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re: cmr chairmans report just released 1
COMPASS RESOURCES NL
ABN 51 010 536 820
19 December 2005
Chairman s Year End Letter
Dear Shareholder,
Your Company has made excellent progress during 2005, not just on the Browns Base Metals
Oxide Ore Project Development but also on its Base and Speciality Metals and Uranium
Exploration Programme in the Northern Territory.
The Significant equity placement in September positioned the company to:
expand its base metal oxide mineral resources
conclude engineering and permitting for development Browns Oxide Project
purchase key items of quality used plant
explore and commence building a uranium mineral resource base
explore potentially significant new base metals discoveries in the Northern Territory (NT)
explore other gold and copper targets in the NT and New South Wales.
In the current high metal prices environment the Company is also evaluating sequenced
development of the Company s major copper, lead, cobalt and nickel sulphide resources.
Browns Base Metals Oxide Ore Project Update
Detailed Construction Cost Estimate
The Company is close to completing a detailed construction cost estimate and sourcing high
quality used plant and equipment for the Browns Oxide operation. A $600,000 deposit has
already been paid on the Cawse solvent extraction plant with the balance due in April 2006.
Other items of equipment have also been purchased and additional plant is currently under
evaluation and negotiation.
This detailed construction cost estimate (which was to have been completed in November) will
now be available in January. Given the anticipated robust nature of the Project, based on the
current ±25% estimates, a formal construction decision (subject to final permits) is expected
early in the New Year.
Permits, Schedule and Financing
Because the Project's construction start date is controlled by the NT wet season, the deferral of
the development decision to early 2006 is not expected to delay either the beginning of
construction or the project commissioning scheduled for December 2006.
The wet season, which has begun early this year, will be a very intense period of activity. The
review period for the Public Environmental Report [PER] should conclude at the end December
2005. The final permits should be approved in March. Resource model updating, mining and
metallurgical and infrastructure work will continue. Contract documents will be prepared. Prime
Level 5, 384 Eastern Valley Way
Roseville NSW 2069
Telephone: 02 9417 3588
Facsimile: 02 9417 8750
email: [email protected]
website: www.compassnl.com.au
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civil, mechanical and electrical contractors and the mining contractor will be selected.
Movement of purchased equipment and construction materials to Darwin will begin.
The financing plan is well advanced and required commitments are to be completed during the
wet season to be in place ready for start of site construction.
Depending on the duration of this year s wet season, site construction activities are expected to
commence early May 2006 allowing commissioning late 2006 and full production thereafter.
Exploration
Copper Cobalt Nickel
The Company has kept shareholders advised of the excellent exploration progress made on the
Company's NT tenements during the 2005 field season with 10 drill progress reports to the
Australian Stock Exchange.
During the wet season drill data compilation will be undertaken with the objective of:
updating the Browns copper cobalt nickel oxide resource and mine plan
providing an initial oxide resource for Browns East
updating the Mt. Fitch copper cobalt nickel oxide resource
updating the Area 55 copper cobalt nickel oxide resource
planning the 2006 drill season on base metals prospects particularly the promising Mt Fitch
South discovery
Uranium
The Company completed two drill programmes in 2005 at the Mt. Fitch Uranium Prospect and a
preliminary scout programme at the Rum Jungle East Prospect.
Results from Mt. Fitch show continuity of uranium mineralisation and confirm that old 1960s
drill results can be used along with Compass' drill data for this estimate. It is planned to have an
initial resource estimate by April 2006 along with plans for a significant follow up drill
programme at this and other uranium prospects in the 2006 field season.
The proximity of Mt. Fitch uranium mineralisation to the Mt. Fitch copper oxide deposits
suggests both may be extracted from a single open pit and could benefit from shared
infrastructure. This would facilitate the early development of any economic uranium resource in
the area.
If uranium prices remain around A$47 per lb U308, resources down to and below 1 lb per tonne
average grade could potentially be economically mined and processed to yellow cake.
Current Metal Prices
The Board believes it appropriate to bring to the attention of shareholders and investors the
potential impact of continued high prices on the Company's already announced JORC compliant
base metals resources in the Northern Territory. These resources, as previously announced are:
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Table 1: Northern Territory - Current Base & Speciality Metal Resources
Mt %Cu %Pb %Co %Ni %Cu Equiv*
Browns 40.0 0.50 4.52 0.11 0.09 3.7
Browns East 30.5 1.29 1.28 0.13 0.13 3.8
Area 55 12.4 0.49 0.56 0.14 0.14 2.7
Mt. Fitch 1.3 0.57 n/a 0.21 0.20 3.9
TOTAL 84.2 0.78 2.69 0.12 0.11 3.5
Total in-situ Tonnes Metal - Copper 660,000; Lead 2,270,000; Cobalt 100,000; Nickel 96,000
*Copper equivalent calculated using longer term USD prices Cu $1.10, Pb $0.38, Co $12.50, Ni $5.50 Exchange Rate 0.70.
Minor rounding differences may occur in Cu equivalent grades due to tonnage rounding above.
Table 2: Spot prices for metals of interest to Compass and in-situ resource inventory value
The Board does not maintain that average long run base metal prices will equal current metal
prices. However there does not appear to be any slackening of the demand for all metals and
energy minerals from the rapidly industrialising economies of China, India and SE Asia and
continued upward pressure on metal and energy prices is anticipated to continue in the near term,
though not necessarily at current record levels. This is supported by the continuing low metals
exchange stock position of all the above base metals
This situation is very attractive for the development of the Company's extensive base and
speciality metal oxide and sulphide resources and any future uranium resources identified.
Further, current base metals resources could potentially support production rates up to 4 million
tonne per year of ore for 20 years. This could be sustained or even potentially expanded by new
discoveries such as the Mt Fitch South and other prospects currently being evaluated.
All previously studied options for the development of the extensive base metals sulphide
resources now exhibit very attractive financial parameters. These options include a concentrate
only export scenario based on mining 1 million tonnes per year of sulphide ore and a
hydrometallurgical scenario at the same tonnage wherein the concentrate is refined to metal
products.
The Company's first priorities for taking advantage of this continuing price situation remain to:
rapidly develop strong cash flow from base metal oxide developments.
outline a JORC compliant uranium resource on the Northern Territory tenements
complete a strategic plan for development of the Company's large Northern Territory base
metals sulphide resources.
Metal $A Closing Spot
Price 16/12/05 per lb
JORC Resources In-situ
Value A$ Millions
Copper
Cobalt
Lead
Nickel
U3O8
02.88
21.28
00.69
08.48
47.40
4,189
4,690
3,452
1,794
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New South Wales
The Board also points out to shareholders that progress is being made on the Company's New
South Wales copper and gold exploration projects. In particular Alkane Exploration has
announced further high grade intercepts on the Wyoming gold discovery including 66 metres @
19.49 g/tonne gold in hole WY 831D. Most of the Wyoming gold resource is subject to a
substantial Compass royalty. Alkane has indicated that they expect to take a decision on
undertaking a final bankable feasibility study next year.
Compass has extensive gold exploration land holdings in this region in its own right which it will
continue to explore during the Northern Territory wet season.
Geophysical surveys were completed this year over western NSW base metal exploration
projects where the Company is targeting Cobar basin type copper and lead zinc deposits. A
number of anomalies have been identified which are planned for drill testing in the first half of
2006.
Americas
The Company has withdrawn from the Worldbeater Gold Project in California in order to place
more emphasis on its Australian projects and has no remaining exploration interests in the
United States.
Due to regional political unrest in Peru, Compass (70%) and JV partner AKD Limited (30%)
have not carried out field activities on the Nangali epithermal gold project this year. Titles are
however being maintained.
Nangali is a high potential gold prospect in one of the world's prime gold producing countries.
The regional political situation shows signs of stabilising and when it does field exploration will
be initiated.
In conclusion Compass is in a sound financial position to embark on the ambitious programme
planned for the year ahead and is well advanced on recruitment of new key staff to assist in the
implementation of this programme.
On behalf of the Board I would like to thank shareholders for their support over the past year.
We look forward to continuing to add value to your Company in 2006.
Yours sincerely,
Gordon L. Toll
Chairman