Pluton Resources Limited Announces Maiden Ore Reserve Estimate And Pre-Feasibility Study Results For Irvine Island Iron Ore Project

08:46 AEST June 6, 2011 ABN Newswire (C) 2004-2011 Asia Business News PL. All Rights Reserved.

Sydney, Australia (ABN Newswire) - Pluton Resources Limited ('Pluton') (ASX: PLV) are pleased to announce a positive outcome as part of the Pre-Feasibility Study (PFS) currently being undertaken by Pluton for development of the Irvine Island Project, Western Australia.

The results highlight the potential for a significant iron ore project at Irvine Island, providing a roadmap for development which maximises returns for shareholders while minimising the project's environmental footprint.


STAGING OF IRVINE ISLAND DEVELOPMENT FOR PFS PURPOSES

For PFS purposes, the Company has adopted a two staged valuation approach to the Irvine Island project. The initial PFS results are solely based on the Indicated Mineral Resources that have been converted to Probable Ore Reserves at the southern end of the Hardstaff Peninsula. Only ore classified as Indicated Mineral Resources or Measured Mineral Resources under the JORC code can be valued to PFS standard.

The PFS results, (for Stage 1 valuation only), are based on an initial eleven (11) year mine life operation using Pluton's current Indicated Mineral Resources at the southern end of Hardstaff Peninsula only, estimated to produce 40 Mt of saleable concentrate and generating estimated revenue of over A$5.6 billion.

In addition to Stage 1, a Stage 2 evaluation will be conducted either during, or prior to the Definitive Feasibility Study (DFS) to take into account:

- Pluton's current Inferred Mineral Resource, of which a proportion is expected to be converted into higher confidence Mineral Resource categories, following additional diamond drilling and technical studies;

- further current Indicated Mineral Resources defined at the Hardstaff Peninsula to the north of the Stage 1 pit; and

- further tonnage from other areas at Hardstaff Peninsula, and from the Isthmus Region.

Stage 2 is expected to significantly increase the mine life for minimal, if any, additional capital expenditure.


PRE-FEASIBILITY RESULTS SUMMARY

- Maiden Ore Reserve defined at the Hardstaff Peninsula.

- Stage 1 Mine Life of 11 years with a low strip ratio (less than 0.7:1).

- Subject to approvals production expected to commence Q4 2013/Q1 2014.

- Production of a pre-concentrate on Irvine Island averaging 40% total iron, with final beneficiation to a high quality concentrate in Asia.

- Stage 1 production of 71Mt of pre-concentrate estimated to produce 40 Mt of final concentrate product generating revenue over the mine life of ~ A$5.6 billion (2011$).

- Cash operating cost of A$63/t of final concentrate (excluding royalties).

- Estimated capital cost of A$700 million for Stage 1 Hardstaff Peninsula.

- Stage 1 estimated Net Present Value @ 12% nominal discount rate ('NPV12') of $A710M.

- NPV = $3.80/share ($3.40/share fully diluted).

- IRR = 38% ungeared (Stage 1 only).


COMMENTS BY PLUTON RESOURCES CEO, MR TONY SCHOER:

'The Pre-Feasibility Study findings support the development of a significant and profitable project at Irvine Island producing a premium iron ore product with low impurities'.

'Irvine Island enjoys the added benefit of deep water access and close proximity to Asia, and is free from the rail and infrastructure constraints that generally typify deposits within the Pilbara region'.

'The initial PFS results are based solely on an evaluation of the Indicated Mineral Resources at the southern end of the Hardstaff Peninsula, supporting an eleven year Mine Life operation producing an estimated 40Mt of saleable concentrate, generating revenues in excess of A$5.6 billion'.

'Stage 2 evaluation of Irvine Island's Inferred Mineral Resources and mineralisation from other areas of the Hardstaff Peninsula and Isthmus Region will be included in the Definitive Feasibility Study. Stage 2 is expected to significantly increase the mine life for minimal, if any additional capital expenditure'.

'The PFS has provided us with a roadmap for development of Irvine Island which includes an initial stage of on-island processing to produce a 40% total iron pre-concentrate which will be shipped to Asia for final beneficiation'.

'This will produce a high quality iron ore averaging 67% total iron containing universally low impurities.

We believe the final concentrate would attract a significant premium within the market when sold'.

'The Company has been in discussions with several Asian beneficiation companies and end users who are willing to work with us to produce this high quality product for their markets. The PFS result gives us the confidence to finalise commercial negotiations in the near future'.

'Importantly the process selected for the project ensures that we meet our stakeholder and environmental objectives. These include providing employment and business opportunities for the traditional owners of Irvine Island, the Mayala People and minimising the environmental impact of operations on Irvine Island'.

'On the basis of the Pre-Feasibility Study results, we will now proceed with confidence to a Definitive Feasibility Study. Based on the delivery schedule prepared by Pluton, the intention is to achieve first production in late 2013/early 2014 subject to approvals'.


MAIDEN ORE RESERVES

A maiden Ore Reserve estimate for the Hardstaff Peninsula at the Irvine Island Project has been completed by AMC Consultants Pty Ltd (AMC).

The delineation of the Ore Reserve at the Hardstaff Peninsula is in line with the Company's development strategy and represents a key milestone in the development of the project. The open-pit Ore Reserve estimate for the Hardstaff Peninsula as reported in accordance with the JORC Code is summarised in Table 1 (see link at the bottom of the release);

Mineral Resources have been converted to Ore Reserves recognising the level of confidence in the Mineral Resource estimate and reflecting any modifying factors. The Ore Reserve Estimate is based on the Mineral Resource estimate for the Hardstaff Peninsula that was previously compiled by AMC (ASX announcement 27th April, 2011).

The Ore Reserve includes that part of the Mineral Resource contained within the open pit mine design. Indicated Mineral Resources within the design convert to Probable Ore Reserves, after consideration of all mining, metallurgical, social, environmental, statutory and financial aspects of the project.


KEY OUTCOMES OF THE PRE-FEASIBILITY STUDY

- The Hardstaff Peninsula Ore Reserve supports the production of an estimated 40 Mt of final concentrate from the initial Stage 1 open pit. Final recovery and grade of the 40% total iron pre-concentrate is subject to a third party processing capability and performance.

- Production of final concentrate (processed by a third party) is estimated at an average 4.4 Mtpa in first 7 years. When Stage 2 production is added it is anticipated that this average can be maintained.

- Mine production is planned to ramp up to 24 Mtpa sufficient to supply 17 Mtpa of process plant feed at 28% total iron to produce 8.5 Mtpa of pre-concentrate (at 1mm sizing) averaging 40% total iron by Year 2 of production at the Hardstaff Peninsula.

- Ore to waste strip ratio of 0.7:1 for the Stage 1 Hardstaff Peninsula open pit.

- Capital investment expenditure of A$700 million (2011$) is required to develop Stage 1. The estimate includes owner's costs, EPCM (Engineering, Procurement, Construction, and Management) and contingency costs.

- Mining, on-island processing and trans-shipment of the pre-concentrate to be awarded to and operated by suitably qualified contractors.


FINANCIAL MODELING RESULTS

Valuation is based on the following key assumptions for mine production, metallurgy, capital costs, operating costs and revenue.


MINE PRODUCTION

Mine planning and scheduling completed by AMC, confirms the technical feasibility for the production of an estimated 40 Mt of saleable concentrate based on the Stage 1 open-pit Ore Reserve defined at the Hardstaff Peninsula.

Open pit mining is to be completed using conventional hydraulic excavator and truck operations. This will allow operational flexibility and optimal ore blending of the higher grade Yampi Member with the lower grade overlaying Wonganin Sandstone necessary for the production of a pre-concentrate.

Total material movement is to progressively ramp up to 24 Mtpa in Year 2 which includes 17 Mtpa of ore and 7 Mtpa of waste. The delivery of 17 Mtpa of feed ore material will be sufficient to produce 8.5 Mt pa of pre-concentrate averaging 40% total iron and 4.4 Mtpa of final product subject to final beneficiation by a third party.

The Ore Reserve estimate does not include material from the Isthmus Region. Preliminary metallurgical investigations indicate that the remaining lower grade material currently defined as Inferred Mineral Resources may be suitable for beneficiation to a pre-concentrate. This may further add to product quantities defined within the Ore Reserve at the Hardstaff Peninsula subject to more detailed metallurgical test work and further drilling to upgrade confidence in the resource as part of the Definitive Feasibility Study.


METALLURGY

As part of the current pre-feasibility study, a number of different processing options were considered. These options included full beneficiation processing on Irvine Island (wet and dry), gravity separation and the production of a single pre-concentrate using dry methods, with final processing to a high grade concentrate offshore. Tests showed that a concentrate grade (+66%Fe) was attainable with full processing including fine grinding and low intensity magnetic separation (LIMS) as well as gravity, wet high intensity magnetic separation (WHIMS) and reverse flotation.

The production of a dry pre-concentrate on Irvine Island with final processing to a high grade concentrate offshore was selected as the preferred case for the pre-feasibility study by Pluton. This case is also considered to offer the best environmental solution at Irvine Island.

The production of a dry pre-concentrate was based on bench scale test results of six diamond drill core composite samples selected from a total of five diamond drill holes located at the southern end of the Hardstaff Peninsula.

Three drill core composite samples were submitted for test work from the Wonganin Sandstone. The iron feed grades for the three Wonganin Sandstone composite samples (PLV_MET_1, PLV_MET_2 and PLV_MET_3) were 21.6% Fe, 28.2% Fe and 32.7% Fe respectively. Three drill core composite samples were submitted from the Yampi Member. The iron feed grades for the three Yampi Member composite samples (PLV_MET_4, PLV_MET_5 and PLV_MET_6) were 34.4% Fe, 33.6% Fe and 54.2% Fe respectively. Each of these samples were crushed and screened to 1mm and fed dry to a bench scale laboratory dry magnetic separator.

The bench scale test work indicates that the samples are amenable to upgrading to a +40% pre-concentrate by dry magnetic separation providing that the minimum average feed grade is 28% Fe. The mass recoveries of these tests range between 45% for the lower iron feed grade to 90% for the highest iron feed grade. No samples of the pre-concentrate were tested for production of a final concentrate.

Pilot scale process plant test work for the production of a dry pre-concentrate at 1mm size will be undertaken in the Definitive Feasibility Study. This will also include investigation of feed material below 28% Fe and also in the range of 15% Fe to 21% Fe. Bulk samples are to be collected from diamond drill holes yet to be drilled at the Hardstaff Peninsula and Isthmus Region and submitted for further detailed test work. This will provide pre-concentrate for further testing by a third party.


CAPITAL COST ESTIMATE

Capital costs for the production of a pre-concentrate are based on estimates provided by Calibre Projects, Perth, Western Australia. These are given in Table 2 (see link at the bottom of the release) and are based on supplier quotations and internal database information where appropriate.


OPERATING COSTS

- Operating costs have been estimated on the basis that all operating activities which include mining, processing and transshipment, will be awarded and contracted to suitably qualified suppliers wherever appropriate.

- An initial Stage 1 open-pit mine operating cost (excluding royalties) is estimated to be A$63 per tonne of final concentrate product (A$74/t including all royalties)

A summary of the total operating costs to produce the final product is given in Table 3 (see link at the bottom of the release).

A simplified flow diagram summarising material mined, dry tailings and pre-concentrate produced with unit costs for Table 3 (see link at the bottom of the release) is given as an attachment at the end of the announcement.


REVENUE

Revenue forecasts were based on iron ore pricing curves contained within Macquarie Commodity Research report dated 18th May 2011, and applying a long term base exchange rate of 0.82 USD/AUD. Iron ore market analysis predicts the current strong demand for iron ore to continue into the future.

The pre-concentrate is planned to be shipped in Cape class size vessels. A US$18/t premium has been assumed in the modeling to reflect this high product grade and low impurities which similar quality products in the market are achieving.

Total life of mine revenue is estimated at A$5.6bn (real 2011$)


NEXT STEPS

Pluton Resources near-term work activities will be focused on the following key areas:

- Reaching agreement with third parties in Asia who will beneficiate the pre-concentrate to a final finished concentrate under commercial terms.

- Continued drilling and technical studies at the Isthmus Region and Hardstaff Peninsula that aim to convert the existing Inferred Mineral Resource into higher confidence Mineral Resource categories.

- Commencement of pilot scale metallurgical test work on samples from both the Hardstaff Peninsula and the Isthmus Region.

- Finalise negotiations with potential funding/off-take partners.

- Refer Irvine project to the Environmental Protection Authority (EPA), Western Australia, to commence environmental approval process.

- Plan and commence Definitive Feasibility Study.

For the complete announcement including figures and tables, please refer to the following link:
http://www.abnnewswire.net/media/en/docs/355875.pdf


About Pluton Resources Limited:

Pluton Resources Limited (ASX: PLV) is a mineral exploration company focusing on iron ore in the Kimberley region of Western Australia, with additional copper, gold and silver projects located in North Western Tasmania. The company was listed in 2006 and is based in Melbourne, Australia. Pluton Resources has proven to innovate and develop new technologies that would otherwise restrict other companies.



Contact:

Mr. Tony Schoer
Managing Director and Chief Executive Officer
Mob: +61-411-232-711
Email: tschoer@plutonresources.com