DMC Mining Limited 1 23rd June 2008 ASX/Media Announcement Scoping Study Complete – Mayoko Iron Ore Project The Directors of DMC Mining Limited (“DMC”) are pleased to release the findings of the Scoping Study completed by GRD Minproc Limited (“Minproc”) on DMC’s 80% owned Mayoko Iron Ore Project in The Republic of the Congo. The executive summary of the Scoping Study is attached to this announcement. KEY FINDINGS OF THE REPORT • Although the Mayoko Iron Ore Project is at a very early stage of development the preliminary economics appear attractive and therefore justify advancing to a more detailed level of assessment. • Direct shipping ore (DSO) production of 3Mt/a to commence as stage 1, and to increase to 11Mt/a within 4 years. • Existing rail capable of transporting 11Mt/a with minor upgrades. • Capital expenditure estimate of USD$198 million for 3 Mt/a DSOoperation. • Capital Expenditure estimate of an additional USD$288 million (USD$486 million total) to achieve 11Mt/a DSO operation. • Operating costs estimate of $22/tonne for 11Mt/a • Revenue potential of USD$1.1 billion/a based on 11Mt/a at current spot prices or USD$302 million /a based on 3Mt/a at current spot prices. • Timeline to production forecasted at 4 years to achieve 11Mt/a operation. The scoping study commenced in Feb 2008 and has involved over 1,500 man hours from GRD Minproc expended across mining, processing and infrastructure assessments. This included visits to the Republic of the Congo for discussions with the port, rail and power authorities. While the study does not meet Pre-feasibility Study standards it exceeds Scoping Study requirements with a number of key issues examined in considerably more detail than warranted for a Scoping Study. DMC Mining Limited 2 Minproc has given consent to DMC to include the Executive Summary of the scoping study to this ASX announcement. Minproc’s assessment of mining and processing was based on the 33Mt Inferred Resource estimate previously reported by DMC. Haematite production would commence at 3 Mt/a and be ramped up to 11 Mt/a. Then, if necessary, the operation would produce nominally 3 Mt/a of pellets from the magnetite tonnage. The preliminary mine design modelling was based on a 55% Fe run-of-mine product and 50% Fe cut-off grade and indicates the deposit has a number of favourable mining characteristics. The key findings from the model are: • Low average strip ratio of 0.51. • High conversion rate with 96% of the resource falling within the optimised pit shell • No pre-stripping is required. The Scoping Study makes the following comment in relation to the ore grade and impurities: • By international standards the iron ore grade is lower than typical for direct shipped ores and the impurity levels are higher than desired. However, this appears to be more a disadvantage than a project impediment. The ore may be amenable to upgrading by blending, selective mining or beneficiation during processing. “The Mayoko Iron Ore project is proving to be a low cost DSO deposit with robust economics and a very real path to production. Given the low risk jurisdiction, supportive government and infrastructure largely in place, DMC’s intention is to bring the project into production as quickly as possible” Executive Director David Sumich said. DMC confirms that, effective immediately, it is commencing a pre-feasibility assessment of the Mayoko Iron Ore Project which includes further drilling (scheduled to start August 2008), metallurgical studies and also the necessary government agreements and regulatory approvals. For further information please contact: David Sumich, Executive Director, DMC Mining Limited: +61 8 9486 1909 Dean Richardson. Investor Relations Manager, DMC Mining Limited : +61 8 9486 1909 James Moses, Partner, Fortbridge Consulting: +61 420 991 574 Competent Persons: The contents of this report relating to geology and the exploration targets and results are based on information compiled by William Witham, a Member of the Australian Institute of Geoscientists. He has sufficient experience related to the activity being undertaken to qualify as a “Competent Person”, as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results. William Witham also has sufficient experience relevant to the styles of mineralisation and types of deposit under consideration. He consents to the inclusion in this report of the matters compiled by him in the form and context in which they appear. Mayoko Iron Ore Project Scoping Study June 2008 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page i Disclaimer This Scoping Study (Report) has been prepared for DMC Mining Limited (DMC Mining) by GRD Minproc Limited (GRD Minproc), based on assumptions as identified throughout the text and upon information and data supplied by others. The Report is to be read in the context of the methodology, procedures and techniques used, GRD Minproc's assumptions, and the circumstances and constraints under which the Report was written. The Report is to be read as a whole, and sections or parts thereof should therefore not be read or relied upon out of context. GRD Minproc has, in preparing the Report, followed methodology and procedures, and exercised due care consistent with the intended level of accuracy, using its professional judgment and reasonable care. However, no warranty should be implied as to the accuracy of estimates or other values and all estimates and other values are only valid as at the date of the Report and will vary thereafter. Parts of the Report have been prepared or arranged by DMC Mining or third party contributors, as detailed in the document. While the contents of those parts have been generally reviewed by GRD Minproc for inclusion into the Report, they have not been fully audited or sought to be verified by GRD Minproc. GRD Minproc is not in a position to, and does not, verify the accuracy or completeness of, or adopt as its own, the information and data supplied by others and disclaims all liability, damages or loss with respect to such information and data. In respect of all parts of the Report, whether or not prepared by GRD Minproc, no express or implied representation or warranty is made by GRD Minproc or by any person acting for and/or on behalf of GRD Minproc to any third party that the contents of the Report are verified, accurate, suitably qualified, reasonable or free from errors, omissions or other defects of any kind or nature. Third parties who rely upon the Report do so at their own risk and GRD Minproc disclaims all liability, damages or loss with respect to such reliance. GRD Minproc disclaims any liability, damage and loss to DMC Mining and to third parties in respect of the publication, reference, quoting or distribution of the Report or any of its contents to and reliance thereon by any third party. This disclaimer must accompany every copy of this Report, which is an integral document and must be read in its entirety. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page ii Table of Contents Disclaimer...................................................................................................................... i 1. EXECUTIVE SUMMARY .......................................................................................... 1 1.1 SCOPE OF WORK .............................................................................................................................1 1.2 RECOMMENDATIONS......................................................................................................................2 1.3 KEY REQUIREMENTS TO ADVANCE ..............................................................................................3 1.4 PEER REVIEW ..................................................................................................................................3 1.5 HAEMATITE ORE RESOURCE .........................................................................................................4 1.6 MINE MODELLING............................................................................................................................6 1.7 PROCESSING OPTIONS...................................................................................................................6 1.7.1 Haematite Plant ...................................................................................................................6 1.7.2 Magnetite Plant....................................................................................................................7 1.8 REVENUE PREDICTIONS .................................................................................................................7 1.9 PROJECT DEVELOPMENT TIMETABLE..........................................................................................8 1.10 HAEMATITE PLANT CAPITAL EXPENDITURE ................................................................................9 1.11 HAEMATITE PLANT OPERATING COST ESTIMATE ....................................................................12 1.12 INFRASTRUCTURE .........................................................................................................................12 1.12.1 Rail....................................................................................................................................13 1.12.2 Port Facilities .....................................................................................................................14 1.13 SOVEREIGN RISK ...........................................................................................................................16 APPENDIX A HAEMATITE PLANT FLOWSHEET............................................................ 17 APPENDIX B HAEMATITE PLANT GENERAL ARRANGEMENT DRAWING .................... 18 APPENDIX C HAEMATITE PLANT ELEVATION AND SECTION DRAWING .................... 19 REFERENCES .................................................................................................................... 20 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 1 1. EXECUTIVE SUMMARY DMC Mining Limited (“DMC Mining”) Mayoko Iron Ore Project is still in its infancy. The exploration lease was obtained barely 6 months ago in December 2007 and the sole drilling program was performed in approximately 1975. Since this time the lease has been dormant. Regardless of this, in the current market the project has a surprisingly high number of positive attributes despite the lack of attention and the short time that DMC Mining has had to advance the project. The project is located in the Republic of the Congo approximately 300 km northeast of Point Noire. DMC Mining reports that the project contains a 750 to 800 Mt magnetite exploration target1 that is overlaid with a 33 Mt haematite deposit that is open along strike and at depth.2 Geological modelling has outlined a haematite exploration target of 110 to 135 Mt.3 This report by GRD Minproc Limited (“GRD Minproc”) assesses at a scoping study level the option of treating the ore body using a staged approach. Stage 1 would see the construction of a crushing and screening plant to process haematite and produce direct-shipped-ore (DSO). The production rate in Stage 1A will be 3 Mt/a. This will be ramped up to 11 Mt/a within approximately 2 years in Stage 1B. The final stage, Stage 2, will treat magnetite to produce 3 Mt/a of pellets. The processing and infrastructure requirements for the haematite and magnetite plants were examined. The mining assessment was limited to the Stage 1B, 11 Mt/a haematite plant operation. Three of the four key criteria required to bring the haematite plant into production were rated as positive while the fourth was given a neutral rating. The sovereign risk, schedule and the capital and operating costs were rated positively. The ore body received a neutral rating. 1.1 SCOPE OF WORK DMC Mining requested GRD Minproc complete a scoping study to determine processing options for the proposed Mayoko Iron Ore Project. The initial scope of work was to determine likely mining, processing and infrastructure requirements to produce 5 Mt/a of haematite at a scoping study level under a directshipped- ore scenario. The scope of work was expanded part way through the study as it became clear from investigations of the infrastructure; (power; rail and port) that these facilities were largely in place. These assets provided a potential opportunity to commence operations in a shorter time and at higher production rates than originally envisaged. The final scope of work was for an 11 Mt/a haematite plant in Stage 1 with a 3 Mt/a magnetite plant following in Stage 2. While this study does not meet Pre-feasibility Study standards it exceeds Scoping Study requirements with a number of key issues examined in considerably more detail than warranted for a Scoping Study. In excess of 1500 man-hours were expended across mining, processing and infrastructure assessments. This included visits to the Republic of the Congo for discussions with the port, rail and power authorities. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 2 The final scope of work included: • An assessment of mining and processing options to produce nominally 3 Mt/a of pellets from the magnetite resource and 11 Mt/a of direct-shipped-ore (lump plus fines) from the haematite resource. Haematite production would commence at 3 Mt/a and be ramped up to 11 Mt/a • Assessment of the suitability of the existing rail network for shipment of ore to the port and consumables and equipment to the mine site. • Assessment of the port facilities including loading options, capacity and maximum ship size and turnaround times. • Assessment of electrical power availability and supply. • Marketing (brief assessment of market conditions and key revenue drivers supplied under separate cover). • Processing Plant Capital Cost Estimate to +/- 30%. • Processing Plant Operating Cost Estimate to +/- 30%. • Preliminary Process Flow Diagrams. • Preliminary equipment layout and elevations (assuming flat ground with no spatial constraints). • Preliminary mine plan including estimated operating and capital costs • Preliminary estimates of mine site infrastructure requirements including indicative capital costs of access roads, mine and plant site office buildings, workshops and warehouses, accommodation camp, communications systems and mobile equipment. • Project Development Timetable (Estimated time into production including drilling programs, test work, feasibility studies, equipment lead time, construction and engineering durations). 1.2 RECOMMENDATIONS Although the project is at a very early stage of development it appears promising and should be taken to a pre-feasibility study level. The economics appear robust and it compares favourably with its peers in the mid-west region of Western Australia. The existence of an operating rail line within 3-5 km of the proposed mine site raises the possibility of bringing the mine into production within a short time frame. The haematite cap appears to be sufficiently large to allow a staged approach to be adopted. Under this scenario a relatively low cost beneficiation plant would be built during Stage 1 to process the haematite cap. As the rail infrastructure to transport the ore to port is substantially in place processing rates of up to 3 Mt/a could be comfortably accommodated at start-up. This could then be ramped up to 11 Mt/a when the rail spur line and wharf facilities to the north of Pointe Noire are complete. This approach would fully utilise the installed equipment, supply early cash flow and provide a rapid payback on the initial capital cost of the processing plant. Stage 2 would see the development of a magnetite plant. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 3 1.3 KEY REQUIREMENTS TO ADVANCE The key requirements to advance the project to the next stage are: • Geological resource definition for both the haematite and magnetite • Metallurgical test work covering ore types and spatial location within the ore body • Marketing information on the minimum product specifications required for sale • Detailed examination of rail and port requirements • Agreements from the rail and port authorities for shipping ore 1.4 PEER REVIEW Although the Mayoko Iron Ore Project is at a very early stage of development the preliminary economics appear attractive and therefore justify advancing to a more detailed level of assessment. In terms of development it is probably fair to compare the project with operators in the mid-west region of Western Australia. These all have relatively young projects and operate, or are contemplating operating, far smaller ventures than the major suppliers, BHP Billiton and Rio Tinto who operate in the Pilbara region. It is beyond the scope of this report to conduct a full analysis of DMC Mining’s peers in the mid-west region. However, a cursory analysis indicates DMC Mining’s Mayoko Iron Ore Project compares favourably. Whilst there is a sovereign risk that does not exist for junior operators in the mid-west region the size of the deposit is comparable and the infrastructure requirements are considerably lower. Whilst a sovereign risk does exist, it is relatively low. The existence of an operating rail line within 5 km of the proposed mine site that runs directly to the port at Pointe Noire further enhances the project. This reduces the initial capital cost and provides the opportunity to bring the project online in a shorter time frame and at higher production rates. In contrast, the production for the mid-west iron ore producers is limited until such time that new rail lines and the new port at Oakajee are constructed. All the mid-west operators started, or proposed to start operations with: • Small initial haematite deposits, typically 5 to 15 Mt. • Low production rates, typically 1 to 2 Mt/a at start-up. • Long transport distances using either road haulage with distances in excess of 220 km and up to 380 km or road and rail with road haulage in excess of 65 km followed by rail haulage in excess of 100 km. • Three of the operators (Gindablie Metals Ltd, Mount Gibson Iron Limited and Midwest Corporation Limited) have magnetite projects that were expected to be bought on line in Stage 2 after completion of the Stage 1 haematite project. (Note: To raise capital and concentrate on their second haematite project Mount Gibson has now divested itself of the magnetite project). Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 4 In comparison DMC Mining’s Mayoko Iron Ore Project has the following attributes: • A 33 Mt initial haematite deposit. • The haematite ore body is open along strike and at depth with an exploration target of 110 to 135 Mt. • Higher initial production rates of up to 11 Mt/a. • A rail line within 5 km of the mine that goes directly to the port. Total haulage distance is approximately 360 km. • A large magnetite resource that can be bought on line in Stage 2 after the Stage 1 haematite project is completed. 1.5 HAEMATITE ORE RESOURCE By international standards the iron ore grade is lower than typical for direct shipped ores and the impurity levels are higher than desired. However, this appears to be more a disadvantage than a project impediment. The ore may be amenable to upgrading by blending, selective mining or beneficiation during processing. The resource was modelled by Runge Limited and the estimated inventory for 33 Mt haematite deposit is shown in Table 1.1. Under the JORC code the resource is classified as inferred. The model assigned the ore to one of three domains: • Iron Cap • In situ • Detrital. The topography which can be seen in Figure 1.2 indicates the terrain is hilly with the deposit forming a ridge which rises from the countryside to the east. The iron cap ore type is the uppermost layer and covers the deposit. The in situ ore type lies below the iron cap. The detrital ore mainly occurs on the edges of the deposit. Table 1.1 Resource Inventory at 50% Fe Cut-Off Domain Volume m3 Tonnes Fe % Al2O3 % SiO2 % P % Iron Cap 380 000 1 330 000 62.17 1.10 5.93 0.09 In Situ 5 171 250 16 098 500 55.56 3.04 11.71 0.10 Detrital 5 587 500 15 645 000 54.90 4.91 9.45 0.09 Total / Average 11 138 750 33 073 500 55.51 3.85 10.41 0.09 Geological mapping indicates the resource potentially contains 110 to 135 million tonnes. The historical drilling covered an area of approximately 5 km along strike and 1.2 km across strike with the greatest density of holes covering an area of approximately 1.4 km x 400 m. All holes intercepted iron mineralisation and 36 of the 38 holes (95%) ended in mineralised zones with grades in excess of 50% iron and are therefore open.2 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 5 The Mayoko Iron Ore Project deposit is contained within the “Massif du Chaillu” formation. This formation runs along a roughly north – south axis. It commences in the Republic of the Congo in the south and extends into Cameroon in the north. The Massif du Chaillu formation hosts multiple iron ore deposits with a combined estimated resource in excess of 2.5 billion tonnes. Including Mayoko, seven of the deposits are estimated to contain more than 100 Mt of iron ore.4,5,6 The nearest deposit, Zanaga, is approximately 100 km east in the Republic of the Congo and the furthest deposit, Mbalam, is approximately 550 km north in the Cameroon. Figure 1.1 Known Iron Ore Deposits within the Massif du Chaillu Formation Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 6 1.6 MINE MODELLING Geological mapping indicates the resource potentially contains 110 to 135 Mt. However, the mine plan relates to the 33 Mt inferred resource. The preliminary mine design modelling based on a 55% Fe runof- mine product and 50% Fe cut-off grade indicates the deposit has a number of favourable mining characteristics. The key findings from the model are: • Low average strip ratio of 0.51. • High conversion rate with 96% of the resource falling within the optimised pit shell • No pre-stripping is required. Insufficient information is available at present to determine the ultimate tonnage, grade and quality of the deposit. Nevertheless, with favourable mine characteristics other options such as selective mining may be possible that provide alternatives to selling a low grade product. Selective mining would increase the mining costs by a small amount but would result in a higher grade product which would attract a higher sale price. To allow for the possibility to upgrade the ore in the future the estimated mining costs for the 33 Mt haematite deposit has been increased from US$ 4.50 to US$ 6.00 per tonne. This would allow for blending ore from the further reaches of the deposit or selective mining with more material sent to waste. Trade off studies will be conducted at a later date when more information about the deposit is known. These studies will examine the relative merits of selling the product as is, blending, selective mining and addition of extra equipment in the process plant to reject impurities. This type of reallocation would not affect the other positive attributes of the ore body. No pre-stripping is required. During the first few months when the 30 m deep iron cap is processed no waste is generated. The mine plan indicates that the top 70 m, from 820RL to 750RL, would be mined completely. This material would be directed to the processing plant or to the waste dumps. The top 70 m has a strip ratio of approximately 0.36 and contains approximately 5.5 Mt of waste and 15 Mt of ore. From 750 RL down selective mining would be used with the waste left in the pit. At this time the ore resource has been rated as neutral. The lower than desired iron grades are offset by the fact that the host geology is favourable; the resource is open at depth and along strike; the mining costs for the 33 Mt haematite deposit are low and the majority of the resource can be mined and processed. 1.7 PROCESSING OPTIONS 1.7.1 Haematite Plant The resource consists of a haematite cap overlaying a magnetite deposit. The haematite cap must be mined first to access the magnetite. Several options were examined to determine the best choice of processing route and equipment. The criteria employed to assess the options were: • The capacity of the haematite plant using a somewhat conservative design principle had to match the maximum carrying capacity of the rail system as it exists at present. • As far as possible the equipment selected for the haematite plant had to be suitable for use in the later magnetite plant. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 7 • To minimise financing costs the design was to allow for staged construction such that production could commence sooner at lower throughput rates and build up to full production by installation of additional modules. To model the circuit and size equipment a number of assumptions were made regarding the ore characteristics. The haematite ore was assumed to have similar characteristics to ore from the Pilbara region of Western Australia. When compared with ore from the mid-west region the Pilbara ore is typically more friable and produces more fine than lump ore. The higher fines production from the Pilbara ores reduces revenue as lump ore commands a premium to fines but on a like for like basis the ore can be processed at higher capacity rates than the mid-west ores as it is more friable. This study proposes treating the haematite in a conventional two stage crushing circuit to generate two products, lump and fines. The nominal size range of lump ore is larger than 6.3 mm but smaller than 31.5 mm. The fine product is nominally all ore that is less than 6.3 mm in size. As a general philosophy the equipment selection and plant layout has been based on the following principles: • All equipment selected is robust and suitable for heavy duty. This type of equipment is more expensive but is capable of treating harder ores. • The circuit design has assumed a long mine life and consequently the equipment and layout has been chosen to minimise the operating and maintenance costs. This adds to the initial capital costs. The process flow sheet, general arrangement drawing and elevation and section drawing for the haematite plant are attached in the Appendices at the end of this report. 1.7.2 Magnetite Plant The magnetite plant provides the operation with longevity. The processing and infrastructure requirements were assessed to determine what additional equipment and infrastructure would be required to produce pellets and how well these requirements fitted with the haematite plant. The assessment concluded the required mills, magnetic separators and pelletising plant will be a natural add-on in later years. However, the emphasis of the current study is on developing the haematite. Development of the magnetite will follow one step behind and will be examined in greater detail in later studies. 1.8 REVENUE PREDICTIONS It is beyond the scope of this report and the expertise of the authors to predict what price the various iron ore products (fines, lump and pellets) could command in the future. There are a multitude of opinions and analysis’s available in the public domain on iron ore pricing that the reader can refer to. Nevertheless, in order to calculate revenue for the Mayoko Iron Ore Project, low and high sale prices for fines, lump and pellets have been chosen. The calculated revenue is shown in Table 1.2. It should be noted that these calculations do not constitute predictions. They are included to provide an indication of the potential revenue stream. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 8 Table 1.2 Mayoko Revenue Projections at Various Iron Ore Prices Current Spot Price Long term high estimate Long term low estimate Production t/a Grade % Fe Sale Price US$/ t Fe Revenue US$ M/yr Sale Price US$/ t Fe Revenue US$ M/yr Sale Price US$/ t Fe Revenue US$ M/yr Haematite Lump 4,950,000 56% 180.00 $499.0 56.25 $155.9 31.05 $86.1 Fines 6,050,000 56% 180.00 $609.8 45.00 $152.5 27.00 $91.5 Total 11,000,000 $1,108.8 $308.4 $177.5 Haematite Lump 1,350,000 56% 180.00 $136.1 56.25 $42.5 31.05 $23.5 Fines 1,650,000 56% 180.00 $166.3 45.00 $41.6 27.00 $24.9 Total 3,000,000 $302.4 $84.1 $48.4 Magnetite Pellets 3,000,000 67% 180.00 $361.8 74.25 $149.2 37.80 $76.0 The basis for the prices chosen including the premium attributed to lump and pellets is: • The iron content for the haematite is low and as a consequence the realised sale price has been discounted. • The low revenue estimate is based on fines fetching $US27 per dry tonne of contained iron in today’s dollar terms. This is at the low end of prices realised from 1980 to 2004 and provides a reasonable estimate of the minimum revenue stream that could be realised. It is assumed that if prices are low, that the economy is in a downturn and the premium for lump and pellets will be lower. A 15% premium for lump and a 40% premium for pellets relative to fines have been used in the calculations. • The high revenue estimate is based on fines fetching $US45 per dry tonne of contained iron in today’s dollar terms. This assumes demand from China and India will remain high for the medium term but still assumes a discount for the low iron content. In line with higher demand, higher premiums for lump and pellets have been assumed. A 25% premium for lump and a 65% premium for pellets relative to fines have been used in the calculations. • Typical physical characteristics for iron ore from the Pilbara region in Western Australia have been assumed when assigning lump to fines ratios for the purpose of calculating revenue. Any changes to this ratio will affect the revenue. The ores from the Western Australia mid west region have a higher lump to fines ratio. Some of these ores produce approximately twice as much lump as fines with ratios up to 67:33.7 1.9 PROJECT DEVELOPMENT TIMETABLE The proposed project schedule of first operation of 11 Mt/a commencing within 4 years is heavily reliant on a streamlined progression from this Scoping Study through Pre-feasibility and Definitive (Bankable) Feasibility Studies, then into construction and commissioning. The project development schedule has placed the priority on the haematite plant development. The magnetite development is scheduled to run Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 9 one step behind to ensure the project management resources are concentrated on expediting the design, engineering, procurement, construction and commissioning of the haematite plant. Continuity and flow of information from the study phases through design and into construction will allow production to commence as soon as possible. The magnetite plant has a number of long lead items such as the mills and the pelletising plant. The subordinate development of the magnetite plant design will allow adequate time for this equipment to be correctly specified, procured and expedited. 1.10 HAEMATITE PLANT CAPITAL EXPENDITURE The estimated total capital expenditure for the 11 Mt/a Stage 1B haematite plant is US$ 486 M. This includes US$428 M for direct and indirect costs and an additional US$ 58 M in provisional costs. The direct and indirect costs include a contingency provision and are judged to have an accuracy of ±30%. The direct and indirect cost estimate covers the areas and facilities as outlined in the scope of work and discussed in this report. This includes the following; • Process plant including train load out facilities and rail loading loop; • Mining fleet and mine facilities; • Mayoko site infrastructure such as the accommodation village and airfield. • Pointe Noire port facilities excluding rail spur line & wharf; • Rail rolling stock (locomotives and wagons); • First fill consumables and spares and • Engineering, procurement and construction management (EPCM) costs. No allowances were made in the capital estimate for: • Earthworks other than initial site preparation (grubbing & clearing); • Additional allowance for any seismic activity; • Environmental controls; • Capital required to sustain the operation over the anticipated mine life; • Cost associated with obtaining regulatory approvals and • Owners cost An additional US$ 58 M in provisional costs has been allowed to cover the following: • Spur line from main Point Noire-Brazzaville line to the new wharf; • Wharf; • Repairs and modifications to the existing rail line and • Regional roads around the new spur line and to the new wharf Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 10 The estimate for the regional roads and repairs and modifications to the existing rail line is an allowance only. At this stage the line has not been inspected along its full length from Pointe Noire to Mayoko. However, it is currently used for passenger and freight services and was used previously to transport ore. As a consequence major repairs are not expected. The cost of the spur line is judged to have an accuracy of +/- 30% but this is heavily qualified as the route and ground conditions have not been verified. The spur line costs are based on the assumptions that; the route is reasonably direct; the terrain is relatively flat; ground conditions are stable; minimal road and pedestrian crossings are required and security fencing is only required along part of the line. The initial indications are that these assumptions are reasonable but until the route can be verified and right of access approvals granted the costs are considered provisional only. The cost of the wharf is judged to have an accuracy of +/- 30% but this is heavily qualified as no bathometry (sea depth) and sea bed data has been sighted. The wharf costs are based on the assumptions that; the transition from land to sea is simple with stockpiles in close proximity to the waters edge; the sea bed is stable; no dredging is required; minimal navigation and berthing aids are required and a finger style wharf of 350m total length is sufficient. The initial indications are that these assumptions are reasonable but until more information is available the costs are considered provisional only. Commencing operations with a 3 Mt/a plant, leasing locomotives and using contract mining allows in excess of US$285 M of capital expenditure to be deferred. The total capital expenditure of US$ 198 M includes US$192 M for direct and indirect costs and an additional US$ 6 M in provisional costs. This smaller scale start-up operation is dependent on the Pointe Noire Port Authority granting temporary access to the existing port. The estimated capital expenditure for the 11 Mt/a and the 3 Mt/a plant are shown in 3. All costs are estimated in US dollars as at the second quarter 2008. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 11 Table 1.3 Haematite Plant Capital Expenditure Estimate Haematite Stage 1B 11 Mt/a US$ M Haematite Stage 1A 3 Mt/a US$ M Mining Mine Facilities 6.6 6.6 ROM Stockpile 2.3 2.3 Mining Fleet 42.2 0.0 Contract mining for 3 Mt/a Total Mining 51.1 8.9 Process Plant Primary Crushing 17.5 17.5 Secondary Crushing & Screening 17.3 17.3 Train Load Out & Plant Rail Loop 33.6 18.6 Load out by FEL for 3 Mt/a Plant Infrastructure 32.2 22.2 Total Process Plant 100.6 75.6 Mayoko Area Infrastructure 9.0 9.0 Pointe Noire Area Port area infrastructure 15.7 15.7 Wagons and locomotives 111.1 18.2 Lease loco's & 1/3 rd wagons req'd for 3M t/a Wagon dumper & ship loader 28.8 14.4 Buildings (maintenace workshop, admin, storage shed) 26.5 13.2 Total Pointe Noire Area 182.1 61.5 Miscellaneous (reagents, spares, commissioning) 10.6 6.4 Total Direct Cost 353.4 161.4 Indirect Costs (Engineering & Construction Management) 74.3 30.1 TOTAL DIRECT & INDIRECT COSTS 428 192 Provisional Costs Spur line to Point Noire wharf 28.5 0 Spur line not req'd for 3 Mt/a Wharf 23.9 0 Wharf not req'd for 3 Mt/a Repairs and modifications to existing line 5 5 Regional roads at new wharf 1 1 Total Provisional Costs 58 6 TOTAL COST 486 198 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 12 1.11 HAEMATITE PLANT OPERATING COST ESTIMATE The estimated operating costs are based on processing 11 Mt/a of ore to produce direct-shipped lump and fine products. All costs are estimated in US dollars as at the second quarter 2008 and are judged to have an accuracy of ±30%. The operating cost estimate is summarised in Table 1.4 Table 1.4 Haematite Plant Operating Costs US$ / t crushed Total US$ / yr Mining Mine production 4.50 49,500,000 Blending / selective mining allowance 1.50 16,500,000 Total Mining 6.00 Process Plant Labour 0.23 2,480,000 Power 0.27 2,952,000 Consumables 0.06 658,000 Maintenance 0.77 8,483,000 Administration 0.03 330,000 Total Process Plant 1.35 Product Transport 14.40 158,400,000 Export Charges (port & royalties) 0.50 5,500,000 TOTAL OPERATING COST 22.25 244,803,000 The operating costs for the 3 Mt/a start-up facility have not been estimated. A small rise in costs can be expected as fixed costs will be spread across 3 Mt/a production instead of 11 Mt/a. Additional costs beyond this resulting from contract mining, locomotive lease and the port authority lease and right of access costs will also need to be absorbed. 1.12 INFRASTRUCTURE The existence of a rail line from the port at Pointe Noire to Mbinda on the Gabon border in the north that passes within 5 km of the proposed plant location provides considerable leverage to reduce the project costs. It provides a ready made transport corridor to move equipment and supplies from the port to site and iron ore from the site to port for export. An airfield capable of handling light planes exists within close proximity to the mine site. The airstrip needs some upgrading but once this is done it will be capable of moving personnel from Pointe Noire to site. Pointe Noire is well serviced with regular flights from Europe and South Africa. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 13 The port facilities are capable of handling containerised and break bulk goods. The facilities are sufficiently modern and have adequate capacity to handle all plant and construction equipment that may be required. Additional detail on the available infrastructure is discussed below along with comments on possible modification and/or upgrade requirements. 1.12.1 Rail The ROC has an existing rail system, the Chemin de Fer Congo-Ocean (CFCO). This is operated and maintained by the Federal Government. Two lines are installed and operating. The main line comprises a dual track running east-west from the capital city, Brazzaville, in the south east to the second largest city, Pointe Noire, on the west coast. This is a major corridor for moving freight and passengers between the two major cities. The second line comprises a single track running from Mbinda on the Gabon border in the north to the town of Dolisie in the south where it connects into the Brazzaville-Pointe Noire line. This line was constructed to service a manganese mine operated by Comilog in Gabon from 1962 to 1986. Comilog transported manganese ore to the port for export. The northern line runs past the town of Mayoko with DMC Mining’s ore body within 5 km of the line. The close proximity of the rail line, town and ore resource is shown in Figure 1.2. The manganese company has ceased business but the line remains operational with a weekly passenger service using the facilities. The rail authority has indicated that the line is available for use by DMC Mining to transport iron ore. The initial evaluation indicates the line is capable of carrying 11 Mt/a. The CFCO rail system is narrow gauge of 1067 mm (3’6”). This gauge is commonly used in Central and West Africa, Europe and Australasian countries. The Brazzaville-Point Noire rail uses a 46 kg/m rail (high strength) which is suitable for industrial freight. There are two sections to the northern (Mayoko) line. The first shorter section from Dolisie to Mossendjo uses 36 kg/m rail section (medium strength). The second and longer section extends from Mossendjo to Gabon. This section was constructed by Comilog for heavy haulage and utilises 50 kg/m rail (high strength). The rail system is well suited for the exploration and construction phases of the project. It can be used “as is” with no modifications for these stages of the project. The CFCO can supply transportation services for the mobilisation of exploration equipment and supplies to site, using their existing diesel locomotives and freight wagons. During construction the CFCO can facilitate the transportation of break-bulk and containerised equipment, fabricated structure sections and consumables. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 14 Figure 1.2 Rail Line at Mayoko Extensions to the rail line are required for the production phase. A rail loop of approximately 5 km will be built for the 3 M t/a start-up during Stage 1A construction. This will link into the northern rail line in the vicinity of Mayoko and extend to the processing plant. A front-end-loader will be used to load the ore wagons at the processing plant. The ore will be transported to the existing port where it will be unloaded and stockpiled using temporary facilities prior to loading onto ships. During the Stage 1B upgrade which will increase production to 11 Mt/a, automated load out facilities will be constructed at site. The spur line, wharf and permanent stockpiles, wagon unloading, ship loading and associated facilities at Pointe Noire will also be built during this stage. 1.12.2 Port Facilities The port facilities are approaching the limit of their capacity and shipping 11 Mt/a through the existing port facilities is not feasible. New facilities which would include a wharf and spur line from the existing rail line are needed. The port authorities have indicated a site approximately 10 km north of the port is available. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 15 For the proposed 11 Mt/a production of haematite lump and fines product a “Capesize” vessel (approximately 175 000 t to 250,000 t capacity) is preferred. It is possible to move this amount of ore with a smaller vessel such as a 65,000 tonne “Panamax” but this would require a very tightly controlled shipping schedule with average turnaround times of 2.2 days. This schedule would negate redundancy within the port system. The existing port facilities can not accommodate “Capesize” vessels as these require an 18 m minimum draft. The maximum draft the port can currently accept is 13 m, which is adequate for a “Panamax” size ship. As a result the project will look at a new jetty, ship loading and stockyard facility. The proposed location is north of Pointe Noire in the existing industrial zone area near the oil refinery and can be seen in Figure 1.3 The estimated 15 km spur line and new wharf facility will increase the capital cost significantly and increase the project duration. However, during discussions with the port authorities in May 2008 they indicated they were willing to consider a two stage approach. Under this scenario temporary facilities would be installed in the port to export approximately 3 Mt/a. To export 3 Mt/a can be accomplished using “Panamax” size ships with an average turn around time of 8 days. This is within the capabilities of the existing port facilities. The temporary installation would be used for approximately 2 years while the new spur line and wharf were built. When the new facilities were complete, production would be ramped up to 11 Mt/a. Negotiations have commenced with the port authorities to bring the operation into production in two stages. Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 16 Figure 1.3 Pointe Noire Port Facilities Map Courtesy of GoogleEarth® 1.13 SOVEREIGN RISK The current government headed by Denis Sassou-Nguesso has been in power for over 10 years and appears stable. The specialist risk consultancy firm, Control Risks, has rated the Republic of the Congo as one of the lowest risk countries in Africa based on both security and political risk.8 Foreign investment seems to be encouraged. Magindustries has just committed to construction of a US$723 M potash plant with construction planned to commence in Q3, 2008.9 In May 2007 Mining Projects Development (MPD) signed agreements with the government and is ramping up the drilling program and concurrent studies for the Zanaga iron ore deposit 100 km east of the Mayoko deposit.10 The Congo electrical authority has committed to bringing a 25 MW power plant on-line by the end of this year with a 400 MW plant scheduled to be on-line by the end of 2010.11 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 17 APPENDIX A HAEMATITE PLANT FLOWSHEET
Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 18 APPENDIX B HAEMATITE PLANT GENERAL ARRANGEMENT DRAWING A 60024 18.03.08 60024-0012-05-121-001 A JNM JNM 1 : 1000 DMC MINING LTD MAYOKO IRON ORE PROJECT HEMITITE PLANT GENERAL ARRANGEMENT 0 20 40 80 120 160 200m 100000 200000 130000 C C ROM PAD. BASED ON CAT 989 HAUL TRUCK. PROPOSED RAIL LOOP. BN-202 . FINE ORE TRAIN LOAD OUT BIN. (1000m) ST-202 FINE ORE STOCKPILE. (80000m) TU-202 BN-201 . LUMP ORE TRAIN LOAD OUT BIN. (1000m) TU-201 C C BL-003 BL-001 CR-001 CONVEYOR CV-005. FINES TRANSFER. CONVEYOR CV-006. FINES TRANSFER. C C SC-002 PRIMARY SCREEN No.2 SC-001 PRIMARY SCREEN No.1 LUMP STACKER CV-004 BN-002. PRIMARY SCREEN BIN. (250m) ST-201 LUMP ORE STOCKPILE. (80000m) CV-001 PRIMARY CRUSHER DISCHARGE CONVEYOR B 0012-05-121-02 0012-05-121-02 A PLANT GRID NORTH BLD-003 PRIMARY SCREEN BUILDING BLD-002 SECONDARY CRUSHER/TRANSFER BUILDING CR-002 SECONDARY CONE CRUSHER. BN-003 SECONDARY CRUSHER BIN (100m) BLD-001 PRIMARY CRUSHER BUILDING CR-001. PRIMARY GYRATORY CRUSHER. FE-001. PRIMARY CRUSHER APRON FEEDER. CV-003 AREA 011 & 012 CRUSHING AND SCREENING FOR INFORMATION ONLY ISSUED FOR INFORMATION ONLY D C A B H G E F 1 2 3 4 5 6 7 8 9 10 11 12 No. BY DATE REVISION CHECKED APPROV. BY DATE CLIENT PROJECT No. DRG SIZE REV No. DRAWING No. A1 PROJECT APPR. DESIGN APPR. DESIGNED CHECKED DRAWN TITLE SCALE DRAWING No. REFERENCE DRAWINGS CLIENT: COPYRIGHT C This drawing remains the property of GRD MINPROC LIMITED and may not be copied in any way without prior written approval from this company ABN 52 008 992 694 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 19 APPENDIX C HAEMATITE PLANT ELEVATION AND SECTION DRAWING A 60024 18.03.08 60024-0012-05-121-002 A JNM JNM DMC MINING LTD HEMATITE PLANT 0 7.5 15 30 45 60 75m SCALE 1:750 RL:7500 RL:0.000 DGL RL:39500 WP RL:0.000 DGL RL:15000 TOS RL:25200 TOP PAD RL:0.000 DGL RL:30325 WP MAYOKO IRON ORE PROJECT 1 : 750 ELEVATIONS AND SECTIONS B 0012-05-121-001 SECTION 0012-05-121-001 SECTION C RL:7500 RL:0.000 DGL RL:39500 WP RL:20000 TOS ROM PAD. BASED ON CAT 789 HAUL TRUCK. SC-002. PRIMARY SCREEN. SC-001. PRIMARY SCREEN. CONVEYOR CV-006. FINES TRANSFER. CONVEYOR CV-007. FINES TRANSFER. RL: 15000 TOS 300000 130000 100000 200000 0012-05-121-001 A 0012-05-121-001 SECTION D 284994
7487 6487 FE-202 FE-201 BN-003 4400 38225 BL-001 BN-001 CR-001 CR-002 RL:0.000 DGL REINFORCED ROM WALL CR-001 CV-001 CR-001. PRIMARY GYRATORY CRUSHER. FE-001. PRIMARY CRUSHER APRON FEEDER. BN-002. PRIMARY SCREEN BIN. (250m) RL:25200 TOP PAD CR-001 ROM PAD ST-202 OMITTED FOR CLARITY CV-201 ST-201 LUMP ORE STOCKPILE. (80000m). TU-201 CV-004 FOR INFORMATION ONLY AREA 011 & 012 CRUSHING AND SCREENING ISSUED FOR INFORMATION ONLY SECTION D C A B H G E F 1 2 3 4 5 6 7 8 9 10 11 12 No. BY DATE REVISION CHECKED APPROV. BY DATE CLIENT PROJECT No. DRG SIZE REV No. DRAWING No. A1 PROJECT APPR. DESIGN APPR. DESIGNED CHECKED DRAWN TITLE SCALE DRAWING No. REFERENCE DRAWINGS CLIENT: COPYRIGHT C This drawing remains the property of GRD MINPROC LIMITED and may not be copied in any way without prior written approval from this company ABN 52 008 992 694 Mayoko Iron Ore Project Scoping Study h:\tony w\mayoko scoping report exec summary_1.doc Page 20 REFERENCES 1 DMC Mining, ASX Announcement, 3 December 2007 2 DMC Mining, ASX Announcement, 28 February 2008 3 DMC Mining, ASX Announcement, 7 May 2008 4 Personal communications B. Franzen DMC Mining, B.R.G.M Congo Geologie Map, 1963 5 Congo Metallogenic Map 1:1,000,000 6 Porter GeoConsultancy Pty Ltd, Ore Deposit Description Database Gabon Iron, http://www.portergeo.com.au/database/mineinfo.asp?mineid=mn1211, [Accessed 28 May 08] 7 Muir A, Rowell A, Tonkin S., Mid-West Iron Ore Book Steeling the Limelight from the Pilbara, August 2006, Hartleys Ltd 8 DMC Mining, ASX Announcement, 29 April 2008 9 http://www.magindustries.com/detail.php?id=510 [accessed 5 June 2008] 10 L’exploitation du fer dans la Lékoumou augure de bonnes perspectives pour l’économie congolaise, http://www.congo-site.com/pub/fr/v4x/actualites/article.php?num=6819 [accessed 29 May 2008] 11 Meeting 30 April 2008 with Mr Henri Inokmis, Directeur Départemental, Société Nationale d’électricité
DMM Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
(20min delay)