Reed Resources enters into replacement MoU with Chinese conglomerate NFC for development of Barrambie Vanadium Project in Western Australia
HIGHLIGHTS
- Reed Resources enters into replacement MOU with NFC and Arccon in relation to Barrambie project.
- Replacement MOU is on the same terms as the original MOU, but extends the period for provision of fixed price EPC quote by NFC and Arccon to 31 July 2011.
- An estimate to +/- 7.5% accuracy expected by end of June 2011.
- SKM appointed to estimate revised operating costs for Barrambie based on plant optimisations arising from NFC and Arccon’s design work. Initial indications suggest savings are achievable, despite higher input costs.
- Financing discussions ongoing.
Australian diversified resources company Reed Resources Ltd (ASX: RDR) (the “Company” or “Reed Resources”) is pleased to announce that it has entered into a replacement Memorandum of Understanding (“MOU”) with a consortium of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd (“NFC”) and Arccon (WA) Pty Ltd (“Arccon”) for the Barrambie Vanadium Project (“Barrambie”), which replaces the MOU previously announced on 11 November 2010.
The replacement MOU is on the same terms as the original MOU, but extends the period to 31 July 2011 by which NFC and Arccon are required to provide Reed with an updated, fixed price Engineering, Procurement and Construction (“EPC”) contract quote for Barrambie.
As previously announced, the updated EPC quote from NFC and Arccon will, where possible, specify the use of Chinese equipment and services for Barrambie, and Reed expects it to achieve significant savings compared to the original Definitive Feasibility Study (“DFS”) capital cost estimate of A$628.9 million, subject to escalation and foreign exchange movements. Reed expects to receive an estimate of the EPC pricing from NFC and Arccon to an accuracy of +/- 7.5% before the end of June.
Reed Resources has concurrently appointed the authors of the original DFS, Sinclair Knight Merz (“SKM”), to work with NFC and Arccon to provide an update of the processing plant operating cost estimates. Reed Resources has recently received a draft from SKM which indicates that operating cost savings of approximately 6% may be achievable over the DFS estimate on a like-for-like basis. This is due primarily to reductions in power and soda ash consumption, which are expected to arise from plant optimisations identified by NFC and Arccon as part of the design work for their EPC quote. These expected operating cost savings are despite increases in the price of certain inputs, including gas and labour, since the original DFS estimates were completed.
Reed Resources and NFC remain in discussions with potential equity financing partners and lenders to the project, and will ensure that the market remains fully informed about all further developments regarding Barrambie as they arise.
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