Production Target - Further Cautionary Statement
It should be noted that over the proposed nine-year production plan it is projected that 2 Mt of gypsum will be sold. Under the current resource model 1.3 Mt is an indicated mineral resource and 2.6 Mt is an inferred mineral resource. This means that over the nine-year production model 35% (700,000 t) of the projected 2 Mt would be from the existing inferred mineral resource (as the resource model currently stands).
There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.
The scoping study showed that the uses for gypsum go well beyond the amelioration of sodic soils to include the amelioration of transient salinity, aluminium toxicity and calcium and sulphur deficiencies in subsoils, thereby markedly increasing its market potential.
In addition, the study showed that gypsum markedly improved water use efficiency (WUE) in responsive soils with 5 to 10 t/ha of gypsum increasing yield potential up to 85%, meaning that crop returns increased by almost $200 /ha over a 4-year period.
The economics around these major agricultural issues were such that the Pyramid Lake gypsum can be readily applied to a broad geographic area which includes the southern portion of the Goldfields-Esperance region, through to the eastern-most portion of the Great Southern and Wheatbelt regions.
A production scenario was established for the Pyramid Lake gypsum which showed the potential for a 9-year model to deliver a Net Present Value (5% discount rate) of $33.2 million and an Internal Rate of Return (IRR) of 104.7%, demonstrating the robustness of the project.
The production model and associated financial model showed that this could be achieved at a very modest capital investment ($1.2 million) with a further moderate capital injection ($0.6 million) in year 6 to accommodate plant and throughput expansion. The capital expenditure has been based largely on the acquisition of second-hand equipment with low operating hours to keep overall costs down.
The gypsum resource is situated at the surface (no overburden) as part of a major dune system. There is norequirement for drilling and blasting as the material can be “free-dug” from the dune system and due to thecurrent sizing and the tendency of the gypsum to reduce further in size when handled there will also be no need for a crushing circuit. The process will comprise the following:
Loading and hauling–from the mine to the processing plant
Screening–at various sizes
Conveying–to various stockpiles
Loading to stockpile areas (with possibility of a bagging plant in the future)
Loading from stockpile to trucks for delivery to end-users
The majority of the gypsum will be sold as bulk tonnage for broad-acre applications. A brief investigation into bagged products was undertaken and it was determined that more work needed to be completed to determine the merits of generating bagged gypsum.
The proposed production model assumes that the plant and equipment are established and commissioned in the first year and bulk gypsum sales commence in the second year. Based on market enquiries and existing historical production and usage figures for the gypsum industry in Western Australia it was projected that 50,000 tonnes of gypsum could be sold by the end of year 2.
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