BELLZONE MINING PLC Bellzone Mining plc (AIM: BZM) is pleased to announce an update and results of the technical study undertaken to date on its Kalia Project for the production of ferronickel, as the first step in exploiting its Kalia iron ore concession.
HighlightsFurther detailed study to determine the major cost parameters for a base case ferronickel project indicates a financially attractive opportunity.
A production capacity base case of 2 x 1.2MW smelters has been established with a targeted 9,602 tpa FeNi product over 20 years.
Objective of delivering product with a specification of Ni 18.0%; Fe 81%; Si 0.05%; S 0.03%; P 0.05%; Cr 0.03%; C 0.10%; Co: Ni ratio
The product specification may improve with project optimisation work to be undertaken during the feasibility study. Future positive exploration results within the existing Mining Licence area may also increase project scale and life of mine assumptions.
Preliminary base case total capital cost is estimated to be US$51 million (capital intensity of US$5,359 per annual tonne of production).
Base case assumptions with illustrative 10% discount rate result in a conceptual break-even price of $10,617/t.
The planned Ferronickel Project production is supported by Indicated and Inferred Mineral Resources of 79.28 million tonnes at 0.69% Ni reported in accordance with the Joint Ore Reserves Committee ("JORC") Code 2012 published by Bellzone in October 2015.
The Ferronickel Project represents a start to iron ore mining at Kalia, ahead of Kalia Project 1 or "KP1", the planned exploitation of the highest grade iron ore at Kalia. The Ferronickel Project has the benefit of stripping the lateritic cap above sections of the iron oxide that will be exploited in KP1 and KP2.
The outcome of the work to date has resulted in Bellzone committing to completing a Feasibility level technical study as per the JORC Code 2012 (a "Definitive Feasibility Study" or "DFS").
A critical enabler of the Ferronickel Project is the use of Envirosteel Proprietary Limited's small scale Energy Saving Smelters ("ESSs"), marketed exclusively by Tenova Pyromet. This smelting technology enables smelting to take place at Kalia site, allowing Bellzone to export a high-value low- volume product, largely utilising existing transport infrastructure. This should enable Kalia to generate free cash flows that will contribute to the development of the bulk infrastructure required to be built for the exploitation of the iron ore Mineral Resources and Reserves at Kalia.
The Bellzone management team is in discussions to secure the funding for the Ferronickel Project.
Bellzone Chairman Michael Farrow commented "I would like to thank all of our consultants for enabling us to complete the targeted technical study on schedule. We are pleased that we are now able to confirm the viability of the potential to produce a ferronickel product in reasonable quantities and that there is every possibility for an economic and profitable project. We now look forward to completing what is required to upgrade this work to a DFS and to commence construction as soon as the financing is in place. Preliminary feedback from relevant financial institutions has been positive and we will immediately engage in detailed discussions with them to work out what needs to be done to arrive at a definitive financing decision. The path to exploiting our Kalia iron ore reserves is clear and Bellzone will move as quickly as possible to begin production in Guinea."
Cautionary StatementThe results of the technical study are preliminary and the economic viability of the project is dependent on a number of important factors including but not limited to the funding of the project. The financial summary detailed below is illustrative and dependent on assumptions that may not be realised and consequently the outcome of the project is not certain.
IntroductionThe Ferronickel Project concept and pre-feasibility study work conducted to date shows the first phase of Kalia's development is expected to deliver a positive return on investment on a standalone basis, ahead of the planned development of the large-scale bulk export iron ore mine. Bellzone plans to achieve first ferronickel production from Kalia in H1 2018, with exports expected to commence shortly after production commences.
The Ferronickel Project will provide a good platform for future development of the iron ore mine, enabling Bellzone to develop on-mine infrastructure and to build a strong and well-trained staff base conversant with the extraction and processing of both nickel mineralisation and bulk iron ore. There is reasonable scope to expand the Ferronickel Project through future exploration within the Concession area as there are expected to be additional nickel-mineralised deposits contiguous with the area drilled to date.
Project TeamThe study work has been led by Tenova Pyromet, a division of Tenova South Africa (Pty) Ltd and has included work from Tenova Pyromet & GLPS (smelting), SGS Bateman (Pty) Ltd (ore processing and plant / services design), Nagrom Laboratories (metallurgical testing) and CSA Global Pty Ltd ("CSA Global") (Mineral Resources and mine planning).
The project team has leveraged existing study data and chosen to focus on specific technical aspects of the project in order to shorten timeframes and optimise the use of the limited financial resources of the Company. The focus has primarily been on the metallurgy and processing aspects which represent the majority of the projected capital costs and provides the resultant ferronickel product. Accordingly, elements of the technical study range between Conceptual level through to readiness for inclusion at full Feasibility level.
Nickel Mineral Resources at KaliaThe Nickel Mineral Resources at Kalia, as per Bellzone's announcement dated 15 October 2015, are summarised in the Appendix to this announcement. The JORC Code 2012 requires the publication of JORC Table 1 which provides further explanatory notes as to how the Mineral Resources have been compiled. JORC Table 1 may be found on the Company's website at www.bellzone.com/projects-and- operations/kalia/kalia-nickel-project.
The iron ore containing the nickel mineralisation forms part of the lateritic (weathered) cap at the surface and depths of up to 50 metres below surface. The mine plan will specifically target the saprolitic horizons within the laterite cap as these strata contain the best Fe:Ni ratio for the smelter technology to enable production of the planned baseline 18.0% Ni ferronickel product.
The Kalia Project is an advanced pre-development project, with over 274,000m of drilling and more than 80,000 assay samples having been processed during the course of exploration, the great majority of which has been exploration for iron ore rather than for the definition of nickel mineralisation. The 2013 reverse circulation ("RC") drilling programme of 42,000 metres and 23,000 assays to prove-up the iron ore JORC Probable Reserve in the highest-grade surface iron ore areas originally identified the nickel concentration in the laterite cap. The data from that drilling programme was re-analysed in 2015, enabling Bellzone to declare a maiden nickel JORC Resource in October 2015, estimated by CSA Global.
In early 2016, Bellzone conducted a diamond drilling programme twinning some of the RC holes drilled in the 2013 programme. The assays from these new holes demonstrated the reliability of the RC drilling assays from 2013 for the purposes of assessing the confidence in the Mineral Resources. The Company is consulting with CSA Global to define what further work will be required to improve confidence in the Mineral Resources so Bellzone can move towards the declaration of an Ore Reserve which will be the basis for the DFS.
Ferronickel ProductThe project has been designed to optimise the ferronickel quality based on economically-attractive life of mine assumptions, tailored to the saprolite available. The targeted metallurgical specification of the baseline product is as follows:
Ni 18.0%; Fe 81%; Si 0.05%; S 0.03%; P 0.05%; Cr 0.03%; C 0.10%; with Co:Ni ratio
Cu:Ni ratio
A limited quantity of the saprolite at Kalia is ideal for the production of ferronickel as it has a relatively low Fe:Ni ratio with production targeting a Fe:Ni ratio of below 25:1 in mined material to be processed. This enables better selective reduction in the furnace, with nickel being reduced at a lower temperature than iron, allowing the nickel to be upgraded from approximately 1% in the mined material to 18% in the product. Kalia saprolite also contains low concentrations of cobalt and copper, both of which can compromise reduction of the nickel at higher concentrations.
The study work has established that saprolites with a Fe:Ni ratio of up to 30:1 can be smelted to successfully produce ferronickel. Of the 79.28mt of JORC Resource at 0.69% nickel, 4.43mt of the material available has a ratio of below 30:1 and this currently available tonnage limits the project to the 2 x 1.2MW smelters modelled in the base case for a mine life of 20 years. It should be noted that a proportion of the 4.43mt is in that part of the Mineral Resource classified as Inferred and further drilling may not result in this being converted to Indicated Resources.
The nickel Mineral Resources occur within and adjacent to the currently-defined Ore Reserves for the Kalia iron project. The Mineral Resources have not been fully explored and remain open in several areas.
The study work has also demonstrated that a ferronickel of up to 26.4% nickel grade is possible from Kalia saprolite if the fine fraction of mined material particles can be treated without compromising the throughput of lateritic material through the smelter feed preparation plant. Work continues on process optimisation that may enable a higher grade product to be achieved, between 18.0% Ni and 26.4% Ni but likely to be closer to 18.0% Ni, although there can be no certainty that this work will be successful.
Mining planThe mining plan has been addressed at a scoping study level based on information gleaned from the DFS completed on the significantly larger KP1 iron ore project and the recently estimated nickel Mineral Resources. Due to relatively small volumes, the limited number of material types to be mined and existing equipment, mining is expected to be a low contributor to operating and capital costs. The proposed mining method is to extract mineralised material from a number of shallow open pits using a combination of free dig with drill and blast.
A small load and haul operation of less than 0.5mtpa total mineralised material and waste in the base case scenario will move the material to the feed preparation plant. As the deposits are close to or at surface the mining is expected to be relatively low strip ratio with a life-of-mine strip ratio of 1 tonne of waste for each tonne of mineralised material estimated for the purposes of the scoping study at this stage.
Preliminary mine planning based on smelter feed metallurgical criteria and the current Mineral Resources database has been performed by CSA Global. The mine plan will be refined as the target production zones are better defined and as the project moves towards the estimation on Ore Reserves.
Processing FacilitiesTenova, SGS Bateman and GLPS designed the process plant and mine site infrastructure. The base case design allows for 2 x 1.2MW smelters for the start-up operation, capable of expansion by adding more smelter units if future exploration programmes prove the availability of suitable ore.
The mined material will be processed through a simple crushing, scrubbing, screening and de-gritting smelter feed preparation plant ("SFP"). The SFP is modular and required to convert run of mine material for feeding into the smelters. The plant is not required to upgrade the run of mine material but may offer the opportunity to improve the smelter feed properties to improve the final product from the defined baseline reported herein.
A SFP design has been prepared. The design will be finalised to Feasibility Study level using material from a bulk sample that is representative of the material to be processed though the life of mine, as defined by SGS GeoTech. This will complete the required metallurgical characterisation, plant optimisation, supporting infrastructure and utilities design work.
There is no chemical stage in the smelter feed preparation process, which will assist in allaying environmental concerns related to the tailings from the feed preparation plant.
The ESS unit designs are complete off-the-shelf units. The smelters will use thermal coal as their main energy source and metallurgical coal as the reductant.
The smelting process will produce 165 ktpa of slag that can be used in much needed construction materials in Guinea such as aggregate for concrete and road base.
Both thermal and metallurgical coal will have to be imported. Approximately 3.0 tonnes of thermal coal and 0.9 tonnes of metallurgical coal are required for the production of 1 tonne of ferronickel and given the low tonnages required, the coal can be imported along existing roads.
Transport and ExportThe product will be transported from Kalia to port by way of the existing public road network utilising conventional containers. This will require the construction of a short link road (less than 5km) from the mine site to join to the existing public road.
It is expected that the product-carrying container units will be exported from the port at Conakry which is already equipped to handle containerised cargo. The detailed transport contracts and arrangements will be finalised during the Feasibility study.
Project ImplementationThe initial Ferronickel Project development schedule indicates the operations can be designed and constructed in less than 12 months from project start approval, with first export scheduled for H1 2018. The critical path in the development timeline is the construction of the smelters and related environmental plan update and permitting.
Financial SummaryAt this time the preliminary capital cost estimate for the base case scenario of 2 smelters, excluding contingencies which will be assessed at the Feasibility Study level, is US$51 million. The capital intensity is US$5,359 per annual production tonne.
Capex | US$m |
Smelters | 24.5 |
Mine, plant and mine site infrastructure | 16.4 |
Road-truck fleet and infrastructure | 3.0 |
Port facility modifications | 2.5 |
Working capital, EPCM and Owner's costs | 5.0 |
Total | 51.4 |
The current financial analysis of the project indicates that the project is viable and is expected to provide a path to positive cash flow under a range of sensitivities applied to the principal capital and operational cost variables.
Bellzone has modelled the Ferronickel Project with a nominal 10% contingency in addition to the capex total above and the normal discount rate of 10% used industry-wide to assess the breakeven nickel price in the base case scenario of 2 x 1.2MW smelters. Bellzone has also assessed the returns at increased prices within the range of broker's forecasts in the public domain and available to the Company. The range of broker's forecasts for the long term nickel price (+2020) is from $9,700/t to
$19,200/t with an average of $15,132/t.
Bellzone Mining plc published this content on 25 August 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 25 August 2016 07:34:07 UTC.
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