Anglesey Mining plc
24 July 2017
LSE:AYM
Anglesey Mining Reports Positive
Results of
Scoping Study on Parys Mountain
Mine
Viable mining
project demonstrated with initial eight-year mine life
Anglesey Mining plc (“Anglesey” or the “Company”) is
pleased to report, in summary, the results of its recently
completed 2017 Scoping Study on its wholly owned Parys Mountain
copper-lead-zinc project in North
Wales.
The Scoping Study was prepared by Micon International Limited
(Micon) and Fairport Engineering Ltd (Fairport).
The selected base case envisages a mining rate of 1,000 tonnes
per day, to produce an average annual output of 14,000 tonnes of
zinc concentrate at 57% Zn, 7,200 tonnes of lead concentrate at 52%
Pb and 4,000 tonnes of copper concentrate at 25% Cu, annually, over
an initial mine life of eight years.
The overall net smelter return (NSR) for the three concentrates,
including the silver and gold precious metals contributions, is
expected to total more than $270
million at the forecast metal prices used for the base case
models.
The base case yields a pre-tax net present value of $33.2 million, or £26.6 million, at a
conservative 10 per cent discount rate, using present day metal
prices of $1.25 per pound for zinc,
$1.00 per pound for lead,
$2.50/pound for copper, $17.50 per ounce for silver and $1,275 per ounce for gold and at an exchange rate
of £1.00 = $US1.25. With an
estimated pre-production capital cost of $53
million, or £42 million, this results in an indicated
internal rate of return (IRR) of 28.3%.
Using longer term metal price projections of $1.35 per pound for zinc and $3.00 per pound for copper the NPV10 would be
$43.2 million, or £34.6
million. At an 8% discount rate, used to reflect the
relatively low risks of the project given its advanced level of
development and low political risk in the UK, the NPV8 would be
enhanced to $41 million, or £32.8
million, for the base case metal price scenario and to $53 million, or £42 million for the higher
long-term metal prices, with an IRR of 33%
To illustrate the comparison and put the results of the Scoping
Study into context, the market capitalisation of the Company at the
close of trading on 21st July was £8.9 million.
Importantly, the study was based on only the 2.1 million tonnes
of indicated resources reported by Micon in 2012. Micon had
also reported a further 4.1 million tonnes of inferred resources
which were not incorporated into the Scoping Study. It is
expected that a high proportion of these inferred resources will be
converted to indicated resources once exploration drilling from
underground takes place. These additional resources would be
processed through the same concentrator plant and would
significantly increase the projected life of the mine, to perhaps
double the mine-life to 15 or 18 years, and enhance the NPV.
Bill Hooley, Chief Executive
commented “We are very pleased with the results of the Scoping
Study which demonstrate a viable mine development at Parys Mountain
and a healthy financial internal rate of return. The base case
economic model at 1,000 tonnes per day indicates a robust project
at consensus forecasts for the long-term prices of zinc and copper.
This is the first detailed economic study of the Parys Mountain
project for a number of years and, based on the current
availability of reconditioned process plant, the estimated
pre-production capital cost for the project is at a level that
could be financeable.”
The pre-tax net present values, at 10% and 8% discount rates,
and internal rates of return, are illustrated in the table below,
all at a Sterling:US dollar exchange rate of £1.00 = $US1.25. The table also demonstrates the
sensitivities of the Parys Mountain Project to zinc and copper
prices.
Metal
Prices |
Pre-Tax |
Zinc
$/lb |
Lead
$/lb |
Copper
$/lb |
Silver
$/oz |
Gold
$/0z |
Undiscounted
$M |
NPV
(10%)
$M |
NPV
(8%)
$M |
IRR
% |
1.25 |
1.00 |
2.50 |
17.50 |
1,275 |
91.2 |
33.2 |
41.0 |
28.3 |
1.35 |
1.00 |
3.00 |
17.5 |
1,275 |
110.8 |
43.2 |
52.4 |
33.1 |
Foreign Exchange assumed to be £1.00: $US1.25 |
Summary of 2017
Scoping Study
Mine Development Plan
The original feasibility studies conducted on the Parys Mountain
project in the 1990s envisaged production at a rate of 1,000 tpd
being mined at depth through the 300-metre-deep Morris Shaft.
During the period 2006-2010 Anglesey Mining carried out a detailed
drilling programme on the White Rock Zone which lies adjacent to
the Morris Shaft and largely overlies the deeper Engine Zone
deposits, but which extends to surface. As a result of this
drilling the 2012 resource estimate carried out by Micon included
both the White Rock Zone and the Engine Zone.
A new mining plan based on a surface decline to access the
White Rock zone was
prepared. The proposed decline would be developed by mining
contractors and would be used as the initial means of access to the
resource for development and mining. Mined ore would be trucked up
the decline to the proposed surface processing plant. During the
initial production phase from White
Rock the decline would continue to be driven to reach the
current bottom of the Morris Shaft and beyond. The shaft
would then be dewatered and deepened by approximately 150 metres
and would be recommissioned as a hoisting shaft for the remnant
White Rock ore and for the deeper
Engine Zone ore.
Production Alternatives
The initial work on the Scoping Study was designed on a
throughput of 500 tonnes per day using conventional
processing. As the first results became available it became
apparent that a higher daily production throughput would be
financially more attractive to potential financiers.
Accordingly, assessment of increased throughput alternatives of 700
tpd and 1,000 tpd were added to the initial scope of the study.
This extra work necessitated additional time and resulted in
finalisation of the study being delayed beyond its originally
expected completion date.
In addition, the concept of adding a dense media separation
plant ahead of the main concentrator was reviewed. Dense
media separation (DMS) is a process technology to remove largely
non-metal bearing material from the mine feed ahead of the
concentrator. This results in a substantial reduction in the
tonnage of ore to be treated by the concentrator. Obviously,
there are additional costs associated with building and operating a
DMS plant, and there is some loss of metal associated with the DMS
tailings, but overall inclusion of a DMS plant improves the
financial performance.
Concurrent with evaluation of these processing options, mine
planning at 700 tpd and 1,000 tpd was also studied. Mining
would be carried out initially from the main decline using
rubber-tyred equipment including drill jumbos, load-haul-dump
machines and trucks to remove development waste to surface and
production ore to the processing plant. It was concluded that
after an initial ramp-up period, the higher production level can be
maintained. In due course, the lower level of the shaft will
be accessed from the decline and deepened as originally planned.
The existing hoist and headframe will be refurbished and used to
bring ore to the surface for delivery to the adjacent processing
plant.
The planned processing plant was initially designed in a modular
form with an initial capacity of 500 tpd throughput expandable to
1,000 tpd to minimise up-front capital costs. The plant will
consist of crushing and grinding followed by conventional three
stage flotation to produce copper, zinc and lead concentrates to be
shipped to smelters in Europe.
The study clearly showed that the best financial results can be
obtained with the higher throughputs. There is relatively
little additional capital cost required for the higher throughput
options and this increase is rapidly offset by lower unit operating
costs and increased revenue.
Based on these outcomes it was concluded that the preferred
development option for the Parys Mountain Mine is a 1,000 tpd mine
and plant with a DMS section ahead off the main concentrator.
This will generate a mine life of approximately eight years.
Mineral Resources and Exploration
Potential
The 2017 Scoping Study utilises the Micon 2012 JORC Code
compliant resource estimate of 2.1 million tonnes at 6.9% combined
base metals in the indicated category. Micon had also
reported a further 4.1 million tonnes at 5.0% combined base metals
in the inferred category. These inferred mineral resources were not
included in the current study but would have significantly extended
the projected operating life of the mine with a consequential
increase in the resultant estimated valuation.
As reported in 2012, the resource estimate was made using a
gross metal product value cut-off of $80 per tonne. It is noted that the cash
operating cost of the project, prior to royalties and taxes, is
forecast at $47 per tonne. This
will enable some further review of the resource to be
undertaken. A lower cut of-grade would increase the tonnes in
the indicated category at the same time as reducing the
grade. The larger tonnage would increase the mine life but
would reduce the annual revenue due to the lower feed grade to the
plant. An optimisation study will be required to determine
the optimum cut-off grade that would provide the maximum increased
return over that currently reported.
It is also noted that in addition to the indicated and inferred
resources reported by Micon, the Parys Mountain area, over which
the Company holds the mineral rights, contains numerous indications
of mineralisation across several kilometres many of which have been
disclosed in earlier releases and reports. The Company has
recognised that as most of these indications have been encountered
in drilling at some depth, further exploration would be more
effective from underground locations once mining operations
commence. Should any of these exploration efforts prove
successful an increased throughput and a further extended mine life
would be the likely outcome.
Scoping Study Results
Capital Costs:
The pre-production capital cost of the preferred option base
case including mining, DMS, concentrator and infrastructure is
estimated at $53 million. The
initial capital cost for mine development is estimated to be
$13 million, the concentrator
$29.5 million including $3 million for the DMS plant and infrastructure
$10 million, for a total of
$53 million. Included within
these figures is a $4 million
contingency provision.
The major component of capital costs is initially associated
with the processing plant and surface
infrastructure. Capital costs have been estimated
based on quotes provided by equipment suppliers together with
construction costs forecast by Fairport. Capital costs for the
processing plant and infrastructure includes, when suitable, some
used and reconditioned plant which has been identified as readily
available. The remainder would be new equipment.
Despite the quite wide spread in throughputs studied it became
apparent that the lower throughput options did not present
significant savings in capital cost. This is largely due to
minimum equipment sizes required for several units that could also
accomplish the duty for the higher throughputs and with the fixed
items for work required for buildings, construction etc that do not
change materially across the throughput range.
Mine development capital costs are based on all new equipment
and on mine contractor development costs.
Operating
Costs:
Operating costs have been developed by Micon and Fairport based
on current knowledge and experience. Cash operating costs at the
higher levels of production are forecast at around $47 per tonne of ore treated. Whilst capital
costs were fairly constant across the throughput spectrum,
operating cash costs per tonne of ore mined and milled varied
significantly with the higher throughputs benefitting from much
lower costs. This led to the clear conclusion that the higher
the throughput the better the financial result.
The following table shows the key outcomes derived for each of
the options studied.
|
500 tpd no DMS |
700 tpd no DMS |
700 tpd with DMS |
1,000 tpd with DMS |
Life of Mine (Years) |
16 |
12 |
12 |
8 |
Initial Capital Cost $m |
48 |
50 |
52 |
53 |
Operating cash cost $/t |
63 |
55 |
53 |
47 |
NPV10 $m * |
9.0 |
21.6 |
19.3 |
33.2 |
IRR % * |
13.8 |
20.3 |
18.8 |
28.3 |
Payback (Years) * |
7 |
5 |
5 |
4 |
Pre-Tax Based on Cu $2.50/lb, Zn
$1.25/lb, Pb $1.00/lb, Ag $17.50/oz, Au $1,275/oz
Selected Base Case Option - 1,000
tpd
The 1,000 tpd option is clearly the most favourable financial
outcome. The additional capital cost required is only
$5 million higher than the lowest
cost option and at these levels that is not considered
critical.
The inclusion of the DMS plant results in the rejection of
approximately 37% of mined material ahead of the
concentrator. Included within this is approximately 4.5% of
the metal in feed that will be permanently lost to tailings.
As a result of the application of the DMS the net concentrator feed
to the floatation circuits will be approximately 700 tpd.
The NPV and IRR generated are significantly better at 1,000 tpd
than the lower throughput options. Therefore the 1,000 tpd
option has been chosen as the base case for further
consideration.
No detailed study was carried out on a 1,000 tpd throughput
without the DMS. However, a short study indicated that it is
likely that DMS will be far more favourable when the plant capacity
is expanded to around 1500 tpd, which should occur when the
inferred resources are upgraded to the indicated category.
The incorporation of DMS is therefore considered advisable and
prudent.
Metal Production
Metallurgical performance and recovery is based on the large
volume of information available from test work on Parys Mountain
ores over the years.
Total base metal recovery in the concentrator to each of the
three copper, zinc and lead concentrates is forecast to be 89.8%
and taking into account the DMS losses overall recovery will be
approximately 85.7%. Significant amounts of silver and gold
will report to each of the concentrates. Some free gold will
be recovered by gravity methods ahead of the concentrates and will
be sold as Welsh gold.
It is expected that each of the three base metal concentrates
will be sold to smelters in Europe. Smelter payment terms and
penalties have been based on treatment charges currently prevailing
from these smelters. It is possible that better terms could
be obtained from Chinese smelters from time to time but the cost of
shipping to the Far East compared to the proximity of shipping to
continental Europe is likely to
make such options less viable.
On average 14,000 tonnes of zinc concentrate at 57% Zn, 7,200
tonnes of lead concentrate at 52% Pb and 4,000 tonnes of copper
concentrate at 25% Cu, will be produced annually. These
figures will vary somewhat during the life of the mine as mine feed
varies depending upon the particular ore bodies being mined at any
time. This will result in average annual metal production into
concentrates of 17.6 million pounds of zinc, 8.3 million pounds of
lead and 2.2 million pounds of copper.
Taking into account shipping costs, smelter terms and penalties,
the overall net smelter return (NSR) for the three concentrates,
including the precious metals contribution, is expected to total in
excess of $270 million at the metal
prices used for the base case calculations. This would
represent a net smelter return of approximately 72% of the metal
value in concentrates sold to the smelters.
Further work
Both Micon and Fairport have recommended that further work be
carried out, including more detailed mine and stope design,
underground geotechnical studies, additional infill drilling in
some locations, more detailed engineering studies, additional
metallurgical test work, including work to improve recovery of
specific metals to their own concentrate, and review of tailings
management and paste processes. Several opportunities for cost
reduction or productivity improvement have been identified for
further study.
It is planned to carry out these and other activities as
suitable funds are available. This will then lead to the
generation of more detailed production and costing feasibility
reviews to support project financing.
John Kearney, Chairman stated, “I
have been involved with this Company and the Parys Mountain project
for many years, and I am encouraged that that many of the variables
and moving parts, including metal prices, treatment charges and
used plant availability, have now moved in our favour and present a
real and realisable opportunity for Parys Mountain. There is
of course still much to be do but we now have a clear path
forward. We will need to expand the management team to make
this happen and I look forward to being involved with the future
financings and the path to development, construction and eventual
mine production.”
Based on the positive results of the Scoping Study, the company
now plans to engage in discussions with potential financiers or
partners for the development of the Parys Mountain project.
It is expected that this financing will occur in a stepped
progression. A number of recommendations have been made by
Micon and Fairport regarding further work to optimise and enhance
the project as the next step ahead of mine development. It is
hoped that financing for this work can be arranged as speedily as
possible and will be followed by subsequent financings to move
towards mine construction.
About Anglesey Mining plc
Anglesey is carrying out feasibility and development work at its
100% owned Parys Mountain zinc-copper-lead deposit in North Wales, UK with a reported resource of
2.1 million tonnes at 6.9% combined base metals in the indicated
category and 4.1 million tonnes at 5.0% combined base metals in the
inferred category.
Anglesey holds a 6% interest and management rights to the
Grangesberg Iron project in Sweden, together with a right of first refusal
to increase its interest by a further 51%. Anglesey also holds
11.8% of Labrador Iron Mines Holdings Limited which holds direct
shipping iron ore deposits in Labrador and Quebec.
For further information, please contact:
Bill Hooley, Chief Executive +44
(0)7785 572517
Danesh Varma, Finance Director +44
(0)207 653 9881
Elliot Hance, Beaufort Securities
+44 (0)207 382 8300