carina pfs completed

28 July 2008
ASX RELEASE
Carina Pre-Feasibility Study Completed
Yilgarn Iron Ore Project
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Encouraging financial returns and sound operating margins indicated for start-up project
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Opportunities to enhance returns through increased production rates
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Recommendation to proceed to a bankable feasibility study
Iron ore company Polaris Metals NL (ASX: POL) is pleased to announce the completion of the pre-feasibility study (PFS) for the development of the Carina deposit - Stage 1 of the Yilgarn Iron Ore Project (YIOP), 60km north of Koolyanobbing in Western Australia.
The PFS was completed under the coordination of independent consultant group Prodemas International who sub-contracted various facets to specialist consultants and service providers.
The study adopted a base case for mining the Carina ore body at a rate of 2.5Mtpa, trucking the ore to a new siding on the Trans Australia rail line and then railing to the Fremantle Port Authorities’ Kwinana operation. A feed of 20Mt at a grade of 57% Fe was used in the Stage 1 study, giving an initial mine life of 8 years from production start-up in late 2010.
The base case produces a net present value (NPV), at a 10% discount rate, in excess of A$100M. The results are considered very positive and indicate the project is viable.
The capital cost including rolling stock is estimated at A$120-130M with operating costs estimated at A$60 - 70 per tonne depending on operating options which is consistent with other operations in the region. Revenues were based on the latest benchmark iron ore prices over the project life. The accuracy of the study is +/-25%. Sensitivity analysis in the studies indicates that the operating costs are reduced as mining rates increase and also that a doubling of the fuel price, still produces a robust NPV.
Prodemas’ key recommendation from the study is that Polaris should proceed to a Bankable Feasibility Study (BFS).
Polaris believes that subject to State environmental approvals it is possible to bring the Stage 1 Carina project into production in 2010. As resources are established on the other prospects in the YIOP and approvals to mine are granted, the study indicates the benefits and potential of increasing production to 5-10Mtpa.
Future Work
Polaris is continuing with a number of optimisation studies that will permit the identification of the preferred option for rail and Port infrastructure. This process is expected to be completed in the fourth quarter of calendar 2008. A formal decision on proceeding to a BFS will be made on conclusion of these studies which is consistent with the proposed development timetable. Simultaneously, drilling will continue to upgrade Carina to define an Indicated Mineral Resource at least, along with geotechnical, metallurgical and hydrological studies. By August 2008 it is expected to have two RC rigs and one diamond rig on site. Work such as the flora and fauna studies is also ongoing to facilitate project approval in the estimated time frame.
Key staffing appointments have been made recently, including an Environmental Manager to focus on statutory approvals and two new Supervising Geologists.
Background
The YIOP comprises five prospects with:
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An Inferred Mineral Resource for the Carina, J4 and J5 deposits estimated at 30.4Mt at 58.1%Fe; and,
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Exploration potential for the project (in addition to the Inferred Mineral Resources) estimated to be in the range 70-90Mt at 57-58%Fe.
The potential quantity and grade of iron deposits reported as exploration potential is conceptual in nature and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.
A PFS was commenced in late 2007 aimed at establishing the economic potential for mining in the YIOP area at nominal rates of 5-10Mtpa. During the study, the estimation of the initial resource at Carina and the enhanced understanding of timing realities for mining approvals for some of the deposits and export Port considerations led to a widening of PFS scope.
Carina was separately studied as a Stage 1 early development option for which mining could start in 2010, albeit at a lower production rate. The study for the whole YIOP suggests significantly greater financial returns should reserve definition enable production rates to be increased to 5Mtpa or higher.
Carina has the benefits of:
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A relatively simple tabular ore body geometry with visual ore identification;
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A potential extraction rate in line with likely initial port capacity;
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Proximity to infrastructure, and;
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Being located outside the proposed Mount Manning Class A Reserve extension.
Once the infrastructure options and Mineral Resource upgrade are finalised it is anticipated a BFS will formally commence later in 2008. It is expected that this will be finished by mid 2009.