Scoping Study - Bushveld Iron Ore Project
BUSHVELD IRON ORE PROJECT
SCOPING STUDY, 22 APRIL 2013
Bushveld Minerals Limited (AIM: BMN), a mineral development company focused on iron and tin projects in southern Africa, is pleased to present a summary of the Scoping Study for the initial development phase on its Bushveld Iron Ore Project.
The initial development phase of the project has three key criteria.
a) Firstly a short timeframe to production and cashflow which will fund future production growth.
b) Secondly a low capex requirement to minimize any future equity financing and potential shareholder dilution.
c) Finally it is achievable by the Company without reliance on additional 3rd party infrastructure.
Subsequent phases will focus on increasing production to leverage the large resource base and proposed infrastructure improvements, enhanced downstream beneficiation and exploitation of the phosphate and other by-product credits to improve margins.
Highlights
· Scoping study delivers an initial low capital expenditure ("capex") project which results in first phase cashflows that can be leveraged to unlock the larger potential inherent in exploiting the deposit along strike and to lower depths, as well as pursuing downstream beneficiation opportunities
· Scoping study undertaken on the P-Q Zone only equating to 12% of the total JORC resource (JORC-compliant 718 Mt resource)
· Low capex and concentrate product route at base case RoM of 5 Mtpa underscores viability of project:
o Low capex at US$126 million
o NPV of US$140 million at 12.5% discount rate
o 34.2% IRR (real)
o Payback: 2 years from start of mining
· Project well positioned relative to existing infrastructure:
o 45 km from rail line with both port options (Maputo / Matola and Richards Bay) undergoing significant capacity expansions
o 20 km from a Kusile power station transmission line, as well as from a planned new transmission line and substation from the near complete Medupi power station
· Titanium and vanadium credits based on current metallurgical test work and extensive field-based research with potential customers
· Attractive operating costs: US$51 / tonne, (US$6 / tonne when adjusted for titanium and vanadium credit)
· Pre-feasibility study due to commence in May 2013 with completion expected by end Q1 2014
This scoping study was focused on an initial phase designed for nearer term cashflows that can be leveraged to unlock the value of the project, inherent in its resource size and scope for downstream beneficiation:
a) Scale Up
§ Total mined 87.53 Mt resource represents only 12% of P-Q Zone resource
§ Ramp-up of project mining volumes - subject to rail infrastructure capacity study being undertaken can be undertaken along identified strike, without increasing the stripping ratios
§ Financials for a 7 Mtpa ROM scenario:
- Low capex at US$153 million
- NPV of US$179 million at 12.5% discount rate
- 39.0% IRR (real)
- Payback at 1 year 9 months from start of mining
b) The MML Resource opportunity
§ Simultaneous development of the vanadium-rich Main Magnetite Layer ("MML") deposit comprising 52 Mt at 44.7% Fe, 9.7% TiO2 and 1.48% V2O5, which is not included in the current scoping study
c) Downstream beneficiation opportunity
§ Downstream beneficiation to a pig iron product, high TiO2 slag and vanadium slag
- Utilising the abundant raw materials, particularly coal, within close proximity of the project
- Optimising rail logistics costs by transporting a higher value product
- Implementing a modular and scalable low capex option
d) Logistics costs optimisation
§ Potential upside from optimising logistics cost significant
- The project is sensitive to logistics costs, which at US$75/ton account for >50% of the delivered cost of the project. The infrastructure costs used, based on current realizable rates, are significantly higher than CRU logistics benchmark costs. A 20% reduction in the logistics would unlock as much as US$50m incremental NPV value
Commenting on the Scoping Study, Fortune Mojapelo, the Company's CEO said, "We are delighted to present the positive scoping study results for our Bushveld Iron Ore Project in South Africa. We have chosen to adopt an initial low capex route to enable the Company to reach production and cash flows in a shorter time horizon. We believe our approach is low risk, particularly given the challenging global markets for project financing. Yet the project retains the flexibility to scale up the mining operations and the option of developing modular integrated pig iron or steel facilities. The pre-feasibility studies that are due to commence in May will investigate these options further and we look forward to presenting the PFS results in Q1 2014.
We believe that this conservative approach will give the project the best opportunity of reaching production by our target of 2016 with competitive economic parameters.
That this scoping study utilises only 12% of the current resource, which is based on only 5.5 km of a potential 18 km strike, with scope for selective high grade mining, underscores the scale-up opportunities of the project.
While the P-Q deposit can support a much larger scale of operations, we also took into account realisable capacity on the existing rail and port infrastructure in opting for a base case 5 Mtpa RoM. We believe that such a conservative approach will give the project a great chance of actually being delivered to production with competitive economic parameters and in a short timeframe (2016).
The level of work undertaken in this study goes beyond the scope required for a scoping study and allows us to accelerate the pre-feasibility programme, which we intend to complete by Q1 2013.
EXECUTIVE SUMMARY
The Bushveld Iron Ore Project is located in the Limpopo Province, South Africa. It is situated on the northern limb of the Bushveld Complex and is based on three contiguous new-order prospecting rights on 12 farms covering a total area of 25,207 hectares. These rights are held in South African subsidiaries of Bushveld Minerals structured to comply with the South African Black Economic Empowerment ("BEE") requirements.
This scoping study was designed to deliver an initial low capex project which can be brought into production in the short term with cash flows that can be leveraged to unlock the larger potential inherent in the deposit size and downstream beneficiation opportunities.
Resource ….
A JORC-compliant Ti-magnetite resource of 770 million tonnes (Mt) contained in two adjacent deposits has been established, comprising 718 Mt in the P-Q Zone and 52 Mt in the vanadium-rich Main Magnetite Layer ("MML"). Both deposits are layered ore bodies with a strike length in excess of 5 km and dipping at approximately 18° to the west.
The resource is summarized below:
|
Deposit |
|
Million Tonnes |
SG (g/cm3) |
Fe (%) |
TiO₂ (%) |
V₂O₅ (%) |
SiO2 (%) |
Al2O3 (%) |
P₂O₅ (%) |
S (%) |
|
|
P-Q Zone |
Indicated |
347.88 |
3.65 |
33.3 |
10.8 |
0.21 |
22.6 |
9.73 |
0.04 |
0.39 |
|
|
Inferred |
369.88 |
3.64 |
32.2 |
10.0 |
0.18 |
24.6 |
10.3 |
0.07 |
0.56 |
||
|
P-Q Zone Total |
717.76 |
|
|||||||||
|
MML |
Indicated |
51.81 |
4.04 |
44.7 |
9.7 |
1.48 |
11.2 |
8.3 |
0.01 |
0.01 |
|
|
Bushveld Project TOTAL |
769.57 |
|
|||||||||
Table 1.1- Combined Inferred and Indicated mineral resources for the P-Q Zone and MML
This Scoping Study was conducted based on the larger tonnage but lower grade iron and vanadium P-Q Zone alone. A study on the economics of the higher grade iron and vanadium but thinner MML Resource will be undertaken during the pre-feasibility study phase, which is due to commence in May 2013 with completion expected by Q1 2014.
Geology …
The P-Q Zone outcrops beneath a thin soil layer (~2 m) and comprises 5 distinct layers over an average thickness of 45 m, consistent to depth (400 m) and along strike. The layers fall into two categories - massive and disseminated ore - and are weathered down to about 30 m.
The clear definition of the layers comprising the P-Q Zone has allowed for resource estimations on each layer and has created opportunities for selective mining for optimal returns while retaining the scale potential of the project. This has been of fundamental importance in assessing the technical and financial merits of the project, which is based on mining an 18 m thick disseminated layer (Q3 unit) together with an underlying 12 m thick massive Ti-magnetite layer (Q2 unit).
Metallurgy …
Metallurgical test work including heavy liquid separation, magnetic separation (both Low Intensity Magnetic Separation ("LIMS") and Davis Tube Tests), pre-reduction studies and smelting tests on the disseminated and massive ore types of the P-Q Zone were undertaken and provided important input parameters for the financial evaluation of the project:
· Heavy Liquid Separation ("HLS") was used to provide a proxy for the potential to use a Dense Media Separation ("DMS") plant as a pre-beneficiation step. Separation at a density of 3.6 t/m3 was shown to be optimal and HLS showed that DMS has a high potential to produce an acceptable grade at a fairly coarse top size.
· Scrubbing testwork to upgrade the weathered ore by removing the friable clay showed a noticeable reduction in undesirable contaminants. Increase in iron content was relatively small, and relatively high iron content went to the fines, thus it is unlikely the capex costs invested in a scrubbing plant would be economical
· Excellent liberation was confirmed by Scanning Electron Microscope ("SEM") analysis of the products after Davis Tube Tests. Decreasing the grind below 80% < 500 μm yielded no benefit and this topsize was selected for further work during the next phases of the study. A product grade of 55% Fe, 19.5% TiO2, 0.33% V2O5 was achieved at 500 μm
· The smelting tests showed that a high TiO₂ slag with grades in excess of 60% is possible
· The proposed process flow, chosen from several options, is a conventional circuit for magnetite recovery - this produced the highest grade product that ultimately yielded the most iron
· Significant scope to reduce the product grind size and obtain better grades shown - without significantly changing the project capital expenditure
Mining …
A mining study that includes a Whittle Pit optimisation and a preliminary production schedule was undertaken and the results factored into the financial model. Given the nature and geometry of the ore body, it is ideally suited to open-pit mining. The ore can be readily accessed from surface after minimal overburden (soil) stripping.
Three production schedules were generated from the Whittle Pit Inventory for production rates of 3.0 Mtpa, 5.0 Mtpa (Base Case) and 7.0 Mtpa Run-of-Mine, (RoM). In the three production schedules only the Upper Layers of the Q-Zone, Layers Q3 and Q2, were targeted to avoid mining the layers with a lower grade and which are also separated by waste partings. In the schedule the weathered ore from the Q3 and Q2 layers are mined first and thereafter the deeper un-weathered ore. Pre-stripping of waste is allowed for in the schedules in Year 1 prior to mining ore.
Infrastructure (Rail, Port, Electricity and Water) …
The project is located close to supportive bulk commodity infrastructure:
· Rail line 45 km from existing rail
· Port options in the form of Matola / Maputo and Richards Bay, both undergoing capacity expansion
· Coal deposits with thermal and coking coal, within a 100 km radius
· Electricity generation capacity in the form of the Medupi power station being added to the Kusile power station - both located 150 km from the project with existing and planned new transmission lines passing 20 km from the project area
· Sufficient water resources identified - The project area lies mainly within the Bakenburg Rural Water Scheme (RWS) where studies have shown available groundwater potential in excess of project requirements. A potential groundwater resource has also been identified within the project area. A longer term additional source of water that may be required if the project develops into downstream beneficiation operations is the Lebalelo Water Users Association dam scheme (comprising ~10 mining companies along the northern limb of the Bushveld Complex) into which Bushveld Minerals would need to invest into for water allocation
Market Analysis …
Ti-magnetite concentrate is a niche product with a narrower market than other conventional iron ore. Most of the steel mills processing Ti-magnetite are located in China where they have a long history of mining and processing vanadium-bearing Ti-magnetite. Processing Ti-magnetite requires plants that typically combine reduction and electric arc furnaces, usually requiring higher capex than conventional iron ore. However, this higher capex is typically offset by additional credits from vanadium and /or in some cases titanium. Moreover, the technology is well established and employed in a number of operations processing similar ore around the world, but mostly in Asia.
A comprehensive market study was undertaken to identify scope for supplying the Chinese market with Ti-magnetite concentrate. CRU Strategies identified market opportunities with existing steel mills in Asia (mainly China) with a long history of mining and processing Ti-magnetite ore, often at much lower grades than Bushveld Iron Ore project grades. This study identified opportunities for not only supply into China but also economic credits for titanium and vanadium, supported by the metallurgical test-work confirming the scope for producing a saleable vanadium and titanium slag
The study highlights among other things, that Bushveld Iron Ore project's Ti-magnetite concentrate carries one of the world's highest titanium grades for Ti-magnetites and identifies potential prices achievable for the iron ore together with titanium and vanadium credits at Chinese inland steel mills.
Finally, the study provided a basis for determining a realizable potential CIF price of Bushveld Iron Ore Project's concentrate product, which was calculated to be US$177 after including credits for titanium and vanadium credits.
Financial ...
The project was based on the assumption of producing a concentrate product. Detailed marketing studies, including field research with potential off-takers for the project, showed that economic credit for titanium and vanadium could be obtained.
The concentrate product route was determined by Bushveld Minerals' strategy to establish a low capex operation that can be brought into production quickly and to leverage the resulting cash flows to consider further downstream beneficiation to produce pig iron or intermediate Direct Reduced Iron ("DRI") products.
Economic evaluation of the project has shown the potential to establish an economically viable operation at the Bushveld Iron Ore project.
The economic indicators for the project are summarized below:
|
Base Case Scenario - 5 Mtpa Run-of-Mine |
||
|
Item |
Unit |
Value |
|
Total Mill Feed |
LOM Mt |
87.53 |
|
Run of Mine |
Mtpa |
5.0 |
|
Product (Concentrate) produced |
Mtpa |
2.20 |
|
Strip Ratio |
waste:ore |
1.36 |
|
Gross Revenue |
LOM US$'m real |
2 929 |
|
Royalty |
LOM US$'m real |
160 |
|
Net Revenue |
LOM US$'m real |
2 769 |
|
Operating Costs |
LOM US$'m real |
1 469 |
|
Capital Costs Initial Sustaining |
US$'m real US$'m p.a. |
125.8 2.5 |
|
Cash flow |
LOM US$'m real |
476 |
|
NPV @ 10% real @ 12.5% real IRR real |
US$'m US$'m % |
188.4 139.8 34.2% |
|
Payback (based on discounted cash flow) |
Yr |
2 years |
|
Life of Mine |
Yr |
18 |
The economics for the alternative production scenarios are shown below:
|
Scenario |
NPV @ 12.5% US$'m |
IRR % |
Capex Initial US$'m real |
Payback Period¹ |
Life of Mine |
|
Scenario 1: 5 Mtpa (Base case) |
139.8 |
34.2 |
125.8 |
2 years |
18 years |
|
Scenario 2: 3 Mtpa |
81.6 |
27.0 |
95.9 |
2 years 7 months |
30 years |
|
Scenario 3: 7 Mtpa |
179.1 |
39.0 |
153.4 |
1 years 9 months |
13 years |
A sensitivity analysis was carried out and shows that the NPV for the project remains positive when the Fe concentrate price, opex, logistics, discount rate and product grade is varied for the Base Case;
Conclusion …
The Scoping Study has allowed the Bushveld Iron Ore project to be evaluated as to its economic viability. It has further identified areas that should be addressed in a further phase of study. In view of the positive cash flows that can be generated at the different production rates it is recommended that a Pre-feasibility Study be undertaken to evaluate the project at a higher level of accuracy and to determine the full potential of the Mokopane Iron Ore Project.
WAY FORWARD
The financial evaluation has shown that the Bushveld Iron Ore Project Project of Bushveld Minerals has potential and should be investigated in more detail by conducting a Pre-Feasibility Study ("PFS"). The investigations required to advance the Scoping Study level of accuracy to that of a PFS will include the following:
§ Infill drilling in the initial area of mining to allow conversion of the Indicated Mineral Resources to the Measured Category and an update of the Mineral Resource estimate
§ Completion of the Geophysical Survey that was started during the Scoping Study
§ Survey of the project area to a 1m contour interval
§ Geotechnical investigation of the open pit slope angles
§ Mining Study to conduct a Pit Design and allow the Mineral Resources to be converted to Mineral Reserves
§ Detailed hydrogeological Investigation to determine the groundwater potential of a well field as an initial water supply
§ Metallurgical Test work for detailed process plant design including extractive and pyro-metallurgy
§ Process Plant Design
§ Design of a Tailings Facility and Slag Dumps
§ Environmental and Social Impact Studies
§ Financial Evaluation
The Company intends to commence the pre-feasibility study in May 2013 to complete by Q1 2014.
Simultaneously the Company will explore the several upside opportunities for the project identified above, which include:
e) Scale Up
§ Total mined 87.53 Mt resource represents only 12% of P-Q Zone resource
§ Ramp-up of project mining volumes - subject to rail infrastructure capacity study being undertaken can be undertaken along identified strike, without increasing the stripping ratios:
§ Financials for a 7 Mtpa ROM scenario:
- Low capex at US$153 million
- NPV of US$179 million at 12.5% discount rate
- 39.0% IRR (real)
- Payback at 1 year 9 months from start of mining
f) The MML Resource opportunity
§ Simultaneous development of the vanadium-rich Main Magnetite Layer ("MML") deposit comprising 52 Mt at 44.7% Fe, 9.7% TiO2 and 1.48% V2O5, which is not included in the current scoping study
g) Downstream beneficiation opportunity
§ Downstream beneficiation to a pig iron product, high TiO2 slag and vanadium slag
- Utilising the abundant raw materials, particularly coal, within close proximity of the project
- Optimising rail logistics costs by transporting a higher value product
- Implementing a modular and scalable low capex option
h) Logistics costs optimisation
§ Potential upside from optimising logistics cost significant
- The project is sensitive to logistics costs, which at US$75/ton account for >50% of the delivered cost of the project. The infrastructure costs used, based on current realizable rates, are significantly higher than CRU logistics benchmark costs. A 20% reduction in the logistics would unlock as much as US$50m incremental NPV value
The compilation of the scoping study had contributions from several experts in their fields and was compiled and reviewed by the persons shown below:
|
Compiled by: |
|
Peer Reviewed by: |
|
HG (Wally) Waldeck, Pr Eng Independent Mining Consultant |
|
Mr Martiens Mulder Technical and Management Consultant |
|
Email: wallywaldeck@gmail.com |
||
|
Contributing Authors: |
||
|
· Wally Waldeck, Pr Eng; · Prof. Morris Viljoen, MSc, PhD (Wits), FSEG, FGSSA,FSAIMM, FRSSA, Pr. Sc. Nat; · Prof. Richard Viljoen, MSc, PhD (Wits), FSEG, FGSSA, FSAIMM, FRSSA, Pr. Sc. Nat; · Dr. Luke Longridge, BSc. Hon. Geol., PhD (Wits); · Mineralogical study by Microsearch CC · Geological report review, Resource Estimation and Competent Person's Report by the MSA Group · Metallurgy and Processing report by Mr. Jan Rabe (PESCO), BSc. Hon. Metallurgy · Metallurgical testwork undertaken by SGS SA and MINTEK · Infrastructure and Logistics report by Mott Macdonald Group · Power Infrastructure report by First Tech International Limited · Hydrology / Geohydrology report by SRK Consulting; · Financial Evaluation by Hindsight Financial and Commercial Solutions · Market Analysis by CRU Strategies · Whittle pit optimization studies by Deswik Mining Consultants
|
||
Enquiries: info@bushveldminerals.com
|
Bushveld Minerals Fortune Mojapelo |
+27 (0) 11 268 6555 |
|
Fox Davies Jonathan Evans |
+44 (0) 20 3463 5000 |
|
Tavistock Communications Jos Simson/ Jessica Fontaine |
+44 (0) 20 7920 3150 |
|
Tielle Communications Stéphanie Leclercq |
+27 (0) 83 307 7587 |
This information is provided by RNS
The company news service from the London Stock Exchange
ENDS -
Notes to the editor
Bushveld Minerals Limited is a mineral development company focused on the Bushveld Iron Ore Project and the Mokopane Tin Project, both located on the northern limb of the Bushveld Complex, South Africa.
The Company was admitted to the Alternative Investment Market of the LSE in March 2012.
The Comprehensive Scoping Study report is available on Bushveld Minerals' website (www.bushveldminerals.com)
-
This information is provided by RNS
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