80% increase to 900,000 tpa
June 06 2006 - 2:02AM
UK Regulatory
RNS Number:0857E
Oriel Resources PLC
06 June 2006
PRESS RELEASE
June 6, 2006
AIM: ORI
TSX: ORL
Oriel Resources plc
Expedited Development of Voskhod Chrome Project Continues on Schedule
Voskhod Feasibility Study Confirms
Sharply Increased Production and Dramatically Stronger Economics
--------------------------------------------------------------------------------
Oriel Resources Plc ('Oriel', or the 'Company') (AIM:ORI, TSX:ORL) is delighted
to announce the completion of the SRK Feasibility Study for its 100% owned
Voskhod Chrome Project, Kazakhstan.
The results of the Feasibility Study confirm management's decision to fast-track
development of the Voskhod Project and indicate significantly improved
production output and economic metrics as compared to the Preliminary Assessment
Study ('PAS') prepared by SRK Consulting (UK) Ltd ('SRK') in 2005 (see press
release dated 8 September 2005).
SRK's Feasibility Study Highlights:
*Increased annual production will place Voskhod in top 3 global suppliers
of high-grade chrome ore, a critical ingredient in the growing stainless
steel market.
+ *80% increase in average annual saleable chrome ore to 900,000 tonnes.
+ *Voskhod chrome ore is of very high grade; typically up to 48% Cr2O3
with up to 57% Cr2O3 grade concentrate anticipated to be readily
produced.
+ *Voskhod maintains a long mine life of 14 years, with potential to
extend life to over 20 years.
*Increase in CIM and NI 43-101 compliant Indicated and Inferred mineral
resources.
+ *Indicated resource of 19.51 million tonnes at 48.47% Cr2O3, being a
9.5% increase of contained chrome content over the PAS.
+ *Inferred resources of 1.57 million tonnes at 41.05% Cr2O3, being a
six-fold increase of contained chrome content over the PAS.
*Capital expenditure estimated at US$131 million, including 10%
contingency, VAT (recoverable) and import duties.
+---------------------+---------------------+---------------------+
| (100% Equity) | Pre-Tax | Post-Tax |
+---------------------+---------------------+---------------------+
| NPV | US$472 million | US$320 million |
+---------------------+---------------------+---------------------+
| IRR | 50% | 41% |
+---------------------+---------------------+---------------------+
+ *Endeavour Financial are advising on project finance options and is
confident that the Voskhod Project will support a debt facility of more
than US$100 million.
+ *Life of mine operation cash flow estimated at US$1.2 billion with
average annual cash flow of US$85 million.
*Extension to the Voskhod contract license area awarded, which includes
the Karaagash deposit which has Russian C2 and P1 classified resources of
some 7.8 million tonnes. These estimates have not yet been audited and do
not comply with NI 43-101 standards.
*Off-take demands for Voskhod ore from both ferrochrome plants and metal
traders in Russia, China and Western Europe have exceeded 1.7 million
tonnes.
*Further development of on-site infrastructure such as roads, rail and
power-supply allows for the security of independent, long-term production.
*Commencing Q2 2008, life of mine operating costs of US$20.80 per tonne of
run of mine (ROM) ore.
*SRK used a conservative ore price of US$145 per tonne in the Feasibility
Study financial model, whereas market expert, Heinz Pariser forecast a price
between US$154-US$224 (average US$183) per tonne through to 2015.
Executive Chairman, Dr Sergey V Kurzin commented:
"Results from the SRK feasibility study are extremely encouraging with an almost
100% increase in the mine's output from our initial studies. Heinz Pariser's
extremely positive market report shows growing ore demand especially in Asia
which, in conjunction with our own advanced negotiations with potential
off-takers, exceeded our initial expectations and this demand is significantly
greater than Voskhod's production output. This has resulted in the Company
decision to increase the output of saleable chrome ore product by 80%, therefore
considerably enhancing the project's economics."
"We have made excellent progress in a short space of time and will have the mine
in production in early 2008; only 3 years from acquisition. The development of
the road, rail and power-supply infrastructure, whilst increasing the capital
cost, will give us the security of independent and long-term production."
"Led by Endeavour Financial, we are in advanced negotiations with a number of
leading international banks on debt financing options. Endeavour is confident
that the project economics is sufficiently robust to support over US$100 million
of debt which, in addition to over US$30 million of Oriel's cash reserves,
provides the security the project financing requires."
Authors of the Feasibility Study
The Voskhod Feasibility Study was authored by lead consultants SRK, Dowding
Reynard & Associates (International) (Pty) Ltd (DRA-I) and Mintek of South
Africa.
Voskhod Chrome Project
Oriel commissioned SRK in October 2005 to prepare a feasibility study on Oriel's
100% owned Voskhod chrome project, Kazakhstan. SRK were assisted in the
preparation of the study by DRA-I on process plant and infrastructure matters
and Mintek, South Africa who performed all the beneficiation test-work on ore
samples selected by SRK from the 2005 Oriel core drilling programme. The Voskhod
study and the resource and reserve statements have been prepared by Dr Alwyn
Annels and Mr Mike Beare of SRK, who are both competent persons in accordance
with definitions set out in National Instrument 43-101.
Oriel acquired the Voskhod chrome project in February 2005 for the equivalent of
US$15.0 million in cash and the allotment of 9,181,352 Oriel shares, at the time
valuing Voskhod at US$25.0 million.
The Voskhod chrome project is located within the Khromtau District of the Aktobe
Region of western Kazakhstan. A newly completed tarmac road links the town of
Khromtau with Aktobe, the regional administration centre, 110 km to the west.
The Voskhod deposit is itself 7km NNE of Khromtau and is surrounded by a group
of existing and exploited mines.
The Voskhod deposit lies within a layered ultramafic complex, referred to as the
Kempirsayskiy Massif, together with up to 80 other deposits discovered since
1936. This massif is 82km long in a NNE direction and covers an area of 920km2.
The host rocks to the deposit have been subjected to hydrothermal alteration and
now consist of serpentinites and serpentinised dunites.
The deposit consists of one large lens of massive to disseminated chromite with
smaller fault controlled offsets on its eastern boundary. It is a "blind"
deposit, lying at depths of 98m to 440m with a north-easterly dip of 28o.
The results of a total of 14,921m of HQ diamond and some 57,960m pre Oriel
ownership drilling have been incorporated into the resource estimation completed
by SRK in May 2006.
The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Indicated and
Inferred NI 43-101 compliant mineral resources calculated on a 20% Cr2O3 cut off
are summarised below;
+------------+------------+------------+------------+------------+------------+
| Resource | Tonnes | Cr2O3 % | Fe2O3 % | SiO2 % | Estimation |
| Category | (Million) | | | |Methodology |
+------------+------------+------------+------------+------------+------------+
| Indicated | 19.51 | 48.47 | 13.12 | 8.49 | 3D |
+------------+------------+------------+------------+------------+------------+
| *Inferred | 1.57 | 41.05 | 12.29 | 12.65 | 2D |
+------------+------------+------------+------------+------------+------------+
*Inferred Resources were only determined using 2D methodology
In addition, Oriel has recently been awarded an extension to the Voskhod
contract licence area to include the Karaagash deposit which has Russian C2 and
P1 classified resources of some 4.5 million tonnes and which has, assuming
positive results of a confirmatory drilling program, the potential to provide
additional resources for mining beyond a 20 year life.
Mine design
SRK has designed the mine based around a fully mechanised operation with an
inclined 1,250m ramp access from the base of a box cut located to the south east
of the orebody. The orebody will be stoped by a sub level caving method using a
20m level interval. Up hole drilling and subsequent blasting from the extraction
levels will be followed by mucking with 5m3 scooptrams into 45 tonne capacity
low profile haul trucks for transport to surface. Ventilation is provided by two
shafts to the 220m level and heating of the air during winter months is provided
by electrical heaters.
SRK has designed the mine operations utilising Earthworks Mine2-4D software
which allows for all development driveage and ore production tonnages to be
scheduled throughout the mine life. Estimated total lateral development for the
life of mine is 36,000m. The Probable Reserve, based on the Indicated Resource,
allowing for mining recovery losses of 10% and a dilution factor of 18% at zero
grade is 18.3 million tonnes at 40.3% Cr2O-3, giving a mine operational life of
14 years from this part of the deposit.
ROM production is planned at 1.3 million tonnes per annum with first chrome ore
sales planned for Q2 2008.
Chrome recovery
Mintek carried out test work on core samples selected from four drill holes
identified by SRK as being reasonably representative of the Voskhod deposit on
the basis of preliminary studies. The tests included the crushing, screening,
washability, characterisation and concentration of the chrome ore into products
to generate the necessary data for the design of the process flow sheet for the
commercial plant. The results showed that very high grade chrome ore of
typically 48% Cr2O3 and a chrome concentrate of up to typically 57% Cr2O3 can be
readily produced from Voskhod. The test work and process flow sheet information
from Mintek was supplied to DRA-I to support the design and determination of the
processing plant capital and operating costs.
The DRA-I plant design comprises a crusher and screen to reduce the 300mm ROM
ore feed to less than 150mm, DMS (Dense Media Separation) drum and DMS cyclone
stages for coarse and fine chrome ore fractions, respectively and a spiral
concentration plant for the fine ore of less than 1mm. The tailings are
thickened for disposal in the tailings dam.
Tailings will be stored in a lined facility with deposition planned over 14
years at an average rate of 148,000 tonnes per annum pumped slimes and 216,000
tonnes per annum of trucked coarse material. The height of the facility at
closure will be 25m.
The plant has been designed with flexibility to handle the expected variations
in ROM feed over the life of the mine and has scope for future optimisation.
DRA-I estimated the capital and operating costs for the plant and in addition,
certain costs related to the associated infrastructure.
The expected yield was projected to be 69.8% and split into products as 52.3%
lumpy (typically + 10 - 150mm), 9.9% chip (typically + 1 - 10mm) and 7.6% fines
(typically -1mm) concentrate expressed as a percentage of the ROM feed.
Infrastructure
Infrastructure for the mine include a road to the proposed new rail sidings and
ore load out facilities at a location 14km to the north west of the site,
provision of a 100kV power line from the HT supply at the Kempersai sub station
60km north of the mine, and potable and process water supplies. The facilities
designed ensure the Voskhod operations are fully independent.
Market
Heinz H Pariser Alloy Metals & Steel Market Research (Pariser) carried out an
updated study of the chrome ore market. Pariser provided a positive outlook for
chrome ore demand and a ten year price forecast of between US$154-US$224
(average $183) per tonne (free at the Kazakhstan/Russian border) for a 48% Cr2O3
Kazakhstan ore.
Ahlers Logistics and Maritime Services of Antwerp, Belgium, carried out a
detailed logistics study that concluded there are no major operational transport
issues concerning the supply of Voskhod chrome ore to the markets that were
addressed in the Pariser report.
Development
The Company has entered into discussions with an internationally recognised
mining contractor who has formed a joint venture relationship with a local
Kazakh contractor to provide rates for the decline and ventilation shaft
development contract. It is intended that a process engineering company be
appointed for the detailed design and construction for the plant and related
infrastructure.
A full management team from Oriel will be in place to oversee all aspects of the
project construction phase.
Endeavour Financial has been advising the Company on debt financing options
available. To date it has received a number of offers of debt finance for the
Project and with the feasibility study results is confident that the project
economics are sufficiently robust to support a debt facility of more than US$100
million. Oriel will continue to work with Endeavour and a number of leading
international banks, with whom negotiations are well advanced, to secure the
required debt financing by Q4 2006.
--------------------------------------------------------------------------------
Qualified Persons:
Dr Alwyn Annels, PhD, CEng, FIMMM, Principal Mining Geologist at SRK Consulting
(UK) Ltd, and was responsible for reporting of Mineral Resources in the
Feasibility Study. He is a Qualified Person in accordance with definitions set
out in National Instrument 43-101 and he has consented to this announcement and
reference to his report herein.
Mr Mike Beare, BEng, CEng, MIMMM, Senior Mining Engineer at SRK Consulting (UK)
Ltd), had responsibility for reporting of the Mineral Reserves and overall
preparation of the Feasibility Study. He is a Qualified Person in accordance
with the definitions set out in National Instrument 43-101 and he has consented
to this announcement and reference to his report herein.
--------------------------------------------------------------------------------
Notes to Editors:
Oriel Resources was incorporated in July 2003 with Dr Sergey V. Kurzin as
Executive Chairman and CEO, with a primary focus on the acquisition, exploration
and development of advanced and high quality nickel and gold projects in the
countries of the Former Soviet Union (FSU).
The company was admitted to trading on the Alternative Investment Market (AIM)
of the London Stock Exchange in March 2004, raising GBP40.56 million. The
Admission was at that time the largest funded mining IPO in the history of AIM
and provided the company with a solid financial foundation.
Oriel subsequently listed on the Toronto Stock Exchange in February 2005,
providing the company with access to the resource-oriented Canadian market and
providing for greater liquidity for the Company's shares.
--------------------------------------------------------------------------------
For further information please contact:
Dr Sergey V Kurzin, Executive Chairman, Oriel Resources plc
Tel: +44 (0) 20 7514 0590
Nick Clarke, Managing Director, Oriel Resources plc
Tel: +44 (0) 20 7514 0590
Gavin Dallas, Marketing and PR, Oriel Resources plc
Tel: +44 (0) 20 7514 0590
Michael Padley / Michael Spriggs, Bankside Consultants
Tel: +44 (0) 20 7367 8888
Keith Schaefer, Vanguard Shareholder Solutions
Tel: + 1-604-608-0824
www.orielresources.com
--------------------------------------------------------------------------------
GLOSSARY OF TERMS
Crusher A machine for crushing rock.
Deposit An anomalous occurrence of a specific mineral or minerals within the
earth's crust.
Feasibility Study A definitive engineering study addressing the economic
viability of bringing a deposit to the production stage; taking into
consideration all associated costs, revenues and risks.
Infrastructure The supporting installations and services that supply the needs
of the project.
Mine development The term employed to designate the operations involved in
preparing a mine for ore extraction. These operations include tunnelling,
sinking, cross-cutting, drifting and raising.
Ore Accumulation of minerals containing a substance which can be economically
recovered.
Preliminary
Assessment Study The initial stage of the feasibility study in which the
accuracy of the factors involved such as costs and revenues is +/-25%.
Tailings Material rejected from treatment plant after the recoverable valuable
minerals have been extracted.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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