Completion of Pickstone-Peerless Definitive Fea...
African Consolidated Resources plc / Ticker: AFCR / Index: AIM / Sector: Mining
15 July 2013
African Consolidated Resources plc ("AFCR" or "the Company")
Completion of Pickstone-Peerless Definitive Feasibility Study and Updated Resource Estimate
African Consolidated Resources PLC, the AIM listed resources and development company, is pleased to announce the successful completion of its Definitive Feasibility Study ("DFS") on the initial phase of development at the 3.2 million ounce Pickstone Peerless Gold Project in Zimbabwe ("Pickstone-Peerless"). Phase 1 development, focussing on the oxide cap, being a subset of the entire Pickstone-Peerless Mine, is being accelerated in order to generate near term cash flow with low capital expenditure intensity. In addition, the Company announces an updated JORC compliant mineral Resource estimate and updated capital requirements for Pickstone-Peerless.
A supporting presentation shall shortly be available for download on the Company's website at www.afcrplc.com.
Key Highlights:
A maiden mineral Reserve estimate of 136,000 ounces @ 2.06 g/t based on a gold price of USD 1,500/oz and a cut-off grade of 0.4g/t. This maiden Reserve represents only 17% of the mining inventory reported in the Preliminary Economic Assessment ("PEA") in December 2012.
EBITDA after tax of USD 26M after 3 years of operation and of USD 54.8M after 6 years of operation and a project valuation of USD 17.7M on a discount rate of 10%. These are based on an average gold price of USD 1,250 in 2014, USD 1,350 in 2015 and USD 1,500 per ounce thereafter.
2013 Competent Persons Report ("CPR") confirms the previous estimate with minor modifications, being a gold resource of 40 million tonnes grading at 2.5 g/t and containing 3.2 million ounces of gold.
Updated net funding requirement of USD 15.7M reflects the introduction of a four month pre-production ore stockpile in order to improve the grade of ore reporting to the processing plant. Sources of funding to minimise recourse to shareholders are in advanced stages.
AFCR's Chief Executive, Craig Hutton, commented: "The completion of this DFS on time and on budget represents a significant achievement in the transformation of AFCR from an exploration company to a mining company.
"I should like to emphasise that the DFS relates to the oxide cap only, just one component of the much larger Pickstone-Peerless Gold project, and will support the funding of the much larger and higher grade sulphide ore (Phase 2) outlined in the PEA. Restricting Phase 1 to the oxide cap reduces the CAPEX that would otherwise be necessary and enables us to use plant facilities already in place. We have increased the funding requirement for Phase 1 principally to stockpile ore for four months to maximise early grade. Scheduling for implementation of Phase 1 remains on track for first production of gold in June 2014.
"Meanwhile, work on the Pre-feasibility study for Phase 2 is in progress. This study is expected to be complete in September/October 2013 and as a result of this we are targeting a Reserve of 1,000,000 ounces at that time."
Definitive Feasibility Study
Considering the state of current market conditions and the requirement to raise funds to achieve production, the Company has prioritised cash generation from the Pickstone/Peerless gold mine. Consequently, the focus of the DFS has been to keep the capital expenditure intensity to a minimum whilst maximising the near term cash flow. To this end, it was decided that only the oxide cap would be considered in Phase 1 at a production rate of 20 ktpm, as part of the two-phased strategy to exploit the previously reported open pit mineral inventory of 813 koz (at 5.1g/t) - Option 3 reported in the PEA as announced on 4 December 2012.
The DFS therefore represents a subset of the larger project and allows the Company to declare a maiden Reserve of 136,000 ounces at 2.06 g/t based on a gold price of USD 1500/oz and a cut off grade of 0.4 g/t and to generate in excess of USD 50M cash over a 5 year period on an EBITDA less tax basis despite the lower grades that relate to the oxide cap and the higher concomitant unit costs of production. This strategy provides the Company a way to generate organic cash flows to reinvest in the development of the Phase 2 (50ktpm) operation. This strategy also benefits shareholders as the Company will be able to redeem previously capitalised exploration expenditure as well as financing further capital expenditures thereby minimising the burden on existing shareholders and limiting the dilutionary effect of new capital raised to bring these assets into production.
The Company has been able to maximise early projected cash flows by decoupling the open pit mining from the plant feed by building stockpiles in advance of milling. This strategy enables the grade reporting to the plant to be managed thereby decoupling the in situ average grade from the average plant feed grade that will contribute to the funding and development of Phase 2 expansion to 50 ktpm. The projected effect of this in the first five years of the mine is significant - engineering an estimated average 3.04 g/t feed grade to the plant from an estimated 2.10 g/t in situ grade. The reduction in capital intensity has been largely due to utilising existing infrastructure and focusing on the oxides portion so as not to incur additional capital in the plant to treat the sulphides. Additional capital would have been required for floatation and increased leaching facilities and which has been avoided.
Phase 2 is now being considered at a Pre-feasibility level of study, and it is the Company's intention to have this study completed in September/October 2013 together with a conceptual study of underground mining which would represent Phase 3. The significance of the expanded Phase 2 operation is that the higher grade sulphides can be liberated, whilst the increased rate of production will realise economies of scale. The combined effect of these two considerations will reduce both the USD/oz. and the USD/tonne cost of production thus significantly improving the project margin.
Basil Read Matomo ("BRM") a division of Basil Read, a South African construction, engineering and mining development company, was appointed as the lead contractor for the DFS and will remain for the Prefeasibility Study for Phase 2. PDNA Minxcon, a South African based minerals and mining consultancy company, was retained to undertake the mine design, mine scheduling and financial valuation of the DFS.
Key DFS results:
| Maiden Reserves | Tonnes | Grade | Content |
| kt | g/t | Oz | |
| Proved | 221.55 | 2.68 | 19,115 |
| Probable | 1,830.26 | 1.99 | 116,937 |
| Total | 2,015.80 | 2.06 | 136,052 |
| Tonnes Produced | Unit | Project |
| ROM Head grade | g/t | 2.10 |
| Tonnes to mill from RoM stockpiles | tonnes | 1,240,015 |
| Mill Head grade from RoM stockpiles | g/t | 3.04 |
| Recovered grade | ||
| Recovered grade | g/t | 2.74 |
| Overall Recovery Percentage | % | 90% |
| Metal recovered | ||
| Metal | Oz | 109,248 |
| USD/Gold oz. | USD/Milled Tonne | |
| Metal Recovered | ||
| Gold (oz) | 82,548 | 82,548 |
| Gravity Gold (oz) | 26,700 | 26,700 |
| Net Turnover | 1,388 | 122 |
| Mine Cost | 340 | 30 |
| Plant Costs | 402 | 35 |
| Total Cash Operating Costs | 742 | 65 |
| Royalties | 97 | 9 |
| Tax | 47 | 4 |
| Total Cash Cost including Tax | 886 | 78 |
| EBITDA | 549 | 48 |
| Capex | 230 | 20 |
| Notional Cost | 1,069 | 94 |
| EBITDA Margin | 40% | 40% |
| YEAR | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||
| Units | LOM | 1 | 2 | 3 | 4 | 5 | 6 | |
| Metal Recovered | 1 | |||||||
| Gold | oz | 82,548 | 1,759 | 18,403 | 18,422 | 18,162 | 16,384 | 9,418 |
| Gravity Gold | oz | 26,700 | 569 | 5,953 | 5,958 | 5,875 | 5,300 | 3,046 |
| Total Gold Recovered | oz | 109,248 | 2,328 | 24,355 | 24,380 | 24,037 | 21,684 | 12,464 |
| Revenue | USDm | 151.7 | 2.8 | 31.2 | 34.7 | 34.3 | 30.9 | 17.8 |
| Mining Cost | USDm | (37.1) | (0.6) | (10.1) | (9.3) | (9.6) | (7.5) | 0.0 |
| Plant Costs | USDm | (43.9) | (0.7) | (8.6) | (8.6) | (8.6) | (8.6) | (8.6) |
| Royalties | USDm | (10.6) | (0.2) | (2.2) | (2.4) | (2.4) | (2.2) | (1.2) |
| Total Production Cost | USDm | (91.6) | (1.5) | (20.9) | (20.4) | (20.7) | (18.3) | (9.9) |
| Total Capex | USDm | (26.2) | (21.1) | (0.7) | (1.5) | (1.2) | (1.5) | (0.3) |
| Tax | USDm | (5.2) | 0.0 | 0.0 | 0.0 | (0.5) | (2.8) | (1.9) |
| Working Capital Changes | USDm | 0.0 | (0.1) | 0.1 | (0.4) | 0.6 | (0.6) | 0.5 |
| Annual Free Cash Flow | USDm | 28.6 | (20.0) | 9.8 | 12.4 | 12.5 | 7.7 | 6.2 |
| Cumulative Cash Flow | USDm | 0.0 | (20.0) | (10.2) | 2.2 | 14.7 | 22.4 | 28.6 |
| EBITDA | USD '000 | 60,022 | 1,249 | 10,346 | 14,379 | 13,578 | 12,587 | 7,884 |
| Cumulative EBITDA | USD'000 | 1,249 | 11,595 | 25,974 | 39,552 | 52,138 | 60,022 | |
| Tax | USD '000 | (5,186) | 0 | 0 | 0 | (506) | (2,774) | (1,906) |
| EBITDA less Tax | USD '000 | 54,836 | 1,249 | 10,346 | 14,379 | 13,072 | 9,813 | 5,978 |
Project Valuation Summary
| Real Discount Rate | Unit | Project |
| NPV @ 0.00% | USD million | 28.6 |
| NPV @ 5.00% | USD million | 22.6 |
| NPV @ 10.00% | USD million | 17.7 |
| NPV @ 15.00% | USD million | 13.6 |
| NPV @ 20.00% | USD million | 10.2 |
| IRR | % | 43% |
| NCE Margin | % | 27% |
| Payback | Months | 34.5 |
| Cash Generated (EBITDA - Tax) | USD million | 54.8 |
| Capital Redeemed | USD million | 26.2 |
| Item | Unit | Project DFS Duration |
| Waste Tonnes Mined (Undiluted) | t | 4,173,016 |
| Ore Tonnes Mined (Undiluted) | t | 2,455,581 |
| Stripping Ratio | 1.71 | |
| Total Tonnes Mined (Undiluted) | t | 6,618,597 |
| Grade Mined (Diluted) | g/t | 1.92 |
| Diluted Ounces Available on Stockpile | Oz | 157,103 |
| Tonnes to Plant (Milled) | t | 1,240,015 |
| Mill Head Grade | g/t | 3.04 |
| Kilograms to Plant | kg | 3,775 |
| Recovered grade | g/t | 2.74 |
| Overall Recovery | % | 90% |
| Ounces Recovered | oz | 109,248 |
| Revenue | USDm | 151.7 |
| Capital Expenditure Until June 2014 | USDm | 21.1 |
| Peak Funding Requirement* | USDm | 20.2 |
| Peak Funding Year | Year | 2014 |
| Peak Cash Flow Year | Year | 2017 |
| Peak Cash Flow (2017) | USDm | 12.5 |
| Steady State Cash Flow per Month | USDm | 0.85 |
| Breakeven Milled Grade | g/t | 1.84 |
| Breakeven Gold Price | USD/oz. | 839 |
* The Peak Funding Requirement is the maximum cumulative cash flow needed for the project in year 2014
Note: Capital expenditure until June 2014 is detailed in the table under 'Capital Requirements' below and inclusive of working capital and mining site establishment up to June 2014.
Updated JORC Resource estimate
The JORC compliant mineral Resource estimate update (30 June 2013), undertaken by ExplorMine Consultants, in substance confirms the previous Resource estimate as announced on 13 September 2012. The updated Resource estimate reflects 39.50 Mt of ore at a grade of 2.50 g/t containing 3,200 koz of gold in situ. This is categorised as follows: Measured 1.90 Mt, 1.90 g/t, 120 koz; Indicated 17.20 Mt, 2.40 g/t, 1,300 koz; and Inferred Resource 20.40 Mt, 2.70 g/t, 1,800 koz. (Rounding has been applied)
The cut off applied was as follows: A 0.5 and 0.6 Au g/t cut-off has been applied for near surface (less than 250m below surface) material at Pickstone and Peerless respectively, and a 1.5 g/t cut-off has been applied for material deeper than 250m below surface.
| Pickstone and Peerless Mineral Resource Tabulation - June 2013 at a cut-off of 1.5g/t for Underground and 0.5-0.6 g/t for Open pit (rounding has been applied) | |||||
| Mineral Resource category | Reef Type | Tonnes (Million) | Grade AU (g/t) | AU (kgs) | Au (oz) |
| Measured | Oxide and Fresh | 1.91 | 1.91 | 3,642 | 117,086 |
| Indicated | Oxide and Fresh | 17.20 | 2.35 | 40,430 | 1,299,857 |
| Total - Measure and Indicated | Oxide and Fresh | 19.11 | 2.31 | 44,072 | 1,416,942 |
| Inferred | Oxide and Fresh | 20.42 | 2.70 | 55,181 | 1,774,096 |
| Total Resources | Oxide and Fresh | 39.52 | 2.51 | 99,252 | 3,191,038 |
| Pickstone and Peerless Mineral Resource Tabulation - October 2012 at a cut-off of 1.5g/t for Underground and 0.5-0.6 g/t for Open pit (rounding has been applied) | |||||
| Mineral Resource category | Reef Type | Tonnes (Million) | Grade AU (g/t) | AU (kgs) | Au (oz) |
| Measured | Oxide and Fresh | 1.72 | 1.91 | 3,282 | 105,527 |
| Indicated | Oxide and Fresh | 19.32 | 2.34 | 45,253 | 1,454,915 |
| Total - Measure and Indicated | Oxide and Fresh | 21.04 | 2.31 | 48,535 | 1,560,442 |
| Inferred | Oxide and Fresh | 16.20 | 3.22 | 52,098 | 1,675,001 |
| Total Resources | Oxide and Fresh | 37.24 | 2.70 | 100,634 | 3,235,443 |
The open pit mineral Resource estimate was increased to a depth of 250m. The Resource declaration is reconciled as follows:
| Gold | g/t | Tonnes 000's | |
| Total 2012 | 3.2 moz | 2.70 | 37.24 |
| add increase in Measured category | 0.01 moz | 1.89 | 0.19 |
| less decrease in Indicated category | 0.16moz | 2.27 | 2.12 |
| Net decrease in M&I | 0.15 moz | 2.31 | 1.93 |
| add increase in Inferred category | 0.10 moz | 0.73 | 4.22 |
| Total 2013 | 3.2 moz | 2.51 | 39.52 |
As stated in the updated Resource estimate "Reconciliation with previous mineral Resource estimate", the following has been extracted:
The estimates for the Peerless portion of the mineral Resource remains essentially the same except for minor changes in tonnage due to changes in the application of density factors and changes in the depth to which opencast Resources are declared with the associated cut-off.
Reconciliation of the Pickstone portion of the 2013 and 2012 mineral Resource estimate (at 0g/t cut off) reflects a 6.7% increase in tonnage and 9.5% decrease in grade, resulting in an overall 3.4% reduction in contained gold. This is a result of changes in tonnage due to changes in the application of density factors, changes in the depth to which opencast Resources are declared with the associated cut-off, updates to the oxide surface and topography, additional surface drilling resulting in improved quality of data (increased Measured Resource), and change in the 2013 estimation technique improving the range of variograms and resulting in increased tonnes but reducing grade.
The Resource estimate was again undertaken by ExplorMine in South Africa and is being independently audited by an associate of SRK Consulting (South Africa) (Pty) Ltd and a former chairman of the South African Mineral Resources and Reserves Committee ("SAMREC").
Capital Requirements
| Capital Expenditure until June 2014 | Amount | |
| Plant | ||
| 20ktpm Capital Cost* | USD'000 | 15,103 |
| Other | ||
| Bankable Feasibility Study (20ktpm) | USD'000 | 53 |
| Prefeasibility Study - expansion (50ktpm) | USD'000 | 600 |
| Underground conceptual study | USD'000 | 65 |
| Working Capital | USD'000 | 1,600 |
| Mining/Site Establishment | USD'000 | 761 |
| Subtotal Capital Requirement | USD'000 | 18,182 |
| SRK | USD'000 | 127 |
| Other Working Capital ** | USD'000 | 2,933 |
| Subtotal Total | USD'000 | 21,242 |
| Corporate costs allocated | USD'000 | 2,295 |
| Total | USD'000 | 23,537 |
| Bank balance end June 2013 | USD'000 | 7,813 |
| Net Funding Requirement for Pickstone/Peerless Mine | USD'000 | 15,724 |
* A contingency of USD1.4 million is included in the plant cost
** 4 months of stockpiling
As explained above, the decision to stockpile four months of ore in order to maximise grade and cash flow has the effect of increasing the funding requirement. The Company is comfortable that it will be able to secure the funding necessary without undue shareholder dilution. In addition to debt financing, which is in an advanced stage, funding options available for Pickstone Peerless include the sale of Harare offices, South African Department of Trade and Industry grant and sale of tailings.
This announcement has been reviewed by Mike Kellow BSc, a member of the Australian Institute of Geologists and Technical Director of ACR. Mr Kellow meets the definition of a "qualified person" as defined in the AIM Note for Mining, Oil and Gas Companies.
**ENDS**
For further information visit www.afcrplc.com or please contact:
| Roy Tucker | African Consolidated Resources plc | +44 (0) 1622 816918 +44 (0) 7920 189012 |
| Craig Hutton | African Consolidated Resources plc | +27 11 51 333 42 |
| Andrew Godber | Panmure Gordon (UK) Limited | +44 (0) 20 7886 2500 |
| Callum Stewart | Panmure Gordon (UK) Limited | +44 (0) 20 7886 2500 |
| Adam James | Panmure Gordon (UK) Limited | +44 (0) 20 7886 2500 |
| Susie Geliher | St Brides Media & Finance Ltd | +44 (0) 20 7236 1177 |
Glossary of technical terms
| Term | Explanation | Acronym |
| Au | chemical symbol for gold | |
| core | Cylindrical sample of rock as cut by a diamond drill | |
| diamond drilling | Drilling method using a diamond-impregnated cutting bit to obtain a core sample of rock | |
| greenstone belt | belts of metamorphosed sedimentary and igneous rocks of Archean age | |
| JORC | Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy | |
| lodes | Higher grade portion of mineralised zones, usually with specific orientation | |
| mineralised zones | hydrothermally altered structural features containing potentially valuable minerals | |
| orebody | economically viable portion of a mineralised zone | |
| Reserve | mineral reserve as defined by the JORC Code 2004 | |
| Resource | mineral resource as defined by the JORC Code 2004 | |
| reverse circulation drilling | rotary percussion drilling whereby the sample is returned from the cutting head inside the rod string to surface thereby avoiding contamination from the walls of the hole | RC |
| sulphide | sulphur bearing metallic mineral | |
| tenement | an area encompassing a number of blocks of claims | |
| UNITS | ||
| cm.g/t | centimetre grams per tonne - metal content expressed as grade times thickness | |
| g | gramme | |
| g/t | grammes per metric tonne - metal concentration | |
| ha | hectare | |
| kg | kilogramme, a thousand grammes | |
| km | kilometre | |
| koz | thousand ounces | |
| kt | thousand metric tonnes | |
| kv | thousand volt | |
| kva | thousand volt amperes | |
| m | metre | |
| mm | millimetre | |
| µm | micron, or millionth of a metre | |
| Mt | million metric tonnes | |
| Moz | million ounces | |
| oz | fine troy ounce equaling 31.1048 grammes - normal unit used in selling gold | |
| ppb | parts per billion | |
| ppm | parts per million, equivalent to g/t | |
| t | metric tonne | |
| t/m3 | density measured as metric tonnes per cubic metre |
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: African Consolidated Resources Plc via Thomson Reuters ONE
Latest directors dealings
- 1 day ago Savannah Energy
- 1 day ago Buccaneer Energy PLC
- 1 day ago Savannah Energy
- 1 day ago Carclo
- 1 day ago Schroder Japan Growth Fund