positive feasibility study

UNIVERSAL RESOURCES LIMITED
ACN 090 468 018
15 September 2006
The Manager
Company Announcements Office
Australian Stock Exchange Limited (ASX)
Electronic Transmission
8 page(s)
Dear Sir/Madam,
UNIVERSAL ANNOUNCES POSITIVE FEASIBILITY STUDY FOR ROSEBY
COPPER PROJECT
Universal Resources Limited (Universal) directors are pleased to announce the results
of the Feasibility Study on the Roseby Copper Project in the Mt Isa Region of North
West Queensland.
The study concluded that, based on the technical testwork and financial assumptions
used, large scale development of the project is both technically and financially
feasible.
• Copper production targeted to commence in fourth quarter 2008 with overall
timing determined by several long-lead items.
• Roseby forecast to produce up to 34,000tpa of copper and 14,700oz of gold at
competitive cash operating costs.
• The project is viable at copper prices well below current copper price – payback
period at US$2.00/lb is 3.6 years.
• Project NPV increase to A$980.7M and IRR to 61.9% at US$3.50/lb copper
price, demonstrating strong leverage to copper price upside.
• Forecast capital expenditure of A$338 million includes significant contingency
costs and A$48 million to acquire a mining fleet.
• Cash operating costs consistent with rising costs across the industry
• The current estimated life of the mine is 8.5 years.
Under the development schedule outlined in the Feasibility Study, pre-stripping
activities at Roseby will commence in late 2007 with ore treatment planned to
commence in fourth quarter of 2008. The ramp-up to the planned rate of copper
production of 34,400 tonnes per annum will occur relatively quickly, and is expected
to be achieved within the first quarter of 2009. During the first three years of
operations, there will also be an annual average of 14,700oz of gold production.
HEAD OFFICE
Level 2,
91 Havelock Street, West Perth
Western Australia 6005
POSTAL ADDRESS
P O Box 1466, West Perth
Western Australia 6872
Phone: +61 (0)8 9486 8400
Facsimile: +61 (0)8 9486 8700
Email: [email protected]
Website: www.universalresources.com.au
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The study confirms that the project has significant leverage to upside in the copper
price, as evidenced by the financial indicators for the project at a number of different
copper prices. Using a flat copper price of US$2.00 per pound from the project startup,
the net present value (NPV) at a discount rate of 8.5% is A$156.5 million with an
internal rate of return of 19.5% and a payback period of 3.6 years. With copper at
US$3.50 per pound, the NPV is A$980.7 million with an internal rate of return of
61.9% and a payback period of 1.4 years. The relevance of the US$3.50 per pound
comparison is best illustrated when it is considered that the LME average cash price
for copper during August was US$3.49 per pound.
The physical and financial results of the study are tabulated below:
Ore treatment rate tpa 5,000,000 to 8,000,000
Payable copper produced per annum t 34,400
Treatment Plant Capital Cost A$’000 248,443
Mobile Fleet Capital Costs A$’000 47,970
Pre Strip Cost A$M 41,370
Total Capital Cost A$M 337,783
USD/AUD Exchange Rate 0.72
Copper Price US$/lb 2.00 3.50
Operating Cost US$/lb 1.14 1.19
Net Present Value @ 8.5% Discount Rate A$’000 156,500 980,700
Internal Rate of Return % 19.5 61.9
Payback in years 3.6 1.4
The Feasibility Study evaluated an open pit mining operation and a processing plant
capable of throughputs of up to 8 Mtpa on a blend of sulphide and oxide ore but with
sufficient versatility to allow either sulphide or oxide ore to be treated separately.
When treating sulphide ore alone the plant capacity is 5Mtpa. The plant comprises a
crushing and grinding circuit, a rougher flotation, regrind mill and cleaner flotation
circuit. In addition to the plant construction, the capital cost includes provision for on
site accommodation, EPCM costs, tailings dam, pit dewatering, offices and all
contingencies. Power will be supplied by a gas fired power station at Mt. Isa and
reticulated to site by a dedicated transmission line.
Mining will initially focus on three deposits: Little Eva, Blackard and Scanlon. These
will supply feed to the treatment plant for a minimum period of 8.5 years. Initially the
Little Eva deposit will be mined to provide higher grade sulphide ore feedstock. This
sulphide ore is characterised by a high metallurgical recovery and the net effect of this
treatment strategy is to maximise the cash flow in the early years of the project. All
mill feed from these three deposits falls into the Proved and Probable Ore Reserve
category except for a small proportion which comprises Inferred Resource captured
within the pit design envelope. Drilling is currently in progress with the objective of
converting this Inferred Resource to the Measured and Indicated Resource categories.
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For the purpose of the study a non reserve mill feed tail has been included utilizing
four of the nine other deposits identified at Roseby. These are two oxide deposits
(Longamundi and Legend) and two sulphide deposits (Bedford and Lady Clayre).
These four deposits are assumed to provide mill feed for the second half of 2016
through to 2017.
Mining
It was initially assumed that contract mining would be undertaken at Roseby, however
the Feasibility Study has demonstrated that there are considerable financial benefits to
be derived from purchasing and operating the mobile equipment fleet. The fleet will
comprise up to two 180-tonne class excavators, one 125-tonne class excavator and up
to 10 150-tonne capacity dump trucks as well as a number of items of ancillary
equipment. The mine will have a very low strip ratio averaging 2.6:1 across all of the
deposits. The equipment will be used to mine at a rate of up to 28Mtpa in the first year
of mining although this will decline slightly as the open pits become deeper. The
Little Eva deposit will require a pre-strip of 20 million tonnes of waste prior to the
commencement of ore mining operations.
Metallurgy
Pilot scale metallurgical test work has confirmed the native copper and sulphide
copper can be successfully recovered separately or as a blended feed through the same
treatment circuit. The optimum strategy which provides the highest net present value
is to initially treat 5,000,000tpa of sulphide ore from Little Eva in the early years and
later 8,000,000tpa of mainly oxide ore from Blackard and Scanlon combined with a
small proportion of sulphide ore primarily from Little Eva. The recovery of copper to
concentrate will be 95% in the sulphides and 63% in the native copper and oxide ore.
This is in line with expectations from earlier studies. The average grade of the
concentrate produced will be 34% copper although the sulphide and oxides will
produce different grades of concentrate of 30% and 38% respectively.
Capital Costs
There have been cost increases across the mining industry and these have impacted on
the capital and operating cost of the Roseby Project. However the project is highly
leveraged to the copper price and, at copper prices above US$2.00/lb, the impact of
cost increases has a diminished impact on the project economics.
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The table below shows the main elements of the capital cost estimate used in the
Feasibility Study.
Item Cost A$
Process Plant 138,199,000
On site Infrastructure 37,490,000
Owners Costs 15,770,000
Contingency 22,748,000
EPCM 34,236,000
Sub Total Plant 248,443,000
Mobile Equipment Fleet 47,970,000
Pre strip 41,370,000
Total 337,783,000
There have been some cost increases associated with extra equipment requirements
identified by the detailed pilot and bench scale test work as well as increases in the
cost of most of the inputs to the project. The Feasibility Study has gone into far
greater detail than the original study, both in the design work and the cost estimation.
Direct comparisons between the two are only possible at a high level and detailed
variance analysis is not meaningful because of this.
Operating Costs
Operating costs have been impacted by the increases in input costs for diesel fuel,
labour, explosives, reagents and transport costs. There are a number of areas where
costs have decreased and these have served to mitigate to some extent the overall cost
per tonne of ore for the project. It is now planned to have a utility company build and
operate a gas fired power station in Mount Isa and construct a transmission line to
Roseby. The power cost incurred in this arrangement will be extremely favourable.
The on site operating cost including mining, processing and administration averages
A$15.01/tonne over the mine life while off site charges including transport, royalties,
smelting and refining costs, price participation and transport participation charges
average A$4.88/tonne to give a total operating cost of A$19.90/tonne of ore.
Royalties
All royalties associated with the project have been included in the study. These
include State government royalties on gold and copper as well as a vendor royalty
payable to Zinifex and Lake Gold of 1.5% of Net Smelter Return.
Project Schedule
A number of long-lead items of equipment will determine the start date for the
project. These include the SAG mill which will take up to 98 weeks to design,
manufacture and install and this will be the critical item in the project schedule. The
anticipated start date for the project is now estimated to be in the fourth quarter 2008.
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Ore Reserves and Mineral Resources
The total Mineral Resources for the Roseby deposit at June 30th 2006 are summarised
in the following table. These Mineral Resources are inclusive of the Ore Reserves.
Deposit Resource
Category
Ore
‘000s
Tonnes
%Cu Contained
Cu Tonnes
g/t Au Contained
Oz Au
Little Eva** Measured 2,280 1.26 28,728 0.14 10,262
Indicated 17,990 0.77 138,523 0.13 75,191
Inferred 9,540 0.75 71,550 0.15 46,008
Sub total 29,810 0.80 238,801 0.14 131,461
Blackard** Measured 20,900 0.66 137,980 0.00 0
Indicated 19,000 0.64 121,760 0.00 0
Inferred 3,800 0.59 22,537 0.00 0
Sub total 43,700 0.65 282,277 0.00 0
Scanlan** Measured 0 0.00 0 0.00 0
Indicated 15,400 0.65 100,010 0.00 0
Inferred 4,300 0.79 34,129 0.00 0
Sub total 19,700 0.68 134,139 0.00 0
Bedford
South**
Inferred 710 1.25 8,875 0.32 7,304
Bedford North* Inferred 1800 1.07 19,260 0.26 15,047
Sub total 2,510 1.12 28,135 0.28 22,351
Legend** Indicated 6,200 0.59 36,580 0.00 0
Longamundi* Indicated 5,060 0.81 40,986 0.00 0
Great Southern* Indicated 3,720 0.78 21,216 0.00 0
Caroline* Inferred 4,000 0.80 32,000 0.00 0
Lady Clayre* Inferred 4,500 1.12 50,580 0.19 74,654
Total Measured 23,180 0.72 166,900 0.01 10,262
Indicated 67,370 0.69 464,800 0.03 75,191
Inferred 32,650 0.82 267,700 0.13 143,013
Sub total 123,200 0.73 899,400 0.06 228,466
* These resources were defined at a cut off grade of 0.5% copper for all material types.
** These resources were defined at a cut off grade of 0.3% copper for all material types
Cu = Copper, Au = gold
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The Ore Reserve for the Roseby deposits is summarised in the following table.
Deposit Ore
Type
Reserve
Classification
Ore
‘000
Tonnes
%Cu Contained
Cu Tonnes
g/t
Au
Contained
Au oz
Little
Eva
Sulphide Proved 1,986 1.20 23,832 0.14 8,940
Sulphide Probable 14,968 0.73 109,266 0.12 57,750
Sub
Total
Proved &
Probable
16,954 0.78 133,098 0.12 66,690
Blackard Oxide Proved 12,978 0.67 86,952 0.00 0
Oxide Probable 3,432 0.68 23,338 0.00 0
Sulphide Proved 461 0.75 3,457 0.00 0
Sulphide Probable 338 0.65 2,197 0.00 0
Sub
total
Proved &
Probable
17,209 0.67 115,944 0.00 0
Scanlon Oxide Proved 0 0.00 0 0.00 0
Oxide Probable 8,806 0.72 63,403 0.00 0
Sulphide Proved 0 0.00 0 0.00 0
Sulphide Probable 44 0.69 304 0.00 0
Sub
total
Proved &
Probable
8,850 0.72 63,707 0.00 0
Sub
Total
Oxide Proved &
Probable
25,216 0.69 173,693 0.00 0
Sulphide Proved &
Probable
17,797 0.78 139,056 0.11 66,690
Total Proved &
Probable
43,013 0.73 312,749 0.05 66,690
In addition to the Ore Reserve contained within the pit designs there is also a quantity
of Inferred Resource which cannot be classified as ore reserve under the JORC code.
The following table quantifies this Inferred Resource contained within the pit designs.
This has been included in the production schedules and cash flow calculations
primarily in order to obtain the best representation of the ore body for equipment
selection and costing purposes. Drilling is in progress to convert these Mineral
Resources into Ore Reserves.
The mine life on the basis of Ore Reserves is estimated to be 7.5 years and when the
Mineral Resource tail is included this extends to 8.5 years.
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Deposit Ore Type Inferred
Resource
Within Pits
‘000s
Tonnes
%Cu Contained
Cu Tonnes
Au
g/t
Contained
Au Oz
Little Eva Oxide
Sulphide 1,466 0.72 10,578 0.12 5,656
Blackard Oxide 0 0.00 0 0.00 0
Sulphide 438 0.76 3,309 0.00 0
Scanlon Oxide 1,135 0.58 6,645 0.00 0
Sulphide 2 0.47 8 0.00 0
Sub Total 3,041 0.67 20,540 0.06 5,656
Bedford Oxide 0 0.00 0 0.00 0
Sulphide 900 1.05 9,450 0.27 7,813
Lady Clayre Oxide 0 0.00 0 0.00 0
Sulphide 500 0.93 4,650 0.59 9,485
Longamundi Oxide 2,138 0.65 13,897 0.00 0
Sulphide 550 0.77 4,235 0.00 0
Legend Oxide 4,000 0.60 24,000 0.00 0
Sulphide 100 0.54 540 0.00 0
Sub Total 8,188 0.69 56772 0.06 17,298
Total 11,229 0.69 77,312 0.06 22,954
Project Financing
Universal has appointed Perth based Prime Corporate Finance to advise the company
on the raising of debt finance for the project. BBY is advising the company on the
provision of equity finance.
Discussions are continuing with a number of banks with regard to financing the
project and senior representatives from these banks have already made a site visit to
conduct a preliminary field assessment. Snowden Associates Pty Ltd has been
appointed to undertake a due diligence review of the feasibility study for the banks
and, once this is complete, a follow up field visit will be undertaken by the selected
banks.
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In addition to the discussions and activities regarding debt and equity financing of the
project, discussions have been held with representatives of a number of non bank
Australian and international institutions - all of which have approached Universal with
a view to potentially providing financing for the Roseby Project.
Michael Hulmes
Managing Director
Information in this report that relates to exploration and feasibility results has been compiled by
Maurice Hoyle who is a Fellow of the Australasian Institute of Mining and Metallurgy and has
sufficient experience which is relevant to the activity which he is reporting on as a Competent Person
as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Mr Hoyle consents to the inclusion in the report of the matters based on
the information compiled by him, in the form and context in which it appears
Information in this report that relates to ore reserves results has been compiled by Quinton de Klerk
who is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience
which is relevant to the activity which he is reporting on as a Competent Person as defined in the 2004
Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves’. Mr de Klerk consents to the inclusion in the report of the matters based on the information
compiled by him, in the form and context in which it appears