3rd Quarter Activities Report
30 April 2008 - 5:00PM
UK Regulatory
RNS Number:3247T
Gippsland Limited
30 April 2008
Gippsland Limited
THIRD QUARTER ACTIVITIES REPORT
Period: January - March 2008
HIGHLIGHTS
* ABU DABBAB
* Reconfirmation of 40 million tonne total Resource estimate
* Measured and Indicated Resource categories now total 25 million tonnes
* Resource to Reserve upgrade drilling nearing completion
* Completion of satellite topographic survey
* Use of raw sea water provides significant CAPEX and OPEX benefits
* Potential substantial revenue rise due to increase in tin price
* Bank due diligence for project finance expected to be completed by June
2008
* WADI ALLAQI
* Consideration of admission of Nubian Resources PLC to LSE-AIM
* ZEEHAN TIN PROJECT
* Stellar acquires 60% JV Interest in Zeehan Tin Project
* CORPORATE
* Option Exercise
* Exercise of all listed Options held by Directors
* Issue of Broker Options
ABU DABBAB - EGYPT
During the quarter Gippsland Limited ("Gippsland" or "the Company") (ASX/AIM:
GIP, DB: GIX) continued the development programme for the Company's 40 million
tonne Abu Dabbab tantalum-tin project ("Project") which is expected to become a
major supplier to the global tantalum industry.
RESOURCE UPGRADE
The Directors determined that a relatively small and low cost drilling programme
had the potential to upgrade a significant portion of the Abu Dabbab Inferred
Resources to the higher Indicated category. In turn, when resources are
remodelled to include the new information, it is anticipated that the total Ore
Reserves will expand beyond the 14.6 million tonnes estimated in the feasibility
study.
Consequently, in late 2007, the Company commenced a programme of eight drill
holes having a combined length of 2,000 metres to increase the drilling density
of the drill holes completed during the early 1970s.
The Resource estimate prior to the commencement of the drilling programme is
shown in Table 1.
Table 1: Abu Dabbab Resources pre-2008 drilling (100g/t Ta2O5 cut-off)
Resources Million Tonnes* Ta2O5 grade Sn grade
---------------- ------------- --------------- -------------
Measured 12.0 274g/t 0.130%
Indicated 2.1 260g/t 0.16%
Inferred 26 240g/t 0.06%
---------------- ------------- --------------- -------------
Total 39.9 252g/t 0.09%
--------------- ------------- --------------- -------------
* Numbers in table may not add correctly due to rounding.
The results to date are most encouraging, despite delays due to a drill rig
failure and the long turnaround of laboratory assay results. The receipt of
assay results for the first 1,438m metres of the drilling programme has enabled
the resource categories to be re-estimated as summarised in Table 2.
Table 2: Abu Dabbab Resources update March 2008 (100g/t Ta2O5 cut-off)
Category Million Tonnes Ta2O5 grade Sn grade
---------------- ------------- --------------- -------------
Measured 12.0 261g/t 0.136%
Indicated 13 248g/t 0.066%
Inferred 15 225g/t 0.063%
---------------- ------------- --------------- -------------
Total 40 243g/t 0.09%
--------------- ------------- --------------- -------------
The Abu Dabbab resource total remains at 40 million tonnes of which 25 million
tonnes is now in the Measured and Indicated categories. The resources will again
be up-dated when the results of the remaining 560 metres of diamond drilling are
available. These results are anticipated during May 2008.
RESOURCE ESTIMATION METHODOLOGY
Slightly different methodology was used to update the Abu Dabbab resources in
comparison with the previous estimate. In this case, resources were estimated
using the ore block modelling method within a wireframe representing the
mineralised body. Grades were estimated using an inverse distance squared
interpolation. The database included 2,162 assays derived from 36 drill holes
totalling 4,549 metres and three adits totalling 719 metres. An upper cut of
800g/t was applied to the Ta2O5 assays and 0.55% for Sn values. Search distances
of 75 metres for the long axis and 50 metres for the minor axes were used. The
search ellipsoid was left flat as apart from a vertical variation, the deposit
appears to have a uniform grade distribution. A global density of 2.6g/cm3 was
applied.
RESERVE UPGRADE
The above drilling was not designed to increase the total resource but to
increase the Indicated Resources and in turn enable remodelling to increase the
present Proven and Probable Reserves which are now expected to significantly
expand as a result of the drilling programme. The Directors believe that
expansion of the Reserve base will further heighten investor and project
financiers' confidence in the project.
SATELLITE TOPOGRAPHIC SURVEY
The 3D satellite data, which covers a 125km2 belt from Abu Dabbab mine site
through to the Red Sea Coast was acquired in late December 2007 by the Middle
East ground station. This Ikonos satellite imagery has now been reviewed and
processed.
This Ikonos satellite stereo data has enabled the generation of the 3D contours
and topographic contours to an accuracy of approximately 1 metre which in
conjunction with high resolution Quickbird imagery is ideally suited for the
detailed engineering design of the open pit mine, plantsite and the tailings
storage facility (TSF).
RAW SEAWATER PROCESS WATER
As a result of the on-going optimisation of the flowsheet, it was determined
during the quarter that the majority of the process plant could be operated
using raw seawater thus reducing the need to produce 6,000 cubic metres per day
of potable water by way of a reverse osmosis (RO) plant. It has been calculated
that the modified process route will consume less than 600 cubic metres per day
of potable water which will be used in the final stages of the process.
The down-sizing of the RO plant will provide significant CAPEX and OPEX benefits
for the Project.
TIN PRICE
The Abu Dabbab project is expected to produce approximately 1,530 tonnes per
year of LME grade tin which has increased in price from approximately US$14,000
to US$24,100 per tonne since April 2007. The Directors are encouraged to note
that, based on the present tin price, the Project would generate an additional
revenue of approximately US$15 million per year over the likely mine life of 20
years.
FEASIBILITY STUDY UP-DATE
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.
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. Details of the project financials will be
released following the completion of the Resource to Reserve conversion.
Gippsland engineers will continue to use the intervening period to optimise the
process flowsheet with the view to increase tantalum and tin recovery rates
whilst containing CAPEX increases.
This on-going review process has already resulted in a number of significant
benefits to the project, including the use of raw seawater for the majority of
the process flowsheet and the relocation of the process plant both of which will
have a significant positive effect on the Project's CAPEX and OPEX.
PROJECT FINANCE
During March 2008, Gippsland hosted representatives of the German banks KfW
IPEX-Bank GmbH ("KfW") and DEG-Deutsche Investitions und
Entwicklungsgesellschaft mbH ("DEG") in a due diligence trip to Egypt. KfW and
DEG bankers, engineers and environmentalists visited the Abu Dabbab project
area, plus the nearby 98 million tonne Nuweibi deposit and participated in
various meetings with governmental and environmental bodies in Cairo. The KfW
and DEG delegation was supported by a representative of the mining consultancy
Coffey Mining Ltd ("Coffey") which has been appointed by KfW and DEG as
independent engineer for the Project.
As a result of the due diligence work undertaken to date, the Directors believe
that KfW, DEG and Coffey have a most positive attitude towards the Project. It
is anticipated that the KfW and DEG due diligence process will be completed
prior to 30 June 2008.
WADI ALLAQI - EGYPT
The Company holds the right to explore eight gold tenements and one
copper-nickel tenement in Wadi Allaqi situated to the south-east of Aswan in
Egypt where a first pass discovery has been made of an Indicated Resource of 1.5
million tonnes having a grade of 1.7g/t Au (93,000 oz Au).
The Wadi Allaqi exploration is being undertaken by Gippsland's 100% owned
subsidiary Nubian Resources PLC. In view of the present buoyant state of the
gold market, the Directors are considering the possible admission of Nubian
Resources PLC to the London Stock Exchange AIM.
The rationale for the spin-off is that the Company considers that its Wadi
Allaqi exploration assets are not being properly valued in Gippsland and that
they can receive sharper focus and improved market recognition in a separate
entity, with the additional benefit that this will enable Gippsland to devote
more of its resources to the development and mining of its tantalum interests at
Abu Dabbab and Nuweibi.
It is anticipated that additional gold exploration assets would be introduced in
to Nubian Resources PLC if the admission was to proceed.
ZEEHAN TIN DEPOSIT - TASMANIA, AUSTRALIA
During the Quarter Gippsland announced that Stellar Resources Limited (ASX
"SRZ") had signed an agreement with Western Metals Limited for the purchase of
Western Metal's 60% interest in the Zeehan tin deposit located in western
Tasmania. The balance of 40% is held by Gippsland Limited.
Under the terms of the Joint Venture Agreement, Stellar Resources has the right
to increase its Zeehan ownership to 70% by (1) completing a banked feasibility
study and (2) by arranging project finance for not less than one half of all
costs to be met by Gippsland for the commercial development of the project.
There has been no drilling on the project over the last 25 years due mainly to
low tin prices. However, the recent recovery in the tin price to record levels
and the lack of exploration at depth provide the opportunity to confirm and
expand the historical mineral resources. The Zeehan deposit includes an
historical Indicated and Inferred Resource of 7.3 million tonnes at 0.69% Sn.
CORPORATE
During the quarter the exercise of 33,674,180 listed options having an exercise
price of A$0.09 was completed raising approximately A$3 million (approximately
UK#1.37 million). All 11,068,322 options held by Gippsland Directors were
exercised.
During the Quarter 2 million unlisted options having an exercise price of 7 UK
pence and an expiry date of 15 December 2011 were issued to the Company's London
brokers Seymour Pierce Limited and Fox-Davies Capital Ltd.
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
--------------------------------
Jane Stacey Richard Hail
Investor Relations Fox-Davies Capital
M: +44 792 292 3306 T: +44 (0)20 7936 5200
E: jane@conduitpr.com E: richard.hail@fdcap.com
------------------------ ----------------------------
Ed Portman Alexandria Carse
Investor Relations Fox-Davies Capital
M: +44 (0)792 292 3307 T: +44 (0)20 7936 5200
E: ed@conduitpr.com E: alexandra.carse@fdcap.com
--------------------- -------------------------------
Warrick Hazeldine Charles Kernot
Investor Relations Seymour Pierce Limited
M: +61 (0)417 944 616 T: +44 (0)20 7107 8000
E: whazeldine@purplecom.com.au E: charleskernot@seymourpierce.com
--------------------------------- ---------------------------------------
David Newton Asa Bridle,
Seymour Pierce Limited Seymour Pierce Limited
T: +44 (0)20 7107 8000 T: +44 (0)20 7107 8000
E: davidnewton@seymourpierce.com E: asabridle@seymourpierce.com
-------------------------------------- ---------------------------------
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.
ABOUT GIPPSLAND
Gippsland is an Australian based company listed on the ASX Ltd and the London
Stock Exchange AIM under the code "GIP". The Company's shares also trade on the
Frankfurt Deutsche Borse under the code "GIX".
The Company's prime assets are the 40 million tonne Abu Dabbab and the 98
million tonne Nuweibi tantalum-tin projects located in the Central Eastern
Desert of Egypt, adjacent to the western shore of the Red Sea. The Company has
completed an Environmental & Social Impact Assessment (ESIA) to World Bank
standards and a definitive Bankable Feasibility Study (BFS).
The BFS has determined that the Abu Dabbab project will produce in excess of
650,000 pounds of tantalum pentoxide per year which will firmly establish the
operation as the world's second largest tantalum producer, and with a low cost
base.
Gippsland has entered into a 10-year off-take agreement with the German tantalum
major HC Starck GmbH for 600,000 pounds of tantalum pentoxide per year
representing > 90% of annual tantalum production. The project will also produce
1,530 tonnes of tin metal per year which will be sold direct to industry and/or
via the London Metal Exchange. Based on BFS parameters, the project will
generate gross revenue in excess of US$630 million during the first 10 years of
its estimated 20 year mine life. These sales are from tantalum and tin only and
exclude all potential feldspar sales revenues which have the potential to
increase net revenue by US$20 million per year.
Gippsland also has tenements in 8 separate gold areas within the Wadi Allaqi
region in south-eastern Egypt, together with a copper-nickel deposit. Recent
gold, copper and nickel exploration has yielded highly encouraging results.
Gippsland holds control of its Egyptian 50:50 joint ventures by way of a casting
vote on the Board of Directors and appoints all senior JV management positions.
ABOUT KfW & DEG
KfW IPEX-Bank GmbH and DEG -Deutsche Investitions und Entwicklungsgesellschaft
mbH are wholly-owned subsidiaries of KfW Bankengruppe which itself is owned 80%
by the Federal Republic of Germany and 20% by the 16 German federal states (
BundeslTM?nder). KfW Bankengruppe is active in providing project finance
world-wide, particularly in situations where the project provides a significant
benefit to local peoples.
KfW Bankengruppe holds a long-term AAA Standard and Poor's ranking.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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