Coziron updates Indonesian lead trading business
Monday, February 4 2008 - 07:18 AM WIB
Coziron Resources Limited is pleased to provide additional information in respect of its announcement issued on Friday in which it announced that it has signed heads of agreement to joint venture with PT Galian Endapan Buana to develop a lead trading, exploration and mining business in West Sumatra Indonesia.
GEB which holds an exploration license on a tenement in Solok Selatan, West Sumatra, with an area of 500 hectares, is to provide mining and export licenses before 15th February, 2008. It will undertake to collect one to two thousand tons of lead ore per month, delivered to the warehouse in Padang.
CZR will be responsible for processing, marketing and sales of the lead ore, CZR will provide the technical support (XRF metal analyser, Engineer, Metallurgist etc) and to provide for all the financial requirements.
This agreement is subject to the due diligence period of one month. This joint Venture is on an 80: 20 basis, CZR 80% GEB 20% - GEB?s interest will be a free carried interest.
We schedule to have our first trial shipment of 1,000 tonnes of ore out in March, thereafter 2,000 tonnes per month.
We are currently in discussions with two prominent Chinese companies and a Dubai company for sales/off take contracts and we are looking to finalise the detail within two weeks.
We are initially targeting to export 24,000 tonnes of lead ore/concentrate per annum, which we anticipate will generate a projected net profit before tax in the vicinity USD$2.5 -3.5 million a year once fully operational.
Coziron is delighted to have this new cash flow focused project - for the past 3 months Coziron has been examining the possibility of commencing a lead trading and export operation sourcing high-grade lead ore from lead mines in West Sumatra.
GEB?s exploration concession is crucial in the process of securing the necessary transport, storage and export licences to establish the new lead trading business.
GEB has signed lead ore supply agreements with six mines in West Sumatra that should see the joint venture export approximately 2,000 tonnes per month of lead ore, once all the requisite licences are in place.
Utilising a storage facility established near Padang port that incorporates all the necessary loading and storage infrastructure, we will collect, store, test and ship the ore to our customers expected to commence this March.
Coziron also believes that the new lead trading business has significant capability to grow beyond its initial targets. Coziron intends to actively explore the Solok Selatan project with a view to delineating an economic lead deposit and to doing a feasibility study on going down-stream to lead concentration and processing opportunities in West Sumatra to extract higher margins per tonne of ore exported.
Further details on the Solok Selatan Project and the lead trading business, together with an overview of the company?s growth strategy, are provided below.
Solok Selatan Project
As a crucial first step in the establishment of the lead trading business, GEB has been granted rights to a 500 hectare area prospective for lead mineralisation at Solok Selatan. Following a successful exploration programme at Solok Selatan, Coziron hopes to develop Solok Selatan into a primary source of lead ore for Coziron?s lead trading business.
West Sumatra is an established mineral province and there are many local lead mines in close proximity to the Padang port facility. The map attached shows the location of the Solok Selatan lead project and the six existing mines that have signed lead supply agreements with GEB.
Lead Trading Business
Coziron?s new lead trading business intends to commence with acquiring lead ore of various grades from six operating lead mines at Musi Rawas (2), Pasaman (2), Solok Selatan and Pesisir Selatan.
Most of the lead ore sold by the mines is currently sold directly to local traders and, in some cases, to international ore marketing firms for export to China. Marketing is however difficult for local miners due to poor grade control and ore contamination in the ore sold by small miners. Coziron believes that by consolidating purchasing, storage and testing of lead ore, it can offer a superior price to local miners and also extract the premium international prices paid for sea borne lead ore meeting certain grade specifications.
Having already secured the Solok Selatan exploration concession, GEB is now applying to the West Sumatran Government for the associated mining, transport, storage and export licence to allow it to establish the lead trading business.
Once approved, Coziron will collect, store and test the lead ore at a storage facility leased by GEB at Padang, strategically located only 6 kilometres from the port of Padang. Testing will involve the adoption of modern techniques to analyse and certify the ore grade for marketing.
Coziron expects to commence exporting lead in March, with a first shipment of 1,000 tonnes of ore. Coziron plans to expand its lead exports to 2,000 tonnes per month commencing in April 2008.
Growth Strategy
Once lead trading operations are established, Coziron intends to examine the expansion of its lead business.
1. Solok Selatan lead project - covers an area of 500 hectares 130 kilometres East of Padang. Previous exploration has outlined a zone of surface lead mineralisation extending over 10 kilometres that warrants further exploration. Coziron intends to conduct a preliminary soil sampling and drilling campaign on the project in the first half of 2008 to test the project for economic lead mineralisation that could be mined and used as a key supplier to the Company?s trading business.
2. Lead mining - Coziron intends to pursue acquisitions, joint ventures and/or development of other lead deposits and mines in the West Sumatra region. Many of the existing lead mines in the region are undercapitalised and poorly managed and could be expanded and improved with further capital and the adoption of modern mining techniques.
3. Ore processing - much of the ore currently produced by local miners is of variable grades and contains impurities typical of lead ore such as galena, including zinc and silver. Coziron intends to examine development of a lead processing facility near its storage facility with a view to the concentration and/or separation of ore to better meet the specifications of customers, thereby increasing margins. Direct shipping ore needs to be of a high grade (above 40%) - whereas with the processing facility, we can take on ore grade as low as 15% lead content (processable ore reserve will be tremendously increased). (end of edited excerpt)