20 December 2004Company Announcements OfficeAustralian Stock...

20 December 2004
Company Announcements Office
Australian Stock Exchange Limited
20 Bridge Street
SYDNEY NSW 2000

Valuation Of The Rincón Salar and Admiralty Resources NL Market Capitalisation

The Board of Admiralty Resources NL advises that it is in receipt of a independent preliminary
report from Dr Carlos Sorentino of Ekos Research, a Sydney based Consultancy, entitled
“Preliminary Report on an Independent Technical Review and Valuation of the Salar del Rincón
asset and opinion on the Market Value of Admiralty Resources NL” (Dr Sorentino expects to
complete his final report early next week).
The report was commissioned for two reasons:
1. To assist potential investors in the Converting Note understand the potential of the
Rincón Salar asset;
2. Provide an independent up to date valuation of the Rincón Salar asset which takes
account of the recent work of the Board in conjunction with the CSIRO, co-authors
of a recent report on the Rincón Salar who are Jorge Fowler a Mining Engineering
Consultant based in Antofagasta, and Pedro Pavlovic, a Chemical Engineer based
in Santiago Chile and Professor J Andreni, University of Salta.
The range of valuations contained in the independent preliminary report are:
“A preliminary valuation of this evaporite indicates the following range of values:
Lower 5 percentile Median (expected) Higher 5 percentile
NPV discounted at 12%, US $ million
56.0 73.0 103.2
NPV discounted at 12%, Aus $ million
74.7 97.3 137.6
Internal rate of return
25% 27% 35%
Within this analytical framework, Admiralty’s market capitalisation will range as follows:
Lower 5 percentile Median (expected) Higher 5 percentile
Admiralty Resources Market capitalisation, Aus $ million
597.3 778.7 1,100.8
Based on the 450,342,630 shares currently on issue this equates to the following value per
share:
Lower 5 percentile Median (expected) Higher 5 percentile
Admiralty Resources Market capitalisation, Aus $ per share
1.32 1.73 2.44
The Board intends to commence further drilling and other work to more accurately calculate the
inferred resource. The results of this preliminary report instills confidence in the Board in its
commitment to develop and exploit the Rincon Salar to maximize shareholder wealth. We are
encouraged by the report and it supports the boards intention to immediately develop the
Rincon Salar .
Dr Carlos Sorentino, of Ekos Research, Sydney, a Fellow of the AUSIMM, has the necessary
qualifications and experience relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Dr Carlos Sorentino consents to the inclusion in the
report of the matters based on his information in the form and context in which it appears”.
Yours sincerely
Phillip Thomas BSc MBM AAIG
Executive Chairman / CEO
Admiralty Resources NL
[t] +61-3-9642 3535
[f] +61-3-9670 8965
[e] [email protected]
Note:
The JORC Code states at Clause 6.0 that it is applicable to all solid minerals, including diamonds, other
gemstones, industrial minerals and coal, for which Public Reporting of Exploration Results, Mineral
Resources and Ore Reserves is required by the Australian and New Zealand Stock Exchanges. The
Rincón Salar brine inferred resource is a liquid and is replenished over time (and thus will be many times
the inferred amount depending on pumping/depletion rates as noted) so it falls outside of the JORC
Code.
A Public Report concerning a company’s Exploration Results, Mineral Resources or Ore Reserves is the
responsibility of the company acting through its Board of Directors. Any such report must be based on,
and fairly reflect the information and supporting documentation prepared by a Competent Person or
Persons. For this purpose the Company has asked Dr Carlos Sorentino to form his own opinion, and
review the latest work (12 December 2004) of the co-authors, Fowler and Pavlovic and other inferred
resource estimations provided by a competent person, Alex Teluk, Geodyne Pty Ltd in October 2000, a
consultant based at Gold Coast, Queensland. The key qualifier in the definition of a Competent Person
is the word `relevant' experience. Both Consultants have had relevant experience in the task over the
past five years. Dr Sorentino the competent person compiling and submitting the report believes from
his review of the Fowler Pavolvic report, that the authors can be classified as “competent persons”.
There are some modifying factors which all three authors have taken into consideration.
ekos research pty limited
ACN 001 878 691 ABN 22 001 878 691
75 Melba Drive Telephone [02] 9887 4176
East Ryde NSW 2113 Fax [02] 9805 1244
AUSTRALIA e-mail [email protected]
16 December 2004
Mr Phillip Thomas
Chief Executive Officer
Executive Chairman
Admiralty Resources NL
Level 6, 150 Queen Street
Melbourne VIC 3000
Preliminary report on an Independent Technical Review and
Valuation of the Salar del Rincón asset and opinion on the
Market Value of Admiralty Resources NL
Dear Sir,
Our company has been requested by you to prepare an Independent Technical Review and
Valuation of the Salar del Rincón asset owned by your company. The purpose of this valuation
is to provide comfort and information to potential subscribers of a Converting Note placement
your company proposes to make.
This Technical Review and Opinion has been prepared having regard to the Australian
Securities & Investment Commission (ASIC) Policy Statements 75, "Independent Expert
Reports to Shareholders" (which sets out the ASIC's views on the meaning of "fair" and
"reasonable"), ASIC Practice Notes 42 (which deals with Independence of Experts' Reports)
and 43 (which deals with Valuation Reports and Profit Forecasts), and to the Listing Rules of
the ASX.
The Salar del Rincón is located in the Andean region of northwestern Argentina, in the province
of Salta province and near the limit with Chile. The property, located at 3,700 meters of
altitude, comprises 33 contiguous mining tenements covering approximately 410 km2 within
which a multi-element haline brine resources is contained in an area of about 260 km2. The
Salar’s development could be aided by the good infrastructure that is available in the area
including a high voltage power line, a gas pipeline, and a railway line to the Antofagasta port,
750 km away in the Chilean Pacific coast.
Jorge Fowler, a Chilean Mining Engineer based in Antofagasta, Chile and Pedro Pavlovic a
Chemical Engineer, based in Santiago Chile, each with over 35 years experience, prepared a
technical review and valuation which has been taken as guidance in the preparation of this
preliminary valuation. Although Fowler and Pavlic do not claim to have prepared a report
compliant with the Australasian Code for Reporting of Mineral Resources and Ore Reserves
(The JORC Code) and they are not members of a professional association included on the list of
JORC Recognised Overseas Professional Organizations, their work provides consistent and
relevant information about the magnitude of Mineral Resources available for exploitation in the
Salar del Rincón.
It must be noted that the Salar del Rincón is an active evaporite still being formed, that is to
say, a replenishing mineral resource, depositing salts at a rate that exceeds the project’s
requirements.
The Salar del Rincón Inferred Resources can be estimated at:
Inferred
resources
Metallurgical
recovery
Resource
magnitude
Proposed
annual
production Product
Million tonnes
Thousand
tonnes
KCl 17.2 52 9.0 95.0
H3BO3 2.3 39 0.9 6.0
Li as LiCl 2.9 50 1.5 13.6
These order of magnitude calculations indicate the project has enough resources to produce
beyond current plans. This is indeed the experience of other evaporitic deposits in the area
where the magnitude of the resource exceeds all demand requirements and result in lifes of
mine often exceeding centuries.
A preliminary economic valuation of this evaporite indicates the following range of values:
Lower 5 percentile Median (expected) Higher 5 percentile
NPV discounted at 12%, US $ million
56.0 73.0 103.2
NPV discounted at 12%, Aus $ million
74.7 97.3 137.6
Internal rate of return
25% 27% 35%
In our opinion the development of the Salar del Rincón project will add considerably to
Admiralty’s market value. The last five years average CAPM beta of 12.7% for the ASX
resources sector, indicates that it will be prudent to use as an estimate of market capitalisation
a price to earning ratio of one to eight. This value is similar to the one recently used by SQM in
their valuation of the Atacama deposits. Within this analytical framework, Admiralty’s market
capitalisation will range as follows:
Lower 5 percentile Median (expected) Higher 5 percentile
Admiralty Resources Market capitalisation, Aus $ million
597.3 778.7 1,100.8
This valuation has been prepared independently. The project has been reported to Admiralty
shareholders in detail in statutory reports and in independent technical reviews and valuations.
We have direct experience of this project, having carried out during 1996 to 2000 an extensive
survey of the evaporitic deposits in the region, including Salar del Rincón. We believe the
material facts as presented are sufficient to produce this order of magnitude valuation.
The reader must take into account that there are a considerable number of modifying factors,
risks and uncertainties that will be further elaborated in a report that will be released in the
very near future.
Yours sincerely
• Dr. Carlos M. R. Sorentino PhD, MEnvSt, BE(Chem),MMICA, FAusIMM, CP(Man)