RESULTS OF BFS FOR ISUA PROJECT, GREENLAND (1168A)
March 27 2012 - 2:01AM
UK Regulatory
TIDMLOND
RNS Number : 1168A
London Mining Plc
27 March 2012
London Mining Plc
Quoted on London AIM (LOND LN)
("London Mining" or the "Company")
27 March 2012
RESULTS OF BANKABLE FEASIBILITY STUDY FOR ISUA PROJECT,
GREENLAND
Highlights
-- 15Mtpa premium 70.2% Fe blast furnace ("BF") pellet feed with
less than 2% SiO(2) and Al(2) O(3)
-- Project NPV of USD2.37billion with a project IRR of 20.9%
assuming a 15 year operation with 3.5 year payback
-- Potential to improve project NPV through conversion of Inferred to Indicated resources
-- JORC classified Mineral Resources increased by 10% to 1107Mt
with internally diluted grade of 32.6% Fe.82% increase in Indicated
resources to 380Mt grading 32.6% Fe
-- Additional mineralisation potential of between 950Mt and
1,500Mt including a high grade hematite target of between 150Mt and
300Mt
-- Preparation for permitting to begin and financing process to continue in April
Graeme Hossie, Chief Executive of London Mining said "The
completion of the bankable feasibility study for Isua provides us
with the basis to proceed with the permitting and financing process
which will in turn allow London Mining to commence construction of
the project. The results show that Isua has extremely robust and
attractive ecomomics under a number of scenarios with potential for
mine life extension from both the existing Inferred resource and
from significant mineralisation potential that has been identified
by the 2011 drilling campaign."
In February 2011 London Mining released the results of a scoping
study compiled by SNC Lavalin International Inc. ("SLII"), for the
Isua iron ore project in Greenland. The scoping study considered a
15 year life mine with 15Mtpa open pit, processing plant, pipeline
and a deep water port.
A bankable feasibility study ("BFS") with AACE Class 3 estimates
for a 15Mtpa operation considering a 10 year mine life based on the
currently available amount of Indicated resources has now been
completed. A 15 year scenario was also evaluated to demonstrate the
greater potential of the asset. The BFS supports the initial
findings of the scoping study, provides a more accurate estimate of
cost and provides the foundation to finance and construct a mine at
Isua. The detailed results of the BFS for the next stage of the
project are outlined below.
Highlights of the Bankable Feasibility Study
Study date Scoping Study BFS
February 2011 March 2011
Annual production (Mtpa) 15 15
Mine life (years) 15 10 with possible extension
to 15
Operating cost (USD/t 30 46
concentrate)
Capital expenditure (USD 2.05 2.35
billions)
--------------- ----------------------------
Capital Intensity (USD/tpa) 136 157
--------------- ----------------------------
Resources and mine life
As part of the BFS programme, 7,656m of drilling was completed
during the summer of 2011 which forms the basis for an updated
resource statement. Snowden now estimate a total resource for Isua
of 1,107Mt grading 32.3% Fe. This improved result has increased the
resource by 10% in resource tonnage from the March 2011 resource
statement. The modest reduction in Fe grade to 32.6% is the result
of the decision to report internally diluted head grades due to
incorporation of waste bearing structures in the block model rather
than consideration of a selective mining method.
The new resource represents a substantial 82% increase in
Indicated resources from 209Mt to 380Mt which is sufficient to
support a 10 year mine life. Potential to extend the mine life
could be achieved though further drilling necessary to convert
Inferred resources into the Indicated category.
Summary of Isua Mineral Resource at March 2012 reported at a 20%
Fe cut-off grade and constrained inside an ultimate pit shell
Category Tonnes (Mt) Fe (%) Al(2) O(3) (%) SiO(2) (%) S (%) P (%)
Indicated 380 32.6 2.4 41.8 0.23 0.03
------------ ------- --------------- ----------- ------ ------
Inferred (1) 727 32.1 2.3 42.3 0.22 0.03
------------ ------- --------------- ----------- ------ ------
Total 1,107 32.3 2.4 42.2 0.22 0.03
------------ ------- --------------- ----------- ------ ------
(1) 83% or 607Mt of the inferred resources are extrapolated
beyond the current drilling coverage
The 2011 drilling campaign also confirmed additional mineral
resource potential originally indentified by Rio Tinto in 1997.
This area of mineralisation potential has been identified as a down
dip extrapolation of the Isua banded iron formation ("BIF") bearing
the existing resource. Part of this mineralisation potential is
comprised of an area of hematite BIF which has been interpreted at
the top of the BIF unit. This appears to be underlain by more
typical magnetite BIF.
Summary of the mineralisation potential at the Isua deposit at
end December 2011(2)
Potential mineralisation Potential tonnage range Potential Grade Range
type (Mt) (Fe%)
Magnetite BIF 800 to 1200 30-33
------------------------ ----------------------
Hematite BIF 150 to 300 >35
------------------------ ----------------------
(2) Snowden considers this material to be an indication of
Mineralisation Potential only and makes no guarantees that this
material can or will be converted to a Mineral Resource or an Ore
Reserve at any time in the future following the collection of
additional data.
BFS results
The March 2012 BFS considers a 15Mtpa operation with a mine life
of 10 years. The main changes, when compared with the February 2011
scoping study are the reduced mine life as well as increased,
albeit more accurate, operating costs and capital expenditure.
The mine life of 10 years is based on the current availability
of Indicated resources whereas the scoping study included Inferred
resources in its 15 year mine plan. Snowden expects further
Indicated results could be defined if additional infill drilling
were undertaken.
The operating costs have increased from an average of USD 30/t
to an average of USD46/t principally as a result of anticipated
increased power consumption based on more representative testwork
indicating greater hardness of Isua ore than previously considered.
Strip ratio has also increased as Inferred resources in the pit are
now considered as waste rather than ore in the February scoping
study.
Capital expenditure for the project is now estimated at USD
2.350 billion. This represents an increase of 15% from the February
2011 scoping study which estimated capital cost for a 15Mtpa
operation to be USD2.05 billion. The capital estimate is however
constrained within a much narrower degree of confidence, +/- 15%
versus -30%/+40% based on more detailed analysis.
Testwork by SGS Lakefield has confirmed the final product from
Isua to be a premium quality blast furnace grade pellet feed with
70.2% of Fe and less than 2.0% Silica (SiO(2) ) and Alumina (Al(2)
O(3) .) Sulphur levels will be either 0.12% or 0.3% depending on
the grade of sulphur in the ore processed.
Financial analysis
Two pricing scenarios were considered in the study. The base
case scenario considers the sale of 5Mtpa of low sulphur pellet
feed into Europe and 10Mtpa of higher sulphur product into China
with a more conservative case assuming the sale of all products
into China. Long term market study and price forecasts were
undertaken by Raw Materials Group ("RMG"). RMG assume a
conservative premium of USD3 per Fe unit above benchmark with
freight costs of USD34/wmt for capesize shipping to China and
USD9/wmt into Europe. Three scenarios were considered for the
purposes of financial modelling. The base case scenario assumes a
10 year mine life and pricing based on sales of product into both
Europe and China. Two further scenarios were considered both
incorporating Inferred resources into the mineable resource to
achieve a 15 year mine life. One of these scenarios assumed the
sale of all products into China. The results are shown below.
Results of Isua Project financial analysis (after tax)
Base case Extended mine 100% sales to
life China
Mine Life 10 years 15 years 15 years
----------------- ----------------- ----------------
Pricing assumption 5Mtpa to Europe 5Mtpa to Europe 15Mtpa to China
10Mtpa to China 10Mtpa to China
----------------- ----------------- ----------------
Project IRR
(100% equity) 18.7% 20.9% 19.9%
----------------- ----------------- ----------------
Project NPV (8%
discount rate, USD
m, 100% equity) 1,755 2,366 2,135
----------------- ----------------- ----------------
Equity IRR
(70% debt : 30%equity) 30.1% 31.6% 30.1%
----------------- ----------------- ----------------
Project payback 3.5 years 3.5 years 3.6 years
period (in years
of operation)
----------------- ----------------- ----------------
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