Quarterly Activities Report
31 January 2008 - 6:02PM
UK Regulatory
RNS Number:8747M
Gippsland Limited
31 January 2008
Gippsland Limited ("Gippsland" or the "Company")
SECOND QUARTER ACTIVITIES REPORT
Period: October - December 2007
To view this announcement together with its geological graphics,
please visit the Quarterly Announcements section of the Gippsland website.
HIGHLIGHTS
* ABU DABBAB
* 10 year tantalum sale contract concluded with German major HC Starck
GmbH for 600,000 pounds tantalum pentoxide per year
* Project tantalum & tin sales over initial 10-year period in excess of
US$530 million
* Resource to Reserve upgrade drilling nearing completion
* WADI ALLAQI EXPLORATION - COPPER-NICKEL
* Drill intersected copper and nickel mineralisation; significantly
including
- 5m at 5.25% Cu & 1.42% Ni in ASRC004
- 16m at 2.25% Cu & 0.64% Ni in ASRC009
* CORPORATE
* Fox-Davies Capital (London) appointed as Co-Broker
* Seymour Pierce Ltd (London) appointed as Nominated Advisor and Co-Broker
* Gippsland commences trading on Frankfurt stock exchange (Deutsche Borse)
* Exercise of all listed Options held by Directors
ABU DABBAB
Ten year tantalum offtake agreement
During the quarter the company announced that its 50% owned subsidiary Tantalum
Egypt JSC had secured a 10 year contract ("Offtake Agreement") with the German
major HC Starck GmbH ("HC Starck") for the supply of six million pounds of
tantalum pentoxide ("Ta2O5") from its 40 million tonne Abu Dabbab project in
Egypt.
The milestone Offtake Agreement covers the delivery of a minimum of 600,000
pounds of Ta2O5 per annum - almost the entire expected initial annual production
of 650,000 pounds of Ta2O5 from the project. As is traditional for the tantalum
industry, the Ta2O5 Offtake Agreement prices are confidential, however based
upon present Ta2O5 spot prices the Abu Dabbab project is expected to generate
Ta2O5 revenue in excess of US$280 million over the initial 10-year period of
operations.
In addition to Ta2O5, the Abu Dabbab project is scheduled to produce
approximately 1,530 tonnes of tin metal per annum which will be sold on the open
market or via the London Metal Exchange. Based upon the present LME tin price
the Abu Dabbab project is expected to generate tin revenue in excess of US$250
million over the initial 10 years of its estimated 20 year mine life.
The Directors have ensured that the Offtake Agreement forms a solid foundation
from which the Abu Dabbab project can diversify and expand significantly
creating a focal point for world Ta2O5 production.
Importantly, the Ta2O5 Offtake Agreement contains price escalation clauses which
largely protect Gippsland shareholders from production cost escalations,
significantly reducing market risk. Additionally, the Abu Dabbab tantalum and
tin extraction process is based upon industry-standard gravity separation
techniques which affords considerable protection against technical risk.
The Offtake Agreement signed on 12 November 2007 replaces the smaller Ta2O5
offtake agreement between Gippsland and HC Starck referred to in the Company's
announcement dated 13 January 2005 for the supply of 480,000 pounds of Ta2O5 per
annum for a period of 5 years.
The Offtake Agreement is subject to a number of standard conditions precedent,
including the placement of orders for SAG (Semi Autogenous Grinding) and Ball
Mills by 30 April 2008, Execution of an Engineering, Procurement, Construction
Management and Commissioning Services (EPCM) contract by 31 July 2008 and
commencement of site works construction by 31 January 2009.
Project Finance
Discussions with German and English project finance banks have been ongoing
during the negotiation of this expanded Offtake Agreement. Detailed negotiations
are in progress with a major German bank over the terms and conditions for
securing the senior debt portion of the project finance facility.
The Company is well placed to finalise project finance arrangements early in
2008. The capital cost for the project, including financing during construction
is presently estimated to be US$125 million which is expected to be funded on an
attractive 80% debt and 20% equity basis.
Feasibility Study Up-date
An addendum to the Feasibility Study Update was received during October 2007
documenting additional work that had been conducted since publishing the
previous document in April 2007. The items reported in this Addendum include:
*Relocation of the process plant site to the vicinity of the mine to
reduce ore haulage costs.
*Capital and operating cost changes pertaining to the items above.
The overall Capex of the project is presently being reviewed and is expected to
be available during February 2008.
Site Access
A dirt access road to the north side of the deposit was extended around the
deposit utilising in part an existing but unusable track from the Soviet
exploration period. The Soviet track was cleared, refurbished and continued
around to the adits on the south side of the deposit where it joins up with the
original dirt access road. All dirt roads were graded to facilitate the supply
of plant and equipment.
Resource - Reserve Up-grade Drilling
A programme of eight reverse circulation (RC) drill holes totalling 1,438m was
completed during October and November as part of an in-fill drilling programme
to increase the drilling density of the more widely spaced Soviet drill holes.
This will allow the inferred resources to be upgraded to the higher indicated
category and hence be converted to a reserve category under the JORC Code. The
coordinates of the completed holes are listed in Table 1.
Table 1 Collar coordinates of completed RC holes
Hole RL North (Local) East (Local) E-UTM N-UTM Az Dip Depth
--------- ------ ---------- --------- ------- ------- ----- ------ ------
ADRC001 410.8 1018.834 1360.258 655431 2804132 188 -75 180
ADRC002 410.8 1015.703 1360.222 655431 2804129 188 -65 180
ADRC003 400.5 1072.081 1269.023 655343 2804182 200 -75 180
ADRC004 400.5 1069.993 1268.999 655343 2804180 200 -60 180
ADRC005 354.6 965.805 1072.605 655156 2804078 65 -65 178
ADRC006 354.6 969.907 1078.915 655162 2804082 30 -60 180
ADRC007 426.1 825.61 1191.014 655271 2803945 30 -75 180
ADRC008 426.1 825.61 1191.014 655271 2803945 23 -60 180
-------- ------ ------ -------
Total 1438
--------- ------- ----------- ---------- -------- -------- ------ ------ -------
The RC drill holes will be extended by diamond drilling to depths below the
previous planned pit shell allowing a bigger pit to be designed resulting in a
larger reserve component. The diamond drilling programme comprises seven holes
varying in length from 20m to 120m. The diamond holes to be drilled are listed
in table 2.
Table 2 Details of proposed diamond holes
-------- ------- ----- -------
Hole RL North (Local) East (Local) E-UTM N-UTM Az Dip Length Final depth (m)
-------- ------- -------- -------- ------- ------- ----- ------ (m) -------
-------
ADDH001 410.8 1018.834 1360.258 655431 2804132 188 -75 60 240
ADDH002 410.8 1015.703 1360.222 655431 2804129 188 -65 70 250
ADDH003 400.5 1072.081 1269.023 655343 2804182 200 -75 70 250
ADDH004 400.5 1069.993 1268.999 655343 2804180 200 -60 70 250
ADDH006 354.6 969.907 1078.915 655162 2804082 30 -60 20 200
ADDH007 426.1 825.61 1191.014 655271 2803945 30 -75 90 270
ADDH008 426.1 825.61 1191.014 655271 2803945 20 -60 120 300
-------- ------ ------ ------- -------
Total 500 1760
--------- ------- --------- --------- -------- -------- ------ ------ ------- -------
Satellite Survey
The 3D satellite cover for the entire area from Abu Dabbab to the Red Sea Coast
was acquired in late December 2007 by the Middle East ground station with first
pass images be available in early February 2008.
Ikonos satellite imagery has been ordered to cover a 125km2 belt from the Abu
Dabbab mine leases to the Red Sea coast. The Ikonos satellite will be
specifically manoeuvred to the location as dual scanners have to be used to
obtain the stereo data necessary for the generation of the 3D contours.
Topographic contours to an accuracy of 2m can be generated from the
stereoscopically acquired data which will be used for the mine and plant
construction.
WADI ALLAQI
Abu Swayel - Copper / Nickel
During the quarter a programme of thirteen holes totalling 776m of RC drilling
was completed at the Abu Swayel copper-nickel prospect. The drilling tested
ancient workings and a transient electromagnetic (TEM) conductor which was
delineated by a TEM survey completed during August.
The most significant results (Table 1) were obtained from holes ASRC004, 6 and 9
which were drilled below the ancient workings. Hole ASRC0011 which was drilled
along strike from the ancient workings intersected 18m at 0.96% Cu and 0.57% Ni
including 4m at 2.73% Cu and 1.33% Ni.
Table 3 Abu Swayel RC drilling - best results
---------- ----------
Hole From (m) To (m) Interval (m) Cu (%) Ni (%)
----------- ---------- ---------- ---------- ---------- ----------
ASRC004 24 42 18 1.55 0.54
including 37 42 5 5.25 1.42
ASRC005 35 40 5 0.68 0.23
ASRC006 40 48 8 0.99 0.32
ASRC008 52 56 4 0.76 0.27
ASRC009 20 36 16 2.25 0.64
including 21 28 7 4.41 1.17
ASRC011 24 42 18 0.96 0.57
including 31 35 4 2.73 1.33
including 39 42 3 1.16 0.94
ASRC012 11 36 25 low 0.16
ASRC013 8 20 12 0.24 0.19
----------- ---------- ---------- ---------- ---------- ----------
The results are consistent with some earlier sampling from a shaft and crosscut
and some diamond drilling completed during the early 1960s. These results
included 10m at 1.87% Cu and 1.53% Ni in a shaft and 8m at 4.11% Cu and 1.77% Ni
from a crosscut off the shaft at the 22m level.
The two holes drilled to test the TEM conductor contained minor sulphides
(pyrite) in the drill cuttings and returned anomalous results (Table 2) but did
not adequately explain the conductor.
Table 4 Abu Swayel - anomalous results from TEM conductor
----------- ---------- ---------- ---------- ----------
Hole From (m) To (m) Interval (m) Cu (ppm) Ni (ppm)
----------- ---------- ---------- ---------- ---------- ----------
ASRC003 56 60 4 926 311
ASRC010 24 72 48 215 528
including 74 72 8 446 1387
----------- ---------- ---------- ---------- ---------- ----------
Two drill holes (ASRC011 & 012) drilled close to the TEM conductor intersected
mineralisation down plunge from the ancient workings and confirmed the easterly
dip of the mineralisation in the ancient workings located to the southeast. The
easterly dip is contrary to the interpreted dip of the relatively low amplitude
conductor which was modelled as having a westerly dip.
Table 5 Abu Swayel drill hole locations
----------- -------- -----------
Hole E-WGS84 N-WGS84 Depth (m) Azimuth (mag) Dip
----------- ----------- ------------ -------- ----------- --------
ASRC001 565653.000 2519068.000 60.00 220.0 -60.0
ASRC002 565604.000 2519135.000 74.00 220.0 -60.0
ASRC003 565408.000 2519182.000 84.00 040.0 -60.0
ASRC004 565548.000 2519130.000 54.00 220.0 -60.0
ASRC005 565578.000 2519111.000 51.00 220.0 -60.0
ASRC006 565511.000 2519148.000 51.00 220.0 -60.0
ASRC007 565530.000 2519171.000 60.00 220.0 -60.0
ASRC008 565575.000 2519168.000 72.00 220.0 -60.0
ASRC009 565525.000 2519122.000 57.00 200.0 -60.0
ASRC010 565488.000 2519153.000 81.00 360.0 -60.0
ASRC011 565487.000 2519159.000 45.00 220.0 -60.0
ASRC012 565475.000 2519147.000 36.00 220.0 -60.0
ASRC013 565608.000 2519064.000 51.00 200.0 -60.0
----------- ----------- ----------- --------- ------------ --------
The results are most encouraging and a programme of geological mapping,
rock-chip sampling and ground magnetics will be completed to search for
along-strike repetitions of the Abu Swayel Cu-Ni mineralisation.
Seiga Prospect
A total of eight RC holes (CRC136 - 143) totalling 495m were completed. A short
diamond tail was drilled on the end of CRC143. Six of the holes tested rock-chip
geochemical anomalies. One hole was abandoned at 12m due to drill rig mechanical
problems, with the last hole testing the depth extension of the main zone of
mineralisation.
Six holes testing the rock-chip geochemical anomalies intersected zones of
mineralisation with the best result in hole CRC138 which intersected 32m at
2.18g/t Au from 20m depth including 8m at 5.35g/t Au.
Hole CRC143 was drilled to test the depth potential of the main zone of
mineralisation where previous work has defined a resource of 93,000oz. A
pre-collar was RC drilled to 120m depth where the drilling method was changed to
diamond to a programmed depth of 150m. The hole was terminated at 169m short of
the target mineralised zone due to mechanical problems with the drilling rig.
CORPORATE
Appointment of London-based Co-Brokers
During the quarter Gippsland appointed Fox-Davies Capital Ltd and Seymour Pierce
Ltd as Co-Brokers to the Company.
Working independently, these broking houses will provide the Company with sound
emerging market expertise, a research-driven platform and a high profile amongst
institutional investors. The appointment of Fox-Davies and Seymour Pierce will
expand the Company's presence in the United Kingdom, Continental Europe and
North America to the maximum benefit of Gippsland shareholders.
The Directors see that these appointments are a logical progression in the
Company's evolution, as it continues to progress its 40 million tonne Abu Dabbab
tantalum project towards production as the Company becomes a critical link in
the global tantalum supply chain.
Frankfurt stock exchange (Deutsche Borse)
Gippsland continued its expansion into European capital markets, with the
Company's shares now trading on a regular basis on the Frankfurt Stock Exchange
(Deutsche-Borse) under the code "GIP".
Gippsland's move onto the major German securities exchange follows the Company's
recent success in securing a 10-year tantalum offtake agreement with the German
major HC Starck GmbH, which considerably increased German investor interest in
the Company. A EURO based trading platform in Frankfurt will provide better
exposure and involvement with the wider European investor base.
The Company will hold a number of investment seminars in Frankfurt and other
German financial centres during the first half of 2008. German investor
participation will be assisted by a German language website presently being
prepared by the Company.
Exercise of listed Options
During the quarter Gippsland completed the issue and allotment of 33,674,180
shares pursuant to the conversion of listed options having an exercise price of
A$0.09 which expired on 31 December 2007.
All of the Gippsland Directors holding listed options exercised 100% of their
entitlements prior to or on 31 December 2007 as follows:
RJ Telford 6,558,322
JM Chisholm 2,260,000
JD Kenny 2,250,000
The Directors were pleased to note that 77% of the outstanding listed options
were converted raising approximately A$3 million (approximately UK�1.35 million
or Euro1.81 million) for the company.
RJ (Jack) Telford
Executive Chairman
Gippsland Limited
www.gippslandltd.com
For further information please contact:
Jack Telford
Gippsland Limited
T: +61 (0)8 9340 6000
E: jtelford@gippslandltd.com
--------------------------------
David Newton, Director Corporate Richard Hail, Head of Corporate
Finance Finance
Seymour Pierce Limited Fox-Davies Capital
T: +44 (0)20 7107 8000 T: +44 (0)20 7936 5200
E: davidnewton@seymourpierce.com E: richard.hail@fdcap.com
------------------------------------- ----------------------------
Jane Stacey / Portman Warrick Hazeldine
Investor Relations Investor Relations
T: +44 (0)20 7429 6606 / 6607 T: +61 (0)8 9485 1254
M: +44 792 292 3306 M: +61 (0)417 944 616
E: jane@conduitpr.com ed@conduitpr.com E: whazeldine@purplecom.com.au
----------------------------------------- ---------------------------------
Note:
In accordance with Listing Rule 5.6 of the Australian Stock Exchange Limited and
Part 2 of the AIM Guidance Notes for Mining, Oil and Gas Companies, the
geological information in this report that relates to Exploration Results,
Mineral Resources and Ore Reserves is based on data compiled by Dr John Chisholm,
a Fellow of The Australasian Institute of Mining and Metallurgy. Dr Chisholm
who is an Executive Director of Gippsland Limited with over 25 years experience
in the mineral industry including the evaluation of exploration data, mineral
resources and ore reserves, has consented to the issue of the information in
this report in the form and context in which it appears.
This information is provided by RNS
The company news service from the London Stock Exchange
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