ASX Announcement – Aurox Resources Limited, 1/245 Churchill Ave, SUBIACO, WA 6008
Telephone 08 9382 4477, Fax 08 9382 2012 email contact: [email protected], website: www.aurox.com.au
15 January 2007
e-lodgment
Company Announcements Office
Australian Stock Exchange Limited
2 The Esplanade
PERTH WA 6000
BALLA BALLA PROJECT UPDATE
Feasibility Study
Aurox Resources Limited (“Aurox” or “Company”) is pleased to announce that all
sections of the Balla Balla vanadium bankable feasibility study (“BFS”) and associated
titanomagnetite concentrate pre-feasibility study (“PFS”) are complete, apart from the
financial modeling section, which requires the final off-take pricing numbers currently
being discussed with Chengde Iron & Steel Group Co Ltd.
Aurox commenced work with Lycopodium Engineering Limited (“Lycopodium”) on
the BFS in February 2006, initially focusing on the development of plant and
infrastructure capable of producing 4,700 tonnes of vanadium (5900 tonnes
ferrovanadium- FeV80) annually. Following the signing of a Heads of Agreement with
two major Chinese resource companies in September 2006, Aurox and Lycopodium
commenced PFS work on a 2 million tonne per annum (“tpa”) titanomagnetite
concentrate circuit to operate alongside the vanadium plant.
Financial evaluation of the BFS and PFS by Aurox and its advisors has determined that
developing the Balla Balla project in two stages is the most effective and low-risk
avenue to timely production and cash flow.
The first stage will be the construction of a 2 million tpa concentration circuit. The
capital cost of this stage is estimated to be between AUD140 and AUD160 million and
includes all plant and infrastructure required to function as a stand-alone operation.
The second stage will be the construction and operation of the vanadium circuit, which
will run alongside the titanomagnetite concentration plant. The capital expenditure for
the vanadium plant is currently estimated to be a further AUD290 million; however, this
figure may vary depending upon the prevailing capital cost environment at the time
when the second stage is initiated. Summary details of the vanadium BFS and
titanomagnetite concentrate PFS will be released in the December 2006 Quarterly
Report.
Lycopodium estimates the time required to upgrade the titanomagnetite concentrate PFS
to a bankable-level document is 4 months.
ASX Announcement – Aurox Resources Limited, 1/245 Churchill Ave, SUBIACO, WA 6008
Telephone 08 9382 4477, Fax 08 9382 2012 email contact: [email protected], website: www.aurox.com.au
Status of Chengde / MCC Agreement
On the 5th of September 2006 Aurox advised the ASX that it had entered into a Heads
of Agreement (“HoA”) with Chengde Iron & Steel Group Co Ltd and China
Metallurgical Group Corporation (“Chengde/MCC”) whereby these major Chinese
companies would together participate as a significant joint venture partner to the Balla
Balla Iron Ore & Vanadium project. Under the HoA, Chengde/MCC will farm into the
Balla Balla Vanadium and Iron Ore Projects via cash payments of AUD20 million
following completion pursuant to the Balla Balla Option Agreement. Chengde/MCC
will also provide funding of AUD33.6 million by way of a convertible note and a share
placement. The HoA also provides for Chengde/ MCC to purchase by way of proposed
off-take arrangements 70% of the Balla Balla ferrovanadium production and a minimum
of 2 million tpa of titanomagnetite iron ore concentrate for the life of the vanadium and
iron ore projects respectively. The HoA is subject to a number of conditions precedent
including; 1) shareholder and regulatory approvals, 2) negotiation and execution of the
convertible note deed, JV and share placement agreement and 3) review of the
completed Vanadium BFS by Chengde/MCC.
It was intended that Chengde/MCC and Aurox negotiate formal Joint Venture, off-take,
convertible note and share placement documentation prior to the end of September 2006
as outlined in the HoA and stated in the ASX announcement. However it was necessary
to push back the timetable for these negotiations to the first quarter of 2007 due to the
following:
1. delays to a Balla Balla site visit by key Chengde/MCC personnel (now
complete);
2. time required by Chengde/MCC to translate and review the 2M tpa titanomagnetite
concentrate PFS (now complete);
3. time required for Chengde/MCC to evaluate a new conceptual mining study
which includes the 11 kilometre strike of titanomagnetite extending to the west
and east of the current BFS limits where resource definition drilling completed
in November demonstrates excellent continuity of Fe, V, Ti mineralisation (now
complete).
All relevant data is in the possession of Chengde/MCC, and Aurox is in daily
discussions with regards to providing clarification of any aspect of the Balla Balla
project.
Conceptual Mining Study
In December 2006 mining consultants Orelogy Pty Ltd (“Orelogy”) carried out a
conceptual mining study focused on minimising the strip ratios associated with mining
the ore required to produce 2 million tonnes of titanomagnetite concentrate per annum.
The study concluded that a strip ratio of 1 tonne of ore to 0.25 tonnes of waste could be
maintained for 12 years within the 5 kilometre BFS area. Incorporating the 11
kilometres of Balla Balla titanomagnetite extending east and west beyond the BFS area,
the study demonstrated that the same 1 : 0.25 ore-to-waste strip ratio could be
maintained for 30 years.
ASX Announcement – Aurox Resources Limited, 1/245 Churchill Ave, SUBIACO, WA 6008
Telephone 08 9382 4477, Fax 08 9382 2012 email contact: [email protected], website: www.aurox.com.au
On 5 January 2007 Aurox announced that Golder Associates will undertake 3D block
modeling work to define new resources for the BFS, Don Well and Caine Well areas.
The modeling work will focus on optimising the vanadium and iron mineralisation, as
both products are present in economic quantities. The new block models will
subsequently be delivered to consultants Orelogy for calculating optimal economic and
mining parameters, followed by the estimation of new JORC-compliant reserves. The
strip ratio is a key mining parameter in determining the amount of material that can
profitably be removed and processed.
As noted, the current Balla Balla reserve estimate does not include any titanomagnetite
falling outside the current BFS limits. Nor do the current reserves include
titanomagnetite that is weathered (oxide) or has a vanadium content of less than 0.6%.
The weathered and lower-grade material can, however, be processed and sold as
titanomagnetite concentrate for steelmaking mill feed and thus will be included in the
new reserve estimation. The upcoming work by Orelogy is expected to dramatically
increase the reserve position of the Balla Balla project.
Aurox Resources Limited
Charles Schaus
Managing Director
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