Talon Metals Provides Operational Update on its Trairão Iron Project

Corporate Strategy Modified to Include Near-Term Production Opportunities 

TSX:TLO

ROAD TOWN, Tortola, British Virgin Islands, Sept. 27, 2012 /CNW/ - Talon Metals Corp. ("Talon" or the "Company") (TSX: TLO) is pleased to provide an operational update in respect of its 100% owned Trairão Iron Project ("Trairão Project"), located in Pará State, Brazil.  As previously reported in its press release dated March 2, 2012, the Trairão Project hosts an indicated resource of approximately 1.4 billion tonnes at an average grade of 34.27% Fe (using a 25% Fe cut-off), and an inferred resource of an additional 1.2 billion tonnes at an average grade of 29.48% Fe (using a 25% Fe cut-off).

Update on the Trairão Project

Since March 2012, Talon has been working on numerous initiatives to advance the Trairão Project, including, refining its geological model, conducting further mineralogical and metallurgical test work and completing a logistics study to identify various port options for purposes of exporting pellet feed and/or pellets from the Trairão Project.  In addition, the Company has undertaken a drilling program on its surficial deposit to assess the potential of delineating a high grade, near surface resource that may be amenable to producing direct shipping ore ("DSO"), in an effort to generate near-term cash flow for the Company.

The refining of the geological model has involved additional detailed surface mapping, as well as more comprehensive lithological and chemical re-logging of the diamond core and RC drill samples, in an effort to better define the characteristics and distribution of the iron mineralization.

Three mineralized lateritic profiles have been identified: surficial, saprolite and saprock, which overly the mineralized fresh rock.  There are two types of fresh rock, quartz-magnetite banded iron formation ("BIF") and magnetite-rich mineralization (previously referred to as magnetite-rich chlorite schist).

Based on the refined geological model, the Company selected representative samples of the different rock types and conducted test procedures on such samples.  These test procedures, including a summary of the results, are described below.

Quantitative Evaluation of Minerals by Scanning ("QEMSCAN") was performed by SGS in Lakefield, Ontario on two BIF samples, 30 magnetite-rich mineralization samples and two saprock samples.  QEMSCAN was used to understand the mineralogy of the different rock types as a precursor for conducting Davis Tube metallurgical testing.

Talon has focused the majority of its recent mineralogical and metallurgical efforts on the fresh rock, where the potential for resource expansion at the Trairão Project lies.

In respect of the BIF, QEMSCAN samples were selected for the first round of Davis Tube testing at a grind P100 of 45µm, using low magnetic intensity separation of 800 Gauss to produce a Fe concentrate.  Both the concentrate and tailings were submitted for XRF analysis.

Two samples of BIF were submitted for Davis Tube testing, which produced concentrate grades of 68.1% and 71.3% Fe at a mass yield of 35.4% and 33.3%, and calculated metallurgical recoveries of 69.9% and 67.1%.  These results are consistent with the results previously reported by the Company in its press release of March 2, 2012.  Aluminum and phosphorous continued to be low, at 0% and 0.3% for aluminum and 0% and 0.01% for phosphorous.  Silica was at 1.5% and 4.3%.

Thirty samples of magnetite-rich mineralization were submitted for Davis Tube testing.  As with the BIF, QEMSCAN samples were selected for the first round of Davis Tube testing at a grind P100 of 45µm, using low magnetic intensity separation of 800 Gauss to produce a Fe concentrate.

Of the 30 samples, seven produced good concentrate grades of between 66.4% and 69.8% Fe at mass yields of 19.4% to 27.9%, and calculated metallurgical recoveries of between 49.7% and 66.6% (as compared to 32% to 46% previously reported by the Company on March 2, 2012).  These results represent a substantial improvement over the results previously reported by the Company on March 2, 2012.  Aluminum ranged from 0.2% to 0.8%, while phosphorous was 0% to 0.03%.  Silica varied between 2.5% and 5.4%.

The results from the remaining 23 samples produced a range of concentrate grades and mass yield percentages, with concentrate grades ranging between 40.7% and 68.4% Fe, at mass yields of 10.3% to 28.6%, and calculated metallurgical recoveries of between 16.2% and 57.5%. Aluminum ranged from 0.3% to 5.1%, while phosphorous was between 0% and 0.05%.  Silica varied between 3.9% and 31.1%.  Notwithstanding these variations, based on an analysis of the QEMSCAN results, management believes that the concentrate grades and the mass yield percentages (and therefore the metallurgical recoveries) should increase with grinding finer than 45µm.  On this basis, the Company has commissioned Davis Tube testing on lower size fractions.

"We are pleased with the results from the initial Davis Tube metallurgical tests conducted on the fresh rock", said Henri van Rooyen, CEO of Talon.  "The results confirm good metallurgical recoveries from the BIF, and suggest that with finer grinding, we will be able to continue to improve the metallurgical recoveries from the magnetite-rich mineralization, although seven samples have already provided good metallurgical recoveries.  Going forward, the Company has commissioned further Davis Tube testing on lower size fractions in an effort to maximize liberation and concentrate grades in respect of the magnetite-rich mineralization. In addition, all mineralogical and metallurgical test results received will be used by the Company's process engineering consultants to help formulate a process engineering strategy." 

Previously, low and high intensity magnetic separation (800 Gauss - 16,130 Gauss) on particle sizes less than 45µm was performed on a blended saprolite and saprock sample, which produced 64% Fe with a metallurgical recovery of 47% (applying 800 Gauss to 3,200 Gauss) and 60% Fe with a metallurgical recovery of 79% (applying 800 Gauss to 16,130 Gauss) (see the Company's press release dated March 2, 2012).

In order for the Company's process engineering consultants (see section below entitled "Next Steps") to formulate an optimal processing strategy, the Company has continued its work on saprock by commissioning mineralogical testing, which was performed using QEMSCAN analyses on two discrete saprock samples.  These test results indicate total Fe oxide grades of 93% in the case of both samples, with a cumulative elemental Fe oxide mass of 51% and 47% at a fraction of equal or above 80µm.  Further work is being conducted to determine a predicted Fe grade and recovery curve.

As saprolite likely constitutes only a very small portion of the total resource at the Trairão Project, no further work has been conducted on the saprolite, and no further work is currently planned.

Drilling and sampling is currently underway on the surficial deposit in order to assess the near surface high grade areas that may represent a resource, which could be amenable to producing DSO.  This work is being performed in accordance with the terms of a Letter of Intent, which is further described below under the section entitled "Update on Trairão DSO: Letter of Intent Signed for the Sale of Lump".

The Company has completed a logistics study under which a number of different port options have been considered for purposes of exporting pellet feed and/or pellets at a production rate of 30 million tonnes per annum ("mtpa") from the Trairão Project.  The Company commissioned Southmark Logistics S.A. in respect of this study.  Southmark is independent of Talon.

The logistics study identified a number of planned port expansions throughout Brazil, including certain ports located outside of Parã State, which may provide the Company with a number of export options from the Trairão Project.

In addition to these planned port expansions, Brazil's President, Mrs. Dilma Rouseff, recently announced a US$45-billion (R$91-billion) infrastructure expansion plan, which includes the completion of the Norte-Sul railway line from Açailândia to the Vila do Conde port (near Belém), as well as to the planned Espadarte port (a new port currently in the planning stage).  The completion of this railway line could materially impact the Trairão Project in a positive way, as it would situate the project only 300km from a railway that connects to a port, which could be used for export of pellet feed and/or pellets from the Trairão Project.

Going forward, the Company plans to utilize the data from its logistics study to further evaluate infrastructure options from the Trairão Project to the various ports.

In addition to the various initiatives described above, the Company has appointed Ausenco (a global, diversified engineering, project management and mining services company), who is independent of Talon, to evaluate all mineralogical and metallurgical test results received from the Trairão Project, which will be used to devise a process engineering strategy for the Company.  Thereafter, it is expected that Ausenco will assist the Company with the creation of optimal flow sheets and a mine design, with a view to preparing for the commissioning of a Preliminary Economic Assessment at the appropriate time.

Update on Trairão DSO: Letter of Intent Signed for Sale of Lump

The Company is pleased to report that it has signed a Letter of Intent with a potential off-taker for lump material from the surficial deposit at the Trairão Project.  This agreement is part of the Company's ongoing strategy to progress the Trairão Project's surficial deposit into a near-term production operation, which could generate cash flow for the Company.

Drilling of the surficial deposit at the Trairão Project is underway, and it is intended that samples from the drilling program will be provided to the potential off-taker in accordance with the Letter of Intent for review and analysis.

Based on an analysis of the initial crush and screen tests, management believes it may be possible for the surficial deposit at the Trairão Project to achieve a lump material fraction size with a mass yield in excess of 50% at an average grade of approximately 60% Fe.

It is envisaged that the Letter of Intent will be formalized into a more fulsome definitive agreement if the lump material meets the off-taker's specifications.

Corporate Strategy Update

Following the changes to the Company's management team announced between February, 2012 and April, 2012, Talon has reviewed the Company's business strategy, with the primary goal of optimizing the use of its existing cash resources to maximize shareholder value.  To this end, the Company has taken into consideration a number of factors, including: (1) the consensus view that iron ore prices will remain at approximately US$80-$90 FOB Brazil, which could create economic challenges for large-scale projects requiring substantial development costs, such as the Trairão Project; (2) uncertain conditions in the capital markets, and in particular, the junior exploration sector; and (3) the overall declining macroeconomic picture, particularly for resources.

Based on these factors, the Company has decided to modify and broaden its existing business strategy of advancing its iron projects in Brazil to also actively looking for opportunities that could generate cash flow for the Company in the near-term.  Given Talon's understanding of the Brazilian iron ore industry, this has included the search for smaller high grade deposits within Brazil that are amenable to producing high grade DSO and are located close to existing steel industry infrastructure.  The Company is also actively reviewing a number of projects in respect of different commodities, both in Brazil and elsewhere.

"Despite better metallurgical results being achieved at the Trairão Project, and the recent announcement that both port and rail infrastructure may be built, which could allow for the export of large volumes of pellet feed material from the Trairão Project, we believe it is prudent for a junior exploration company with an early-stage magnetite deposit with large capital requirements, such as Talon, to carefully manage its rate of investment to ensure its shareholders will ultimately benefit from advanced infrastructure and higher iron ore prices in the long-term", said Sean Werger, President of Talon.  "To this end, we have already taken steps to substantially reduce the Company's overhead expenses, while broadening our corporate strategy to include pursuing opportunities that can generate cash flow for the Company in the near-term, including the potential sale of lump material from the Trairão Project."

Qualified Persons

Talon's exploration programs are being managed by Mr. Mauricio Prado (MAIG), Vice President, Resource Modeling of Talon. Mr. Prado is a Qualified Person within the meaning of National Instrument 43-101 ("NI 43-101"). Mr. Prado is satisfied that the processes used by SGS are standard industry operating procedures and methodologies, and he has reviewed, approved and verified the technical information disclosed in this news release (other than the mineral resource estimates) including sampling, analytical and test data underlying the technical information.

The Qualified Person who prepared the mineral resource estimates presented in this news release is Mr. Porfírio Cabaleiro Rodriguez (MAIG), who is a mining engineer, independent of Talon and an employee of Coffey Consultoria e Serviços Ltda., a branch of Coffey International in Brazil ("Coffey").  Mr. Rodriguez is responsible for the mineral resource estimates in this news release and has reviewed, approved and verified the data disclosed in this news release relating to the mineral resource estimates (including sampling, analytical and test data underlying the mineral resource estimate).

Please refer to Talon's news release dated March 2, 2012 entitled "Talon Metals Announces Substantial Increase to Mineral Resources at the Trairão Iron Project, Brazil" for additional information on the mineral resource estimates. Coffey compiled a NI 43-101 compliant technical report on the Trairão Project entitled "Fourth Independent Technical Report on Mineral Resources" dated March 30, 2012, a copy of which is available under Talon's SEDAR profile at www.sedar.com.  Please refer to this technical report for further information on the Trairão Project.

The mineralogical and metallurgical test work discussed in this news release was conducted by SGS in Lakefield, Ontario.  SGS is independent of Talon.

About Talon

Talon is a TSX-listed company focused on the exploration and development of its portfolio of iron projects in Brazil. The Company has a well-qualified exploration and mine management team with extensive experience in project management.

Talon has a treasury of approximately CDN$17 million and has 92 million common shares outstanding and 111 million shares on a fully diluted basis.

Forward-Looking Statements
This news release contains certain "forward-looking statements". All statements, other than statements of historical fact that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future are forward looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Such forward-looking statements include, among other things, statements relating to the Trairão Project with respect to estimates of mineral resource quantities, mineral resource qualities, the metallurgical test work, the potential for resource expansion, concentrate grades and metallurgical recovery rates and further improvement in metallurgical recoveries, estimated production rates, the potential for infrastructure expansions and the anticipated impact on the Company, the further drilling to provide samples to the potential off-taker and the timing and completion of a more fulsome definitive agreement in that respect, the development of a process engineering strategy and commissioning of a preliminary economic assessment, iron ore prices, the Company's expectations with respect to its financial resources, and targets, goals, objectives and plans and the timing associated therewith, including actively looking for opportunities that could generate additional cash flow for the Company in the near-term. Forward-looking statements are subject to significant risks and uncertainties and other factors that could cause the actual results to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: failure to establish estimated mineral resources, the grade, quality and recovery of mineral resources varying from estimates, risks related to the exploration stage of the Company's properties, the possibility that future exploration results and metallurgical testing will not be consistent with the Company's expectations (including identifying additional mineralization and/or recovery), failure to enter into a definitive off-take agreement on terms and conditions acceptable to the Company or at all, the anticipated lump material mass yield and iron ore grade for the surficial deposit not being achieved, changes in the price of iron ore, changes in equity markets, political developments in Brazil, the inability of the Company to generate cash flow in the near-term, uncertainties relating to the availability and costs of financing needed in the future, changes to regulations affecting the Company's activities, delays in obtaining or failures to obtain required regulatory approvals, the uncertainties involved in interpreting drilling and exploration results and other geological data and other factors (including exploration, development and operating risks). Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

The mineral resource figures disclosed in this news release are estimates and no assurances can be given that the indicated levels of iron will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the Company believes that the mineral resource estimates disclosed in this news release are well established, by their nature mineral resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. If such estimates are inaccurate or are reduced in the future, this could have a material adverse impact on the Company.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. Inferred mineral resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred mineral resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves. There is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration. 

SOURCE Talon Metals Corp.