Release: Herald Resources: Results of Dairi feasibility study
Monday, February 7 2005 - 11:21 AM WIB
February 7, 2005 ? Herald Resources Limited is pleased to announce the results of the Dairi Feasibility Study (DFS), the components of which have been prepared by respected independent consulting groups, and coordinated by Herald personnel. The study has been based solely on mining of the Anjing Hitam deposit, and takes no account of possible extension of mine-life from mining of other resources and future exploration success.
Note - All monetary figures are in US$.
Financial analysis
Throughput capacity: 1m tonnes p.a.
Quantity treated: 6.64m tonnes
Head grades: Zinc 14.6%; Lead 8.8%
Net project cashflows
Pre-tax: $277m
Post-tax: $196m
DCF calculations
Net present value: Pre-tax $109m; Post-tax $65m
Internal rate of return (IRR): Pre-tax 29%; Post-tax 22%
Cash operating cost (per pound of zinc equivalent): 37?
Notes
- Head grades are mining diluted
- These base case figures have been prepared on an ungeared basis, but include the cost of PRI (political risk insurance)
- Metal prices and operating costs are unescalated
- ?Post-Tax? refers to corporate income tax only. Royalties, tenement rentals etc. have been included in operating costs
- NPV figures have used a discount rate of 10%
- All figures are 100% project totals
Metal Prices Assumptions
These were obtained from the 15-month bid prices on the London Metal Exchange on 31 January 2005. (Price in US$)
Zinc: Per tonne = $1,265; Per pound = 57.4?
Lead: Per tonne = $860; Per pound = 39.0?
Capital Costs ($m)
Mining pre-production: 19.9
Minesite plant (1): 65.1
Port and pipeline (2): 47.9
Owners costs (3): 3.6
TOTAL = $136.5m
Several components of the minesite plant that have been costed from Australia are believed by Herald to be considerably over-priced compared to our experience with local costs, particularly in areas such as earth-moving and road-works. Also, all items have been costed on a ?new? basis, so any purchases of second hand plant should result in further savings.
In addition, some of the port and pipeline costs may possibly be substantially reduced in areas such as:
- portsite civil works and concreting.
- steel piling works, where a conservative 35m has been allowed for, but which initial drilling suggests need only be to 25m depth.
- the pipeline, which may be able to be reduced from 5? to 4.5? diameter to better match the production rate, which would significantly reduce steel tonnage.
Notes
(1) Includes concentrator, site buildings, power installations, village, tailings storage facility, site roads, EPCM, commissioning, spares/first fill, mobile equipment, EPCM and accuracy provision.
(2) Includes, pipeline, concentrate pumping station, portsite dewatering plant, site civils and concrete, concentrate shed, barge loader & marine, barge, EPCM and accuracy provision.
(3) Includes costs such as pre-production PRI, land acquisition, legal fees, operations team and so on.
Operating Costs
On a life-of-mine basis, these have been estimated as follows:
ONSITE ($ Per tonne processed)
Mining: 24.03
Processing & admin: 25.05
Port and pipeline: 2.86
Subtotal: 51.94
OFFSITE ($ Per tonne processed)
Government royalties and charges: 3.01
PRI: 1.34
Admin & other: 0.57
TOTAL UNIT COSTS = $56.86/t
Drilling
Total drilling at the Anjing Hitam deposit since 1998 is 24,967m in 110 diamond drill holes.
Resource Estimation
The measured and indicated resources at the Anjing Hitam deposit are:
Additional resources at Lae Jehe (8.2 mt @ 7.7% Zn, 4.1Pb) and Base Camp (0.8 mt @ 7.2% Zn, 4.3% Pb) have not been included in the DFS, but represent possible future sources of ore supply.
Mining
Australian Mining Consultants prepared the mining scheme, schedule and costs. This envisages the extraction of a Mining Inventory of 6.64Mt at a diluted grade of 14.6% Zn, 8.8% Pb, 11g/t Ag and zinc equivalent grade of 21.6% from the measured and indicated resource total mentioned above. As previously advised, a significant shallow part of the resource has not been not considered for mining and also a 1m skin of mineralisation has been left adjacent to parts of the hanging wall. These sections will be reviewed during mining operations to try and increase ore tonnes extracted. In addition, underground exploration will be directed to the ore-grade Upper Mineral Horizon not presently considered in the mining scheme.
Metallurgical Testwork
Consultants AMMTEC and Ausenco Ltd have suggested that metallurgical recoveries and concentrate grades should be applied as a result of the completed testwork as follows:
Zinc ? 85% recovery; 55% Zn concentrate grade;
Lead ? 75% recovery; 64% Pb concentrate grade.
It should be noted that significantly higher lead grades have been obtained during the testwork programs.
Samples have been distributed to several smelters with general satisfaction expressed. There are no elements in the concentrates that are likely to attract penalties from smelters. Iron in particular is relatively low at about 6.5% and 4.7% in zinc and lead concentrates respectively.
Concentrator, Pasteplant and Infrastructure Design
Ausenco Ltd have completed the design and costing of the Concentrator and general infrastructure, including power plant and reticulation, paste plant, accommodation village, and administration buildings, Knight Piesold Ltd have designed upper site roads, drainage and tailings dam (TSF), and CEIS Pty Ltd/PT Petrosea have designed and costed the main site access roads.
Ausenco have calculated the life of mine concentrate production to be:
Zinc concentrate - 1,495,000 dry tonnes @ 55% Zn;
Lead concentrate - 684,000 dry tonnes @ 64% Pb.
It is proposed to pump the concentrate via slurry pipeline to Singkil Baru on the west coast (see also below).
Transportation and Logistics
Incoming materials and outgoing concentrate transportation studies have been completed by CEIS Pty Ltd /PT Petrosea and Maunsell Ltd.
The 85km long pipeline (5? internal diameter) is proposed to be built from the Dairi plant site to the port of Singkil Baru. A dewatering plant, concentrate store with about 50,000t capacity, and a barge loading jetty are proposed. A 6,000 tonne capacity barge is proposed to be built or purchased and this would transport concentrates to ships at anchor about 5km offshore.
Incoming materials and consumables would be shipped to the Belawan container port and road transported to site via Medan, the provincial capital of North Sumatra.
Shipping and Smelters
Shipping matrix costs have been estimated based in shipping from Singkil Baru to the East Asia region. Smelting charges and deductions for zinc and lead have been estimated based on recent benchmark transactions, but in practice may be improved upon given the forecast strong demand for both lead and zinc concentrates from smelters.
These costs have been netted from revenues rather than added to operating costs.
Yours faithfully
MICHAEL P WRIGHT
Executive Director
NOTE: Sections of the information contained in this report pertaining to mineralisation and/or mineral resources are based on information compiled by or supervised by: Mr B Kirkpatrick BSc, MAusIMM, MAIG, a full-time employee of Herald Resources Limited, who is a Corporate Member of the Australian Institute of Mining and Metallurgy and who has had more than five years relevant experience.
NOTE: The 2004 resource estimate for Anjing Hitam Deposit was supervised by Mr Paul Payne, Principal Consultant of Resource Evaluations Pty Ltd. He is a Chartered Professional member of the Australasian Institute of Mining and Metallurgy. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and type of activity undertaken to qualify as a Competent Person as defined in the 1999 ?Australasian Code for Reporting of Mineral Resources and Ore Reserves?. Mr Payne consents to the inclusion of the information in the report in the form and context in which it appears. (end of release)