Information  X 
Enter a valid email address

Cradle Arc PLC (CRA)

  Print   

Thursday 31 May, 2018

Cradle Arc PLC

Maiden Ore Reserve for Mowana Supports DMS Upgrade

RNS Number : 7404P
Cradle Arc PLC
31 May 2018
 

Cradle Arc Plc / EPIC: CRA.L / Market: AIM / Sector: Mining

31 May 2018

Cradle Arc plc

("Cradle Arc", the "Company" or, together with its subsidiaries, the "Group")

 

Maiden Ore Reserve for Mowana Supports DMS Upgrade Plan Economics

 

Cradle Arc (AIM: CRA), the African focused base and precious metals exploration and production company, is pleased to announce a maiden JORC (2012) ore reserve (the "Ore Reserve Estimate") for its 60% owned open pit Mowana copper mine located in northeast Botswana ("Mowana").

 

On 3 April 2018, the Company announced, inter alia, its maiden mineral resource estimate (the "Mineral Resource Estimate") for Mowana, completed by Wardell Armstrong International Ltd. ("WAI"), and that it had commissioned WAI to produce a maiden JORC (2012) Ore Reserve, drawing together the technical data from the various positive work streams completed in respect of the planned implementation of the Dense Media Separation ("DMS") pre-processing technology.  The Mineral Resource Estimate previously announced has now been further updated following WAI's work on the Ore Reserve Estimate, with a portion of the Inferred Resources being transferred into the higher confidence Indicated Resource category.

 

Highlights:

 

·     Maiden open pit Ore Reserve Estimate (Proved & Probable) of 31.8Mt @ 1.17% Cu for 370,800 tonnes contained copper metal, based on the DMS mine plan

·     Mineral Resource Estimate updated, with Measured and Indicated Resources now 55.0Mt at 1.17% Cu for 640,000 tonnes of contained copper, representing an increase of 37%

·     Life of mine ("LOM") at Mowana extended by an additional 3 years, to 14 years, and now underpinned by reserves

·     Inferred Resource material of 3.7Mt @ 0.93% Cu for 34,500 tonnes contained copper is currently being treated as waste in the LOM schedule and therefore represents further potential upside if resource confidence is ultimately improved into the Measured & Indicated categories

·     Average LOM production of approximately 21,000tpa Cu, peaking at 27,000tpa Cu in year 3

·     Average LOM cash costs (C1) of US$4,099 per tonne Cu (US$1.86 per pound) and all-in sustaining costs of US$5,038 per tonne Cu (US$2.29 per pound) *

·     Ore Reserve Estimate gives Mowana an after tax net present value ("NPV") of US$272.8 million (quoted in real terms using an 8% discount rate and a copper price of US$3.00/lb Cu)  

·     Mining operations ramping up, with two mining units operating full time in the open pit, accessing ores below the 960 level with transitional ores exhibiting process recoveries in-line with the mining reserve plan

 

*  Cash operating costs (C1) per pound of payable copper includes cash operating costs, including treatment and refining charges ("TC/RC"), freight and distribution costs net of by-product credits. All-In Sustaining Costs (AISC) of payable copper include cash operating costs plus royalties and agency fees, expenditures on rehabilitation, capitalised stripping costs, exploration and geology costs, corporate costs and sustaining capital expenditures. Some stripping in years 6 to 9 has been categorised as Sustaining Capital Stripping as the northern pit is opened up via pushbacks.

 

Kevin van Wouw, Cradle Arc's CEO, commented:

"The successful completion of the Ore Reserve Estimate and upgrade of the Mineral Resource Estimate underpins the significant scale and long term commercial value potential of Mowana.  WAI's independent assessment further supports our recently implemented accelerated development plan announced in April 2018, which we anticipate enabling us to reach steady state production and positive cash flows more rapidly, in addition to enabling management to make the final decision regarding the implementation of the DMS upgrades as we seek to ramp-up production and ultimately strengthen the value fundamentals of Mowana.

 

"Mining operations at Mowana have been ramping-up over the last six weeks and we currently have two mining units operating full time in the open pit.  These works will support a doubling of tonnage to the existing processing plant and the planned integration of DMS will then enable the plant to produce an average of approximately 21,000 tonnes of copper per annum, and up to 27,000 tonnes of copper in year 3, over a newly extended 14-year life of mine."

 

Operational Update

 

Following the commencement of the Company's accelerated development plan at Mowana in April 2018, mining operations have been ramping-up and two mining units are currently operating full time in the open pit, allowing access to ores below the 960 level.  In mid-May 2018, the first 40,000 tonne blast of transitional ore was produced in line with the mining reserve plan.

 

Following commencement of processing of these transitional ores, the Company is pleased to confirm that the recoveries are within the range expected.  Whilst it is too early to perform a more detailed reconciliation to the mining reserve and detailed mining schedules, the Company intends to carry out such reconciliations next month and thereafter provide a more detailed report in an operational update for the quarter to 30 June 2018.  This will in turn provide an early basis for production guidance for the balance of the year.

 

Revised Mineral Resource Estimate

 

On 3 April 2018, the Company announced a maiden JORC (2012) Mineral Resource Estimate for Mowana. The Mineral Resource Estimate included a Measured and Indicated resource of 40.0 Mt at 1.17% Cu for 466,000 tonnes of contained copper and an Inferred resource of 35.0 Mt at 1.12% for 395,000 tonnes of contained copper.

 

Further to its additional work on the Ore Reserve Estimate, WAI has updated the previously announced Mineral Resource Estimate, with a portion of the Inferred resources being transferred into the higher confidence Indicated resource category.  Accordingly, the revised JORC (2012) Mineral Resource Estimate (set out in Table 1 below) now shows a Measured and Indicated resource of 55.0 Mt at 1.17% Cu for 640,000 tonnes of contained copper, representing an increase of 37%, and an Inferred resource of 20.0 Mt at 1.08% for 220,000 tonnes of contained copper.

 

Table 1: Mowana Copper Mine - Revised Mineral Resource Estimate

 

Mowana Copper Mine Mineral Resource Estimate 7


Cut-Off4

Measured

Indicated

Measured + Indicated

Inferred

(% Cu)

Tonnes

Cu (%)8

Cu Metal6

Tonnes

Cu (%)8

Cu Metal6

Tonnes

Cu (%)8

Cu Metal6

Tonnes

Cu (%)8

Cu Metal6


(kt)

(kt)

(kt)

(kt)

(kt)

(kt)

(kt)

(kt)

Oxide

0.72

572

1.58

9

980

1.45

14

1,552

1.48

23

22

1.51

0.3

Transition

0.37

1,262

1.31

17

1,884

1.17

22

3,146

1.24

39

217

1.09

2

Supergene

0.34

1,553

1.41

22

2,022

1.33

27

3,575

1.37

49

395

1.16

5

Fresh

0.29

11,689

1.3

151

34,760

1.09

378

46,449

1.14

529

19,673

1.08

213

Total


15,076

1.32

199

39,646

1.11

441

54,722

1.17

640

20,307

1.08

220

Notes:

1.        Mineral Resources are reported in accordance with the guidelines of the JORC Code (2012).

2.        Mineral Resources were constrained by an optimised pit shell based on a copper price of US$3.20/lb.

3.        Mineral Resources have been based on the most current topographic survey as at 26 February 2018.

4.        Cut-off grades are breakeven cut-off grades based on open pit optimisation parameters.

5.        Mineral Resources are not Ore Reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study.

6.        Cu Metal represents estimated contained metal in the ground and has not been adjusted for metallurgical recovery or any other factor.

7.        Numbers presented in the table may not cast due to rounding differences.

8.        Average Cu % shown rather than total.

 

 

Mowana Copper Mine - maiden JORC (2012) Ore Reserve Estimate

 

WAI utilised its updated Mineral Resource Estimate as the basis for its work on the preparation of Mowana's maiden Ore Reserve Estimate.  Ore Reserves are those parts of a Mineral Resource which, after the application of all mining factors, are the basis of an economically viable project after taking account of all relevant processing, metallurgical, economic, marketing, legal, environment, socio-economic and government factors.

 

The economic assessment in WAI's Ore Reserve work was made on the basis of the planned introduction of a DMS plant upgrade, with construction work commencing later this year and with a construction timetable of approximately 11 months.  The DMS upgrades and associated ancillary upgrades are expected to increase the nameplate copper in concentrate production, from the existing circa 12,000tpa Cu to circa 21,000tpa Cu.

 

Accordingly, WAI has provided the Company with its independent JORC (2012) Ore Reserve Estimate (summarised in Table 2 below) for Mowana, comprising 12.4Mt @ 1.27% Cu for 157,700 tonnes contained copper metal classified as Proved reserves and 19.4Mt @ 1.10% Cu for 213,100 tonnes contained copper metal classified as Probable reserves. 

 

Table 2:  Mowana Copper Mine - Maiden Ore Reserve Estimate

 

Mowana Ore Reserve Estimate 9

Prepared in accordance with the Guidelines of the JORC Code (2012)

Category

Ore (kt)

Copper Grade

(% Cu)

Contained Copper Metal

(kt Cu)

Ore Reserves

Proved

12,435

1.27

157.7

Probable

19,374

1.10

213.1

Total

31,809

1.17

370.8

Mineral Resources not forming part of the Ore Reserve

Inferred

3,692

0.93

34.5

Notes:

1.        The Ore Reserve Estimate has been compiled under the supervision of Mr. Mark Mounde, C. Eng., who is a Technical Director at WAI and is a Member of the Institute of Materials, Minerals and Mining.  Mr. Mounde has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined under the Guidelines of the JORC Code (2012). 

2.        Tonnages (t) are metric tonnes.

3.        Ore Reserves are reported with mining modifying factors of mining dilution at 10% and mining recovery of 95%. 

4.        A copper price of US$6,063/t (US$2.75/lb) was used in the estimation.

5.        Ore Reserves have been estimated under the 2012 Edition of the JORC Code.

6.        The Life of Mine Schedule includes 3.69Mt of Inferred Mineral Resources at a grade of 0.93% Cu which has not been classified as an Ore Reserve and is included as waste in the mining schedule.

7.        As of the date of WAI's report preparation, no environmental, permitting, legal, title, taxation, socio-political, marketing or any other relevant issues were known that could affect the Ore Reserve Estimation.

8.        Based on the most current topographic survey as at 26 February 2018.

9.        Numbers presented in the table may not cast due to rounding.

 

Detailed mining schedules for the current estimated LOM have been prepared (Table 3) to provide a LOM plan which includes tonnes of ore and waste moved, grade of mined material and expected recoveries.  This has then enabled the Company to prepare a realistic and achievable programme for the incorporation of the DMS upgrades, with no significant interruption to mining operations. 

 

Table 3: Mowana Copper Mine - LOM Schedule

 

Mowana Life of Mine Schedule

Year

RoM Ore

(Mt)

RoM Grade

(% Cu)

Waste

(Mt)

Strip Ratio

(tw:to)

Stockpile Balance (Mt)

Plant Feed

(Mt Ore)

Feed Grade

(% Cu)

1

1.3

1.8

9.6

7.2

 -  

1.3

1.8

2

2.1

1.2

24.9

11.6

 -  

2.1

1.2

3

3.0

1.5

23.5

7.8

0.6

2.4

1.4

4

2.0

1.5

24.5

12.5

0.2

2.4

1.5

5

3.0

1.3

25.5

8.6

0.7

2.4

1.3

6

1.9

1.0

57.6

30.2

0.2

2.4

1.1

7

2.2

1.0

57.5

26.7

 -  

2.4

1.0

8

2.5

1.1

58.4

23.2

0.1

2.4

1.1

9

2.7

1.0

51.7

19.3

0.4

2.4

1.0

10

2.6

1.3

41.2

15.8

0.6

2.4

1.2

11

2.9

1.0

13.6

4.7

1.1

2.4

1.1

12

3.5

1.0

12.9

3.7

2.2

2.4

1.0

13

2.1

1.0

 10.8

5.1

2.0

2.4

1.0

14

-

-

-

-

-

2.0

1.0

Total

31.8

1.2

412.0

12.9

-

31.8

1.2 

 

Inferred Resource

 

The LOM schedule also includes 3.69Mt of Inferred Mineral Resources at a grade of 0.93% Cu which, due to its classification, cannot be included as an Ore Reserve and, in-line with JORC (2012), is therefore included as waste in the mining schedule set out in Table 3.  Accordingly, this Inferred Resource material, could potentially provide a further opportunity to increase mineable ores by improving the confidence in this material through additional drilling. If, following such further work, this Inferred resource material is able to be moved into either the Measured or the Indicated resource categories, this tonnage will have the benefit of both increasing ores, reducing waste and, should the full 3.69Mt be reclassified, add up to two years to the LOM.

 

DMS Plant upgrade

 

The parameters included in WAI's work with regard to the planned DMS upgrades, are based on the purchase, installation and commissioning of two, 150tph, DMS modular units and associated ancillary circuits and equipment.  

 

The scope of the DMS upgrade project will also include a review of the Environmental Social Impact Assessment ("ESIA") and the mine's Environmental Management Plan.  Upgrades will be required to the tailings underflow pumping and remedial works undertaken within the tailings storage facility ("TSF") to ensure efficient and effective operations, which will include the additional drilling of two 10 inch water supply boreholes and the inspection and refurbishment of the current operational borehole network.  

 

Certain plant units will need to be upgraded such that they are aligned to the requirements of the DMS plant and able to cater for the additional tonnages required on the dry section as well as the holding capacity required for concentrate thickening and tailings disposal.  Controls will also be enhanced for maximum efficiencies throughout the plant.

 

The total costs of the DMS plant and associated upgrades, which have been included in WAI's model, are expected to be approximately US$20.0 million, as set out in Table 4 below.

 

Table 4:  DMS Upgrade Costings  

 

DMS upgrade costings

US$ M

SGS TurnKey Solution Contract

11.4

SGS Contract Variation Cost

2.3

Tailings Handling

0.1

Site Remedial Action for Upgrade

1.7

Wellfield Upgrade

2.5

Total Direct Costs

18.0



Environmental Consultant EIA/EMP Update Proposed Cost

0.3

Owner's Fixed Costs

0.8

Total Indirect Costs

1.1



Contingency

0.9



TOTAL PROJECT COSTS

20.0

 

Summary of DMS and flotation plant inputs

 

Further to the Company's announcement of 31 January 2018, significant metallurgical work has been conducted to understand the recoveries of transitional and supergene ores on a bench by bench basis.  The inputs into WAI's Ore Reserve Model, which have stemmed from both this new analysis and the historical work completed, are summarised in Table 5 below.

 

Table 5: Summary of DMS & Flotation Inputs into WAI's Ore Reserve Model

 

Item

Parameter

Ore Type



Transition

Mixed

Supergene

Sulphide

1

DMS Recovery

60.0%

82.5%

85.0%

89.0%

2

DMS Yield

30.0%

37.5%

40.0%

40.0%

3

Flotation Recovery

55.0%

79.0%

84.0%

93.0%

 

Financial Parameters

 

Set out in Tables 6 to 12 below are the various key parameters in WAI's model, which it used to prepare the Ore Reserve Estimate and NPV valuation for the Mowana Copper Mine, and a summary of the sensitised outputs from WAI's model.

 

Table 6: Mining Cost Breakdown

 

LOM Project Mining Operating Costs (LOM Real Values)

Description

US$ M

Waste Mined

411.7

Ore Mined

31.8


Labour

63.8

Equipment Owning

136.0

Equipment Operation

93.3

Fuel

155.6

Miscellaneous

5.3

Drill & Blast

212.8

Margin

16.2

Subtotal

683.1



Total US$ per ROM tonne

21.48

US$ per total tonne of rock mined

1.54

 

 

Table 7: Processing Costs Breakdown

 

Project's Processing Costs (LOM, Real Values)

 Item

US$/t ROM

US$ M

Plant Costs

6.24

198.2

Fixed

1.22

38.9

Variable

4.39

139.7

Sustaining Capex

0.45

 14.4

Tailings

 0.17

 5.5

 

 

Table 8: Processing Inputs and Concentrate Production

 

Processing Inputs and Concentrate Production Summary

Description

CPR*

DMS

Ore to Pre-Concentration


               31.8Mt

Cu to Pre-Concentration


                      370kt

Ore Grade to Pre-Concentration


1.17%

Ore to Processing (Flotation Feed)

           12.2Mt

               14.3Mt

Cu to Processing

                   143.6kt

                      326.3kt

Ore Grade to Processing

1.17%

2.28%

Flotation Recovery

91%

90.62%

Total Recovery

91%

79.75%

Recovered Cu

                   130.6kt

                      295.7kt

* Base case non-DMS figures contained in the Competent Person's Report published in the Company's AIM Admission Document

 

 

Table 9: Project's G&A Costs

 

Project's G & A Costs

Description

US$ M

Non Production HO Costs


                         94.5

Owner Management Fees*


29.5

General Management


                         42.0

Project Management


                            4.2

Closure & Rehabilitation Costs

                            7.9

Insurance Costs


                         10.8

* Owner Management Fees are charged to Mowana by Cradle Arc and not subject of the 60% attribution.

 

Table 10: Project's Realisation Costs  

 

Project's Realisation Costs

Description


Concentrate Shipping Costs (US$/tonne)

118.93

Concentrate Sales Commission

2.50%

Treatment & Refining Loss

3.50%

Concentrate Treatment Cost (US$/tonne)

               110.00

Concentrate Refining Cost (US$/Lb Cu)

                     0.11

 

 

Table 11:  Average LOM Production and Costs

 

Concentrate Sold (tonnes)

            85,530

Cu Sold (tonnes)

                21,228

Revenue / Tonne Concentrate (US$)

              1,642

Revenue / Tonne Cu (US$)

              6,614

Cost / Tonne Cu (C1) (US$)

4,099

Cost / Lb Cu (C1) (US$)

               1.86

Cost / Tonne Concentrate (US$) - All In Sustaining Cost

             1,260

Cost / Tonne Cu (US$) - All In Sustaining Cost

             5,038

Cost / Lb Cu (US$) - All In Sustaining Cost

               2.29

 

 

Table 12:  After tax NPV (US$M) Sensitivity Analysis (Real & Unlevered)*

 

Cu Price / lb

6%

8%

10%

12%

2.70

191.1

170.9

154.1

140.2

2.80

229.3

204.8

184.6

167.7

2.90

267.4

238.8

215.1

195.1

3.00

305.5

272.8

245.5

222.6

3.10

343.6

306.7

276.0

250.1

3.20

380.7

339.7

305.6

276.9

3.30

418.2

373.2

335.6

303.9

3.40

455.7

406.6

365.6

331.0

3.50

489.6

436.7

392.5

355.3

* NPVs are quoted before debt servicing and at a flat forward US$3.00/lb Cu price, quoted real. Through its holding in the project, 60% of the NPV value would be attributable to Cradle Arc.

 

Review of Information

 

Kevin van Wouw, the Company's CEO and a Fellow of the South African Institute of Mining and Metallurgy, has reviewed and approved the technical information contained within this announcement.  Mr van Wouw has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking and meets the criteria for a qualified person under both the requirements of the JORC Code and the AIM guidance note for mining and oil & gas companies.  Mr van Wouw has reviewed this announcement and consents to the inclusion in this announcement of the matters based on his information in the form and context in which they appear.

 

Glossary of technical terms

 

Cu

copper;

DMS

dense media separation;

Indicated Resource

that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered;

Inferred Resource

that part of a Mineral Resource for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes;

 

JORC

the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia;

 

JORC (2012)

the 2012 edition of the JORC code;

kt

thousands of tonnes;

ktpa

thousand tonnes per annum;

m

metre;

M

million

Measured Resource

that part of a Mineral Resource for which quantity, grade (or quality), densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered;

Mineral Resource

a concentration or occurrence of material of economic interest in or on the earth's crust in such form and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity, and other geological characteristics of a Mineral Resource are known, estimated from specific geological evidence and knowledge, or interpreted from a well-constrained and portrayed geological model;

 

Modifying Factors

considerations used to convert mineral resources to ore reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors;

ore

the 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 or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified;

 

ppm

parts per million;

Reserve

the 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. Ore Reserves are sub-divided in order of increasing confidence into Probable Reserves and Proved Reserves. A Probable Reserve has a lower level of confidence than a Proved Reserve but is of sufficient quality to serve as the basis for a decision on the development of the deposit;

 

ROM

run-of-mine; and

supergene

processes or enrichment of ore that occur relatively near the surface.

 

**ENDS**

 

For further information on the Company, please visit www.cradlearc.com or contact:

 

Cradle Arc plc

Kevin van Wouw

Mark Jones

 

Tel: +44 (0)20 7907 9310

Strand Hanson Limited

Angela Hallett

Matthew Chandler

James Dance

 

Tel: +44 (0) 20 7637 5216

Tamesis Partners LLP

Richard Greenfield

 

Tel: +44 (0)20 3882 2868

St Brides Partners Limited

Charlotte Page

Susie Geliher

Tel: +44 (0)20 7236 1177

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
MSCLLFEEELIIVIT

a d v e r t i s e m e n t