Anglesey Mining PLC Positive Results of Scoping Study
July 24 2017 - 2:00AM
UK Regulatory
TIDMAYM
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 GBP26.6
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 GBP1.00 = $US1.25. With an estimated pre-production capital
cost of $53 million, or GBP42 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 GBP34.6 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 GBP32.8 million, for the base case metal
price scenario and to $53 million, or GBP42 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 GBP8.9 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 GBP1.00 = $US1.25. The table also demonstrates the
sensitivities of the Parys Mountain Project to zinc and copper prices.
Metal Prices Pre-Tax
Zinc Lead $ Copper Silver Gold Undiscounted NPV NPV (8%) IRR
$/lb /lb $/lb $/oz $/0z $M (10%) $M %
$M
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 GBP1.00: $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 1,000 tpd with
DMS DMS
Life of Mine 16 12 12 8
(Years)
Initial Capital 48 50 52 53
Cost $m
Operating cash cost 63 55 53 47
$/t
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
END
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