ORM Ormonde Mining Plc

 

TIDMORM 
 
RNS Number : 7802S 
Ormonde Mining PLC 
16 September 2010 
 

16 September 2010 
 
                               Ormonde Mining plc 
                          ("Ormonde" or "the Company") 
 
                               Scott Wilson Study 
 
  Independent Study Indicates Substantial Net Cash Flows from Open-Pit Mine at 
                         Barruecopardo Tungsten Project 
 
The Board of Ormonde is pleased to report theresults of an Independent Technical 
and Economic Review and Optimisation Study ("the Study") carried out by Scott 
Wilson Mining ("Scott Wilson") on Ormonde's Barruecopardo Tungsten Project in 
Salamanca, Spain. 
 
 
Highlights 
 
·     A review of the May 2010 resource model has concluded that the optimum 
approach to mining in the initial 10 year period based upon current Indicated 
Resources would be by open pit at a design production capacity of 500,000 tonnes 
per annum, an increase of 25% on previous estimated initial production rates. 
·     The Study shows the Base Case Project, based solely on current Indicated 
Resources, is capable of generating Euro 9.3M per year of averaged pre-tax 
operating cash flows for 10 years, at the current tungsten price of US$245/mtu 
WO3. 
·     Market analysis suggests that the forecast tungsten market deficit could 
result in prices moving to levels in line with the 2005/6 peak of just under 
US$300/mtu in the next few years; at a tungsten price of US$290/mtu, averaged 
pre-tax operating cash flows for the Base Case project rise to Euro 13.7M per 
year. 
·     The initial capital cost for the Base Case is Euro 29.9M, an increase over 
previous estimates (Euro 25M) resulting from the impact of the 25% increased 
production rate on process plant capital and open pit waste pre-stripping 
requirements. The average unit cash operating cost shown is Euro 80.4/mtu. 
·     The Study has also considered the possibility of further increasing the 
open pit production rate to 800,000 tonnes per annum for 10 years (Expanded 
Case) by the inclusion of the Inferred Resources. This could result in the 
project generating Euro16.1M per year of averaged pre-tax operating cash flows, 
at the current tungsten price of US$245/mtu WO3, with this cash flow rising 
accordingly at the higher US$290/mtu price. 
·     Tungsten prices continue to rise(1) and projections from the EU Commission 
in June 2010(2) suggest probable supply shortages of the metal to the EU into 
the future. 
 
 
Kerr Anderson, Ormonde's Managing Director, said: 
 
"This is an excellent outcome for Ormonde Mining.  The results have exceeded our 
expectations both in terms of net cash flow projections and the life of the open 
pit portion of the project. 
The Study supports the Directors' view that Barruecopardo would be amongst the 
largest producers of tungsten in the World outside of China, with real potential 
to further increase production rates post start-up. 
This is an exciting time for Ormonde with the Study underlining the potential 
for the Project to bring significant and long term benefits to the local area 
surrounding the project site, and to Ormonde shareholders.  All this is 
occurring against a backdrop of significant increases in the tungsten price.  We 
look forward to reporting regularly to shareholders as the Company progresses 
Barruecopardo to production in late 2012". 
 
 
Barruecopardo Project 
 
Ormonde has a 90% interest in the Barruecopardo Project in joint venture with 
the regional government affiliated company Sociedad de Investigación y 
Explotación Minera de Castilla y León (SIEMCALSA) which holds 10%. 
Barruecopardo has a current reported mineral resource (JORC compliant) totalling 
10.9 million tonnes grading 0.45% WO3 (tungsten trioxide) at a 0.25% cut-off, 
equating to 4.9 million metric tonne units ("mtu") or 49,000 tonnes of contained 
WO3. Of the total resource, 6.5 million tonnes grading 0.46% tungsten trioxide 
is in the Indicated Mineral Resource category. Based upon this Indicated 
Resource, metallurgical testwork, and other engineering work carried out 
to-date, Scott Wilson was commissioned to carry out a mine optimisation study 
and a technical and economic review of the previous engineering work, to 
facilitate this independent quantification of project economics. 
 
Technical and Economic Review and Optimisation Study 
 
The Independent Technical and Economic Review and Optimisation Study (accuracy 
of ±25%) prepared by Scott Wilson included mine optimisation, design, scheduling 
and costing studies. Scott Wilson retained Aker Solutions to carry out a review 
of results from previous metallurgical testwork by various laboratories, 
including Wardell Armstrong International, and to develop preliminary process 
operating and capital cost estimates. All other aspects of the project, 
including environmental studies, were reviewed by Scott Wilson, who also 
prepared preliminary financial models based upon tungsten market price 
information provided by the Company. 
The preliminary open pit optimisation study was carried out only on the 
Indicated portion of the May 2010 Mineral Resource estimate, prepared by CSA 
Global Pty Ltd, Australia. This pit optimisation exercise captured potentially 
mineable material of 3.9 million tonnes with an average life of mine grade of 
0.43% WO3. The mine production from this pit was scheduled at 500kt of ore per 
year and this was used as a Base Case for an initial mine life of 10 years. This 
500ktpa represents a 25% increase on past production rate estimates. 
The Base Case models contract open pit mining with averaged production of 
130,000 mtus of WO3 per year (155,000 mtus average during the period of 
operation at design production capacity) from a simple and low cost gravity 
plant. This plant would comprise three stage crushing followed by jigs and 
spirals for gravity pre-concentration, with flotation clean-up of the 
pre-concentrate to produce an industry standard 65% WO3 (scheelite) concentrate. 
Average life-of-mine metallurgical recoveries of 79% were adopted based on 
existing testwork results. Most plant waste products will be produced in a "dry" 
sand form. 
The initial capital cost for the Base Case is Euro 29.9M, an increase over 
previous estimates (Euro 25M) resulting from the impact of the 25% increased 
production rate on process plant capital and open pit waste pre-stripping 
requirements. The average unit cash operating cost shown is Euro 80.4/mtu. 
The Base Case assumes that all WO3 concentrate produced is sold at prices 
reflecting recent mid-prices for APT (ammonium paratungstate) of US$245/mtu. 
Market analysis suggests that the forecast market deficit could result in prices 
moving to levels in line with the 2005/6 peak of just under US$300/mtu in the 
next few years (CRU, 2009).  The impact on cash flows at a price of US$290/mtu 
is also considered.  The Study used a US$/EUR exchange rate of 1.35. 
Mining could be continued by underground methods post completion of the Base 
Case 10-year open pit, although this scenario was not addressed as part of the 
current study. 
 
Expanded Case 
Scott Wilson has reported that, based upon the entire mineral resource 
(Indicated and Inferred) a larger open pit operation at higher production rates 
than the Base Case of 500ktpa may be possible if, after further infill drilling, 
the Inferred Resources are upgraded to the Indicated category. This case, termed 
the Expanded Case, models mining a larger open pit at a production rate of 
800ktpa to yield averaged production of 200,000 mtus of WO3 per year (230,000 
mtus average during the period of operation at design production capacity). 
Scott Wilson noted that the level of geological confidence associated with 
Mineral Resources classified under the Inferred category is low and consequently 
there is no certainly that the economic forecasts on which the Expanded Case is 
based will be realised. 
For the Expanded Case, total initial project capital costs increase to Euro 
40.3M with the average pre-tax operating cash flow over the first 10 years of 
the operation (at prevailing metal prices) rising to Euro16.1M per year. At the 
higher metal price, this cash flow could rise further to Euro 22.8M per year. 
Continuation of this Expanded Case in an underground mining operation has not 
been considered, as considerable deeper drilling would be required to support 
such a scenario. 
 
 
Study Results 
 
+---------------+------------------------+--------------------+ 
|               |      OPERATING CASH FLOWS PER YEAR(I)       | 
+---------------+---------------------------------------------+ 
|               |Current Tungsten Price  |  Higher Tungsten   | 
|               |                        |       Price        | 
+---------------+------------------------+--------------------+ 
|               |      US$245/mtu        |    US$290/mtu      | 
+---------------+------------------------+--------------------+ 
|               |                        |                    | 
+---------------+------------------------+--------------------+ 
| Base Case     |       Euro 9.3M        |    Euro 13.7M      | 
+---------------+------------------------+--------------------+ 
|               |                        |                    | 
+---------------+------------------------+--------------------+ 
| Expanded Case |      Euro 16.1M        |    Euro 22.8M      | 
+---------------+------------------------+--------------------+ 
(I)         Averaged pre-tax operating cash flows per year for first 10 years of 
Project 
 
 
Tungsten Outlook 
Ammonium paratungstate (APT) prices, the product for which tungsten is priced 
globally, have increased from US$180-190/mtu in mid 2009 to the current price of 
US$246-253/mtu, a price increase of some 30%.  This appears to be driven 
primarily by increased demand for concentrates from China, which dominates both 
the world's supply and consumption of tungsten.  Recent commentary on tungsten 
demand suggests that the requirement for tungsten in steels and alloys used in 
critical sectors of China's economy is strong. 
Barruecopardo, a historical tungsten producer closed in the early 1980's, is now 
a recognised high grade, low capital cost, tungsten asset, situated close to the 
major markets for Western processors and manufacturers of tungsten products. 
Evaluation of this asset continues to progress against a backdrop of rising 
world tungsten prices and it is anticipated that Barruecopardo will be developed 
as a major tungsten producer in late 2012. 
 
(1)  Ammonium paratungstate (APT) prices, the tungsten product which is priced 
globally, have increased steadily from US $180-190/mtu WO3 in mid 2009 to the 
current price of US$ 246-253/mtu WO3.  One mtu = 10 kg. 
(2)  EU Commission Report released in June 2010 entitled "Critical Raw Materials 
for the EU". 
 
 
 
Kerr Anderson PhD EurGeolPGeo, Managing Director of Ormonde Mining plc, and a 
qualified person as defined in the Guidance Note for Mining, Oil and Gas 
Companies, February 2007, of the London Stock Exchange, has reviewed and 
approved the technical information contained in this announcement. 
 
 
A glossary explaining technical terms contained in this announcement can be 
found at www.ormondemining.com/en/investors/technical_glossary. 
 
 
Enquiries to: 
 
Ormonde Mining plc 
Kerr Anderson, Managing Director  Tel: +353 (0)46 9073623 
 
Bankside Consultants 
Simon Rothschild / Louise Mason  Tel: +44 (0)20 7367 8888   Mob: +44 (0)7703 
167065 
 
Davy (Nomad / ESM Adviser) 
Fergal Meegan/Roland French  Tel: +353 (0)1 6796363 
 
Fairfax I.S. PLC (Joint Broker) 
Ewan Leggat/Katy Birkin  Tel: +44 (0)207 598 5368 
 
 
ENDS 
 
 
About Ormonde 
Ormonde Mining plc is quoted on the AIM in London and the ESM in Dublin. Ormonde 
is a mineral development and exploration company focused on Spain, with a 
principal objective of developing the Barruecopardo Tungsten Project to be a 
major western tungsten mine by late 2012. 
 
About Scott Wilson 
Scott Wilson is now part of URS Corporation. 
 
URS/Scott Wilson provides consulting services to the mining clients at all 
stages of project development from exploration and resource evaluation through 
scoping, prefeasibility and feasibility studies, financing, environment and 
social assessment, permitting, construction, operation, closure and 
rehabilitation. 
 
For more information please visit www.ormondemining.com. 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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