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MINERAL COMMODITIES LTD — Capital/Financing Update 2017
Nov 26, 2017
65371_rns_2017-11-26_c6d70006-ea30-4ee8-8670-340076bf192d.pdf
Capital/Financing Update
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Australian Securities Exchange Company Announcements Office
27 November 2017
MUNGLINUP GRAPHITE PROJECT SCOPING STUDY RESULTS
Mineral Commodities Ltd (ASX: MRC) (“MRC” or “the Company”) is pleased to announce that subsequent to the recent execution of the Farmin and Joint Venture Agreement between MRC’s wholly owned subsidiary MRC Graphite Pty Ltd and Gold Terrace Pty Ltd for the Munglinup Graphite Project (“Munglinup” or “Project”), located in the global Tier 1 Mining Jurisdiction of Western Australia. The completion of the scoping study (“Scoping Study” or “Study”) and the resultant preliminary economics underpin a near term project development profile. As a result, MRC has already commenced a comprehensive metallurgical testwork and drilling program required for a Pre-Feasibility Study with delivery anticipated in January 2018.
Scoping Study – Cautionary Statements
The Scoping Study referred to in this announcement has been undertaken to assess the potential viability of an open pit mine and graphite processing plant constructed onsite at Munglinup. It has also been completed to optimise and schedule the five discrete yet proximal graphite deposits and provide a Production Target. It is a preliminary technical and economic study of the potential viability of the Munglinup Graphite Deposit. It is based on low level technical and economic assessments that are not sufficient to support the estimation of Ore Reserves. Further metallurgical evaluation work and appropriate studies are required before MRC will be in a position to estimate any Ore Reserves or to provide any assurance of an economic development case.
The Scoping Study is based on the material assumptions outlined below. These include assumptions about the availability of funding. While MRC considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved.
To achieve the range of outcomes indicated in the Scoping Study, funding of in the order of $25 million will likely be required. Investors should note that there is no certainty that MRC will be able to raise that amount of funding when needed. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of MRC’s existing shares.
The Company has concluded it has a reasonable basis for providing the forward-looking statements included in this announcement and believes that it has a reasonable basis to expect it will be able to fund the development of the Project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Scoping Study Outcomes
The results of the Munglinup Scoping Study demonstrate a viable low capital, low operating cost operation. Munglinup’s annual average graphite concentrate production target of approximately 56kt greatly benefits from the exceptionally high graphite grades and excellent infrastructure commensurate with a project in one of the world’s best mining jurisdictions.
| A$150M1 | A$528/t | A$47M | 56kt | 9 yrs. | A$270M |
|---|---|---|---|---|---|
| NPV | Mid Case Average | Total | Average | Total | Project |
| OPERATING | DEVELOPMENT | ANNUAL CONC. | MINE LIFE | FREE FLOW CASH | |
| CASH COST | CAPEX | PRODUCTION | GENERATION |
The results of the Scoping Study demonstrate the potential for the Munglinup Project to support a very low capital and operating cost operation with annual graphite concentrate production of approximately 56,000 tonnes over an initial mine life of 9 years:
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Total operating costs of approximately A$528 (US$396) per tonne concentrate (FOB Esperance Port) – at the bottom of the graphite supply cost curve and the lowest of any reported ASX-listed peer company of scale <600ktpa throughput.
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Total capital cost of A$47 million, for production of ~56,000 tonnes of concentrate per annum – lowest capital intensity of all peers.
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Very rare combination of low capital and operating costs at a realistic scale of production.
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Payback of under 2 years using conservative graphite pricing assumptions.
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Simple process flow sheet with no primary crush or grind, leading to low processing costs and lower capital requirements.
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Simple plant design uses “off the shelf equipment” allowing rapid and cost effective initial construction whilst allowing for future expansion options.
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High quality product with historical testwork indicating excellent flake size distribution results of up to 67% of graphite flake greater than 150 microns (+100 mesh).
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The Scoping Study results are presented on a 100% basis, nominal and post-tax. The estimated level of confidence in the study is +/- 35%.
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Project generates significant cash margins even in severe downside global graphite price scenarios.
Table 1– Indicative annual gross margins (AUD) at various basket pricing
| Average annual life of mine cash generation | Average annual life of mine cash generation | Average annual life of mine cash generation | Average annual life of mine cash generation | |
|---|---|---|---|---|
| Basket Price (USD$/t conc.) | $600 | $800 | $1,000 | $1,200 |
| Annual gross margin (AUD$) | $5.6M | $15.6M | $25.5M | $35.3M |
1 Nov 2016 Canaccord Genuity Long Term pricing outlook and a balanced distribution estimated between the conservative and aggressive distributions, 100% after tax basis.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Mineral Commodities Executive Chairman, Mr Mark Caruso, said “The Scoping Study results unequivocally demonstrate, that by any peer analysis, the Munglinup Project is a high-grade world class asset with all key operating parameters falling within the most favourable quartile. The current market fundamentals in the renewable energy sector and EV market and the advanced stage of the Project are compelling to support an accelerated project development timetable. Importantly, this Project is set aside from the majority of its peers by being in a Tier 1 mining jurisdiction and close to all required infrastructure. The current resource supports the mine life for 9 years but is open in all directions and at depth. The development of Munglinup into production is an ideal complementary project to MRC’s Tormin high grade mineral sands asset and will provide revenue growth and sustainable earnings into the future.”
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Figure 1 – Comparison of peer companies (Development Capital)
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Figure 2 – Comparison of peer companies (Capital Intensity)
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Figure 3 – Comparison of peer companies (Operating Cost)
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Figure 4 – Comparison of peer companies (Reported Production Graphite Grade)
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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Table 2 – Indicative NPV and IRR (post tax) ranges from the Munglinup Scoping Study
| Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR |
|---|---|---|---|
| Graphite Pricing \ Flake Distribution | NPV IRR Conservative |
NPV IRR Balanced |
NPV IRR Aggressive |
| Low - 10 Year Pricing Low Mid - Canaccord Long Term Average High - Peer Company Average |
$38M 26% $102M 50% $193M 81% |
$77M 41% $150M 67% $257M 100% |
$106M 52% $187M 79% $313M 117% |
The Study assumes a small open pit operation with onsite conventional processing facilities comprising gravity and flotation circuits.
Sensitivity analysis confirms that exchange rate, graphite recovery, graphite pricing and flake size distribution are the major impactors on value. A nominal exchange rate of 0.75 was used as the AUD/USD exchange rate while assumed graphite recovery was fixed at a conservative 81% based on historical test work.
Impact of flake size distribution was determined through use of a conservative distribution based on the 2011 Nagrom metallurgical test work, an aggressive distribution based on the 1990 Gwalia metallurgical test work and a balanced distribution estimated between the conservative and aggressive distributions. Recent (2016) petrological studies support the use of these distributions.
Likewise, graphite pricing was ranged with a low-price deck based on the 10-year lows from Benchmark Mineral Intelligence[2] , a mid price deck comprising the Nov 2016 Canaccord Genuity[3] Long Term pricing outlook and a high price deck comprising an average of 2017 reported price decks used in peer company studies.
The basket price range evaluated and presented (combination of flake size distribution and graphite pricing) was done primarily to demonstrate the robust nature of the Project. Completion of the current metallurgical test work will provide more accurate expectations with respect to operational flake size distributions and more narrow basket pricing ranges.
2 Benchmark Mineral Intelligence, Monthly Graphite Price Assessments Review, www.benchmarkminerals.com
3 Canaccord Genuity, “A flake’s chance in cell: quantifying graphite demand” Australian Equity Research 20 Nov 2016
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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Scoping Study Results
MRC is pleased to report the results of the Scoping Study for the Munglinup Graphite Project located near Esperance in Western Australia. The study was conducted internally with input from graphite engineering consultants Battery Limits and other specialist consultants.
Whittle optimisation of the previously reported (MRC ASX Release dated 11[th] September 2017) Measured and Indicated Mineral Resource at Munglinup has resulted in a production target of 3.178Mt at 17% Total Graphitic Carbon (“TGC”).
Project modelling indicates an extremely robust and profitable operation can be developed at Munglinup. MRC is positioned to accelerate development of the Munglinup project because of its financial position, primarily due to excellent cashflows from its mineral sands operation at Tormin in South Africa.
Table 3 – Key Physical and Economic Results from the Munglinup Scoping Study
| Munglinup Graphite Project | Units | Estimated Value |
|---|---|---|
| Physicals | ||
| Average annual total material movement | ktpa | 2,010 |
| Average strip ratio | waste:ore | 4.0 |
| Nominal annual plant throughput | ktpa | 400 |
| Life of Mine feed grade | % TGC | 17.0 |
| Life of Mine average recovery | % | 81% |
| Life of Mine average concentrate grade | % TGC | 94% |
| Average annual concentrate production | ktpa | 56.0 |
| Average annual graphite production | ktpa | 52.7 |
| Mine life | Years | 9 |
| Economics | ||
| Average production cost | AUD$/t conc | 450 |
| Average operating cost (FOB Esperance) | AUD$/t conc | 528 |
| Development Capital | AUD$M | 32.2 |
| Indirects and Contingency | AUD$M | 14.9 |
| Total Development Capital | AUD$M | 47.1 |
| Sustaining Capital | AUD$M | 7.8 |
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Background
The Munglinup Graphite Deposit lies within the Munglinup Mining Lease M74/245 and includes neighbouring Exploration License E74/505. The deposit is located 4km north of the town of Munglinup, 42km east of the Ravensthorpe Nickel Mine and 105km west of the township and port of Esperance, Western Australia.
Graphite occurrences within the area of interest have been identified, studied and at various times mined over the last 100 years. It is recognised that considerable geological understanding of the area exists and historical data informing the quantum and tenor of the graphite occurrences is robust.
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Figure 5 – Location of the Munglinup Graphite Project
Gwalia Minerals NL undertook extensive exploration and evaluation of the deposit from 1988 to 1998 and produced a Feasibility Study in 1991. The graphite is noted as containing coarse-flake graphite and has been subject to extensive testwork by both Gwalia and other owners (predominantly Graphite Australia till 2014).
MRC has entered into a Farmin and Joint Venture agreement with the current tenement holder, Gold Terrace Pty Ltd. MRC currently holds 51% of the Project and is moving towards 90% as per the agreed earnin terms. A prior tenement holder retains a 2% gross royalty over the tenements.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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Geology and Mineral Resource Estimate
The Munglinup area comprises Archean to Paleoproterozoic, metamorphosed granitic and other metamorphic rocks of the Albany–Fraser Orogen, typically hornblende (± garnet) gneiss and migmatite. Within the gneissic rock mass, rocks containing the Munglinup graphite deposits consist of a succession of tightly folded metasedimentary units with a consistent dip to the southeast. This succession, originally carbonaceous shales, comprises graphitic schists and gneisses together with jaspilite (also called ‘ironstone’), and clastic rocks that have been weathered to kaolinite, quartz, graphite, and goethite, with the graphitic horizons having been subjected to a high degree of weathering in comparison to the host rocks. Individual graphite horizons vary in thickness up to a maximum of circa 20m.
In 2016 an updated Mineral Resource model consisting of 5 separate deposits within the Munglinup area was estimated by AEMCO in accordance with the JORC Code (2012 Edition) and reported by MRC on 19[th] September 2017. The resource has been classified into Indicated and Measured for a Total Resource of 3.6 million tonnes @ 15.3% TGC using a lower cut-off grade of 10%.
**Table 4 – Estimated Munglinup Mineral Resource at 10% TGC cut off ***
| Area | Classification | Tonnes (kt) |
Graphite Grade (% TGC) |
Contained Graphite(kt) |
|---|---|---|---|---|
| Halberts Main | Measured Indicated |
1,710 1,367 |
14.1 15.3 |
241 209 |
| Halberts South | Indicated | 179 | 21.7 | 39 |
| Harris | Indicated | 65 | 20.7 | 13 |
| McCarthyEast | Indicated | 56 | 20.7 | 12 |
| McCarthyWest | Indicated | 249 | 16.4 | 41 |
| Sub Total | Measured Indicated |
1,710 1,915 |
14.1 16.4 |
241 314 |
| Total | 3,624 | 15.3 | 555 |
- Some discrepancies in totals may occur due to rounding of numbers.
Mining and Production Target
The Munglinup Graphite Project comprises of five separate deposits. It is highly likely, based on geophysics, remote sensing and geological mapping information, that with additional drilling mineralisation may continue along strike and these deposits might even join up. This is particularly the case with Halberts Main and Halberts South where infill drilling has not been undertaken previously primarily due to lack of funding and limited surface indicators to direct exploration.
Generally, the main deposits are steeply dipping to the east and comprise of numerous stacked layers of mineralised metasediments. Mineralisation starts at surface and has been defined to a maximum of approximately 76m vertical depth at the Halberts Main Zone but remains open at depth. The mineralisation is hosted in soft saprolite and does not require drill and blasting. Some competent host rock has been identified that will be used in optimizing pit slope angles.
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Mining will be done by conventional truck and shovel. Mining costs have been included in the Study financial model assuming a contract mining scenario and using indicative figures provided by a local Western Australian mining contracting company.
Pit optimisation were undertaken for each deposit using Whittle 4x. The imported block models were regularized on a 5m x 5m x 4m block size and reconciled back to the original Mineral Resource Model post regularization and again post Whittle import.
73% of the Production Target material tonnes is contained within the Halberts Main deposit. This deposit also contains all of the Measured Mineral Resource material and is scheduled to be mined first. On a contained graphite basis, the Production Target includes 97% of the total graphite compared with the Mineral Resource at a 10% cut off which demonstrates an excellent conversion rate.
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Figure 6 – Section 6272905mN (middle of Halberts Main) displaying % TGC and final pit
**Table 5 – Munglinup Production Target Estimate Summary ***
| Area | Tonnes (kt) |
Graphite Grade (% TGC) |
Contained Graphite(kt) |
|---|---|---|---|
| Halberts Main | 2,331 | 17.7 | 413 |
| Halberts South | 191 | 20.2 | 38 |
| Harris | 73 | 19.1 | 14 |
| McCarthyEast | 99 | 15.5 | 15 |
| McCarthyWest | 484 | 12.4 | 60 |
| Total | 3,178 | 17.0 | 541 |
- Some discrepancies in totals may occur due to rounding of numbers.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD
ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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----- Start of picture text -----
McCarthy West
McCarthy East
Harris
Halberts Main
Halberts South
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Figure 7 – Contour plan showing proposed final pits
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Figure 8 – Summary annual total material movement by deposit
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Figure 9 – Summary annual ore movement (ex-pit) by deposit
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Metallurgy and Process Design
Significant metallurgical work has been undertaken on the graphite mineralisation in the Munglinup deposit. Gwalia Consolidated completed expansive test work building on from historic work that was originally carried out in the 1950’s, 60’s and 70’s. The Gwalia test program for their 1991 feasibility study was conducted from 1988-1991. Six distinct ore types were identified, and the ore was described as having low variability. The project was further reviewed by Graphite Australia with the aim to consider a lower cost, simplified flowsheet. In 2011, Graphite Australia undertook:
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Metallurgical work to assess the quality of the graphite
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Costeans opened and 6 tonne of sample material from various locations on the Munglinup project site supplied for testing Commissioned test work by Nagrom mineral processors using updated technology
The Nagrom test work was undertaken with an updated flowsheet resulting in an expected gravity graphite recovery of 87-90% and flotation average recoveries of 96%. Preliminary flotation of concentrates achieved grades in the range of 90-96% carbon with the revised flowsheet. The revised flow sheet comprised:
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Ore soaking
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Drum scrubber/Trommel
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Screen at 1.0 mm
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Screen -1.0 mm deslime at 38 μm with slimes reporting to tailings
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Classification into coarse, mids, and fine size fractions
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Spiral (coarse, mids, fines) rougher gravity recovery of graphite concentrates
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Tabling clean-up of (coarse, mids, fines) graphite concentrates
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Gravity concentrate regrind followed by rougher and cleaner flotation
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Final concentrate filtration
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Drying, sizing and bagging
The project Base Case conceptual flow sheet was developed from the Nagrom testwork based on a beneficiation circuit with unit operations that are conventional and well proven in industry. A circuit comprising feeder and trommel, desliming, classification, gravity, milling, flotation, drying, screening and bagging was considered.
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Figure 10 – Graphite Plant Overall Process Flow Diagram (Battery Limits 2016)
The previous test work resulted in several flake size distributions and review of the historical test work by Battery Limits has found that the flow sheet has not yet been optimised. Battery Limits concluded that the Munglinup Project is a high-grade graphite project that provides the opportunity to establish a viable graphite operation. They did not identify any fatal flaws in the Project and suggested that downstream processing such as producing spherical graphite or graphene could be considered to value add to the Project.
Table 6 –Munglinup flake size distributions from historical testwork
| Flake Graphite Size Distribution |
Micron | Mesh | Nagrom Test work (conserv.) |
Median (balanced) |
Gwalia Feasibility Study (aggres.) |
|---|---|---|---|---|---|
| - Jumbo - Large - Medium - Small - Fine |
+300 +180, -300 +150, -180 +75, -150 -75 |
+48 +80 +100 -100 -200 |
10% 30% 10% 25% 25% |
26% 24% 8% 20% 22% |
35% 24% 8% 16% 17% |
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Infrastructure and Logistics
The process plant and infrastructure will consist of:
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Raw water and process water dams
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ROM pad with a 45,000lcm capacity
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Mining contractors workshop and offices
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Tailings dam
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Water supply bores
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Access roads within the plant and the project site
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Auxiliary items including power supply (generators), water treatment & waste treatment plants
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Process plant complete with complementary equipment and office facilities.
Power will be supplied by owner-operated power station utilising 1-2 MW power plant operating generators running on diesel. Horizon Power is the operator of the local grid network in the Esperance area. Initial investigations suggest that the network may have capacity to supply the Project in the future subject to a detailed feasibility study. A 33kV line is located 4km from the Halberts Main deposit.
Water from bore fields has been used as the base case for the study. The plant will have a dedicated tails thickener and concentrate thickener. The overflow from both thickeners will gravitate to the process water pond for re-use within the process plant. A tailings storage facility (TSF) is included in the design with an initial capacity for 2 years with water recovered from the TSF via a tailings return decant system. After 2 years the production schedule allows for in pit dumping of tailings should it prove viable. Water demand is estimated to average 1 m[3] /t mill feed.
The graphite concentrate will be packed into one tonne bulk bags and then into 20 or 40ft containers for transportation. A road haulage contractor will be required for the operation to transport product to Esperance port, which has container storage and handling capabilities.
Environment and Community
The project lies entirely within ML74/245, a mining lease in the Esperance area granted on 26 August 2010 for a term of 21 years, expiring on 25 August 2031. There are no plaints of other applications currently registered with respect to the tenement and no native title claims. The tenement is in a Mining Reserve specifically set aside from agricultural release. The surrounding land use is primarily farmland.
Significant environmental assessment work has already been undertaken. A recent (2015), extensive flora and fauna baseline study was conducted by Ecologia over the mining lease and surrounding area. The Ecologia study concluded that no threatened flora were recorded in the area and three priority flora were recorded.
The assessment identified a total of 283 fauna species with the potential to occur at the study area. This includes 22 native and 2 introduced mammal species, 193 bird species, 45 reptiles, 15 amphibians and 6 fish species. Of these potential species, 46 are of conservation significance, comprising 7 mammal species, 38 bird species, and 1 reptile species. 17 conservation significant vertebrate fauna species were evaluated as
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having a medium or high likelihood of occurrence and 3 species of conservation significance were recorded during the field study.
A preliminary archaeological assessment of the area was undertaken in 1990 after information from the Western Australian Museum showed that there are no known significant sites in the Mining Lease area. No aboriginal sites were found, however areas within the mining lease, distal to the known mineralisation, were highlighted as potentially requiring additional detailed surveys should operations impact these areas in the future.
Graphite Market
The majority of current world demand for graphite (88%) is driven by industrial applications (steel making, refractories and lubricants) that are growing at around 3% pa. Within the industrial sector, new applications comprising expandable graphite, and specialist applications including micronized graphite and graphene, are leading to an increase in demand. Expandable graphite has multiple uses including flame retardant materials, graphite foil, graphite paper, and knitted tape (high temperature and fire resistance). The remaining usage comes from the high-tech sector of batteries that is experiencing very high growth rates and requires high purity product.
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Figure 11 – Graphite usage
It is estimated that the 2015 global natural flake graphite production was around 650kt with the majority of supply coming from Chinese domestic production. These operations, mainly located in the Shandong, Heilong and Jixi regions of China are usually small, of low grade and quality, and prone to poor environmental practices.
According to Benchmark Minerals, global production is estimated to have decreased by 45% since 2013, mainly due to the supply of marginal, lower quality Chinese amorphous production coming under pressure
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from influences such as increasing government intervention (i.e. closure of mines), and plateauing of demand from Chinese steel production.
General market consensus is that in the longer-term, expectations are for the natural flake graphite market to increase in size to around 1.1Mt by 2020, and to +2Mt by 2025, representing a CAGR of 16% (Canaccord Genuity). Supply is expected to increase to around 1.4Mt by 2020 and 2Mt by 2025 resulting in a short period of oversupply assuming natural coarse flake graphite projects currently in the development pipeline are delivered on time.
Of the 21 graphite projects globally (ex-China) at various levels of development and project feasibility, 8 are located in Tanzania and Mozambique. The largest and most advanced of these is Syrah Resources’ 340ktpa Balama project in Mozambique, which recently achieved first production. Collectively these projects represent a potential +1.15Mtpa of natural graphite production, requiring more than US$2.6bn in capital (Canaccord Genuity).
Should a number of these projects not be brought into production as anticipated prior to the ongoing issues around mining regulation, it is likely the coarse flake graphite market will be in undersupply shortly, having a positive impact on graphite pricing.
Recent graphite pricing is already increasing with the Benchmark Flake Graphite Price Index up 16% in August 2017 off the back of China’s tightening of environmental regulation. This is the highest level since June 2015 and there is an acceptance across the market that sharp increases are likely to continue in the short-term (Benchmark Mineral Intelligence).
Project Economics
Estimated capital costs were developed by Battery Limits for a 325ktpa throughput case in 2016. These figures were increase proportionally using the 6/10 rule to estimate 400ktpa throughput then escalated (1.5%).
**Table 7 – Munglinup Project Capital Costs Estimate Summary ***
| Munglinup Graphite Project | Units | Estimated Value |
|---|---|---|
| Capital Cost Breakdown | ||
| Studies and Pre-Development | AUD$M | 2.7 |
| Process Plant | AUD$M | 19.6 |
| Site Infrastructure | AUD$M | 16.4 |
| EPCM | AUD$M | 5.4 |
| Owner's Costs | AUD$M | 3.0 |
| Total | AUD$M | 47.1 |
- Some discrepancies in totals may occur due to rounding of numbers.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Estimated operating costs were developed by Battery Limits and from indicative numbers provided by potential contractors and suppliers. Costs assume contract mining. Provision has been made for transport to/from Ravensthorpe and Esperance for local employees. A large proportion of the commercial functions will be located at the Perth office to reduce on site manning.
Potential exists to reduce water useage costs with a groundwater source drilling program soon to commence on site. The current model assumes pumping water from a proven bore field 22kms away. Scope also exists to increase water recycling within the process plant and tailings systems.
**Table 8 – Munglinup Project Operating Costs Estimate Summary ***
| Munglinup Graphite Project | Units | Estimated Value |
Units | Estimated Value AUD |
Estimated Value USD |
|---|---|---|---|---|---|
| Operating Cost Breakdown | |||||
| Mining Cost | AUD$/t | 7.2 | $/t conc | 235 | 176 |
| Processing Cost (inc power and bagging) | AUD$/t ore | 28.4 | $/t conc | 216 | 162 |
| Logistics (FOB) | AUD$/t conc. | 32.6 | $/t conc | 33 | 24 |
| General and Administrative | AUD$/t ore | 5.9 | $/t conc | 46 | 34 |
| Total | $/t conc | 528 | 396 |
- Some discrepancies in totals may occur due to rounding of numbers.
For the purposes of financial modelling a range of graphite pricing profiles were developed. Historical pricing was examined to generate 10-year lows, industry market professionals were consulted, and peer company studies were assessed. These inputs along with flake size distribution estimations were used to undertake a range analysis of the financial model outcomes.
A discount rate of 8% was used in the financial model.
Table 9 – Basket Pricing Matrix used in the Munglinup Scoping Study
| Basket Price Matrix (USD$/t FOB) | Basket Price Matrix (USD$/t FOB) |
|---|---|
| Graphite Pricing \ Flake Distribution | Conservative Balanced Aggressive |
| Low - 10 year pricing low Mid - Canaccord Long Term Average High - Peer Company Average |
675 819 918 912 1,092 1,218 1,253 1,489 1,681 |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
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Table 10 – Indicative NPV and IRR (post tax) ranges from the Munglinup Scoping Study
| Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR | Indicative NPV (AUD$M) / IRR |
|---|---|---|---|
| Graphite Pricing \ Flake Distribution | NPV IRR Conservative |
NPV IRR Balanced |
NPV IRR Aggressive |
| Low - 10 Year Pricing Low Mid - Canaccord Long Term Average High - Peer Company Average |
$38M 26% $102M 50% $193M 81% |
$77M 41% $150M 67% $257M 100% |
$106M 52% $187M 79% $313M 117% |
Sensitivity analysis of the net present value as expressed in post-tax Australian dollars was undertaken on 29 individual inputs to the financial model. All variables included were flexed +/-25%. Of these, the 12 variables with the largest impact to the project NPV is presented in the charts below. The sensitivity analysis was done using a fixed flake size distribution (Balanced distribution) and the Mid (Canaccord long term average) graphite pricing. Flake size distribution was not included as a variable in the sensitivity analysis, only in the range analysis presented above.
==> picture [464 x 285] intentionally omitted <==
Figure 12 – Tornado Chart of top 12 variables by impact on NPV
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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To achieve the range of outcomes indicated in the Scoping Study, funding of up to AUD$40 million will likely be required for capital works, pre-production operating costs and contingency. It is anticipated that the finance will be sourced through a combination of equity and debt instruments from existing shareholders, new equity investment and debt providers from Australia and overseas.
The Company has sufficient cash on hand at the date of this announcement to undertake all requirements leading to the delivery of a feasibility study, complete further payments to take ownership of the project to 90%, and subject to future cashflows finance pre-production activities (including purchase of long lead items) and early works.
MRC believes that there is a reasonable basis to assume that funding will be available to complete all necessary activities to commence production on the following basis:
-
The Board and executive team have a strong track record in developing resources projects;
-
The Company has a proven ability to attract new capital and fund projects such as the Tormin mobile fleet and GSP expansion; and
-
The Board believes this Scoping Study demonstrates the project’s strong potential to deliver favourable economic returns.
The Company has flexibility via multiple options for financing the development of the project. These include the use of existing cash reserves, future cashflow from current operations, equity from the Company’s primary shareholder base, which has been supportive of all projects developed to date, and/or a mix of debt finance from external institutions and/or marketing offtake finance.
Preliminary Schedule
A Project development schedule has been developed with a view to accelerating all activities required to commence production. Due to the strong cash position MRC enjoys, the Company believes it can commit to an aggressive Project development schedule targeting first production in Q1, 2019.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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Figure 13 – Indicative high-level project schedule
This report may contain forward-looking statements. Any forward-looking statements reflect management’s current beliefs based on information currently available to management and are based on what management believes to be reasonable assumptions. It should be noted that a number of factors could cause actual results, or expectations to differ materially from the results expressed or implied in the forward-looking statements.
- ENDS -
For enquires regarding this release please contact: Peter Torre – Company Secretary Ph +61 8 6253 1100
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
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Competent Persons Statements
The Mineral Resource referred to and used in this report was prepared by Adriaan du Toit who is a member of the Australian Institute of Mining and Metallurgy (AusIMM) and who is an independent consultant to Gold Terrace. Mr du Toit is the Director and Principal Geologist of AEMCO Pty Ltd. He has over 25 years of exploration and mining experience in a variety of mineral deposits and styles. Mr du Toit has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined by the 2012 JORC Edition. The information from Mr du Toit was prepared under the JORC Code 2012 Edition. Mr du Toit consents to inclusion in the report of the matters based on this information in the form and context in which it appears.
The information in this document that relates to mine design and mine plan scheduling is based on information complied and reviewed by Mr Daniel Hastings, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Hastings is an employee of Hastings Bell Pty Ltd and a consultant to the Company. Mr Hastings has sufficient experience relevant to the type of deposit under consideration to qualify as a Competent Person as defined by the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition). Mr Hastings consents to the inclusion in the report of the matters based on the reviewed information in the form and context in which it appears.
The information in this document that relates to metallurgy, the process plant and infrastructure design for a Scoping Study level assessment is based on information compiled and reviewed by Mr David Pass, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Pass is an employee of Battery Limits. Mr Pass has sufficient experience relevant to process plant and infrastructure design thereof to qualify as a Competent Person as defined by the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition). Mr Pass consents to the inclusion in the report of the matters based on the reviewed information in the form and context in which it appears.
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
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Munglinup Summary of Modifying Factors and Material Assumptions
Material assumptions used in the estimation of the production target and associated financial information are set out in the following table.
| Criteria | Commentary |
|---|---|
| Mineral Resource | •The Mineral Resource as previously reported by MRC (11thSeptember 2017) |
| estimate for conversion to Ore Reserves |
was provided by AEMCO. Mr. Adriaan du Toit is the Mineral Resources Competent Person for the purposes of the Mineral Resource Estimate as defined and in accordance with the JORC Code 2012. |
| •The Resource Model is an implicit Leapfrog Model which was regularized and | |
| exported from Leapfrog. Block sizes of 10m x 10m x 8m and 5m x 5m x 4m | |
| were assessed for appropriateness and similarity to the reported Mineral | |
| Resource. The 5m x 5m x 4m exported block model was used for optimisation | |
| and mine planning purposes. | |
| •The Mineral Resources are reported inclusive of the Production Target. | |
| Site visits | •A site visit was undertaken on the 19thOctober 2017. The nearby Towns of |
| Ravensthorpe and Esperance were also visited to assess regional | |
| infrastructure and support capabilities. Historical core from the site was also | |
| examined by the CP prior to the site visit. | |
| •Surface mineralisation was examined along with locating of previous drill | |
| collars. Access and exploration of possible mining issues were assessed | |
| along with a general geographic overview of the area. | |
| Study status | •This study is assessed as being at a Scoping Level. |
| •Historical study work on the Munglinup Deposit is extensive. Review of the | |
| previous studies resulted in the assessment that all areas of study except for | |
| pit optimisation and scheduling, and processing are of a Pre-Feasibility (PFS) | |
| standard or in some cases such as environmental studies, better. This study | |
| primarily addresses the pit optimisation and scheduling short falls, collates the | |
| historical data and provides financial modelling. | |
| •A large amount of metallurgical testwork has been done previously however | |
| it is suggested that this work has not been sufficiently optimised to warrant a | |
| recommended process route / flow sheet. A more comprehensive | |
| metallurgical test work program has commenced and is planned to be | |
| completed in the coming months. | |
| •The historical metallurgical test work does show that a minimum level of | |
| recovery and concentrate grade can be obtained with confidence. These | |
| historical metallurgical studies have been used at this stage as the modifying | |
| factors to inform the Production Target. | |
| Cut-off parameters | •A comprehensive Financial Model was constructed using inputs from previous |
| studies, quotes obtained from potential contractors and suppliers, and | |
| benchmark data sourced from engineering firms. These inputs were then | |
| used to estimate a cashflow for each block based primarily on the estimated | |
| TGC %. The cashflow model was converted to a Python script and executed | |
| on the regularized block model in the General Mine Planning software | |
| (“GMP”). | |
| •Blocks where the cashflow is positive are designated ore and negative blocks | |
| designated waste. | |
| Mining factors or | •The Mineral Resource regularized block model was coded for cashflow and |
| assumptions | other items in the GMP (MineSight) and then exported to Whittle 4x for optimisation. The model was validated by a number of means including |
| comparison to the reported Mineral Resource at each step to ensure the | |
| integrity ofthemodel. The appropriate pit shell was selected alongwithany |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
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| Criteria | Commentary |
|---|---|
| push backs (if required) and exported back to the GMP. No detailed pit design | |
| was undertaken at this stage, only the Whittle generated pits were used to | |
| report the Production Target as it is assumed the Mineral Resource Model will | |
| be updated within the next 6 months to include planned additional drilling. | |
| •The deposit is a small, oxidized, high grade Graphite deposit. The planned | |
| mining method is conventional open pit truck and shovel using small, 60t to | |
| 80t excavators (Komatsu PC600 or equivalent) and 40t all terrain dump trucks | |
| (Caterpillar 740 or equivalent). The model assumes contract mining at this | |
| stage however owner / operator will be assessed at a later stage. | |
| Mineralisation extends to surface so only limited pioneering and soil collection | |
| works are required. There is essentially no pre-strip. Likewise, the high-grade | |
| nature of the deposit results in it being insensitive to strip ratio. Access to the | |
| area is straight forward with council maintained roads available to within 2 | |
| kilometers of the mining area. The topography is gently undulating rises and | |
| it is anticipated that no significant issues associated with mining are likely. | |
| •Historical work included a systematic examination of drill core to assess the | |
| requirement for drill and blast during mining and to assess open pit stability. | |
| The examination was based largely on RQD parameters and concluded that | |
| drill/blast of the ore zone was unlikely to be necessary or desirable. Drill and | |
| blast of the west wall gneiss may however be required at depth. | |
| •In terms of overall pit slopes, those chosen for Halbert's Main Pit (the largest | |
| pit by far) are reasonably conservative by comparison with similar depth pits | |
| in oxidized rock elsewhere in Western Australia. The west wall (footwall) | |
| which includes the haul ramp, slopes 38° overall, whereas the east wall is | |
| steeper at 45° overall slope angle. | |
| •Given the high-grade of the deposit and mode of mineralisation, mining | |
| dilution was set at 5%. | |
| •Likewise, given the high-grades and mode of mineralisation, mining loss was | |
| set at 2%. | |
| •No minimum mining widths were set during the optimisation and staging of | |
| pushbacks. Only Halberts Main is large enough for the optimisation to result | |
| in pushbacks. The pushbacks chosen were assessed for mining | |
| implementation including mining width, vertical advance rate and stage lag. | |
| In all cases no significant issues were found. | |
| •Inferred Mineral Resources were not used in this mining study. | |
| •Infrastructure requirements for the selected mining method are minimal. | |
| Planned maximum annual total material movement is 3 million tonnes with | |
| average movement of around 2 million tonnes. This level of mining activity is | |
| minor and will only require the most basic of infrastructure such as a small | |
| workshop, office, crib and ablution block and equipment hard stand. The | |
| mining operation will require stockpiling capacity to a maximum of 340kt, | |
| waste dumps and a tailings storage facility assuming the final pits cannot be | |
| utilised for tailings storage once completed. | |
| Metallurgical factors or | •The metallurgical process proposed is a combination of gravity and flotation. |
| assumptions | Both these methods are standard processing methods for graphite flake deposits. |
| •Gravity and flotation technology is well tested and understood. | |
| •Significant previous metallurgical testwork has been undertaken. Early tests | |
| achieved an average of 85% C in con at 95% recovery, with rougher float | |
| followed by 5 stages of cleaning on mixed (un-sized) ore. Later tests focused | |
| just on rougher flotation in +300micron, and +150/-300micron size ranges. | |
| Excellent recoveries of +150micron material (~98%) at relatively low con | |
| grades (~60%C) was seen. Reasonable recoveries of +300micron material | |
| was seen at higher cons grades. These tests however left significant graphite | |
| inthe oversize/undersize and artificiallyinflated the graphite gradeintarget |
Telephone: +61 8 6253 1100
39 – 43 Murray Road North WELSHPOOL Western Australia 6106
Fax: +61 8 9258 3601
PO Box 235 WELSHPOOL DC WA 6986
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| Criteria | Commentary | |
|---|---|---|
| size ranges to more than 30%. | ||
| • | Overall, more than 20 specific metallurgical studies were undertaken on the | |
| Munglinup Graphite mineralisation, predominantly in the late 1980’s and early | ||
| 1990’s. This testwork culminated in the release of a Feasibility Study by | ||
| Gwalia Minerals in 1991. | ||
| • | In 2011, Graphite Australia commissioned Nagrom to undertake various | |
| metallurgical tests on a 2t bulk sample. As a result of this test work, a | ||
| conceptual flow sheet was developed based on a beneficiation circuit with unit | ||
| operations that are conventional and well proven in the industry. A circuit | ||
| comprising feeder and trommel, desliming, classification, gravity, milling, | ||
| flotation, drying, screening and bagging was considered. This forms the base | ||
| case for this study. This flow sheet and historical data was reviewed by | ||
| Battery Limits and deemed reasonable however further optimisation is | ||
| possible and additional metallurgical testwork is being undertaken to address | ||
| this. | ||
| • | No specific allowances have been made for deleterious elements. Any non- | |
| graphite material that reports to the graphite concentrate is deemed to be | ||
| dilutionary in nature only and does not attract any specific penalties beyond | ||
| the reduction in concentrate price based on the graphite concentrate purity as | ||
| is standard in the industry. | ||
| • | An 8t bulk sample was extracted from the Halberts Main deposit to be used | |
| for metallurgical test work undertaken by Nagrom in 2011. This sample does | ||
| include material from the three mineralisation types. The sample has | ||
| ultimately been deemed only partially representative as it does not include | ||
| material from depth. Future metallurgical testwork is utilising a master | ||
| composite derived from historical drilling core and that has been selected to | ||
| provide high representivity of the deposit. | ||
| • | Both historical and recent work has been done on the mineralogy of the | |
| deposit. The latest petrographical study was conducted on 12 samples from | ||
| drill core that are representative of the deposit. The petrographical nature of | ||
| the graphite mineralisation at Munglinup is well understood and shows that | ||
| the final product will be able to meet the required specifications | ||
| mineralogically. | ||
| Environmental | • | Significant environmental assessment work has been undertaken. A recent |
| (Ecologia, March 2015), extensive flora and fauna baseline study was | ||
| undertaken by ecologia over the region. Various sites have been identified | ||
| as possible waste dumps and tailings dams however no detailed design has | ||
| been undertaken at this stage. It is likely that given the mining schedule, there | ||
| will be pits available for back fill. Additional drilling soon to commence will | ||
| provide information on the potential for additional mineralisation and sterilize | ||
| areas identified for material storage. The deposit lies entirely within a granted | ||
| mining lease and information from the DMP/DMIRS suggests that only limited | ||
| additional information will be required to proceed with operations. | ||
| Infrastructure | • | The mining lease is currently devoid of any structures or buildings. Access to |
| the site from Munglinup township, 4km to the south, is by gravel road either | ||
| from the west across the Munglinup River or by station tracks from the east. | ||
| Both access roads are in need of an upgrade. | ||
| • | Munglinup is on the gas / diesel powered Esperance S.E.C. grid (35MW | |
| capacity) and is serviced by land line STD phone system. Current power | ||
| demand is below capacity, and should the operation connect to the grid | ||
| sufficient capacity exists. | ||
| • | Esperance, 105km to the east, is served by daily scheduled passenger flights | |
| from Perth and has a port capable of container and bulk handling. Additional | ||
| capacity exists at the port. |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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| Criteria | Commentary |
|---|---|
| •With the recent closure of the Ravensthorpe Nickel Mine, 42kms to the west, | |
| a sufficient local labour pool exists. | |
| •Generally, the project benefits from excellent infrastructure requiring only | |
| minimal additional expenditure. | |
| •Historical groundwater studies conducted in 1990 identified the Cowerup | |
| location 22 kilometers south of the Munglinup area as being able to provide | |
| suitable quantities of processing water. The economic model includes capital | |
| and operating costs based on construction of a bore field at Cowerup and | |
| pumping water up to Munglinup. | |
| Costs | •Project capital costs have been compiled by Battery Limits based on a high |
| level preliminary process concept, for the design, supply, fabrication, | |
| construction and commissioning of the process plant facility. The process | |
| design criteria and high-level process flowsheet underlie the basis of this | |
| estimate. The estimate incorporates direct costs and indirect costs and also | |
| contains estimates for project infrastructure. | |
| •The estimate has been prepared as a factored estimate based upon supplied | |
| cost of equipment from current in-house data from recent projects and | |
| industry standard estimating factors and excludes working capital, sustaining | |
| capital, financing costs, relocation and resettlement costs, rehabilitation and | |
| closure costs. A project contingency allowance has been applied to the | |
| estimate. | |
| •The capital cost estimates are in A$ with a base date of Q1 2016 to a nominal | |
| accuracy of +/-35%. An allowance of 1.5% was included for escalation in the | |
| updated financial model. A contingency of 18% was included in the capital | |
| cost estimated. EPCM costs were estimated at 15%. | |
| •Financial modelling of the project has been undertaken on a 100% equity | |
| funding basis. | |
| •The mining operating cost was derived from contractor quotes. The | |
| processing operating cost estimate is based on an annual operating schedule | |
| of 24 hours per day, seven days per week with a milling operating time of | |
| 91%. The operating post estimate is presented on an annualised basis. An | |
| allowance for initial ramp-up periods has been applied. Industry standards, | |
| information from the operating cost database and information from the | |
| process design criteria underlie the basis of the processing cost estimate. The | |
| operating cost estimates are in A$ with a base date of Q1 2016 to a nominal | |
| accuracy of +/-30%. An allowance of 1.5% was included for escalation and | |
| 1.8% for inflation in the updated financial model. | |
| •Infrastructure, G & A, corporate overheads and marketing costs have also | |
| been estimated in the financial model. | |
| •The AUD/USD exchange rate used is based on recent rates and market long | |
| term projections. | |
| •Transport charges were estimated based on discussions with various | |
| contractors and benchmarked against other operations. | |
| •Product pricing used comes from Benchmark Mineral Intelligence estimates | |
| and assumes FOB. | |
| •A government royalty of 5% and a surviving royalty to Adelaide Prospecting | |
| Pty Ltd of 2% was included in the financial model. | |
| Revenue factors | •Revenue from the project is derived from the sale of Graphite Concentrates. |
| Previous testwork has produced significant test concentrate that has been | |
| assessed by various parties. It was established that the Munglinup | |
| concentrate, if produced to a minimum of 94% graphite in concentrate can | |
| expect to receive premium or near premium pricing levels. | |
| •Concentrate flake size distribution has been assessed using data from | |
| historicaltestworkto develop a conservative, balanced and aggressive |
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Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601
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| Criteria | Commentary | |
|---|---|---|
| distribution. These distributions are; | ||
| Gwalia | ||
| Flake Graphite Size Distribution Micron Mesh Nagrom Test work (conserv.) Median (balanced) Feasibility Study (aggres.) |
||
| - Jumbo +300 +48 10% 26% 35% |
||
| - Large +180, -300 +80 30% 24% 24% |
||
| - Medium +150, -180 +100 10% 8% 8% |
||
| - Small +75, -150 -100 25% 20% 16% |
||
| - Fine -75 -200 25% 22% 17% |
||
| •Head grade delivered to the processing plant was derived from the underlying | ||
| block model. An average recovery was used based on previous metallurgical | ||
| testwork. | ||
| •Graphite pricing in the model is FOB. | ||
| •Testwork to date shows that there are no by-products, co-products or | ||
| deleterious elements in the concentrate. | ||
| Market assessment | •The majority of current world demand for graphite (>80%) is driven by | |
| industrial applications (steel making, refractories and lubricants) that are | ||
| growing at around 3% per annum. Within the industrial sector, lithium ion | ||
| batteries represent a potential high growth area due to the impact of electric | ||
| vehicles and grid power storage. Other new applications comprising | ||
| expandable graphite (flame retardant materials, graphite foil, graphite paper, | ||
| knitted tape), and specialist applications (micronised graphite, and graphene) | ||
| are leading to an increase in demand. | ||
| •The natural flake graphite market focused on batteries is fragmented and | ||
| immature. China is the dominant supplier and likely the dominant battery end | ||
| user at present. China produces 70 to 80% of the world’s graphite supply. | ||
| Approximately 70% of Chinese production is fine or amorphous graphite while | ||
| 30% is flake. China does produce some large flake graphite, but the majority | ||
| of its flake graphite production is very small in the +200 mesh range. | ||
| • Standard product specifications comprise the total graphitic carbon grade | ||
| which must generally exceed 90 to 94% TGC to be saleable and the | ||
| distribution of flake size – with the minimum saleable specification generally | ||
| being “Fine”. | ||
| Economic | •The Production Target estimate is supported by a financial model that has | |
| been prepared to a Scoping Study level. The model covers the current 9-year | ||
| life of the Project. The key economic inputs comprise: | ||
| Financial Inputs Value |
||
| Inflation Rate 1.8% |
||
| Escalation Rate 1.5% |
||
| Discount Rate 8.0% |
||
| Corporate Tax Rate 30.0% |
||
| State Royalty Rate 5.0% |
||
| APPL Royalty Rate 2.0% |
||
| Corporate Overheads 5.0% |
||
| •All major cost inputs have been supplied by contractors, suppliers and from | ||
| databasesheld byindependent engineering consultants. Itis suggested that |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
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| Criteria | Commentary | ||
|---|---|---|---|
| although robust, insufficient specific costings and product pricing results in the | |||
| study being characterized as Scoping level. | |||
| • | Sensitivity analysis undertaken on 29 input variables including; exchange | ||
| rate, recovery, commodity price, and, various individual inputs to operating | |||
| costs and capital costs. | |||
| • | The base case NPV is A$150 million and the following chart presents resultant | ||
| NPV when the top 12 inputs with respect to impact are varied by +/- 25%; | |||
| Social | • | ML74/245 is a mining lease in the Esperance area granted on 26 August 2010 | |
| fora termof 21years, expiring on 25August2031. |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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| Criteria | Commentary |
|---|---|
| •There are no plaints of other applications currently registered with respect to | |
| the tenement and no native title claims. | |
| •The tenement is in a Mining Reserve specifically set aside from agricultural | |
| release. The surrounding land use is primarily farmland. Proximal to mining | |
| lease 74/245 are reserves set aside for timber, recreation, water supply, | |
| parklands (recreation) and rubbish disposal. | |
| •A preliminary archaeological assessment of the area was undertaken in 1990 | |
| after information from the Western Australian Museum showed that there are | |
| no known significant sites in the Mining Lease area. No aboriginal sites were | |
| found however areas within the Mining Lease, distal to the known | |
| mineralisation, were highlighted as potentially requiring additional detailed | |
| surveys should operations impact these areas in the future. | |
| Other | •The Company will be required to submit a comprehensive Mining Proposal to |
| the DMP/DMIRS for assessment of potential environmental impacts and the | |
| environmental management of a proposed mining operation. | |
| •As there is a Mining Lease in place no economic evaluation or justification is | |
| required. | |
| •The DMIRS will assess the proposal and may decide the Project could result | |
| in a significant impact on the environment and require referral to the | |
| Environmental Protection Authority (EPA) for a full environmental impact | |
| assessment. However, the relatively small scale of the proposed graphite | |
| project may result in the Proposal being assessed internally with consultation | |
| from the EPA and other stakeholders, if required. If approved, the Mining | |
| Proposal will be used to determine the environmental conditions for the | |
| Project. | |
| •Sufficient baseline information in respect to flora, fauna, surface water, | |
| groundwater, soils and landforms of the Project area will be key to the | |
| assessment of potential environmental impacts undertaken by the regulators. | |
| The baseline flora and fauna assessment has already been completed. A | |
| drilling program has been developed for execution as soon as a suitable | |
| contractor can be sourced. The drilling program includes allowances for | |
| assessment of groundwater and local hydrogeology. | |
| Classification | •Resources were classified in accordance with the Australasian Code for the |
| Reporting of Exploration Results, Mineral Resources and Ore Reserves | |
| (JORC Code, 2012 Edition). | |
| •The current Mineral Resource classifies mineralisation at Halberts Main as | |
| both Measured and Indicated while all other areas are Indicated only. | |
| •A review of the drill data, lab results, continuity of the mineralization and the | |
| drill spacing allowed the current resource to be classified as Indicated and | |
| Measured. | |
| •A conservative modelling approach was used to be able to classify part of the | |
| Halberts Main zone into measured with an interpolation search radius limited | |
| to 50m on a 50 x 20m drill grid. No extrapolation of the resource were done | |
| past this distance. No mineralization with intersections less than 1m were | |
| used in the resource determination and all waste or non-sampled zones | |
| thicker than 1m was classified to be located outside the mineralized zone. | |
| •The Production Target only utilised Measured and Indicated Mineral | |
| Resources and reconciles well with the reported Mineral Resource. No | |
| additional inferred material or exploration results of targets were used in the | |
| estimation of the Production Target. | |
| Audits or reviews | •Internal reviews of the optimisation and scheduling methodology and |
| estimates have been done. An independent audit of the next phase of study | |
| will be undertaken during, and once the next study is finalised. |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601
PO Box 235 WELSHPOOL DC WA 6986
Email: [email protected]
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MINERAL COMMODITIES LTD ABN 39 008 478 653 Email: [email protected] Web: www.mncom.com.au
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| Criteria | Commentary |
|---|---|
| Discussion of relative | •A degree of uncertainty is associated with the geological and Mineral |
| accuracy/ confidence | Resource estimates and classification. The Production Target also reflects the level of confidence in the Mineral Resources. The Mineral Resource |
| model is an implicit model that has been translated to a conventional, | |
| regularized block model for optimisation and mine planning purposes. Any | |
| conversion of this type, of a geological model will introduce minor | |
| inconsistencies due to the change estimation and reporting methodology. At | |
| all stages the model was reconciled back to the previous model to ensure any | |
| variability was understood and acceptable. | |
| •The design, schedule and financial model on which the Production Target is | |
| based has been completed to a Scoping Study standard with a corresponding | |
| level of confidence (suggested +/- 35%). Optimisation of the process route | |
| and comprehensive variability test work is still required to be undertaken and | |
| may prove to require significant changes to the current flow sheet however | |
| the current flow sheet is proven and supported by significant test work albeit | |
| less than optimal. To account for this lack of optimisation the financial model | |
| has assume conservative recovery estimates from historical test work. | |
| •There is a degree of uncertainty regarding estimates of modifying mining | |
| factors, geotechnical and processing parameters that are of a confidence | |
| level reflected in the level of the study (Scoping). The Competent Person is | |
| satisfied that a suitable margin exists that the Production Target estimate | |
| would remain economically viable with any negative impacts applied to these | |
| factors or parameters. | |
| •There is a degree of uncertainty in the commodity price used, however, the | |
| Competent Person is satisfied that the assumptions used to determine the | |
| economic viability of the Production Target are based on reasonable current | |
| data. |
39 – 43 Murray Road North WELSHPOOL Western Australia 6106 PO Box 235 WELSHPOOL DC WA 6986
Telephone: +61 8 6253 1100 Fax: +61 8 9258 3601 Email: [email protected]
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