maiden jorc reserves at kangwane central

ASX RELEASE
13
th
July 2012
MAIDEN JORC RESERVES
KANGWANE CENTRAL – SOUTHERN OPEN PIT
? Initial probable ore reserves of 26.7 million tonnes defined at Kangwane Central –
Southern Open Pit
o reserves exist within Kangwane Central’s JORC resource of 177Mt
o reserves life-of-mine in excess of 10 years
o initial 1.2 million tonnes saleable product per annum
o upgrade to proven ore reserves expected shortly
? Phase 3 drilling campaign at Kangwane Central has been completed
o 28 borehole programme totalling 3,811 metres
? CPR to be completed in 3
rd
quarter – anticipated further upgrade to resource tonnages
and confidence levels
? Kangwane Central – Southern Open pit has the potential to be one of the largest open
pit anthracite mines in Southern Africa
ZYL Limited (“ZYL” or the “Company”) (ASX: ZYL), the Perth-based emerging anthracite producer
with key projects in development, is pleased to announce the maiden probable ore reserves of
26.7Mt at its Kangwane Central – Southern Open Pit located in South Africa’s Mpumalanga province.
ZYL is working towards completion of its Bankable Feasibility Study (BFS) at the Kangwane Central
Project. The BFS will incorporate the results from ZYL’s recently completed Phase 3 drilling
programme within the associated Competent Persons Report (CPR). The assay results from this
drilling programme have been received and will be integrated into the CPR in the coming month
resulting in the release of ‘Proven’ Reserves on the Kangwane Central project.
CEO Ian Benning said, “The ore reserve classification is expected to be upgraded to proven shortly
and we anticipate a further global resource increase in the near future on the project as a whole.
These proven resources will be a major milestone in the development of Kangwane Central as it Page | 2
provides increased confidence in the project economics allowing us to achieve our ultimate goal of
bringing the Kangwane Central – Southern Open pit into production. We are a significant step closer
to achieving our objective.”
Diagram 1 (below): The Kangwane Central project showing the Southern Open Pit, all drill holes to
date, the identified coal seams and the Kangwane Central Block – Southern Open Pit
Maiden JORC Ore Reserves
Probable ore reserves of 26.7Mt have been defined within the existing 177.7Mt JORC compliant
resource at Kangwane Central. This work has been undertaken by RSV Enco, the BFS manager.
Probable reserves are the economically mineable section within an Indicated, and in some
circumstances, a Measured Resource. The Southern Open Pit contains 57.3Mt of the total 107.3Mt
Indicated resources at the Kangwane Central project; the 26.7Mt probable reserves were derived Page | 3
from the Southern Open Pit. The resource classifications for the 177.7Mt JORC compliant resource at
Kangwane Central, previously announced 24
th
May 2012, are detailed in Table 1 below.
Kangwane Central: JORC Compliant Resource Estimate – Gross in situ tonnes (GIST) Mt
GIST Mt
Total measured coal resource 47.7
Total indicated coal resource 107.3
Total inferred coal resource 22.7
Total JORC-compliant coal resource 177.7
Table 1: Kangwane Central JORC compliant resource estimate
The probable reserves were defined through the pit optimisation exercise based on the known
geological model and various economic parameters. Further open pit potential exists, however the
current focus is Phase 1 production from Kangwane Central in the shortest time period.
CEO Ian Benning said, “We are extremely pleased with the announcement of the maiden ore
reserves, and the product quality that could be produced from the Kangwane Central – Southern
Open Pit, which we believe will be a low production cost operation. Further improvements to the
resource tonnes, economics and product specifications are expected as additional geological data
from the Phase 3 drilling programme is incorporated into the final CPR which we expect to receive
during August”.
Kangwane Central Reserves Estimate – Southern Open Pit only
Seam
Classification Seam
thickness
(m)
Volume
(m³)
RAW
density
(t/m³)
In situ
tonnage
(pit shell)
*MTIS
(mineable
tonnage
in-situ)
**Ore
Reserve
S4U Probable 1.35 2 167 178 1.54 3 337 454 2 336 218 2 476 391
S4L Probable 1.82 4 092 427 1.75 7 161 746 5 013 222 5 314 016
S3 Probable 0.97 1 753 440 1.69 2 963 313 2 074 319 2 198 779
S2 Probable 6.19 13 962 839 1.61 22 480 170 15 736 119 16 680 286
21 975 883 35 942 684 25 159 879 26 669 472
*Geological loss of 25% and mining & layout loss of 5% applied to in situ tonnage to calculate MTIS
**6% dilution applied to MTIS to calculate the ore reserve
Table 2: Kangwane Central – Southern Open Pit Reserve EstimatePage | 4
Table 2 (above) details the Resource to Reserve Statement for the Kangwane Central – Southern
Open Pit after applying the modifying factors as listed below. All the inputs in the calculated ore
reserve were derived from the regularised grid models per seam and evaluated for the pit area.
The key assumptions for the probable reserves are:
? Geological loss of 25%
? Mining loss of 3%
? Mining layout loss of 2%
? Pit volume determined by topographic data and the depth of Seam 2
? Coal volumes determined using modeled widths and areas of major coal seams
? Waste volume derived from total pit volume less coal volumes
? An average life of mine stripping ratio of 8.4 was calculated over the Southern Area based on
available information as at May 2012. Ongoing feasibility study work indicates that this figure
will be reduced in the early years of the mine in line with the final pit optimization.
? In situ coal tonnage calculated by applying raw densities of individual coal seams to the
respective coal seam volumes
? Run of Mine Coal Reserves derived by applying a mining dilution of 6% to Mineable In Situ
Coal Reserve
The product quality per coal seam produced from the Kangwane Central – Southern Open pit is
detailed in Table 3 below.
Kangwane Central Indicative Product Quality per seam
Southern Open Pit
Coal washed for 16% ash content
Seam
Float
density
(t/m3)
Wash
yield
(%)
Calorific
value
(MJ/kg)
Moisture
content
(%)
Volatile
content
(%)
Carbon
content
(%)
S4U 1.99 88.70 28.90 1.08 6.85 76.15
S4L 1.51 20.32 28.48 1.22 6.80 75.98
S3 1.90 60.33 28.37 1.77 6.00 76.75
S2 1.95 70.00 27.89 1.66 6.96 75.49
Table 3: Kangwane Central Indicative Product Quality per seam – Southern Open PitPage | 5
Kangwane Central – Southern Open Pit
Key assumptions for Pit Design
Bench height 10m
Berm width 4m
Batter angle 68°
Overall slope angle 55°
Pit length 2 270m
Pit width 950m
Table 4: Key assumptions for the Kangwane Central – Southern Open Pit applied to the in situ
resources of the optimised pit shell to establish the Mineable Tonnage In Situ (MTIS) Coal Reserves
identified in Table 2.
Completed Drilling Programme
The Phase 3 drilling campaign at Kangwane Central, comprising of exploration, verification and
geotechnical drilling, has been completed. The programme focused on the Kangwane Central Block –
Southern Open Pit (see diagram 1 above) and consisted of 28 boreholes totalling 3,811 metres.
The final results of the programme have been received and are being integrated into a CPR for use in
the Kangwane Central BFS which will ultimately lead to the development of the project. The CPR is
expected to be released to shareholders by the end of August.
The Kangwane Central project is progressing towards BFS finalisation and ZYL anticipates providing
shareholders and the market with continued updates in the coming months
RSV Enco
RSV Enco has been retained to undertake an independent valuation of the Kangwane Central project
for inclusion in an Independent Experts Report (IER). This report forms part of the regulatory process
required for the York Energy NL acquisition (announced 25 May 2012). Upon completion the IER will
be distributed to shareholders with the Notice of Meeting and proxy form for shareholders to vote
on the acquisition.
RSV Enco is an independent consulting engineering and project management company specialising in
coal. RSV Enco’s current projects include the Riversdale Benga Coal Mine, the Coal of Africa Limited
Makhado Coal Project and the Feasibility Study at Xstrata Coal South Africa’s Tweefontein
Optimisation Proj