Perth, Dec 1, 2008 AEST (ABN Newswire) - Image Resource NL (ASX:IMA)(PINK:IMREF) announce a positive outcome from the scoping study carried out in the North Perth Basin.
HIGHLIGHTS
- Image has several options for the commercialisation of its existing North Perth Basin indicated and inferred resources: stand alone dry mining; stand alone dredging; and larger scale dredging/dry mining by a third party ("incremental case").
- The incremental case dredging (2,000tph) and dry mining (800tph) combination gives a best case (US60c exchange rate) Net Present Value (10% discount, before tax) of $180M (Internal Rate of Return 294%) with potential to increase this NPV to $298M if a Synthetic Rutile ilmenite premium is applied.
- Stand alone dredging (800tph and viable on part only of the resources) gives a best case NPV of $87M (IRR 105%), of which Image's share is $68M plus any participation by Image in the NPV (up to $160M with SR ilmenite premium) to a third party mining the balance of the resources.
- The presence of SR ilmenite has the potential to add significantly to the NPV of both stand alone and incremental cases, illustrating the need to determine the distribution of SR ilmenite throughout the project.
- Only the resources identified from the drilling of 20% of Image's targets are addressed. The value of resources identified in the remaining 80% has the potential to be substantially greater by leveraging sunken capital and/or economies of scale.
Conclusions
The results of the various scenarios considered were:
- Stand alone 400tph dry mining NPV (10% discount, before tax) of $16M-$39M (IRR 39%-67%) including capital of $37M.
- Stand alone 800tph dredge mining NPV of $47M-$87M (IRR 73%-105%) including capital of $49M.
- The stand alone scenarios do not take into account that the balance of the resources could be attractive to third parties with NPVs to them in the range of $47M-$86M (disregarding any uplift for SR ilmenite).
- Incremental case 800tph dry mining NPV of $56M-$89M (IRR 446%- 543%) including capital of $23M.
- Incremental case 800tph dredge mining NPV of $63M-$102M (IRR 88%- 118%) including capital of $65M.
- Incremental case 2,000tph dredge, 800tph dry mining combination NPV of $106M-$180M (IRR 241%-294%) including capital of $46M.
- Potential for very substantial increases in the NPV in all cases with SR ilmenite premiums.
Scoping Study
The Scoping Study on Image Resources' initial identified indicated and inferred resources totalling 6.4 million tonnes of heavy minerals in the North Perth Basin has been completed.
The brief for the study was to assess the economics of the development and commercialisation of these initial resources and in particular to examine the potential:
- mining scenarios for a stand alone operation producing concentrate which could then be toll processed by existing underutilised dry separation plants in the mid west or south west of Western Australia;
- value of the resources to existing producers with established but underutilised infrastructure and depleted reserves in this mature mineral sand province.
The study does not take into account that Images' exploration has identified numerous drilling targets (totalling more than 300km in length) or that there is a strong likelihood that many of these targets could ultimately convert into additional resources. Even though the study ascribes no value to these potentially valuable targets, the plant and equipment paid for by the operations considered by the study can be expected to materially enhance the economics of further discoveries.
The methodology and detail of the initial resource estimates have been previously described (ASX release 8 May 2008). The main parameters used for the scoping study are summarised below and include estimates of commodity prices and capital costs. All references to currency are to A$ unless otherwise stated.
The Scoping Study is an initial conceptual study to evaluate project concepts and to provide an order-of-magnitude estimate of cost, return and viability. The study was based on the existing indicated and inferred resources, assumed processing tonnages and grades, with preliminary mineral processing data, and as such should be regarded with appropriate caution. The Scoping Study is early stage and there is no certainty that the estimates of the Scoping Study will be realised in the future.
Scoping Study Parameters
---------------------------------------------------Stand Alone Capital Cost Assumptions---------------------------------------------------400tph Dry Mining Operation 38 $M800tph Dry Mining Operation 52 $M800tph Dredge Mining Operation 49 $MRevenue Assumptions---------------------------------------------------Ilmenite 130 US$/tZircon 850 US$/tRutile 650 US$/tGarnet 150 US$/tExchange Rate 0.6 - 0.7 US$/A$Major Operating Cost Assumptions---------------------------------------------------Mining of Ore - Dry 3.75 $/bcmMining of Waste - Dry 2.75 $/bcmMining of Ore - Dredge 0.8 - 1.2 $/bcmConcentrate Haulage 0.1 $/t/kmMineral Separation Plant 20 $/t con.Toll Treatment of Concentrate 35 $/t con.Net Present Value (NPV)---------------------------------------------------10% discount rate, before tax and financing costs----------------------------------------------------
Mining optimisations of the geological block models were carried out by mining industry consultants and used to assess various dry mining and dredging options for the resources. Estimates of Net Present Value (NPV, 10% discount rate, before tax) proved to be highly sensitive to exchange rates but less so to commodity prices and even less to capital and operating cost changes. Commodity prices for ilmenite, rutile and zircon are expected to remain firm or to strengthen but no view is expressed as to the likely direction or extent of movements in exchange rate.
Stand Alone Cases
The Scoping Study examined stand alone scenarios for 400 tonnes per hour (tph) dry mining, 800tph dry mining and 800tph dredging of the Atlas, Hyperion and Helene resources (total 1.6Mt of HM). The study assumed the use of new (not second hand) equipment. Estimates of NPV and Internal Rate of Return (IRR) at US70c and US60c exchange rates are shown in the table below.
Stand Alone Case - Atlas, Hyperion and Helene Resources
------------------------------------------Case NPV $M IRR %------------------------------------------ US70c US60c US70c US60c------------------------------------------400tph dry mining 16 39 39 67800tph dredge 47 87 73 105------------------------------------------
The NPV of Images' share of these resources range from $12M - $30M (US70c and US60c exchange rates respectively) for the 400tph dry mining case and from $37M - $68M for the 800tph dredge case. Payback times for the stand alone cases are 1.5 years or less. It should be noted that no premium for synthetic rutile (SR) grade ilmenite has been applied to these estimates and that such a premium, if it could be achieved, would have a very significant positive impact on the NPV and IRR. The study indicated that the stand alone options for the Titan, Calypso, Telesto and Bidaminna resources, as they presently stand, are not attractive at current commodity prices and exchange rates however the study shows these resources could be an attractive opportunity for a third party with appropriate plant and equipment with assessed NPVs (with SR ilmenite premium) in the range of up to $107M - $160M.
Incremental Cases
Not surprisingly, the study showed that mining (dry, dredge or a combination of the two) by a third party with existing plant and infrastructure in the region, including access to a synthetic rutile plant (the "incremental case") substantially increases the NPV.
A 2,000tph dredging scenario for the Titan, Calypso, Telesto and Bidaminna resources and concurrent 800tph dry mining of the Atlas, Hyperion and Helene resources gives the best case of an NPV range of $106M to $180M and very attractive IRR's of 241% to 294% at US70c and US60c exchange rates respectively, including capital of $46M and assuming the relocation of a large dredge.
Significantly, if a premium for SR ilmenite of $40 per tonne is factored in, the NPV and IRR ranges increase significantly to $195M to $298M and 359% to 411% respectively. Payback times for the incremental cases are all less than one year.
The incremental case for 800tph dry mining includes capital of $23M which assumes relocation of existing plant and equipment. The 800tph dredging case includes capital of up to $65M and assumes acquisition of a new dredge.
Further Work
The Scoping Study highlighted areas for further work to enhance the value of the project including:
- Infill drilling to upgrade the Atlas resource from Inferred to Indicated status.
- Mineralogical and chemical test work to determine the proportion of SR ilmenite in each of the resources.
- Geotechnical investigations, including ground and surface water investigations, on the resources to assess suitability for dredging.
- Completion of access agreements over the Titan and Calypso resources.
- Investigation of other low cost mining options, particularly for the Titan and Calypso resources.
The study has encouraged Image to affirm its commitment to commercialise its existing resources while continuing with exploration aimed at tripling these resources within the project areas.
About Image Resources NL
Image Resources NL (ASX:IMA) is a mineral sands focused mining company operating an open-cut mine and ore processing facility at its 100%-owned, high-grade, zircon-rich Boonanarring Project, located 80km north of Perth in the infrastructure rich North Perth Basin.
Boonanarring is arguably one of the highest grade, zircon-rich mineral sands projects in Australia. Construction and project commissioning were completed on-time and on-budget in 2018. Production commenced in December 2018 and HMC production ramped-up to exceed name-plate capacity in only the second month of operation.
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