allegiance mining looking great, page-5

From Miningnews .net

Friday, September 05, 2003

ALLEGIANCE Mining has terminated discussions with Murchision United about milling ore from its Avebury nickel deposit in Tasmania through Murchison's Renison plant.

Allegiance chairman Tony Howland-Rose said the parties had been unable to agree terms, but he remained hopeful Renison could yet process ore from Avebury.

The 750,000t per annum Renison mill is currently on care and maintenance, as is the much larger Hellyer plant owned by Western Metals, currently in administration.

Howland-Rose told MiningNews.net that using one of these two mills remained his preferred option.

However, the company is also looking at construction of a dedicated processing plant capable of treating 400,000tpa.

Allegiance said the total capital cost of a decline/underground mine and processing plant is estimated at around $36 million, which, at current prices, would generate net smelter revenue of $40-50 million per annum.

The Avebury mill would have a pre-tax NPV of $62 million and a 37% rate of return including the repayment of capital.

Avebury currently contains 4.06 million tonnes grading 1.5% nickel for a contained 61,500t.

Howland-Rose expects permitting at Avebury (near Zeehan) by November, and is targeting a decline development beginning January 2004.

He said around $3 million would initially be needed to begin the decline, and that negotiations with financiers were underway with SG Australia advising the junior.

"We're looking at both debt and equity," Howland-Rose said.

"There are plenty of examples around where bankable feasibility studies have been funded by banks.

"In the [current] case of nickel you're going to see a lot of that.

"You've seen it already but you're really going to see a lot of it now.

"We've had plenty of offers of money. Money isn't the problem … the problem is the terms - the dilution or the interest rate or the equity sweetener."

Allegiance currently has around $600,000 cash and is capitalised at $16.67 million, with its shares off 0.1 cents this afternoon at 7.3 cents.