significant increase to ore reserve

Significant increase to Ore Reserve estimate at Balmoral South Australasian Resources Ltd (“ARH”) has further strengthened the economics of its Balmoral South Iron Ore Project in Western Australia, as a result of a significant upgrade to its Ore Reserve estimate for the project.
The Probable Ore Reserve for the project has increased by 24% to 680 million tonnes (Mt).
The Ore Reserve estimate is based on an update to the Mineral Resource estimate produced for the Project in May 2007 by independent geological consultants Hellman & Schofield Pty Ltd. That update to the Mineral Resource produced a 33% increase in the Indicated Resource category, which has led to the current increase in the Probable Ore Reserve estimate.
Based on this Ore Reserve estimate, the Project could potentially yield 207 Mt of iron ore product which is equivalent to 17 years of operating life at a 12 Mtpa production rate, up from the previous estimated mine life of 13 years.
The Ore Reserve estimate has been produced for ARH by independent consulting mining engineers, Orelogy and has been made in accordance with ‘The JORC Code, 2004’ (JORC Code). The Ore Reserves estimate indicates that at the time of reporting, economic extraction of iron ore from the Project is feasible, based on a consideration of technical and economic factors.
Resources
An update to the Mineral Resource estimate was completed in May 2007 by Hellman and Schofield. The updated resource forms the basis of the derivation of this Ore Reserve estimate. The updated Mineral Resource includes information from additional drill holes and includes a revision of the geological interpretation, analysis of the QAQC results and review of the deposit variography.
The Mineral Resource estimate is summarised below in Table 1 and is reported at a head grade of 15% MagFe grade. The Mineral Resource includes an estimate of the concentrate grade based on Davis Tube metallurgical test work and is classified into Indicated and Inferred Resource categories as per the JORC Code.
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Orelogy completed the open pit optimisation and subsequent pit design work to assess the economic viability of the Project. The optimisation and design work was based on inputs and parameters derived from a number of different sources. This included parameters developed as part of a Mining Options Study completed by Snowden Mining Industry Consultants Pty Ltd, in November 2006. Processing and transport parameters and costs for the specified ore products were provided by independent metallurgical consultants, Promet Engineers Pty Ltd (Promet) and were recently updated by Promet to a 2007 basis from their engineering study completed in 2006.
The Ore Reserve estimate was based on:
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A product mix consisting of 5.2 Mtpa of concentrate, 4.9 Mtpa of pellets and 1.45 Mtpa of HBI briquettes. On average 42 Mtpa of ore would be mined to produce a total of approximately 12Mtpa of iron ore product.
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Mining costs were based on off highway truck and hydraulic shovel mining operation.
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Due to the homogeneity of the ore body, a 10% dilution factor has been applied to the contact or edge blocks only. This equates to an average 2% dilution factor. A mining recovery of 98% has also been applied to the Ore Reserve estimate.
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The total up-front capital costs used for the previous ore reserve parameters were escalated from the Engineering Review Study completed by Promet in 2006.
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The pit shell selected from the pit optimisation work, used product prices representing a reduction of approximately 23% to 2007/8 world benchmark prices, with a 5% quality premium for concentrate. This equates to a selling price of approximately US$44/tonne for concentrate product.
An optimal pit shell was selected based on consideration of discounted cash flows generated from pit optimisation. The shell was used as the basis for the subsequent pit design, which allowed for practical mining considerations. The Ore Reserves quoted were reported from within the final pit design, shown in Figure 1 below.
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Figure 1: 3D View of Pit Design looking North West
The following points are made in relation to the Ore Reserve estimate:
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Approximately 207 Mt of iron ore products would be produced over the project life, which equates to around 17 years of production at the nominated annual capacity of 12M tpa.
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After allowing for the capital pre-strip of oxidised material as waste (approximately 30-40m from the surface), and considering indicated material only, the strip ratio will average 0.80:1 for the life of the project.
The Ore Reserve estimate is provided below which shows that 91% of the Indicated Resource was converted to a Probable Ore Reserve based on the project evaluation. This is based on a cut-off grade of 15% MagFe.