------------- --------- ---------
|Nickel payability |% of LME nickel price| 75 | 75 |
--------------------------------- --------------------- --------- ---------
|Average nickel grade |% | 0.97 | 0.95 |
--------------------------------- --------------------- --------- ---------
|Total contained nickel in product|000 tonnes | 603 | 623 |
--------------------------------- --------------------- --------- ---------
|Average cobalt grade |% | 0.03 | 0.03 |
--------------------------------- --------------------- --------- ---------
|Total contained cobalt in product|000 tonnes | 15.0 | 15.7 |
--------------------------------- --------------------- --------- ---------
|Life of mine capital cost |$M | 659 | 918 |
--------------------------------- --------------------- --------- ---------
---------------------------------------------------------------------------
|Economic model results: Heap Leach |
------------------------------------------------------- --------- ---------
|Ore Throughput | 3Mtpa | 5Mtpa |
--------------------------------- --------------------- ---- ---- ---- ----
|Nickel price |$lb |$10 | $8 |$10 | $8 |
--------------------------------- --------------------- ---- ---- ---- ----
|NPV post-tax |$M |705 |260 |920 |310 |
--------------------------------- --------------------- ---- ---- ---- ----
|IRR post-tax |% | 26 | 17 | 27 | 17 |
--------------------------------- --------------------- ---- ---- ---- ----
|Payback period |Years |3.2 |5.2 |2.8 |4.5 |
--------------------------------- --------------------- ---- ---- ---- ----
|Capital expenditure |$M |550 |550 |770 |770 |
--------------------------------- --------------------- ---- ---- ---- ----
|Capital intensity |$/lb nickel/yr |11.5|11.5|10.3|10.3|
--------------------------------- --------------------- ---- ---- ---- ----
|Cash operating costs, $/lb contained nickel | $/lb | $/lb |
------------------------------------------------------- --------- ---------
|Consumables | 0.14 | 0.14 |
------------------------------------------------------- --------- ---------
|General & Admin | 0.21 | 0.16 |
------------------------------------------------------- --------- ---------
|Labour | 0.12 | 0.08 |
------------------------------------------------------- --------- ---------
|Maintenance | 0.25 | 0.21 |
------------------------------------------------------- --------- ---------
|Mining | 0.24 | 0.23 |
------------------------------------------------------- --------- ---------
|Power | 0.08 | 0.06 |
------------------------------------------------------- --------- ---------
|Reagents | 1.64 | 1.68 |
------------------------------------------------------- --------- ---------
|Transportation | 1.03 | 1.06 |
------------------------------------------------------- --------- ---------
|Cobalt credits | -0.15 | -0.15 |
------------------------------------------------------- --------- ---------
|TOTAL | 3.56 | 3.47 |
------------------------------------------------------- --------- ---------
|Model assumptions and parameters | | |
--------------------------------- --------------------- --------- ---------
|Mine life |Years | 25 | 17 |
--------------------------------- --------------------- --------- ---------
|Ore mined and processed |million tonnes | 72.1 | 78.3 |
--------------------------------- --------------------- --------- ---------
|Strip ratio |waste/ore | 0.52 | 0.48 |
--------------------------------- --------------------- --------- ---------
|Intermediate Product | | MHP | MHP |
--------------------------------- --------------------- --------- ---------
|Nickel payability |% of LME nickel price| 75 | 75 |
--------------------------------- --------------------- --------- ---------
|Average nickel grade |% | 0.99 | 0.97 |
--------------------------------- --------------------- --------- ---------
|Total contained nickel in product|000 tonnes | 543 | 574 |
--------------------------------- --------------------- --------- ---------
|Average cobalt grade |% | 0.03 | 0.03 |
--------------------------------- --------------------- --------- ---------
|Total contained cobalt in product|000 tonnes | 13.5 | 14.4 |
--------------------------------- --------------------- --------- ---------
|Life of mine capital cost |$M | 603 | 839 |
--------------------------------- --------------------- --------- ---------
Qualified Person
Information in this report is based on financial simulations prepared by Tim
Newton, BEng (Chem), MSc (Min Econ). Tim Newton is a Member of the Australasian
Institute of Mining and Metallurgy (AusIMM) and is Technical Director and a
full-time employee of Simulus Ltd. Tim Newton consents to the inclusion in the
report of the matters based on his information in the form and context in which
it appears.
Technical terms
A glossary of technical terms used by African Eagle in this announcement and
other published material may be found at www.africaneagle.co.uk/p/glossary.asp
For further information on African Eagle, see the Company's web site
www.africaneagle.co.uk or contact one of the following:
Chris Davies (Operations Director)
Bevan Metcalf (Finance Director)
African Eagle Resources plc, London
44 20 7248 6059
44 77 5640 6899
Andrew Chubb / Bhavesh Patel
Canaccord Genuity Limited
44 20 7050 6500
Guy Wilkes
Ocean Equities Limited, London
44 20 7786 4370
Charmane Russell / Marion Brower
Russell & Associates, Johannesburg
27 11 8803924
27 82 8928052
Dutwa Project Overview
African Eagle is developing the major Dutwa nickel project in Tanzania. The
Company discovered Dutwa in 2008 and is now conducting a pre-feasibility study
for the project.
Economic modelling in late 2010 indicated a pre-tax project NPV of $650 million
at a nickel price of $8/lb, with an estimated average cash cost of $3.37/lb
nickel. The model was based on throughput of 3 million tonnes per year for 26
years with processing by atmospheric tank leaching to a mixed hydroxide
intermediate product, requiring estimated initial capital expenditure of $600M
and yielding life of mine earnings of $8.2bn at $8/lb nickel. The mining
schedule was derived from Whittle optimisations of block models of an October
2010 inferred mineral resources. The financial models will be progressively
improved as the feasibility study progresses.
Mineral resources are currently 98.6 million tonnes grading 0.93% nickel and
0.02% cobalt, of which 46.2 million tonnes are in the JORC indicated category
and the remainder in the JORC inferred category. The Company believes that
further drilling will increase the total resource by up to 10Mt.
The Dutwa project consists of two nickel laterite deposits which form the caps
of two ridges about 7km apart. The current JORC mineral resources, at a 0.43%
nickel equivalent cut-off, are 98.6Mt grading 0.93% nickel and 0.02% cobalt,
containing in total 948,000 tonnes nickel metal equivalent. Of this, about half
is now in the indicated category and half in the inferred. Because the deposits
are at the surface, mining will be straightforward and strip ratios very low.
The Ni equivalent grade (NiEq) is calculated using the following formula:
NiEq = Ni [ Co * (RCo/RNi) * (PCo/PNi) ] = Ni (Co * 1.32)
using metal prices (P) of $10/pound Ni and $17/pound Co, and metal recovery
factors (R) of 90% for Ni and 70% for Co, derived from metallurgical test work
conducted by African Eagle.
The Company believes that the resources can be increased by another 8Mt to 10Mt
with further drilling. There is also future upside at Zanzui, 50km to the south,
where the Company is evaluating another significant nickel laterite resource,
and at Nyawa, 15km west of Dutwa.
Metallurgical tests have shown that the nickel ores are unusually easy to
process, giving good recoveries from heap or tank leaching at atmospheric
pressure, with no need for costly high pressure acid leach (HPAL).
African Eagle currently holds a 90% interest in the eastern Wamangola deposit,
which hosts approximately 60% of the total Dutwa resource, with an option to
acquire 100%. The smaller western Ngasamo deposit is subject to a joint venture
between African Eagle and the SAFINA Group of the Czech Republic under which
African Eagle is in the process of earning an interest of between 50% and 75% by
conducting and funding evaluation work there.
On completion of the feasibility study covering both deposits, African Eagle's
own interest in Wamangola, together with the two companies' respective joint
venture interests in Ngasamo will be converted into equity in the mining company
formed to develop and operate the combined project. African Eagle estimates that
it will then hold about 76% of the equity.
About African Eagle
Since discovering a major nickel oxide deposit at Dutwa in Tanzania, African
Eagle is in transition from an explorer into a nickel company. The Company
completed a positive scoping study on the Dutwa deposit in July 2009 and is now
working towards a feasibility study.
In addition to Dutwa, African Eagle is also evaluating a second promising nickel
oxide at Zanzui, which is located 60 km from Dutwa. The Company holds a 49%
interest in the Mkushi Copper Mines joint venture in Zambia, for which a draft
feasibility study was completed in Q4 2008. It also holds a half million ounce
gold resource at the Miyabi project in Tanzania, and a portfolio of gold and
base metal exploration assets, including two projects in the Zambian Copperbelt.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: African Eagle Resources PLC via Thomson Reuters ONE
[HUG#1494493]
Unternehmen: African Eagle Resources PLC - ISIN: GB0003394813