I meant to paste this on Nakety. Thu Oct 18, 2001Argosy...

I meant to paste this on Nakety.


Thu Oct 18, 2001
Argosy Finalizes Agreement With Norilsk

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NEWS RELEASE No. 01-07

Argosy Minerals Inc, through a wholly owned subsidiary, has now finalized the previously announced agreement with a wholly owned subsidiary of the group Norilsk Mining Company, and Societe des Mines de la Tontouta (SMT) in a tripartite venture for the development of the US$800 million Nakety / Bogota project in New Caledonia. Argosy is pleased to announce the broad terms of the agreement which was signed in Paris on 16th October, 2001.

Norilsk Mining Company is the world's leading refiner of nickel and palladium and a major global producer of copper, cobalt and other platinum group metals.

Under the terms of the Agreement, Norilsk will reimburse Argosy 45% of its sunk costs to date, some US$7.166 million, within ten days of signing the agreement. Thereafter Norilsk has the ability to earn a 45% stake in the project by completing the bankable feasibility study to international standards over two years. The cost of the Bankable Feasibility Study has been estimated at US$15 million, which includes additional resource / reserve drilling on the Bogota concessions. Bateman Engineering in Australia, in conjunction with Norilsk's GipproNickel Institute in St Petersburg will complete the bankable feasibility study.

As agreed, Norilsk can then sequentially increase its stake in the project by making an additional payment to Argosy of US$17.5 million and providing the banking guarantees necessary to secure financing for the project within a further year. Achieving these milestones would increase Norilsk's interest to 70% of the project.

Thereafter, an additional payment to Argosy of US$12.5 million, plus a final payment of an agreed 20% of the Net Present Value of the project, will result in Norilsk earning a 90% stake in the project, with SMT holding the remaining 10%.

Argosy will continue to look at new opportunities in the resource sector, to take advantage of its strong cash position and maintains its interest in its other projects.


ON BEHALF OF THE BOARD
Peter H Lloyd
Chief Executive Officer





Information on New Caledonia
Introduction

The New Caledonian Nickel Project is a joint venture formed for the purpose of developing a world class nickel-cobalt deposit in New Caledonia, a French Overseas Territory situated 1500 kilometres east of Australia. The project is based on the Nakety and Bogota laterites, mineral resources enriched in nickel and cobalt that formed from the chemical weathering of the underlying ultramafic rocks. Importantly the deposits in New Caledonia are at or near surface and suitable for the development of low cost open-pit mines. The defined nickel-cobalt resource at Nakety combined with the resource potential of Bogota provide the Joint Venture with a project ranked as world class.

On August 6, 1999 Argosy formed a joint venture agreement with the private New Caledonian company, Societe des Mines de la Tontouta (SMT) to carry out a feasibility study for a nickel refinery on SMT's mining concessions at Nakety. Nakety is a well defined section of the concessions with 676 drill holes within the Nakety deposit. On July 7, 2000 the joint venture agreement was amended to include the rights to mineralised concessions at Bogota, situated only 3 kilometres from the Nakety deposit. These new concessions increase the potential resource available for mining very considerably and allow for development scenarios based on a mineral resource that could be considered unlimited.

On July 25, 2001 Argosy announced that JSC "MMC Norilsk Nickel" will fund the feasibility study on Argosy's behalf to earn an interest in the joint venture. The joint venture provides for Norilsk to fund a bankable feasibility study and refund Argosy a portion of its expenditure to date to earn a minority interest initially. Thereafter, Norilsk can earn a majority interest by guaranteeing financing of the project and reimbursing Argosy for a further agreed amount of its' expenditures.

The Nakety Deposit



Considerable work has already been completed on the Nakety deposit, including metallurgical testwork by Dynatec Engineering and definitive engineering studies by Kvaerner. The deposit has been extensively drilled and is currently being mined on a small scale for saprolite, the underlying magnesium-rich laterite ore. The mining operation has indicated good correlation between actual mined grades and grades calculated from drill hole data. A resource estimate for the Nakety laterite deposit (both limonite and saprolite ore types) was developed by Resource Services Group (RSG) using a block model based on 676 drill holes (19,984 metres of drilling).



Resource reporting by RSG conformed to AusIMM/JORC guidelines and a quality control review of the assay data concluded that assay quality and data precision met industry standards.

RSG also completed a Mining Plan that demonstrated SMT's current mining fleet could mine the Nakety deposit at a rate of 4.2 million wet tonnes a year. The stripping ratio averages 0.16 to 1, with average haul distances less than 1 kilometre.

The Bogota Concessions

In year 2000 Argosy acquired the development rights to 40 concessions at Bogota, covering an area of 53.9 square kilometres, compared to the 3 original Nakety concessions covering 10.4 square kilometres. Previous exploration included drilling on 8 of the 40 concessions. At the time of drilling SMT targeted saprolite ore for export, rather than the limonite ore type that provides optimum economics for the pressure acid leach (PAL) technology.

The Bogota data set consists of 196 drill holes for a total of 5654 metres (average of 28.9 metres per drill hole). The drilling was conducted in the period 1982-1995. The selection of targets for drilling was based on geological mapping by government agencies Service des Mines et de l'Energie and Bureau de Recherches Géologiques et Minières. The drill holes were continuously sampled from surface providing sufficient analytical data to determine the potential for ore grade mineralisation in both the limonite and saprolite zones.

On the basis of the drilling, the distribution of mineralisation exceeding 1% Ni was determined to be extensive. Of 193 holes examined by Argosy, 97 holes carried 5 metres or more at +1% Ni in the limonite zone and 70 holes carried 5 metres or more at +1% Ni in the saprolite zone. Overall, the thickness of limonite zone mineralisation was determined to be considerable, often providing drill intercepts exceeding 35 metres. Data from 109 diamond drill holes on four of the mining concessions, 56 of which were mineralised, were used by a previous operator to arrive at a mineralisation estimate of 43 million tonnes at a grade of 1.65% Ni and 0.18% Co. Argosy used the larger 193 drill hole data set to derive a first pass estimate of the target size for all of the Bogota areas drilled, and a second pass target estimate of the resource potential for the remainder of the Bogota mining concessions geologically mapped as laterite, but not yet drilled.

The methodology used in the first pass estimate was to assign areas of influence to the mineralised intercepts in the drill holes leading to tonnage and grade estimates. For the second pass estimate the global average thickness of mineralisation determined from the first pass estimate was extrapolated over the area of mapped laterite not yet drilled, leading to a second tonnage estimate which was discounted by 40% and 60%. This approach is adequate for a target size estimation but is not sufficiently rigorous to arrive at a geological resource estimation that conforms to AusIMM/JORC standards.

The following table summarises the target size estimate derived to date:



1998 Economic Assessment of the Nakety Deposit

In January 1998 an economic analysis at a scoping study level was prepared by Argosy and Kvaerner using costs adapted from Argosy's previous completed study for a plant to be sited in Australia. The study incorporated revised data for freight, transport, duty and labour costs for New Caledonia. On the basis of an on-site plant and a 4.1 million wet tonnes per year mine producing 34,500 tonnes of nickel and 2700 tonnes of cobalt annually, gross operating costs of the order of $1.23 per pound of nickel were considered achievable. This cost estimate was sufficiently promising to embark on a number of alternate development scenarios for the project, including a plant producing a saleable concentrate rather than final metal.

1999-2000 Assessment of Nakety and Bogota Combined

From mid 2000 to early 2001 the impact of the Bogota acquisition on the potential economics of the project became abundantly clear. In particular the modelling of a project at a minimum of 50,000 tonnes per year of nickel production from 6 million wet tonnes of ore per year was achievable. This throughput would be capable of sustaining the project for 75 years given the +250 million tonne potential of the resource area. The very positive potential economics of the combined Nakety/Bogota resource was supported across the board in the due diligence process completed by joint venture candidates.

Current Status of the Project

The entry into the New Caledonian Project by Norilsk provides the technical and financial strength to complete the bankable feasibility study and take the project on to production. The feasibility study programme and budget are currently subject to review by Norilsk, SMT and Argosy together with the financing of the joint venture and the shares of the parties in the joint venture. The feasibility study will be comprehensive and will address all of the technical, environmental, financial and social issues that are necessary for a mining and financing plan acceptable to major international banks. The study will include work to examine development alternatives and to assess the impact of such alternatives on the financial outcome. Given the lessons learned by the industry from the Western Australia laterite mines, many significant engineering enhancements will be built into the next generation of pressure acid leach plants.

JSC "MMC Norilsk Nickel"

JSC "MMC Norilsk Nickel" is part of the Norilsk group, the largest metal company in Russia, and one of the largest metal companies in the world, with significant reserves of nickel, cobalt, copper and platinum group metals (PGM). Norilsk is the world's largest nickel producer with 20% of the world market, more than 40% of the palladium, 24% of the platinum, 20% of the rhodium, 6% of the cobalt and 3.5% of the copper. Currently the company not only mines, processes and markets the metal but also performs all supporting infrastructure functions.

Following Norilsk's privatisation in 1994, Uneximbank purchased 38%, making it the largest shareholder. Uneximbank has indicated its strong willingness to restructure Norilsk to make it more profitable. Norilsk has stated that at least 20% of their assets would be located abroad after acquisitions over the next five years. The joint venture with Argosy and SMT forms part of their strategy of developing a global presence and is Norilsk's first major investment in the West.

Norilsk has expressed full confidence in the successful development of the New Caledonian Joint Venture, which they selected after a due diligence process on competing nickel laterite projects world-wide. The decision to proceed with Argosy was taken after 10 months of negotiations, intense in-house and independent due diligence evaluations, and meetings with senior representatives of the New Caledonia authorities. Norilsk's decision to participate was further supported by their +30 years experience with laterite ore processing.


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