news!!!

Have a loook at this interview of today, if you please.
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Attention ASX Company Announcements Platform
Lodgement of Open Briefing®
Sally Malay Mining Limited
Level 22, Allendale Square
77 George St
Perth WA 6000
Date of lodgement: 26-Aprl-2006
Title: Open Briefing®. Sally Malay. MD Explains Exploration Success
Record of interview:
corporatefile.com.au
Sally Malay Mining Limited (SMY) is ramping up underground mining at Sally
Malay Project. How is that going? What milling rates do you expect at project
capacity? To what extent will that utilise current milling capacity?
MD Peter Harold
The ramp up is going very well and the underground operation has effectively
been fully commissioned. The budgeted underground extraction rates are 50-
60,000 tonnes a month or 600-650,000 tonnes per year while the existing milling
capacity is about 900,000 tonnes a year, leaving at least 300,000 tonnes a year of
spare capacity. Most of that spare capacity will be utilised during the second half
of the year by milling the material we left behind at the bottom of the open pit.
We’re planning to mine that material from underground and start milling it around
June this year. That should give us an additional 15-20,000 tonne a month of ore
for about six months, which should keep the mill full.
That means nickel production in the second half of the calendar year at Sally
Malay Project should be fantastic with the ore coming from two separate sources
at a combined rate of anywhere between 65-80,000 tonne a month.
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SMY recently announced strong exploration results at both the Sally Malay
Project and the Lanfranchi JV. Firstly at Sally Malay Project, can you explain the
quality of the intersections in terms of size and grade?
MD Peter Harold
We’re very excited about the recent drill intersections at Sally Malay. The best
intersection was over 23 metres at 3.15% nickel which is one of the best in the
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entire orebody and, more importantly, it’s in an area not drilled before, beyond the
western end of the existing resource. That area was difficult to drill from surface
because of the topography and so the previous owners didn’t drill that area at all.
We only allocated about $700,000 from our initial IPO funds for exploration
drilling back in 2002 because we spent most of the money on infill drilling the
open pit in order to get into production as soon as possible, which we did very
successfully. Consequently, we had always planned to drill the western extension
from underground, which we have just done and the results have been
outstanding. The drilling may have also located a new shoot located just to the
south of the Main Ore Zone, which we are calling the Southern Shoot. The
drilling results to date suggest this may be a narrow, high grade zone adjacent to
the Main Ore Zone.
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What is the priority to follow up those drill results? Will you concentrate on infill
drilling or will you chase the extensions further?
MD Peter Harold
The number one priority at the project has always been to maximise production
and keep the mill full. The next priority after that is to add to the resource base,
which we hope to do by drilling out the western extension and various other
drilled areas over the next four to six months. We are budgeting $1.5
million to test the Main Ore Zone Western Extension between the 100 and 500
fault and all necessary infill drilling to get it into a resource category. The drill
programme will require two new exploration drives located deeper down the
decline to get the drill positions where we want them, which is the main reason it
will take 4-6 months. Then there is still the Deeps below the 500 fault which we
probably won’t start drilling until early 2007.
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What impact do you expect the latest results to have on existing resources,
reserves, production levels? How easily could you access any possible new
reserves within the western extension?
MD Peter Harold
These drill results are very important because it potentially means that the
orebody between the 100 fault and 500 fault could open up significantly to the
west and the widths and grades of the intersections are good. It’s far too early to
tell what it might mean in terms of an increase in resource base, but I think the
word significant has been used and I’m happy to continue to use it.
It’s also too early to tell whether it would allow us to increase production, but that
would be something we’d look at down the track given that we have spare
capacity in the mill and the nickel price outlook is excellent.
The western orebody extension will be accessible from the current decline
development and we have the equipment and people ready to handle any
additional ore that we might mine in the future. We also have spare capacity in
the mill and if we mine the additional ore then it will likely reduce our unit
operating costs across the Sally Malay Project.
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In the December 2005 quarter, SMY signed an agreement with Platinum Australia
Limited on its Panton PGM Project which could see SMY processing high grade
Platinum Group Metals (PGM) through the Sally Malay mill. What is the status
of the feasibility study? What are the financial benefits of this agreement for
SMY? What if you find more of your own nickel ore?
MD Peter Harold
We’ve done some metallurgical testwork on Panton ore that was in storage to
ascertain indicative recoveries and concentrate grades if we treated it through our
plant with the addition of a regrind mill. The results of that work were as
expected and the next stage of the feasibility study is to look at the cost of a small
Panton Process plant at Sally Malay. It’s too early to talk about the financial
benefits for SMY and Platinum Australia, however, the opportunity for significant
additional cash flow is real in the short to medium term. We’ll have excess mill
capacity from early 2007 and we’ll be looking to put any ore that we can treat
through our plant if it makes money which would include the Panton PGM ore.
The Panton orebody is the largest undeveloped PGM orebody in Australia and
one of our strategies is to leverage off our existing infrastructure in the
Kimberley, so treating a PGM rich ore is a natural fit for us.
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You recently announced you had settled the Copernicus dispute with Thundelarra
on mutually beneficial terms. What’s the basis of the settlement? How large is
the Copernicus resource in relation to total JORC resources at Sally Malay
Project? When could you put that ore through the mill?
MD Peter Harold
We are very pleased to have settled the dispute on mutually beneficial terms. In
summary Thundelarra have confirmed we own 60% of the Copernicus Project and
we have agreed to spend $3.5million on the project over the next 4 years and
taken a shareholding in Thundelarra. It’s a good deal for both parties and means
that we can now focus on getting the pit into production as soon as possible and
exploring the depth extension. In the study we did in 2004 we determined an
indicated resource of 359,000 tonnes at 1.3% nickel for the open pit containing
4,670 tonnes nickel which could be treated as early as Q2 2007, subject to
granting of the mining lease and all statutory approvals being received in a timely
manner and decision to mine being made.
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All seven drill holes targeting the extension of the Schmitz underground orebody
at the Lanfranchi JV returned significant intersections. Where are these
intersections in relation to the current Schmitz orebody? How large are the
extensions compared to the existing Schmitz orebody?
MD Peter Harold
These intersections extend the current Schmitz orebody about 330 metres downplunge
from the previously mined level. The widths of the intersections are a bit
narrower than what was mined previously, but the grades are consistently high.
Our geological team have determined an indicated resource of 79,500 tonnes at
4.26% nickel containing 3,390 tonnes nickel and the next job is to put a detailed
mine plan, schedule and financial model around it. We’ll refer that plan to the
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Joint Venture committee and hopefully there will be a decision to mine it this
year.
corporatefile.com.au
Can you describe the importance of the Schmitz orebody to the Lanfranchi
Project?
MD Peter Harold
Schmitz was a very important orebody for the Lanfranchi JV. When WMC
operated at Lanfranchi they mined approximately 100,000 tonnes of contained
nickel over 15 years and around 35% of that nickel came from the Schmitz orebody
at a grade of 4.87% nickel. The Schmitz orebody was higher grade than both
Lanfranchi and Helmut South so an extension of the orebody is a very significant
discovery for the Joint Venture in terms of additional reserves and production.
WMC developed down to within about 100 metres of where we’d need to start
mining the new material so we could be producing ore from there within four
months of making a decision to commence development.
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What’s the forward program for Schmitz?
MD Peter Harold
The next stage is to finalise a mining method and develop a mine plan and
detailed capital and operating budget for the additional work. We need to decide
whether to mine the extension by air leg or mechanised mining. The study will
probably take a couple of months to complete and then it will go before the Joint
Venture for a decision.
corporatefile.com.au
The Joint Venture has been waiting on a Geo-Ferret system to become available
so that you can start exploring on the northern side of the Tramways Dome where
you’re hoping that nickel mineralisation repeats. Where are you up to with that?
MD Peter Harold
The Geo-Ferret system is now available and we are planning to commence work
before the end of April. The system can potentially identify electromagnetic
anomalies as deep as 500 metres below surface. We’ll be looking for targets
based on our geological interpretation of the structure on that northern side of the
dome.
corporatefile.com.au
What is the current production rate at Lanfranchi? What are you latest production
forecasts from both operations?
MD Peter Harold
Lanfranchi had a fantastic month in March. We trucked over 15,000 tonnes of ore
to the concentrator, which is our best month ever, at a grade of about 2.4% nickel.
At Sally Malay we milled about 50,000 tonnes in March at 1.3% nickel and
produced about 560 tonnes contained nickel. That is from the underground and,
when we mine the ore left at the bottom of the open pit, it will take us up to about
65-80,000 tonne a month.
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In terms of contained nickel production, we’re still on track for Sally Malay to do
just over 8,000 tonnes and for Lanfranchi to do between 2,500 and 3,000 tonnes
for the full financial year.
corporatefile.com.au
The SMY share price has strengthened by about 30% over the last 2 weeks or so.
Would you put that down to the latest exploration results and an improvement in
nickel prices - or other factors?
MD Peter Harold
I think there are five main factors that have impacted the share price. Certainly
there has been the very strong nickel price over the past couple of weeks after a
significant tightening in supply and ahead of the labour negotiations in North
America. At the same time, we released the first lot of drilling results for the
western extension of Sally Malay. There has also been a refocus by investors on
nickel stocks in Australia and with Brilliant Mining announcing its deal to buy
Donegal Resources’ 25% interest in Lanfranchi for more than $20 million,
investors now have a recent valuation to bench mark our 75% interest in
Lanfranchi. We’ve also released the Schmitz Extension drilling results and the
Copernicus resolution all of which are positive for the company.
SMY now has a market capitalisation of over $200 million and we’re very happy
with our progress in growing the company.
corporatefile.com.au
Thank you Peter.
For further information on Sally Malay Mining Limited visit
www.sallymalay.com or contact Peter Harold on 08 9225 0999.
To read previous Sally Malay Open Briefings, or to receive future Open Briefings
by email, please visit www.corporatefile.com.au
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