ann out - sienna update, page-14

Thought I'd add a bit of detail since I worked on a scoping study recently that studied a thickening plant to replace an existing tailings disposal system.

The tailings paste idea unfortunately seems like more of a thought bubble than a solution to their immediate problems.

- Not all tailings can be thickened to a paste material, it is very dependent on the properties of the particles eg size, density. Pilot plant testing will likely have to be conducted = dollars.

- Depending on how thick the tailings can get there could be some fairly significant cost savings in construction of the embankment.

- The greatest operating cost savings come from the pumping costs. If their power costs are high (using diesel maybe), and they are pumping a lot of tailings water and return water from the pond, their could be some merit.

- A tailings plant will require new thickener and other associated equipment (6-10 Million all up cost at a guess).

- The thickener will have to be imported from one of the few manufacturers and usually has a lead time of 9-12 months.

When I read the sentence about their tailings strategy I was a little perplexed. It doesn't seem like they are in a position to reconsider their tailings strategy especially when the capital cost of a thickening plant is significant for a company of RED's size.

Paste thickening may save a little bit of money but it is a long term strategy due to the fairly significant upfront cost. I'm not even sure what the mine life is here but it would have to be fairly long to consider paste thickening.

For the record - the scoping study that I worked on concluded that a thickening plant would be marginally positive in NPV terms and was not taken any further. In my case it started out as a thought bubble from the site involved but was eventually

Sorry if that sounds a bit negative but thought it would shed a bit of light.

Good luck to all