Scoping study concludes Marampa can deliver strong returns
Australian resources and investment company, Cape Lambert Resources Limited (ASX: CFE) (“Cape Lambert” or the “Company”) is pleased to announce the results of a scoping study (“Scoping Study”) completed on its 100% owned Marampa Iron Ore Project located in Sierra Leone, West Africa (“Marampa Project” or “Marampa”) (refer Figure 1).
The Scoping Study was prepared by independent engineering group, Bateman Engineering Pty Ltd (“Bateman”) with contributions from supporting specialist consultants.
Key Points:
- Scoping study now complete for a 5 million tonne per annum (“Mtpa”), standalone, open pit mining development at Marampa.
- Initial capital investment estimated at US$655 million.
- Scoping study base case indicates that on an un-geared (100% equity), pre-tax basis, an open pit mining and beneficiation operation producing 5Mtpa of high-grade hematite concentrate could deliver:
- NPV8 of pre-tax, free cash flow = US$1.37 billion;
- Project pre-tax NPV8 = US$715 million.
- Metallurgical test work completed for the scoping study produced a high-grade concentrate typically 64-65.7% Fe with low contaminants 2.8-3.7% silica, 0.9-1.1% alumina and negligible levels of sulphur and phosphorus, with mass and iron recovery in the range of 42.8%-43.3% and 83.9-84.9%, respectively.
- Scoping study based only on the maiden JORC Inferred Mineral Resource of 197 million tonnes.
- Five (5) drill rigs currently working at Marampa with first resource update scheduled for the June 2011 quarter. Project hard rock exploration target size remains at 700Mt to 1Bt at 25% to 40% Fe.
The Scoping Study investigated the establishment of a standalone, open pit mining operation, 5Mtpa wet, high intensity magnetite separation (“WHIMS”) concentrator (expandable to 10Mtpa) and all supporting infrastructure to produce a high-grade (65% Fe) hematite concentrate. The Scoping Study was based on the maiden Inferred Mineral Resource of 197 million tonnes at 28.5% Fe (refer ASX Announcement 12 November 2010 for details). A conceptual project layout is shown in Figure 2 and the proposed WHIMS flowsheet is shown in Figure 3.
The base case scenario adopted for the Scoping Study was for a high-grade hematite concentrate delivered into China at a Free on Board (“FoB”) price of US$100 per dry metric tonne (“dmt”) allowing for a US$40 per dmt sea freight cost (ie CFR China of US$140 per dmt). Additional scenarios were considered at an FoB price of US$80 and US$120 per dmt. Spot fines (62% Fe) iron ore cargoes are currently selling for US$176 per dmt (CFR North China).1
The base case key financial parameters adopted to determine the Project’s pre-tax, NPV were:
- an FoB iron ore price of US$100 per dmt;
- a discount rate of 8%;
- an un-geared (ie 100% equity) basis;
- no allowance for income tax (ie pre-tax cash flows);
- an allowance for the government ad valorem royalty;
- an initial capital investment of US$655 million;
- FoB cash operating costs of US$58.50 to US$63.00 per dmt of concentrate;
- a rail combined with barge transhipping transport solution;
- maiden mineral resource of 197Mt.
Table 1 shows that at an US$100 per dmt FoB iron ore price, a standalone, open pit mining operation and WHIMS concentrator producing 5Mtpa of hematite concentrate has an estimated net present value of US$715 million (pre-tax), which increases to US$1.47 billion (pre-tax) at an FoB iron ore price of US$120 per dmt. The break-even FoB iron ore price is US$80 per dmt. Mine life varies from 10.5 to 13 years over the three scenarios considered.
Based on the outcome of the Scoping Study, the Company has commenced further detailed technical, environmental and social studies with the objective of optimising scale, capital and operating costs, and better defining the implementation timeline. This will include reducing cash operating costs to US$55 per dmt of concentrate and increasing the scale of the project to 10Mtpa. The Company’s Executive Chairman, Mr Tony Sage said “Marampa is still growing with the Scoping Study based only on the initial JORC resource of 200 million tonnes, which represents only 20% of the mineralised strike. Additional resources have the potential to further enhance Marampa’s returns, through a change in production scale.”
He further added “Cape Lambert has commenced reviewing options to enable Marampa to be positioned for development to benefit shareholders, the government of Sierra Leone and other local stakeholders, which will involve a partial sell down by Cape Lambert by either an initial public offering or direct investment by a larger steel producer.”
To download a copy of the CFE ASX announcement please click here
For more information please contact:
Cape Lambert Resources Limited:
Tony Sage
Executive Chairman
Tel: +61 (0)8 9380 9555
Australian Enquiries:
David Tasker
Professional Public Relations,
Tel: +61 (0)8 9388 0944
Mobile: +61 433 112 936
Email: david.tasker@ppr.com.au
Website: www.capelam.com.au
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