Indo Mines' updated report on Jogjakarta Pig Iron Project

ASX-listed mining firm Indo Mines Limited announced on Monday that an update of Scoping Study undertaken by ProMet Engineers Pty Ltd has reconfirmed the economic viability and cashflow potential of the Jogjakarta Pig Iron Project in Central Java.

The revised study showed an NPV ranging from US$566 million to $847 million assuming sales at $300-350 per tonne respectively from production of 1 million tonnes per annum, the company said.

?The low operating cost of $149 per tonne arising from a combination of producing a cheap iron concentrate and the low cost of domestic thermal coal means that the operating cost is well within the lowest quartile of worldwide pig iron production,? it added.

??.The company will continue to progress the project?s development and also look to leverage off the recently granted Contract of Work (CoW) to substantially increase it in scale.?

In November 2008 Indo Mines announced that it had signed a CoW with the Indonesian Government, which permits the company to develop the Project and to mine and process iron sands throughout Indonesia. As the original Scoping Study 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 CoW, predominantly the increase in mine life 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.

Indo Mines is continuing with a Bankable Feasibility Study for a 1 million tonne per annum Pig Iron Plant that is due for completion in early 2010. (alex)