Adelaide, Sep 14, 2006 AEST (ABN Newswire) - Discovery Nickel Limited's copper project in Botswana could support a viable mining operation with a net present value of more than US$200 million, according to an independent study.
Discovery (ASX: DNL) announced today that an assessment by Snowden Mining Industry Consultants shows that the Maun Copper Project in north-west Botswana could support a viable open pit mine at the project's existing mineralisation grades of 1.2% copper.
Managing Director, Mr Jeremy Read, said the preliminary mining assessment was a significant positive advance for the project.
"With the mining assessment indicating that profitable open pit operations can potentially be established with average copper grades of 1.2% and above, we now have greater confidence in the ability of the Maun Project to deliver the resource base required to establish a mine," Mr Read said.
"Two of the key objectives of the drill program currently in progress is to attempt to increase the average grade of the Zeta resource above 1.2% and to expand the Inferred Resource base to that required to establish profitable operations," he said.
"If these objectives can be achieved the Maun Project will be even more robust with project net present values possible towards the higher end of the range indicated by the study"
The current 30 hole drilling program - of which five diamond drill holes have been completed - is expected to be finished by the end of the year.
Highlights
- Based upon DNL's assessment of the mineralisation at Maun the potential exists to establish profitable open pit, underground and combined open pit/underground operations at Maun.
- At US$1.50/lb Cu, the project requires an average mineralisation grade of 1.2% Cu and above to support open pit mining ($US1.50/lb Cu is 44% of the current spot cash price for Cu).
- Net Present Values for the targeted project range from US$28M for a 2 Mtpa operation with an average mineralisation grade of 1.2% Cu to US$224M for a 3 Mtpa open pit with an average mineralisation grade of 1.5% Cu at a price of $US1.50/lb Cu. Using a copper price of US$2/lb (59% of the current spot cash price) targeted project Net Present Values range from US$90M to US$341M for the same grades of mineralisation.
- At US$1.50/lb Cu grades of 1.5% Cu and above are required to support a profitable underground operation subsequent to open pit mining.
- Five holes of a 30 hole (approx.) infill and extension diamond drill program have been completed to date. It is anticipated that the currently defined Inferred Resources on the project will be able to be significantly increased.
Open Pit Resource Assessment
The assessment of the open pit potential of the Maun Copper Project comprised a Whittle optimisation study of the geological block models previously defined for the G Grid North and G Grid South prospects. G Grid South includes the Zeta Inferred Resource. Included in the study were resources currently classified as Inferred and Exploration Potential according to the 2004 JORC code. Following the Whittle optimisation study a discounted cash flow analysis was completed.
The preliminary mining study considered flotation and heap leach processing options and studied the effect of variations in the average copper grade of the mineralisation above and below the current average grade of 1.2% Cu (ranging from 1-2% Cu).
The parameters used for the Whittle optimisation were as follows:
- Pit slope angle - 48 degrees
- Production rate - 2 Mtpa and 3Mtpa
- Processing cost for flotation - US$8 per tonne of ore
- Processing cost for heap leach - US$6 per tonne of ore
- Copper recovery for flotation - 95%
- Silver recovery for flotation - 83%
- Copper recovery for heap leach - 70%
- Silver recovery for heap leach - 70%
- Copper price - US$1.50/lb and US$2/lb
- Silver price - US$8/oz
- Treatment Charges / Refining Charges and transport - 22.6% of gross revenue
- Government Royalty - 3% of gross revenue
For the current classified resource and exploration potential models for G Grid South and G Grid North optimum open pits have a potential mining inventory of 14.7Mt @ 0.86% Cu (assuming a flotation processing scenario). At US$1.50/lb Cu the potential mining inventory within the currently defined Zeta Inferred Copper Resource is 4.4Mt @ 0.86% Cu, while at US$2/lb Cu this potential inventory increases to 10.2Mt @ 0.96% Cu. Consequently, at US$1.50/lb Cu, a further 10.3Mt will need to be added to the currently defined Inferred Resource at Zeta in order to compile a mining inventory equivalent to that required by the optimum open pits at the assumed economic parameters. One of the objectives of the current drill program is to undertake drilling to allow mineralisation currently classed as Exploration Potential to be moved in to the Inferred category allowing an economic mining inventory to be defined.
For a heap leach scenario the potential open pit mining inventory at G Grid North and G Grid South for the current classified and exploration potential models is 19.9Mt @ 0.84% Cu. A heap leach processing scenario produces smaller cash flows than the flotation scenario indicating that the loss of Cu recovery for a heap leach operation outweighs the saving in treatment and refining costs. Consequently, it appears that processing of the copper-silver mineralisation via a flotation process will produce a higher economic return.
Open Pit Capital and Discounted Cash Flow Analysis
The open pit optimisations for G Grid North and G Grid South were combined and analysed with varying production rates, capital costs and average grades.
Contact
Peter Gill
Senior Consultant
FIELD PUBLIC RELATIONS
231 South Road
MILE END SA 5031
Tel: 08 8234 9555
Fax: 08 8234 9566
Mb: 0417 784 059
peter@fieldpr.com.au
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