Montero Reports Positive Preliminary Economic Assessment at the Duyker Eiland Phosphate Project, South Africa
February 28 2012 - 7:00AM
Marketwired Canada
Montero Mining and Exploration Ltd. (TSX VENTURE:MON) ("Montero") announces the
results of an initial NI 43-101 compliant Preliminary Economic Assessment
("PEA") of its sedimentary phosphate Duyker Eiland Project located 30 kilometers
north of the Port of Saldanha, in the Western Cape Province of South Africa.
The PEA is based on an initial Inferred Mineral Resource of 32.8 million tonnes,
grading at 7.15% P2O5, as previously reported following an independent resource
estimate prepared by AMEC Earth & Environmental (UK) Limited. Preliminary
metallurgical test work indicated that an acid-grade phosphate concentrate of
33% P2O5to 35% P2O5 (72.1% BPL to 76.5% BPL) can be produced by flotation. (See
News Release dated 14/12/2011). The independent PEA was conducted by Turgis
Consulting (Pty) Ltd. (Turgis) who will also submit the NI 43-101 compliant
report on SEDAR within 45 days. The PEA is preliminary in nature as it includes
Inferred Mineral Resources which are considered too speculative geologically to
have the economic considerations applied to them that would enable them to be
categorized as "Mineral Reserves". There is no certainty that the PEA will be
realized as Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
Dr. Tony Harwood, President and Chief Executive Officer of Montero commented,
"We are pleased the results of the PEA on the initial Inferred NI 43-101 Mineral
Resource at Duyker Eiland has returned such robust economics with a NPV of CAD$
150 million with a 10% discount rate. Montero is in discussions with a number of
parties interested in commercializing our phosphate assets. Montero remains
committed to establishing early production on our flagship Wigu Hill Rare-Earth
Project in Tanzania while seeking partners to develop our phosphate assets."
Highlights of the PEA
-- A NPV of CAD$ 150 million (at a discount rate of 10%) and an IRR of 41%
-- Average 4.5 million tonnes per annum rock mined at low stripping ratios
of 0.57:1
-- Average production of 490,000 tonnes per annum of 33% P2O5concentrate
-- 11 year Life of Mine (based on initial resource estimate)
-- Operating cash costs CAD$ 99 per tonne concentrate Free alongside Ship
("FAS") Port of Saldanha, South Africa
-- Capital costs of CAD$ 129 million
-- Opportunities to increase value of project through production of
fertilizers
Summary of the Project Economics
The PEA indicates that the project is expected to generate robust financial
returns. All figures are presented pre-tax and before South African royalty
deductions. All costs were estimated locally in South African Rand (ZAR) and
converted to Canadian Dollars (CAD$) for reporting purposes. The average
exchange rate for CAD/ZAR is based on a 12 month average from 01/02/11 to
31/01/12 (source: historical interbank rate at www.oanda.com). All revenues were
estimated in USD and converted to ZAR. The average exchange rate for USD/ZAR is
based on a 12 month average from 01/02/11 to 31/01/12 (source: historical
interbank rate at www.oanda.com). The results and assumptions for the economic
analysis are as follows:
----------------------------------------------------------------------------
Economic Analysis using ZAR/CAD exchange rate: 7.38 and ZAR/USD exchange
rate: 7.33
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NPV CAD $150 Million
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IRR 41%
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Discount Rate 10%
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Total Capex CAD$ 129 Million
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Total Opex per tonne of 33% P2O5 concentrate Free USD$ 100 or
Alongside Ship ("FAS") Port of Saldanha: CAD$ 99
----------------------------------------------------------------------------
Estimated 33% P2O5 Concentrate Price FAS Port of Saldanha: USD$ 188
----------------------------------------------------------------------------
Price
The concentrate price was based on rock phosphate prices published by the World
Bank. USD$ 188 per tonne is the 12 month average price of contract 70% BPL
concentrate FAS Casablanca, Morocco between February 2011 and January 2012. The
product concentration expected from Duyker Eiland is between 72% BPL to 76.5%
BPL.
Sensitivity to price was investigated at reduced product prices. At a reduction
in product revenue per tonne of 15% (USD$ 160) the project still demonstrates
robust returns with an IRR of 27%. Currently, 70% BPL rock phosphate FAS
Casablanca is published by the World Bank at USD$ 202 per tonne (January 2012).
Operating Costs
Infrastructure operating costs and mining costs were estimated from the Turgis
cost database and the latter confirmed by comparison with costs supplied by a
local mining contractor. Power and water consumption were estimated from
experience and work carried out in the experimental flotation tests with costs
estimated from South African utility rates and escalated based on expected
increases in these rates. Reagent consumption was calculated from the flotation
tests, a reagent suite based on a fatty acid combination was selected and costs
obtained from a local supplier. Owners costs comprised largely of labour was
estimated from the generation of a labour compliment with standard industry
labour rates applied. Maintenance spares and other auxiliary costs were factored
from industrial experience. Transport and logistics costs which include
transport to port, warehousing at port and transport to wharf alongside ship
(FAS) were calculated based on a budget quote received from local transport
company.
A 20% contingency was included in these estimates resulting in concentrate cost
FAS Port of Saldanha of CAD$ 99 per tonne. It was estimated that port and
loading costs (Free on Board or "FOB") would cost less than CAD$ 10 per tonne of
concentrate.
Capital Costs
Capital costs were estimated by undertaking conceptual level engineering to
define the plant and infrastructure requirements. Capital was then estimated for
these requirements based on: sizing equipment according to a developed flow
sheet and related mass balance; obtaining equipment cost from budget prices from
equipment suppliers and the Turgis cost data base; factoring the additional
direct costs and the indirect costs based on the total direct cost and according
to industrial experience.
The capital generated was then increased by various degrees for the following
categories: Engineering, Procurement and Construction Management at 15%,
Contingencies at 20%, and Ongoing Capital at 5%. Total capital costs for the
Project are estimated to be CAD$ 129 million.
NPV
Based on these assumptions a preliminary financial model indicates robust
project economics with a NPV of CAD$ 150 million. This figure does not include
expenditure required for exploration and engineering development during 2012 and
2013. Montero will continue to explore the possibility of production of other
higher-content phosphate fertilizers and other products to generate additional
returns for the Project.
Future Work
The next steps for the Duyker Eiland Phosphate Project will be to increase the
resource confidence and estimates and complete sampling to allow for detailed
characterization of the rock phosphate concentrates that may be produced. An
Environmental and Social scoping study may commence in preparation for
Pre-feasibility Studies and additional economic assessment may be commissioned
to examine the viability of a fertilizer plant investment in the area.
Qualified Person's Statement
Turgis is a Johannesburg based engineering consultancy, focused on the mining
industry, and has over 20 years of experience in engineering projects for mining
companies in Africa. The Turgis PEA team is headed by Sten Johansson (MSAIMM), a
Process Engineer and a qualified person for the purpose of National Instrument
43-101. Mr. Johansson has firsthand experience operating a phosphate
beneficiation plant at a phosphate mine that once operated 25 km from Duyker
Eiland. Andrew Pooley (FSAIMM) is a Mining Engineer and a qualified person for
the purpose of National Instrument 43-101 and will cover the mining aspects of
the PEA. Technical information contained in this press release has been reviewed
by Mr. Mike Evans, M.Sc. Pr.Sci.Nat., who is a qualified person for the purpose
of National Instrument 43-101 and a Consulting Geologist to Montero.
About Montero Mining & Exploration
Montero Mining and Exploration Ltd. is a mineral exploration and development
company engaged in the identification, acquisition, evaluation and exploration
of mineral properties primarily focused on rare earth elements (REE), but with
phosphates and uranium assets in Tanzania, South Africa and Quebec, Canada,
respectively. Montero is focused on adding value for all shareholders through
the acquisition and exploration on properties, which have the highest potential
for future discoveries or development of existing mineral resources into
mineable reserves. We remain engaged in the development of our flagship Wigu
Hill Rare Earth Element Project in Tanzania, which is a high-grade, undeveloped
Light Rare Earth Element deposit. The Company's current focus is on updating the
initial NI 43-101 Mineral Resource Estimate and advancing the
hydro-metallurgical testwork with Mintek. With the rising prices of REEs and
China's control over export quotas, it is becoming imperative that the rest of
the world develops new rare earth resources to meet the increasing demand from
"green" technology and high-tech applications.
Montero's growth strategy is to develop the Wigu Hill Rare Earth Element project
and to bring this to account through eventual rare earth production and cash
flow, while operating in an environmentally and socially responsible manner. We
will continue to add value through the development of our portfolio of
properties. Montero trades on the TSX Venture Exchange under the symbol MON.
Dr. Tony Harwood - President and CEO
CAUTIONARY STATEMENT: This News Release includes certain "forward-looking
statements". These statements are based on information currently available to
the Company and the Company provides no assurance that actual results will meet
management's expectations. Forward-looking statements include estimates and
statements that describe the Company's future plans, objectives or goals,
including words to the effect that the Company or management expects a stated
condition or result to occur. Forward-looking statements may be identified by
such terms as "believes", "anticipates", "expects", "estimates", "may", "could",
"would", "will", or "plan". Since forward-looking statements are based on
assumptions and address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results relating to, among
other things, results of exploration, project development, reclamation and
capital costs of the Company's mineral properties, and the Company's financial
condition and prospects, could differ materially from those currently
anticipated in such statements for many reasons such as: changes in general
economic conditions and conditions in the financial markets; changes in demand
and prices for minerals; litigation, legislative, environmental and other
judicial, regulatory, political and competitive developments; technological and
operational difficulties encountered in connection with the activities of the
Company; and other matters discussed in this news release. This list is not
exhaustive of the factors that may affect any of the Company's forward-looking
statements. These and other factors should be considered carefully and readers
should not place undue reliance on the Company's forward-looking statements. The
Company does not undertake to update any forward-looking statement that may be
made from time to time by the Company or on its behalf, except in accordance
with applicable securities laws.
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