Quite a number of shareholders have asked for a review of just where we are at this time, but in terms that everybody can relate to. This short review is my attempt to do just that.
I would like to touch on two topics, namely, the nickel price and the Tasmanian exploration scene prior to discussing the projects.
Firstly, the Nickel price.
Since all base metal prices reached their lows in the third quarter of 2001, nickel has made a significant recovery from US$4,500 to trade in the range of US$6,800 to US$7,200 by the end of April 2002. This is better than a 50% increase in just six months! By way of contrast, copper and gold were up 25% and 20% respectively, over the same period while zinc and tin showed little change from their lows over the same period.
The question is why has nickel performed so outstandingly? Is this price level sustainable?
Total annual world production of nickel is only 1.1 million tonnes and demand is expanding at about 4.3% per annum or about 47,000 tonnes per annum. Demand is forecast to outstrip supply for at least the next 5-6 years. The demand means that one project the size of Anaconda's Murrin Murrin must be successfully brought into operation each and every year going forward! Therefore, firm nickel prices can be expected for the foreseeable future.
Secondly, Tasmania (and the West Coast in particular).
There are and have been many significant World Class deposits on Tasmania's rich West Coast including Mt Lyell* (copper gold), Renison* (tin), Rosebery* (zinc, lead, copper, gold), Henty* (gold), Que River and Hellyer (zinc, lead, copper, gold, silver), Mt Bishoff (tin), Beaconsfield* (gold). (*presently operating)
In fact, Tasmania's West Coast Region represents one of the world's smallest most variously and intensely mineralised areas (by the way, it is an area I have been exploring in for forty years!).
Because exploration has been actively pursued for over 130 years, there is superb infrastructure in place. Allegiance's prospect areas lie in close proximity to all required facilities, including road, rail, electricity, drilling contractors, accommodation and a skilled mining workforce. In addition, Burnie is the loading port for transhipment of concentrates from most of the Tasmanian working mines (see above).
Of particular value to the Allegiance prospects is the mining culture on the west coast dating back more than 120 years. This, together with there being no native title issues and no identified environmental impediments to any future mining operations make the Zeehan area a dream compared with many other mining areas. Of great significance is the most helpful support provided by a development-minded State Government.
Our Prospects:
AVEBURY
To date, we have spent about $4 million on the ground we hold around the town of Zeehan. What have we achieved for the money spent you ask! Let's talk about Avebury first.
At Avebury, we have identified a resource of about 3 million tonnes of 1.54% nickel, a third of which is in the Indicated Category and two-thirds in the Inferred Category. It will require significant additional drilling programmes to convert the Resources to Reserves. This upgrading of the resource is a necessary and normal step to advance the project to mine production. What is special about Avebury is that it is a new type of deposit not previously identified elsewhere. The mineralisation consists of a nickel sulphide (pentlandite), magnetite (magnetic iron oxide), a small amount of iron sulphide (pyrrhotite), the host rock (serpentinite), and very little else! Because the grain size of this nickel sulphide is coarse, we believe it will be one of the simplest and lowest cost milling operations known from which to produce the nickel sulphide concentrates. Initial test work shows about a 90% recovery of nickel into a 22% nickel concentrate, which represents just about the best available on the market.
Some people have said that a 1.54% nickel resource grade is low! In fact, it is equivalent to about 10 g/t gold, 2.4% tin (they are mining 1.8% down the road at Renison!). 5.7% copper (they are mining 1.3% Cu down at Mt Lyell right now!). In fact, in the particular case of Avebury, with its excellent infrastructure and low cost milling characteristics, 1.54% Ni is quite attractive and our studies show that currently at US$6,000/tonne, the deposit is economic.
But Avebury gets better! 800 m east at East Avebury, we have good surface indicators and drill hole intersections which infers similar nickel mineralisation to Avebury. Also, 4,000 m to the west of Avebury at Burbank, preliminary shallow drilling again infers the presence of yet another such body. Regional geological and geochemical, and geophysical surveys have revealed a number of look-a-like footprints but no detailed work has been carried out to date.
In brief, the Avebury history of the discovery was that after the initial discovery Hole A001, we drilled 35 drill holes to outline the known Resources (3 million tonnes @ 1.54%) But the Resource is open to depth and to the west. So, even at Avebury, the resource has not yet been delineated. At Avebury itself, even though we have now drilled 35 holes, the resource remains open along strike to the west and at depth.
The Avebury series of deposits represents a new type of nickel deposit. The ultrabasic the host to mineralisation is naturally rich in nickel mostly in silicate form. At Avebury (and elsewhere in the area), we believe the ultrabasic itself contained low levels (0.2%+/-) of disseminated nickel sulphides. The heat from a later intrusion of granite at depth remobilised the nickel sulphides and concentrated them on the limits of the anticline. It is also possible that the granite added sulphur to the system converting some of the silicate to sulphides.
In summary, the resource potential of the Avebury district is exciting with excellent opportunities to substantially expand the resource base beyond the already identified 3 Mt 1.54% nickel.
MELBA FLATS
Enough about the Avebury series of deposits now for Melba Flats. At Melba Flats, along a three kilometres of strike length, some five or so locations have been identified where high grade nickel and copper sulphides with cobalt, gold, platinum and palladium have been defined. Much of our work to date has been concentrated at Nickel Reward at the southern end, where a pipe like massive sulphide body, typically 1-3 m wide, carrying typically 6% (+/-) Nickel, 3% (+/-) Copper and 2 g/t (+/-) of combined of gold, platinum and palladium has been intersected. Now, this mineral assembly is considered high grade by any standards. In terms of gold, it is equivalent to about 1-2 ounces of gold to the tonne!
It is important to consider the genesis of the deposit. The type of mineralisation is similar to that found at Kambalda, WA Thompson Manitoba, Norilsk (Russia) or Sudbury (Ontario). We believe that it has been remobilised from depth by the same granite responsible for the Avebury series of deposits 15 kms to the west. The difference between Melba and Avebury is that the granite at Melba remobilised a conventional deposit up conduits within a series of reactivated shear zones. The importance for Allegiance is two fold. Firstly, we are attempting to locate shallow deposits of the grades mentioned above which can be readily mined and concentrated for shipment. But we are also intent on progressively chasing the mineralisation downwards towards its source. The present programme at Melba Flats is designed to better understand the structures containing and controlling the near surface manifestation of the mineralisation with the objective of (a) defining economic near surface accumulations and (b) subsequently follow the high grade shoots to the source. Genetic considerations suggest the source may represent a very significant target.
How long is all this going to take?
Well, firstly we must concentrate our efforts on firming up the tonnage at Avebury itself and expanding the potential for additional resources in the immediate vicinity. Secondly, we must progress our exploration at Melba with a view to delineating a high grade sulphide resource of say 100,000 tonnes close to surface. Thirdly, we must drill the Burbank prospect to depth as it may be an Avebury Type deposit but much closer to surface.
With the recently raised $750,000 at 4.5 cents plus 1/3 Option, we intend to do all of the above by end of December this year.
Should progressive results be satisfactory and funding be available, we may be able to accelerate our work at Avebury and Melba between now and December.
The current year will be a critical one for Allegiance. The nickel price is predicted to be excellent going forward, this should encourage the market to recognise just what a positive picture we have on the West Coast. This in turn, will make it possible to progress the project towards a mining operation which we all desire!
THE CORPORATE VISION
Against this background of a strong future nickel market, Allegiance has assembled a portfolio of tenements containing prospects with substantial identified nickel resources and excellent scope to expand this resource base.
We have a vision for the future growth of Allegiance based on this position:
* advance these individual prospects to the point where their demonstrated commercial viability is marketable.
* attract appropriate joint venture partners to these projects to operate and manage their commercial mine development, thereby generating a positive cash flow for Allegiance.
* continue to identify and acquire high class exploration and mine development opportunities where Allegiance can use its expertise to add value and then market the opportunity.
A W Howland-Rose MSc, DIC, FGS, FIMM, FAusIMM, FAIG, CEng CHAIRMAN
The information contained in this release is based on information compiled by Tony Howland-Rose who is a corporate member of the Australasian Institute of Mining and Metallurgy and who has more than five years' experience in the field of activity being reported on. Lindsay Newnham consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.
ends - AAP
AGM Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
