Orsu Metals Corporation (TSX:OSU)(AIM:OSU) -
Highlights:
-- Post-tax NPV7.5 of US$150 million, IRR of 30% (based on price of
US$3.25/lb Cu);
-- Initial capital expenditure of US$115 million;
-- Payback period of 2.75 years (on initial capital expenditure);
-- 11.5 years mine production of 149kt (328 Mlb) payable copper:
-- average annual production of 13kt (28.6 Mlb) of copper from sulphide
and oxide ore;
-- at a processing rate of 750,000 tonnes of sulphide ore per annum, a
total of 136.3kt (300 Mlb) of copper in 27.9% concentrate;
-- at a heap leach processing rate of 360,000 tonnes of oxide ore per
annum (over 4.5 years), a total of 12.7kt (27.9 Mlb) of cathode
copper;
-- Life of mine cash operating cost (pre tax) of US$1.47/lb Cu;
-- Net smelter revenue over the life of mine of US$971 million.
Orsu Metals Corporation ("Orsu", or the "Company") (TSX:OSU)(AIM:OSU), the
London-based base and precious metals exploration and development company, is
pleased to announce the positive results of a Definitive Feasibility Study
("DFS") for its 94.75% owned Karchiga Volcanogenic Massive Sulphide ("VMS")
copper project in northeast Kazakhstan (the "Karchiga Project"). The purpose of
the DFS was to determine the viability of open pit copper mining at Karchiga and
has been prepared by the Company's lead mining consultant SRK Consulting (UK)
Limited ("SRK"), which is independent of Orsu, based on Mineral Reserve
Estimates, prepared by SRK and reported according to Canadian Institute of
Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral
Reserves (the "CIM Standards").
Mineral Reserves
On the 8th of December 2011, Orsu reported Indicated Mineral Resources for its
Karchiga Project comprising 10.8Mt of combined sulphide and oxide mineralisation
grading 1.73% Cu for 187,200t (412.7 Mlb) of contained Cu and an Inferred
Mineral Resource of 0.02Mt of sulphide mineralisation grading 1.28% Cu for 300t
(0.7 Mlb) of contained Cu (see the Company's press release dated 08 December
2011).
Using only the Indicated Mineral Resource Estimates, the DFS supports a Probable
Mineral Reserve estimate of 8.5 million tonnes of sulphide ore in the Central
and North East pits containing 145,227t (320 Mlb) of copper at an average grade
of 1.71% Cu to be amenable to flotation ("FL") and additional 1.5 million tonnes
of ore in the Central pit containing 21,399t (47.2 Mlb) of copper at an average
grade of 1.43% Cu to be amenable to heap leaching ("HL").
Table 1. Probable Mineral Reserves Estimates as of 18 February 2012
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Ore Tonnes Cu Metal Cu Metal Au Metal
Orebody Type (Mt) Cu % Au g/t (kt) (Mlb) (Koz)
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Central HL 1.5 1.43 0.06 21.4 47.2 3.0
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Central FL 3.8 1.78 0.12 68.2 150.2 15.2
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North East FL 4.7 1.64 0.18 77.0 169.8 27.4
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Total 10.0 1.67 0.14 166.6 367.2 45.6
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All figures are on a 100% ownership basis
Pit designs and the final National Instrument 43-101 Mineral Reserve estimate
dated 18 February 2012 were completed using two types of software; Whittle 4X
optimisation software was used to generate optimal pit shells which were
designed in detail using Vulcan software. Key optimisation parameters are
presented in Table 2 below.
Table 2. Whittle Input Parameters
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OVERALL SLOPE ANGLES PARAMETER
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CENTRAL PIT
HANGING WALL 49 degrees
FOOTWALL 47 degrees
NORTH-EASTERN PIT
HANGING WALL 51 degrees
FOOTWALL 45 degrees
NORTHERN WALL 47 degrees
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MINING & PROCESSING
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MINING RECOVERY 95%
MINING DILUTION 5%
FRESH CU PROCESSING RECOVERY 94.0%
OXIDE CU PROCESSING RECOVERY 55.0%
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COSTS
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MINING COST
ORE 1.80 USD/t
OXIDE 1.30 USD/t
WASTE 1.60 USD/t
FRESH PROCESSING COST 9.00 USD/t ore
OXIDE PROCESSING COST 22.57 USD/t ore
GENERAL & ADMINISTRATIVE COST 5.00 USD/t ore
ROYALTY 5.7% of RoM Metal Value (above
0.7% Cu head grade)
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PRICE
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CU SELLING PRICE 6,600 USD/t Cu
NSR 83% (For Fresh Rock only)
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Capital Expenditure
The estimated total project capital expenditure ("CAPEX") over the mine life of
US$147 million, including the solvent extraction with electrowinning ("SXEW")
plant to treat the oxide ores, is made up as follows:
-- US$21.5 million for mining equipment
-- US$40.1 million for copper in concentrate processing plant and equipment
-- US$26.3 million for SXEW plant
-- US$21.7 million for mine site facilities and infrastructure
-- US$26.3 million for sustaining capital & closure costs
-- US$11.3 million for contingency
The estimated initial CAPEX is US$115 million, which excludes the SXEW plant,
sustaining capital & closure costs but includes pre-production development
costs.
The initial CAPEX estimate is comparable to the initial capital cost estimate of
US$100 million contained in the technical report entitled "Preliminary
Assessment of the Karchiga Copper Project, East Kazakhstan Region, Kazakhstan"
dated May 25, 2010 and prepared by Micon International Co. Limited (the
"Karchiga Preliminary Assessment Study") (see Company's press-release dated 25
May 2010). The Company estimates that a 12 to 15 month period is sufficient for
the construction of the processing facilities and pre-production development at
the Karchiga Project.
Mine Plan
The open pit mining schedule produced by SRK calculated a producing mine life of
11.5 years. The mining schedule envisages the mining of 10 Mt of sulphide and
oxide ore and 124 Mt of waste with a stripping ratio of 1:12.4 over the mine
life. The average mining rate of the operation is 750kt per annum.
For the first 2.25 years of the mine life, the mining schedule includes open pit
mining of the Central sulphide ore body alone in order to maximise the sulphide
copper grade and hence sulphide copper recovery. The optimised mine schedule has
been developed to minimise the stripping ratio in the initial three years of the
mine life. In addition, the use of stockpiling has enabled the Company to
increase the processed ore grade. From Year 4 until Year 7, sulphide ore will be
mined from both the Central and North East open pits. From Year 8 until the end
of mine life in Year 12, all mining will continue in the North East pit.
The average mining cost over the mine life is US$1.7 per tonne of material moved.
Processing Plan and Economic Model
The plant is designed to process approximately 750,000 tonnes per annum of
sulphide ore. A conventional processing route was chosen using relatively fine
grinding and selective sulphide flotation to produce a 27.9% bulk concentrate.
The first production has been scheduled for Q4 2013 through to final production
in 2025.
Copper from the oxide ore will be extracted using SXEW process. The oxides will
be treated over a period of 4.5 years starting in 2018 at an annual production
rate of 360,000 tonnes and is expected to produce an average of 2.8kt (6.22Mlb)
of copper cathode per annum over that period. Production of cathode copper will
continue until 2022.
In order to reduce the initial CAPEX, the SXEW plant construction has been
delayed until after the initial CAPEX payback period (which is anticipated to be
2.75 years). The plant has been designed to treat an average of 30,000 tonnes of
leachable oxide ore per month.
The results of the DFS demonstrate that economically the best option is to delay
the SXEW construction until 2017, allowing the cost of construction to be
financed from the revenue generated by the sulphide ore treatment.
The project key performance indicators are shown in Table 3 below.
Table 3. Key Performance Indicators
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Key
Performance
Parameter Units Indicator
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Average annual mining rate Tonnes 750,000
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Average mining cost US$/t of ore 22.99
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Annual processing rate (FL) Tonnes 750,000
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Mine life (FL) Years 11.5
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Processing cost (FL) US$/t of ore 8.91
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Metallurgical recovery (FL) % 93.4
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Average annual copper production, over 11.5 years
(FL) '000 tonnes 11.82
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Average annual copper production (FL) Mlb 26.1
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Annual processing rate (HL) Tonnes 360,000
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Mine life (HL) Years 4.5
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Processing cost (HL) US$/t of ore 18.7
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Metallurgical recovery (HL) % 61.1
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Average annual copper production, over 4.5 years
(HL) '000 tonnes 2.8
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Average annual copper production (HL) Mlb 6.2
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Cash operating cost over the mine life (pre tax) US$/lb Cu 1.47
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The mine is expected to produce a total of 149kt (328 Mlb) of payable copper,
with an average of 12,957t (28.57 Mlb) of copper production per annum. Figure 1
below shows the production scenario on a 100% owned basis for the two types of
payable copper products from the Karchiga Project.
To view Figure 1. Production Profile of Copper in Concentrate and Cathode
Copper, please visit the following link:
http://media3.marketwire.com/docs/OSU0229.pdf.
The Karchiga Project site is located 10 km from the main road and a 110 kV
national power grid and is expected to be connected to the same as part of
construction. An adequate supply of water can be sourced from the River Kalzhir
as well as from aquifers in the immediate vicinity of the designed project
facilities.
The project key economic indicators are shown in Table 4 below.
Table 4. Key Economic Indicators
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Parameter Units Key Economic Indicator
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Total project CAPEX US$m 147
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Initial CAPEX US$m 115
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Total Net Smelter Revenue US$m 971
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Sulphide and Oxide Case @ US$3.25/lb Cu:
- Post-Tax NPV7.5 US$m 150
- Post-Tax IRR % 30
- Payback period Years 2.75
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Sulphide and Oxide Case @ US$3.00/lb Cu:
- Post-Tax NPV7.5 US$m 113
- Post-Tax IRR % 25
- Payback period Years 3.0
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All figures are on a 100% ownership basis
The Environmental and Social Impact Assessment Study for the Karchiga Project
was successfully completed by Wardell Armstrong International on 31 January
2012. The Company expects to receive the necessary construction permitting
approvals from the Kazakh authorities by the middle of 2012.
A copy of the DFS will be available on the Company's website and on
www.sedar.com in due course.
Dr Sergey V Kurzin, Executive Chairman of Orsu, commented: "I am pleased with
the successful completion of the DFS, a key milestone in the development of Orsu
as a company. The DFS demonstrates that Karchiga is a technically feasible
project, which can be developed as a high grade, medium cost open pit copper
mine with robust project economics and a rapid payback period. The Company has
been working on the DFS in parallel with local Kazakhstan consulting companies
in order to complete the local Technical Project required under Kazakhstan laws
and regulations and we have already started the process of obtaining the
necessary approvals and permits for project construction and development, which
should accelerate the commencement of construction. In addition, the Company,
together with their consultants Endeavour Financial have been working on project
debt finance options with a number of commercial and development banks with a
view to enabling commencement of project construction in Q3 2012."
Qualified Persons
The "qualified person" (as such term is defined in National Instrument 43-101)
who supervised the preparation of the Mineral Reserve estimates for the Karchiga
Project disclosed in this press release is Dr Alexander Yakubchuk, Chief
Operating Officer, Orsu Metals Corporation. Dr Yakubchuk has reviewed and
approved the contents of this press release.
The "qualified person" (as such term is defined in National Instrument 43-101)
who supervised the preparation of the Mineral Reserve estimates for the Karchiga
Project disclosed in this press release from SRK is Mr Michael Beare, Corporate
Consultant, an employee at SRK Consulting UK Ltd, and independent of Orsu. Mr
Beare was responsible for review and compilation of the Karchiga Project DFS and
has reviewed and approved the contents of this press release.
Dr Mike Armitage, CEng, CGeol, Group Chairman and Corporate Consultant (Resource
Geology) with SRK, Ms Tracey Laight, MSc, CGeol, FGS, Principal Consultant
(Mining Geology) of SRK, both "qualified persons" (as such term is defined in
National Instrument 43-101) and independent of Orsu, are the persons responsible
for the preparation and verification of the Mineral Resource estimates for
Karchiga Project disclosed in this press release.
Forward-looking information
This press release contains forward-looking information which is not comprised
of historical facts. Forward-looking information involves risks, uncertainties
and other factors that could cause actual events, results, performance and
opportunities to differ materially from those expressed or implied by such
forward-looking information. Forward-looking information contained (or referred
to) in this press release includes, but may not be limited to, the Karchiga
Project's expected life of mine and estimated net present value and rate of
return, forecasts relating to future production and processing and the timing
thereof, expected copper grades, estimates relating to key performance and
economic indicators for the Karchiga Project, anticipated costs/expenditures
relating to operations and capital, estimates relating to the future price of
copper, future revenues, cash flows and capital payback, mineral resource and
mineral reserve estimates, anticipated construction at the Karchiga Project and
the timing related thereto, the Company's mine plan and processing plan and the
expected results thereof, the Company's expectation that it will receive
necessary construction and development permits and approvals and the timing
related thereto, and management's expectations relating to the potential of the
Karchiga Project.
Factors that could cause actual results to differ materially from those
described in such forward-looking information include, but are not limited to,
risks normally incidental to the development of mineral properties and operating
hazards, the possibility that future development or mining results will not be
consistent with expectations, uncertainty of mineral resource and mineral
reserve estimates, technical and design factors, the Company's inability to
obtain, maintain, renew and/or extend required licences, permits, authorizations
and/or approvals from the appropriate regulatory authorities, including (without
limitation) the Company's inability to obtain (or a delay in obtaining) the
necessary construction and development permits and approvals from Kazakh
authorities, and other risks relating to the regulatory and/or legal framework
in Kazakhstan, the Company's inability to obtain financing for the development
of the Karchiga Project on favourable terms or at all, fluctuations in the price
of copper, as well as certain other risks set out in the Company's public
documents, including its annual information form dated March 24, 2010, filed
under the Company's profile on SEDAR at www.sedar.com.
The forward-looking information in this press release reflects the current
expectations, assumptions and/or beliefs of the Company based on information
currently available to the Company. In connection with the forward-looking
information contained in this press release, the Company has made certain
assumptions about the Company's business, the economy and the mineral
exploration industry in general, future capital, operating and production costs,
the future price of copper, the accuracy of the Company's anticipated timing for
construction at the Karchiga Project, anticipated mining and processing rates,
the key performance and economic indicators relating to the Karchiga Project,
the regulatory framework in Kazakhstan with respect to, among other things, the
Company's ability to obtain, maintain, renew and/or extend required permits,
licences, authorizations and/or approvals from the appropriate regulatory
authorities, including the necessary construction and development permits and
approvals from Kazakh authorities required to develop the Karchiga Project as
anticipated, the Company's ability to continue to obtain qualified staff and
equipment in a timely and cost-efficient manner to meet the Company's demand,
and has also assumed that no unusual geological or technical problems occur,
plant and equipment work as anticipated and no significant events occur outside
of the Company's normal course of business. Although the Company believes that
the assumptions inherent in the forward-looking information are reasonable,
forward-looking information is not a guarantee of future performance and
accordingly undue reliance should not be put on such information due to the
inherent uncertainty therein.
The mineral resource and mineral reserve figures contained to in this press
release are estimates only and no assurances can be given that the indicated
levels of copper will be produced. Such estimates are expressions of judgment
based on knowledge, mining experience, analysis of drilling results and industry
practices. Valid estimates made at a given time may significantly change when
new information becomes available. While the Company believes that the mineral
resource and mineral reserve estimates contained herein are well established, by
their nature, mineral resource and mineral reserve estimates are imprecise and
depend, to a certain extent, upon statistical inferences which may ultimately
prove unreliable. If such mineral resource and mineral reserve estimates are
inaccurate or are reduced in the future, this could have a material adverse
impact on the Company. Due to the uncertainty that may be attached to inferred
mineral resources, it cannot be assumed that all or any part of an inferred
mineral resource will be upgraded to an indicated or measured mineral resource
as a result of continued exploration.
Any forward-looking information speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking information,
whether as a result of new information, future events or results or otherwise.
GLOSSARY of technical terms:
-- Au - a chemical symbol for gold
-- Cu - a chemical symbol for copper
-- Cut-off grade - the lowest grade, or quality, of mineralised material
that qualifies as economically mineable and available in a given
deposit. May be defined on the basis of economic evaluation, or on
physical or chemical attributes that define an acceptable product
specification
-- g/t - grammes per tonne, equivalent to parts per million
-- Indicated Mineral Resource - that part of a Mineral Resource for which
quantity, grade or quality, densities, shape and physical
characteristics, can be estimated with a level of confidence sufficient
to allow the appropriate application of technical and economic
parameters, to support mine planning and evaluation of the economic
viability of the deposit. The estimate is based on detailed and reliable
exploration and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits, workings and
drill holes that are spaced closely enough for geological and grade
continuity to be reasonably assumed.
-- Inferred Mineral Resource - that part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of
geological evidence and limited sampling and reasonably assumed, but not
verified, geological and grade continuity. The estimate is based on
limited information and sampling gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill
holes.
-- lb - pound (=453.59237 grammes)
-- Massive sulphide - a large, usually stratiform, conformable orebody
composed mainly of iron sulphide, usually pyrite +/- pyrrhotite, and
other base metal sulphides, such as chalcopyrite, along interfaces
between volcanic units and sediments
-- Mineral Reserve - an economically mineable part of a Measured and/or
Indicated Mineral Resource. It includes diluting materials and
allowances for losses, which may occur when the material is mined.
Appropriate assessments and studies have been carried out, and include
consideration of and modification by realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and
governmental factors. These assessments demonstrate at the time of
reporting that extraction could reasonably be justified. Mineral
Reserves are subdivided in order of increasing confidence into Probable
Ore Reserves and Proved Ore Reserves.
-- Mineral Resource - a concentration or occurrence of natural, solid,
inorganic or fossilized organic material in or on the Earth's crust in
such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction. The location, quantity,
grade, geological characteristics and continuity of a Mineral Resource
are known, estimated or interpreted from specific geological evidence
and knowledge.
-- Mlb - million pounds
-- Moz - million troy ounces
-- Oxide Mineral Resource - A Mineral Resource comprising mineralisation
formed by the chemical interaction of an element or elements with
oxygen, usually affected by surface waters
-- oz - troy ounce (=31.103477 grammes)
-- Probable Mineral Reserve - an economically mineable part of Indicated
Mineral Resource. It includes diluting material and allowances for
losses which may occur when the material is mined. A Probable Ore
Reserve has a lower level of confidence than a Proved Ore Reserve but is
of sufficient quality to serve as the basis for a decision on the
development of the deposit.
-- Proved Mineral Reserve - an economically mineable part of a Measured
Mineral Resource. It includes diluting materials and allowances for
losses which may occur when the material is mined. Appropriate
assessments and studies have been carried out, and include consideration
of and modification by realistically assumed mining, metallurgical,
economic, marketing, legal, environmental, social and governmental
factors. These assessments demonstrate at the time of reporting that
extraction could reasonably be justified. A Proved Ore Reserve
represents the highest confidence category of reserve estimate. The
style of mineralisation or other factors could mean that Proved Ore
Reserves are not achievable in some deposits.
-- Sulphide - a mineral composed of a chemical compound between a metal and
sulphur
-- t - tonne (=1 million grammes)
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