Indo Mines reports Jogjakarta liquid iron project activity
Tuesday, April 28 2009 - 03:43 AM WIB
JOGJAKARTA LIQUID IRON PROJECT
(Indo Mines: 70%) Jogjakarta
1. Revised Scoping Study
As the original Scoping Study for the Project was completed in May 2007, the Company engaged ProMet to confirm the Project?s economics utilizing the current market parameters and including the new conditions as set forth in the recently granted Contract of Work (?CoW?).
Key considerations in the revised scoping study were throughput rate, project longevity, infrastructure and community development impacts. The revised minimum project life was increased from 20 years up to 30 years.
At a mining rate of 9 million tonnes of iron sands per annum the Project will support a mine life in excess of 30 years at a production rate of 1 million tonnes of pig iron per annum with an operating cost of US$149 per tonne. At a spot price of US$300 (current spot prices range from US$270 - US$365) the Project has the potential to generate average operating cash flows of US$140 million per annum. Pig iron demand and supply projections within Indonesia and its adjacent markets indicate a stable price will continue for some years, with demand likely to increase with the availability of this cheaper domestic supply.
With a capital cost of US$582 million (determined to a nominal accuracy of ?30%) the project shows an IRR of 22% with an NPV (at a 10% discount rate) in excess of US$566 million, at US$350 per tonne the NPV rises to US$847 million.
2. Socialisation Programme
The Company continued its socialisation programme during the quarter, liaising with local communities and government detailing how the proposed mining process will impact on them. The mine will impact approximately 200 ha of the 3000ha property per year, on site processing of the iron sands will only extract about 6-8% of the total sand mass - the rest of the material is returned to the beach for reclamation and rehabilitation. The Company has legal agreements in place committing them to providing support before, during and after mining guaranteeing that the farmers will not be adversely affected by mining.
Indo Mines has also commenced a project in conjunction with a local University in Jogjakarta to develop more cost effective and productive cropping solutions on the rehabilitated mine areas, as well as creating arable farming land from the 1500 hectares of barren sand dunes within the Project site.
3. $5 Million Funding
As previously advised, the Company has executed a term sheet with Anglo Pacific Group PLC for an A$5 million (US$3.25 million) financing facility. The funds from this facility will be used for:
- Continuation of the Feasibility Study works, including environmental and social studies, metallurgical testing, infrastructure planning and marketing research.
- Acquisition of additional iron sands properties.
- Securing a coal supply through either an off-take agreement or outright acquisition of a resource.
The Conversion Price for the A$5 million facility is A$0.50 per share and carries a coupon of 8% per annum, payable quarterly in arrears. The coupon is payable via the issue of Indo Mines ordinary shares, based on a 10% discount to the 30 day volume weighted average price, or by cash at the discretion of Indo Mines.
Final drawdown under the remainder of the facility is subject to a range of conditions precedent including completion of definitive documentation and due diligence by Anglo Pacific Group PLC. Documentation is well advanced and is expected to be finalised in the June quarter. An additional advance of A$470,000 has been provided by Anglo Pacific Group PLC subject to normal commercial conditions, which has enabled Indo Mines to continue with its Feasibility Study program in the interim.
4. Bankable Feasibility Study
The Company has continued to progress the Bankable Feasibility Study (BFS). The BFS will cover the following major areas:
1. Hot Metal Processing Flow Sheet Development and Detailed Engineering;
2. Mining, Concentrator and Infrastructure design;
3. Environmental & Social Impact Assessments;
4. Detailed financial modelling;
5. Market research;
6. Port and Shipping requirements;
7. Rail Transport; and
8. Power and oxygen supply.
Outotec are conducting reduction and smelting tests in their European facilities with a 50 tonne concentrate sample from the Jogjakarta Pilot Plant and 130 tonnes of low quality thermal coal similar to the material that will be sourced for the Project. Based on the flow sheet developed from this test work Outotec will then complete the full engineering design for the pig iron DRI and smelting plant.
Upon completion of the reduction and smelting test work, GR Engineering Services will detail the mining, concentrator and infrastructure requirements, to enable finalisation of the engineering design.
URS has commenced both the environmental and social impact assessments.
Market research, power and oxygen supply, and logistics infrastructure consultants will be engaged in the coming months. (end of edited excerpt)