Namibian Manganese Project Expected to Generate Strong Cashflows
Scoping Study points to Positive Economics, sets stage for Feasibility Study at Otjozondu
Highlights
- Scoping Study results indicate Namibian manganese project will generate strong cashflows
- Proposed initial 250,000tpa operation from 2012 ramping up to 500,000tpa
- High-grade, high-quality product with targeted average manganese product grade of 38-40%
- Estimated operating costs in the range of A$110 to $140/tonne
- Scoping Study indicates strong operating cashflows1 using manganese price of US$4.50/dmtu FOB
- Excellent leverage to anticipated global increases in manganese ore prices
- Modest A$37 million capital cost for an initial 250ktpa operation
- Additional A$22 million to achieve steady-stage production of 500,000tpa
- Current Inferred Resource of 6.8Mt @ 23% Mn underpins initial production
- Exploration Target of 35Mt to 50Mt grading 23%Mn to 27%Mn*
- In-fill drilling program and Feasibility Study to commence in April 2011
Shaw River Resources Limited (ASX: SRR) is pleased to advise that it has taken another step towards joining the ranks of manganese producers after completing a Scoping Study on its recently acquired Otjozondu Manganese Project (“Otjo Project”) in Namibia (75.5% Shaw River). The Scoping Study indicates the Otjo Project’s potential to generate strong cash flows that are significantly leveraged to the manganese price from a relatively low capital cost development.
A key conclusion of the Scoping Study (drawn from the extensive due-diligence information gathered by the Shaw River team during and after the acquisition process) was that the Otjo Project has the potential to generate strong operating cashflows from an initial 250,000tpa operation commencing in 2012, targeting 500,000tpa within four years.
Favourable geology, shallow open-pittable mineralisation and the availability of existing infrastructure are expected to underpin low operating costs delivering ore by road and rail to Walvis Bay Port, for export to predominantly Asian markets. Unit cash operating costs are forecast in the range of A$110 to A$140/tonne, enabling the operation to potentially generate strong operating margins using a conservative manganese price of US$4.50/dmtu FOB Walvis Bay. (A$198/t FOB).
At a manganese price of $6.00/dmtu FOB Walvis Bay (A$264/t FOB), operating margins will almost double, demonstrating the Otjo Project’s significant leverage to the manganese price.
The existing infrastructure has greatly reduced the Otjo Project’s up-front fixed capital requirements, with estimated capital expenditure for the initial 250,000tpa operation totalling A$37 million and an additional $22 million required to expand production to 500,000tpa.
Shaw River is in the process of selecting an experienced engineering consultancy to commence a Feasibility Study (FS) in April 2011 based on an initial production target of 250,000tpa, increasing to 500,000tpa of manganese product. The cost modelling arising from the Scoping Study was undertaken at a project level. Life of mine and production level considerations were based on the maiden Inferred Resource of 6.8 million tonnes at 23.1% Mn which is expected to underpin initial production from a new gravity separation plant. Further drilling in 2011 in known areas of mineralisation is expected to increase the resource base in 2011, targeting a 10+ years mine life. The finding of the Scoping Study will be further investigated in a Feasibility Study to be completed in Q4 2011.
There is significant potential for further growth in the existing inventory given the maiden resource covers only 7km of the identified 144km of strike within the manganese field (just 5%). Shaw River is targeting to at least double this 6.8Mt maiden resource by the end of 2011 and currently has an Exploration Target at Otjo of 35Mt - 50Mt grading 23% - 27% manganese*. In addition, drilling will be targeting the conversion of a significant portion of its resource to reserve status.
A summary of the key parameters and estimates at a project level from the cost study are detailed in Table 1 of the ASX announcement.
The Scoping Study results confirm the Otjo Project is significantly leveraged to the manganese price.
“We are delighted with the results from our Scoping Study, which provides an additional level of encouragement for Shaw River in the potential of the Otjo Project to become a globally significant manganese producer,” Shaw River’s Managing Director Vincent Algar said. “The Project is robust and our internal studies show that it is also significantly leveraged to a rising manganese price environment. Shaw River is one of the few listed companies globally that can offer investors this type of exposure to manganese – a metal which is a key ingredient in the steel production that is so essential to global economic growth.”
“We are looking forward to updating the market regularly with drilling updates and releasing full results of the Feasibility Study by the end of 2011” Mr Algar added.
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