Venture commits to recommencing Riley Iron Ore Mine.
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Release date- 22082019 - Venture Minerals Limited (ASX: VMS) ('Venture' or the 'Company') is pleased to announce the completion of the updated Riley Iron Ore Mining Study with the prefeasibility study (PFS) delivering strong returns from a low capex two year project, that is well positioned to capture the current higher iron ore price environment.
With this outcome the Board has the made the decision to recommence mining at the Riley Iron Ore Project.
In addition to completing the study the Company, having previously signed a Binding Terms Sheet for the Riley Iron Ore Mine off-take with Prosperity Steel (refer to ASX announcement 2 May 2019), has now signed a full off-take agreement for the Riley product for 100% of the first two years of iron ore production. Venture also secured the services of Peter Adamson, a highly experienced and competent leader with 30 years of management and consultancy experience with companies such as BHP Billiton and Rio Tinto, to fill the key senior role of General Manager of Operations, as it transitions through development into production.
First shipment of ore from the Riley Mine is currently planned for the fourth quarter of 2019. The Company continues to work on additional strategies identified to further reduce operating costs on the project before the first ore shipment. These cost optimisation programs will focus on enhancing ore transport solutions.
Commenting on the updated Riley Iron Ore Mining Study outcomes, Venture Minerals' Managing Director Andrew Radonjic, said: 'This is an exciting phase for the Company as it moves from explorer to producer. The Riley Iron Ore Mining Study demonstrates the delivery of an exceptional Internal Rate of Return in excess of 300% is possible by leveraging the relatively small capex required to commence production. Venture has brought together an experienced team with a blend of local knowledge that has built, managed and operated iron ore and other similar sized projects, thereby de-risking the execution phase of the Riley project. The Riley Iron Ore Mine will create 80 to 100 jobs and will be a boost for the economy of the West Coast of Tasmania. We look forward to commencing production shortly.'
The Riley Iron Ore Project 2019 Pre-Feasibility Study (PFS)
Venture Minerals had previously completed all necessary preparations to commence mining at the Riley Iron Ore Project in 2014 and began mining on the 28th May, but due to declining iron ore prices the mine was placed on care and maintenance after suspending operations in August 2014.
Since last December, the 62% Fe price has risen by almost 40% in USD terms and with the events of early 2019 at Vales' mines in Brazil the current price levels could be sustained for at least the near term. In February this year, the Company began a review of the Riley project to look at recommencing mining, having already completed extensive pre-production work which included a granted mining lease and about 90% of the previously purchased processing plant equipment still on hand
Venture then achieved its first major milestone towards recommencing the Riley Iron Ore Mine when it secured an off-take agreement with one of the largest iron ore traders (refer to ASX Announcement, 2 May 2019)in the world. The company also assembled a team of highly experienced mining professionals to work on updating the previous mining study so that a decision to recommence mining could be made at the earliest opportunity.
Venture has used Rock Team (who prepared the previously stated Ore Reserves for the Riley DSO Project on the 26th July 2012) to prepare the upgraded Ore Reserves to meet the guidelines of the JORC Code 2012 that have been used in this study. Rock Team was previously the Mining Engineering arm of Rapallo but now operates under Rapallo. Rapallo, a highly experienced engineering group, worked with the Company in preparing this updated study. The PFS is an update of the previously completed mining studies that resulted in the initial start-up of mining operations at the Riley Project in 2014. The same mine plan (generated by Rock Team) used to commence mining previously is being used again but with costs updated using current prices.
Project Location and Tenure
The 100% owned Riley DSO Project is located 10 km from the Mount Lindsay Deposit in Northwest Tasmania and sits within granted Mining Lease 5M/2012. The iron ore deposit is all at surface, located less than 2 km from a sealed road that accesses existing rail and port facilities. The total road distance to the Port of Burnie is 120 kilometres.
Deposit Geology and Resources
The Riley deposit is a ferruginous laterite derived from weathering of the underlying Wilson River Ultramafic Complex of western Tasmania. The deposits are sedimentary in nature, most likely derived by the erosion of a once thicker veneer of ferruginous laterite covering Serpentine Ridge. There are three significant iron laterite deposits at Riley Creek, namely Areas A, C and D, covering a combined area of approximately 3km2.
The deposits consist of unconsolidated ferruginous lateritic gravel (pisolites) and cemented laterite. The ore is comprised of a combination of hematite and maghemite. The deposit has an average combined thickness of 1.5m, with some areas reaching up to 4m. The laterite deposits are thickest on the ridges, with Areas A and C the most significant of the three deposits. The resource is estimated to be 2.0M tonnes at an average density of 2.5 t/m3 (refer to ASX announcement 19 June 2019).
The in-situ iron grade of the lateritic gravel ranges from 36% to 64% Fe, and the cemented laterite 46% to 61% Fe. Beneficiation of the ore is via a crushing and screening process removing the sub 1mm fraction, which consists of mainly silica and clay.
A maiden resource statement of 2.0mt @ 57% Fe was defined in July 2012 under the JORC Code 2004. This statement was upgraded on the 19th June 2019 to meet the guidelines of the JORC Code 2012. In estimating the resources, wireframing restricted the model to >50% Fe beneficiated grade, and a lower cut-off of 53% Fe was selected to obtain what is currently a marketable 57% Fe DSO product.
Ore Reserves and Mining Method
Following completion of the July 2012 resource, Venture engaged independent mining engineers, Rock Team, to complete mining studies on the deposit and produce a reserve statement. With all the hematite resources at Riley located at or near surface, the study delivered a 90% conversion rate of resource to reserve under the JORC Code 2004, this has now been upgraded to meet the guidelines of the JORC Code 2012 as part of this ASX announcement.
Post the original Reserves reported on the 26 July 2012, Venture provided Rock Team with resource block models in CSV format. The models were imported into Mine2-4d for interrogation purposes and optimised using the following input parameters that formed the basis of the 2013 PFS done by Rock Team; Clearing Cost A$4,410/hectare, Mining Cost A$2.20/t, Crushing and Screening Cost A$8.00/t, Transport Cost A$22/t, Administration Cost A$4/t, Government Royalty 5.35%, Iron Ore Price A$100/t fob.
The 2013 PFS was assumed Venture personnel would maintain responsibility for supervision and the technical aspects of the project, whilst using a contractor for all mining and processing activities on site. A mining schedule was generated with the aim of the achieving an annual shipped product rate of 1 million tonnes at a monthly grade of over 56% Fe.
Prior to the commencement of mining in 2014, the mining schedule was revised using an updated resource block model to look at shipping a marketable 57% Fe DSO product and to factor in the use of a dry screening plant initially, hence forming the basis of the updated reserve figures.
The ore at the Riley deposit is at surface and hence there is no strip ratio. The ore is free dig and will be extracted by excavator in a series of sequential mining panels. Each mining panel will be 25m wide, stretching the length of the resource. Mined ore will be hauled to the Run of Mine (ROM) stockpile for crushing and screening.
Post completion of forestry activities, the land will be cleared of any remaining trees and debris. An initial mining panel will be cleared with all vegetation windrowed at the base of the cleared area. As mining progresses, the next parallel 25m wide panel will be cleared ready for mining. The vegetation cleared from the next adjacent mining panel will then be pushed into the previously mined area allowing rehabilitation to commence. The depth of excavation is expected to average 1.5 metres, with some pockets up to 4m, so a conventional open pit design is not required.
Ore Processing Methodology
The in-situ ore body contains varying levels of clay and detrital sediments resulting in elevated levels of alumina and silica that are too high for a direct shipping product. Extensive test work established that eliminating the sub 1mm fraction reduced these deleterious elements sufficiently to produce a marketable product.
The clay was the most difficult material to separate at the 1mm fraction and was not amenable to removal by dry screening. Wet screen testing was conducted which successfully removed the clay, along with additional detritus. The result was an increase in the iron grade, and a reduction in alumina and silica values. The ore also contains a large amount of organic material due to the fact it outcrops at surface. This material also needs to be separated from the ore.
These two factors meant that wet screening with an organic bath and mechanical scrubber was required; the bath, to float off the bulk of the fine organics, and paddles to agitate the clay particles off and out of the gravel and into solution. A log washer was engineered into the processing circuit.
Venture Minerals has committed to not having a tailings storage dam for the Riley site, with processing water stored in removeable tanks. Removal of the suspended clay fines from the recirculated process water was designed to be done with a Bucket Wheel De-waterer (BWD) and a thickener for the slime. A bulk sample of crushed ore from the Riley deposit was processed at a small wet screening plant with a BWD. This trial was successful in removing the fines.
Once the strategy on wet screening had been settled on, a washed representative sample was sent to China for sintering tests at the China Iron and Steel Research Institute Group (CISRI) and performed well. Based on the research and output requirements, a process plant design was completed by Venture Minerals and GR Engineering Services.
Mining and Infrastructure Site Layout
All mining infrastructure is to be contained within the mine lease boundary. Infrastructure for the Riley Project will consist of, but is not limited to: Surface Mine, Crushing and Screening plant, Stockpile areas (vegetation/topsoil, ROM), Lay down yard, workshops and offices, Road network access (existing).
Both the local council planning permit (DA2012/00068) and the EPBC approval (2012/6339) are currently valid.
Revenue and Iron Ore Pricing Assumptions
The Iron-Ore pricing assumptions included in the financial model are based on spot pricing of US$90.35 per tonne as at 15 August 2019 referenced to the CFR 62% Fe Platts benchmark pricing index, with a discount applied under the offtake agreement (as per ASX announcement 2 May 2019)for grade and content. The company notes the recent price volatility and the impacting on assumed project revenues since first announcing the re-commencement of the updated study on 16 May 2019. During this time prices have fluctuated from the price of US$94.60 to a high of US$126.20 on 2 July 2019 followed by a recent trend downwards towards the current spot price of US$90.35 on 15 August 2019 used in the financial model. The offtake partner Prosperity Steel has agreed to take 100% of the first two years of iron ore production, based on reserves of 1.6Mt @ 57% Fe.
Sales revenue is recognised on a cost-plus freight (CFR) basis, whereby Venture will be responsible for arranging shipment under the offtake agreement.
The Company has used an assumed exchange rate of A$1 to US$0.68 in the study.
No hedging arrangements are in place, however the company is in talks with major financial institutions regarding a proposed hedging strategy. The PFS assumes no hedging in the financial model.
The Riley Mine site is accessed by modern bitumen roads;
Transport from ROM to the Port of Burnie are by truck and trailer combinations hauling up to 37 tonne payloads.
Port Storage & Ship Loading
Trucks will unload at port or at an off-wharf storage facility during daylight hours only; Ship loading rate: 900tph; Low tide draft: 11.0m; Length of berth: 213m (250m MAX LOAD); Suitable Handymax/Supramax ships, 45,000 tonnes capacity.
The major capital cost components for the project is the wet screening plant and site establishment costs. The costs were based on tender submissions and/or price quotations from suppliers including Shaw Contracting and Project Managers Rapallo.
There are multiple scenarios being investigated by the Company and its project managers to reduce its upfront capital cost requirements including delaying the construction of the wet screening plant and instead, using a dry screening plant for appropriate ore types to commence production initially, hence reducing its start-up costs in the near term.
The average operating costs over the life of the project on a 'cost plus freight' basis (CFR) are A$85.1/t which includes a Royalties and Marketing costs of A$2.91/t. Tasmanian State Government Royalties are calculated on a tiered basis but are capped at 5.35% of net sales. Operational costs are calculated on a 24 hours per day, 7 days per week roster, however road haulage is restricted to daylight hours under the current environmental permit conditions of the mine.
Financial Analysis and Key Assumptions
The PFS is based on a Probable Ore Reserve at Riley of 1.6 Mt grading at 57% Fe (representing an 80% conversion of the total Indicated Resource base) and producing approximately 1Mtpa of final product grade of 57% Fe over a 2-year mine life, using a contractor for all mining and processing activities on site.
Sensitivity analysis indicates that the Project is most sensitive to fluctuations in exchange rates (USD to AUD), followed by iron ore prices, operating costs and discount rates.
Project and Mine Life Upside
Any upside to the mine life of the Riley Project is dependent on the performance of the wet screening plant and that will determine if lower grade resources can be upgraded sufficiently to be mined economically.
The company recently completed a $5.7m placement and accelerated entitlement offer in July 2019, with the purpose of funding the pre-production costs and working capital of the company. Following the first announcement on 16 May 2019, at which time the iron ore price was US$94.60 and subsequently reached a high of US$126.20 on 2 July 2019, the price has trended downwards towards the current spot price of US$90.35 on 15 August 2019 of which the PFS has been completed on.
The company is currently optimising the mining schedule, reviewing the ore processing methods and working with suppliers to reduce the overall costs of the mine including a focus on enhancing ore transport solutions.
The purpose of the optimisation and cost reduction reviews is to limit the impact on its near-term cash flow and working capital requirements as the business progresses towards mining. There are multiple scenarios being investigated by the Company including delaying the construction of the wet screening plant and instead, using a dry screening plant for appropriate ore types to commence production initially, hence reducing its start-up costs in the near term.
Tel: +61 8 6279 9428
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|Date:||Aug 23, 2019|
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