TIDMWAFM
RNS Number : 9172E
West African Minerals Corporation
12 May 2017
For immediate release
12 May 2017
West African Minerals Corporation
("WAFM" or the "Company")
Scoping Study Indicates Significant Economic Potential for the
Sanaga Iron Ore Project, Cameroon
Premium Quality 69% Fe Concentrate Product Deliverable With Low
Capital Requirements And A Short Pathway To Production
West African Minerals Corporation (AIM: WAFM) announces the
details of its recently completed scoping study on the Sanaga Iron
Ore Project ("Sanaga Project") located near the Port of Douala,
Cameroon ("Scoping Study"). The Scoping Study indicates robust
economics and favourable capital and operating cost fundamentals
for an open pit iron ore mine and concentrator using transportation
to the Cameroon coast either by barging down the Sanaga River and
transhipping at sea or using a slurry pipeline to a port in the
vicinity of Yoyo. The Sanaga deposit contains previously released
CIM compliant mineral resources of 82.9 Mt @ 32.1% Fe (as announced
on 5 February 2015). The Sanaga Project is situated in coastal
Cameroon, 70km from the Atlantic Ocean, with access to existing
road and power infrastructure.
The Scoping Study was prepared by independent consultants, Royal
HaskoningDHV ("RHDHV"), in accordance with The JORC Code
(2012).
HIGHLIGHTS
The Scoping Study base case is stated on pre-tax and royalty
basis assuming 100% project ownership and using 5-year historical
average iron ore prices. All amounts are in US dollars.
-- Two project options identified to transport product into
seagoing vessels; Barging or slurry pipeline
-- NPV(10) of US$262-292m*
-- IRR of 29-37%* with 29-46 month payback on capital costs
-- Upfront capital costs US$194-298m (depending on transport
option i.e. barge or slurry pipeline)
-- Production of 2.4Mtpa premium grade (69% Fe) concentrate
-- Current study life of mine of 16-17 years
-- Life of mine strip ratio 1.48
-- 24 months to full production from final investment decision
(* Based on long term forecast of 69% concentrate (CFR China) of
US$112/ tonne)
Gerard Holden, Chairman of WAFM commented:
"WAFM is very pleased to announce the results of an independent
Scoping Study which has identified two potential pathways to
production of 2.4 million tonnes per annum of premium grade iron
ore concentrate.
The geometry of the mineralisation, which outcrops at surface,
lends itself to low cost, low stripping ratio open pit mining.
Metallurgical testing on the primary magnetite ores indicate that
the project can produce a high-quality iron ore concentrate product
(69% Fe) that will command a premium price in the market place. The
Sanaga Project's proximity to the ocean and access to existing road
and power infrastructure allows low capital expenditures and a
short timeframe to develop export infrastructure.
These advantages are borne out by the robust project
fundamentals and attractive economics demonstrated by the
study.
Sanaga represents an opportunity to develop a low capital
intensity project with short pathway to cash flow. On-going
feasibility work and engagement with regulators and stakeholders is
planned as the next steps to advance the project."
RESOURCE, MINING, PROCESSING & LOGISTICS
The Sanaga Mineral Resource is classified into the Inferred
category in accordance with 2010 Canadian Institute of Mining,
Metallurgy and Petroleum (CIM) Definition Standards and,
subsequently, to JORC Standards. Table 1 below sets out the Sanaga
Inferred Mineral Resource at a 25% Fe cut-off as at 19 January 2015
(as announced on 5 February 2015):
Table 1: Sanaga Inferred Mineral Resource (by Mineralisation
Domain) at a 25% cut-off
Mineralisation Al(2)
Domain Tonnes Fe SiO(2) O(3) P LOI
---------------------- -------------- -------- ---------- --------- -------- ---------
(millions) (%) (%) (%) (%) (%)
---------------------- -------------- -------- ---------- --------- -------- ---------
Oxidised Cap 15.8 37.3 37.7 5.0 0.05 3.09
Magnetite gneiss 67.1 30.8 48.5 3.4 0.05 -0.70
-------------- -------- ---------- --------- -------- ---------
Total Inferred
Mineral Resource 82.9 32.1 46.4 3.7 0.05 0.02
---------------------- -------------- -------- ---------- --------- -------- ---------
Notes:
(1) Mineral Resources which are not Mineral Reserves have no
demonstrated economic viability.
(2) The effective date of the Mineral Resource is 19 January 2015.
(3) Mineral Resources for Sanaga have been classified according
to The Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
Definition Standards on Mineral Resources and Mineral Reserves
(2010).
(4) The iron grades presented represent total iron. The
proportion of recoverable iron is yet to be quantified but
petrographic and metallurgical studies suggest minimal contribution
to the total iron content from iron-bearing silicate minerals
(5) WAFM has a 100 per cent. interest in the Sanaga license.
Accordingly, the Gross and Net Attributable Inferred Mineral
Resource are the same. WAFM is the Operator of the Sanaga
Project.
(6) Source: The Inferred Mineral Resource Estimate was prepared
by independent consultants, The MSA Group, as announced by the
Company on 5 February 2015.
A preliminary pit optimisation exercise was conducted by RHDHV
using Whittle to estimate the probable size of the pit to determine
an economic life of mine. No cut-off was applied to the Fe values
for the optimisation. WAFM believes there is significant potential
to expand the Mineral resource with additional exploration. Table 2
below sets out the open pit Whittle optimisation results:
Table 2: Open Pit Whittle Optimisation Results
LoM Ave. grade Strip Ore Waste
Ratio
------------ -------------- ---------- ---------- ---------
17 years 29.1% 1.48 103 Mt 153
Fe Mt
------------ -------------- ---------- ---------- ---------
Note: Source - RHDHV Scoping Study
Based on previous metallurgical test work (as announced on 21
October 2014), processing flowsheet and equipment design was
conducted to produce 2.4Mtpa premium grade (69% Fe)
concentrate.
The Scoping Study identified two viable options for the
transport of the product from Sanaga to the sea, namely:
-- Barging Option: Truck from Sanaga mine site to Edea, barge
down the Sanaga River and tranship concentrate into sea going
vessels. This option has a lower capital requirement (US$194
Million) and higher operating cost (US$83.2/tonne, CFR China);
or
-- Pipeline Option: Pipeline the Fe concentrate from the mine
site to a new port in the vicinity of Yoyo. This option has a
higher capital cost requirement (US$298 Million) but lower
operating costs (US$76.6/tonne, CFR China)
MARKETTING & PRICE FORECAST
Over the past ten years, the price of 62 % iron ore fines has
varied widely between US$ 38/t and US$ 192/t and has averaged US$
111/t. In this context, RHDHV considers that the appropriate price
is a forecast based on a "through the cycle" price (as captured by
the 5-year average which includes periods of both strong and weak
market conditions). Over the past five years the price has averaged
US$ 94/t and this 5-year historic average forms the basis for the
price forecasts used in the Scoping Study, adjusted for the
respective premium that high grade concentrate commands as
discussed below.
Globally, the bulk of iron ore fines/concentrate production
falls between 58 % and 66 % Fe. Only a few smaller mines, and some
larger mines in minor volumes, are able to produce and sell
concentrate with an iron content above 66 % Fe. Sanaga has the
potential to produce a premium 69% Fe concentrate product.
There are two key markets for high grade (>67.5 %) feed as
potentially will be produced by Sanaga: As input material for DRI
pellets and as high grade sweetener in blast furnace pellets.
Buyers of both products readily pay a premium for higher grade
product as it significantly reduces their own operating costs and
can be blended with lower grade concentrates to improve furnace
yields.
Since Metal Bulletin began tracking the historic premiums
applicable to high grade iron ore concentrate (66 % CFR China) in
September 2012, the premium of 66 % concentrate over 62 % fines has
averaged US$ 11.56/t or 15 % of the iron ore price. Over the last
three years the premium has risen to 17 % (US$ 11.68/t) and it
currently stands at 22 % (US$ 19/t). Table 3 below sets out the
historic and forecast pricing of high grade iron ore
concentrates:
Table 3: Historic and Forecast Pricing of High Grade Iron Ore
Concentrate
5-year Average 10-Year Long Term
average Forecast
---------------------- ------------------ ------------ -------------
62% iron ore fines $94/t $111/t $94/t
(CFR China)
---------------------- ------------------ ------------ -------------
66% concentrate $104/t NA $104/t
(CFR China)
---------------------- ------------------ ------------ -------------
69% concentrate NA NA $112/t
(CFR China)
---------------------- ------------------ ------------ -------------
Notes:
(i) Source - RHDHV Scoping Study.
(ii) Long term forecast refers to the average forecast price
from 2020 onwards in real terms and are based on Broadhurst Mining
Research Forecasts based on historic averages adjusted for expected
grade of Sanaga product.
RHDHV have therefore used a long-term forecast (2020 onwards)
for 69 % iron ore concentrate (CFR China) in the Scoping Study of
US$ 112/t based on the 5-year historic average for 66 % concentrate
(CFR China) extrapolated to 69 % quality (assuming straight line
extension of the dollar price premium per % increase in iron
content from 66 % to 69 %). While the spot price is currently below
this level, the period considered in this study is from 2020
onwards and the long-term average is considered a more appropriate
forecast.
TAXES & ROYALTIES
Due to the level of uncertainty around the final project
structure, the financial analysis in the Scoping Study has been
undertaken only on a pre-tax and royalty basis. The Cameroon
Government is entitled to a 5% royalty on revenues and a 10% free
carried interest in the Sanaga Project, while the corporate tax
rate in Cameroon is currently 33%.
Final agreements on taxes, royalties and free carry would be
concluded with Cameroon Government during the negotiation of the
Mining Convention, which defines the fiscal rights and
responsibilities of both the government and the holder with respect
to the operation of the Mining Licence.
FINANICAL RESULTS
The Scoping Study is based on a tried and tested mining method,
an appropriate concentrator plant to produce a marketable
concentrate product and examined for two trans-Cameroon options,
being the combination of road and barge or pipeline, of
transporting the concentrate from the mine site to the coast. The
financial outcome of the study shows that the orebody is
economically viable as set out in Table 4 below:
Table 4: Summary of Financial Outputs for Options
Discount Barging Pipeline
Rate Option Option
------------------------------------ ------------- ------------ ------------
NPV BEFORE TAX 8% US$313m US$359m
------------------------------------ ------------- ------------ ------------
NPV BEFORE TAX 10% US$262m US$292m
------------------------------------ ------------- ------------ ------------
NPV BEFORE TAX 12% US$220m US$236m
------------------------------------ ------------- ------------ ------------
IRR BEFORE TAX 37.3% 29.2%
--------------------------------------------------- ------------ ------------
Upfront Capital US$194m US$298m
------------------------------------ ------------- ------------ ------------
RoCE BEFORE TAX 1.35 0.98
--------------------------------------------------- ------------ ------------
Payback (months) 29 46
--------------------------------------------------- ------------ ------------
Project Life 16 years 17 years
--------------------------------------------------- ------------ ------------
Operating cost per tonne mined US$9.55 US$9.14
(US$/t, CFR China)
--------------------------------------------------- ------------ ------------
Operating cost per RoM ore US$22.69 US$22.33
tonne mined (US$/t, CFR China)
--------------------------------------------------- ------------ ------------
Operating cost per Concentrate US$83.2 US$76.55
tonne (US$/t, CFR China)
--------------------------------------------------- ------------ ------------
Note: Source - RHDHV Scoping Study
NEXT STEPS
The Scoping Study has successfully defined WAFM's preferred
mining and processing plans, throughput rate, project life, and
infrastructure requirements to support the intended production and
logistics profile of the Sanaga Project. The results of the Scoping
Study have determined the expected timeline, capital expenditure
requirements and operating costs for the Sanaga Project. The
advantages of the Sanaga Project's proximity to the coast, access
to existing infrastructure, favourable metallurgy and potential
premium product allow for the potential development of a mine
requiring relatively low capital investment with a short path to
cashflow and attractive operating margins.
WAFM plans to continue with feasibility work and engage with
Cameroon Government regulators to advance the Sanaga project
towards a Mining License and conclusion of a Mining Convention.
QUALIFIED PERSON
Graeme Michael Cox, has reviewed and approved the information
contained in this announcement in his capacity as a Qualified
Person as required under the AIM rules. Mr. Cox is a mining
engineer (BSc. Mining Eng. Wits - 1985) and is a member of the
South African Institute for Mining and Metallurgy and currently
serves as Manager Consulting of Royal HaskoningDHV Mining
Africa.
Royal HaskoningDHV has reviewed the information contained in
this announcement that relates to or is extracted from the
information contained in the Scoping Study, and confirms that the
summary information presented in this announcement is not
misleading and it is accurate, balanced and complete and not
inconsistent with the Scoping Study.
Forward Looking Statements:
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"will" or the negative of those, variations or comparable
expressions, including references to assumptions. These
forward-looking statements are not based on historical facts but
rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the
amount, nature and sources of funding thereof), competitive
advantages, business prospects and opportunities. Such forward
looking statements re ect the Directors' current beliefs and
assumptions and are based on information currently available to the
Directors. A number of factors could cause actual results to differ
materially from the results discussed in the forward-looking
statements including risks associated with vulnerability to general
economic and business conditions, competition, environmental and
other regulatory changes, actions by governmental authorities, the
availability of capital markets, reliance on key personnel,
uninsured and underinsured losses and other factors, many of which
are beyond the control of the Company. Although any forward-looking
statements contained in this announcement are based upon what the
Directors believe to be reasonable assumptions, the Company cannot
assure investors that actual results will be consistent with such
forward looking statements.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Contacts:
West African Minerals
Corporation Gerard Holden +44 (0)1624 639396
Beaumont Cornish Roland Cornish +44 (0)20 7628
(Nominated Advisor) / Michael Cornish 3396
Beaufort Securities +44 (0)20 7382
Limited (Broker) Jon Belliss 8300
A copy of this announcement, including explanatory figures and
charts, will be available on the Group's website at
http://westafricanminerals.com/news/news-2017
About West African Minerals Corporation
West African Minerals Corporation ((AIM: WAFM) is an iron ore
mining and exploration group which has built a portfolio of iron
ore assets. Through its 100 % owned subsidiary Compagnie Minière du
Cameroun SA, the Group owns exploration licenses spanning the
coastal regions in proximity to existing and developing ports, to
licenses in the southeast along the extensive iron ore corridor
that hosts other advanced deposits.
Further information on the Group is available at
www.westafricanminerals.com
Glossary of terms
Al(2) O(3) Chemical symbol for aluminium
oxide
-------------------------------- ------------------------------------
CFR Cost and freight (seller
required to arrange for
the carriage of goods
by sea to a port of destination
and provide the buyer)
-------------------------------- ------------------------------------
CIM The Canadian Institute
of Mining, Metallurgy
and Petroleum
-------------------------------- ------------------------------------
DRI Directly reduced iron,
so called sponge iron,
is produced from the direct
reduction of iron ore
(in the form of lumps,
pellets or fines) to iron
by a reducing gas or elementary
carbon produced from natural
gas or coal.
-------------------------------- ------------------------------------
Fe Chemical symbol for iron.
-------------------------------- ------------------------------------
Hematite The principal ore mineral
of iron with the chemical
formula Fe(2) O(3.)
-------------------------------- ------------------------------------
Inferred Mineral Resource An Inferred Mineral Resource
is that part of a mineral
resource for which quantity
and grade or quality can
be estimated on the basis
of geological evidence
and limited sampling and
reasonably assumed, but
not verified, geological
and grade continuity.
-------------------------------- ------------------------------------
IRR Internal rate of return
-------------------------------- ------------------------------------
LOI Loss on ignition. A test
designed to measure the
amount of moisture or
impurities lost when a
sample is ignited during
analysis
-------------------------------- ------------------------------------
Magnetite One of the most common
iron minerals and an important
ore of iron with the chemical
formula. Fe(3) O(4)
-------------------------------- ------------------------------------
Magnetite gneiss Metamorphic rock with
a distinctive layered
texture due to the discontinuous
segregation of quartzo-feldspathic
and ferromagnesian minerals.
Magnetite can form up
to 50% in this iron-rich
variety of gneiss.
-------------------------------- ------------------------------------
Mineralisation The concentration of metals
and their chemical compounds
within a body of rock.
-------------------------------- ------------------------------------
Mt Million tonnes
-------------------------------- ------------------------------------
NPV(10) Net Present Value calculated
using a discount rate
of 10%
-------------------------------- ------------------------------------
Oxidised cap The uppermost, oxidised
portion of the underlying
magnetite gneiss bedrock
characterised by oxidation
of magnetite to hematite.
These caps are common
in tropical environments
where tropical weathering
results in deep oxidation
and leaching of rocks
exposed at surface.
-------------------------------- ------------------------------------
P Chemical symbol for phosphorus
-------------------------------- ------------------------------------
Reverse circulation drilling A drilling method that
(RC) utilizes a large rotary
drill and air compressor
to collect rock samples
quickly and efficiently.
The high speed and low
cost of RC drilling makes
it an ideal method for
obtaining mineral samples.
-------------------------------- ------------------------------------
RoCE Return on capital employed
-------------------------------- ------------------------------------
SiO(2) Silicon dioxide, also
known as silica, is a
chemical compound that
is an oxide of silicon
-------------------------------- ------------------------------------
Strip Ratio Ratio of the volume of
overburden (or waste material)
required to be handled
in order to extract some
tonnage of ore
-------------------------------- ------------------------------------
tpa Tonnes per annum
-------------------------------- ------------------------------------
Whittle Mining software used to
optimise open pit designs
-------------------------------- ------------------------------------
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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