Underground Production Potential

 

 

30 March 2015

 

AMUR MINERALS CORPORATION

(AIM: AMC)

 

Underground Production Potential Defined At Flangovy and Kubuk

15 Year Mine Life at Six Million TPA

 

Amur Minerals Corporation ("Amur", the "Company" or "AMC"), the exploration and development company focused on base metal projects located in the Far East of Russia, reports it is has completed an internal evaluation of the potential to produce ore from underground operations at its Kun-Manie nickel-copper sulphide project.  Using an Earnings Before Income Taxes, Depreciation and Amortisation ("EBITDA") trade off analysis, the Company has concluded that production by a combination of open pit and underground methods from the deposits at Maly Kurumkon / Flangovy, Vodorazdelny, Ikenskoe / Sobolevsky and Kubuk is potentially capable of supporting a six million tonne per annum nominal capacity project for a 15 year period.    In-fill drilling at Flangovy and Kubuk is required to upgrade Inferred resource to Indicated resource allowing for the subsequent conversion to a mineable reserve.  Most of the planned drilling will target the areas of underground potential.  The operation is now anticipated to be a combined open pit and underground operation with production being an approximate blend of 50% from open pit and 50% from underground.  Highlights include the following:

 

·     In-fill drilling is required to confirm the resource identified at Flangovy and Kubuk.  Presently defined Inferred resources require conversion to the Indicated JORC category.  Additional exploration through step out drilling to expand the existing resource is not required.

 

·     Open pit production will come from Maly Kurumkon, Vodorazdelny, Ikenskoe / Sobolevsky and Kubuk.  A total of 46.2 million tonnes of ore at a strip ratio of 2.8 tonnes of waste per tonne of ore has been identified.  The average nickel grade is estimated to be 0.61% with copper being 0.16%.  The majority of this material is already drilled to a Proved and Probable reserve class.

 

·     Underground production will come from Flangovy and the area below and adjacent to the presently identified Kubuk pit.  Underground production is estimated to be 44.1 million tonnes of ore averaging 0.55% nickel and 0.16% copper.  The majority of this material requires in-fill drilling to convert the Inferred resource to Indicated.  Flangovy is targeted for in-fill drilling during the next field campaign wherein a target of 26.3 million tonnes will be tested.  The target at Kubuk totals approximately 17.8 million tonnes.

 

·     Total combined open pit and underground production is expected to be 90.3 million ore tonnes at an average grade of 0.58% nickel and 0.16% copper.  Total contained nickel is 524,000 tonnes, copper is 142,000 tonnes.  The average contained grade of cobalt is 0.01%, platinum and palladium are both projected to be 0.13 g/t.

 

·     By adding mineable underground production, the indicated amount of ore is increased from 66.8 million ore tonnes to 90 million tonnes.  Simultaneously, the amount of open pit waste  is reduced by 211 million tonnes. 

 

·     Preliminary underground designs including a Reverse Room and Pillar Retreat ("RRPR") or a Long Hole Retreat ("LHR") system were examined and it has been confirmed by the Company that the ore zone thicknesses, grades and orientation are conducive to both mining methods.

 

·     First principle engineering costs estimates indicate that the cost to mine a tonne of ore using one of the underground approaches is US$11.88 per ore tonne including development.  The estimated cost to mine an open pit tonne of material is US$1.58.

 

·     The life of mine EBITDA using a combination of open pit and underground production is projected to be US$1.4 billion.  This represents an increase from the previously reported Conceptual Open Pit Design EBITDA expectation of US$1.2 billion.  The total increase in implementing the combined surface and underground production scenarios is US$0.23 billion.  The EBITDA is based on the concentrate being shipped to a contract smelter where approximately 30% of the nickel, 50% of the copper and all base metals are lost as a part of the smelting fees.  The total value of the lost metal is projected to be US$3.45 billion.

 

·     Analysis has shown a substantial increase in projected mineable reserve and extension of the mine life from 11 years for the open pit only option to 15 years for the combined open pit and underground production option.  This is based on an annual production rate of 6.0 million ore tonnes per year.

 

·     A production schedule is being finalised to determine the Net Present Value of the newly defined mining system.  Initial ore will come from the open pits with underground production to follow.  Based on the production schedule, the Company will be able to assess the economic potential of the operation on a toll smelting basis and subsequently assess the viability of constructing and operating its own smelter.

 

The Underground Analysis ("UA") included a series of steps comprised of a review of the configuration of the ore with regard to its orientation and thickness to determine if the mineralisation could be mined using a proven underground mining system.  Preliminary schematic drawings confirmed that both the RRPR and LHR could be successfully implemented.  Estimates for development and to mine ore were compiled using the first principle approach.  The cost to mine and deliver a tonne of ore to the processing plant is estimated to be US$11.88 per ore tonne.

 

The EBITDA value to mine the Runge, Pincock, Minarco ("RPM") December 2014 generated mining shells was calculated based on the newly defined underground mining cost for comparison to the open pit shell EBITDA's.  The parameters used to estimate the EBITDA values for both the open pit and underground production scenarios are presented below.

 

Cost Centre	Open Pit	Underground
Mining Cost Per Tonne	$1.58	$11.88
Processing Cost Per Ore Tonne	$10.38	$10.38
Tailings Handling Cost Per Ore Tonne	$0.14	$0.14
Concentrate Transport To Rail Per Ore Tonne	$1.72	$1.72
General & Administrative Per Ore Tonne	$2.15	$2.15
Rail Transport to Smelter Per Ore Tonne	$12.09	$12.09
Smelter Penalties Per Ore Tonne	$3.80	$3.80

 

Metallurgical deductions were considered in the determination of the EBITDA with average recoveries at the plant being 80.4% for nickel and 90.2% for copper.  A final deduction was included to account for smelter fees wherein the smelter pays for 70% of the recovered nickel and 50% of the recovered copper.  The smelter also does not pay for any of the recovered cobalt, platinum or palladium.  The EBITDA using the Q1 2015 updated information and a nickel price of US $7.50 per pound (US$16,530) for both (i) Open Pit only and (ii) Open Pit and Underground options are presented below.

 

Deposit	EBITDA		Increase In EBITDA
	Open Pit Only	Open Pit and Underground
Ikenskoe / Sobolevsky	$355,949,875	$355,949,875	$-
Maly Kurumkon / Flangovy	$552,336,844	$680,898,198	$128,561,354
Vodorazdelny	$135,014,810	$135,014,810	$-
Kubuk	$138,519,076	$239,629,058	$101,109,983
Total	$1,181,820,605	$1,411,491,942	$229,671,337

 

The underground EBITDA values generated at both Vodorazdelny and Ikenskoe / Sobolevsky were less than the open pit EBITDA for all shells.  Hence, these two deposits represent open pit mineable areas only.  The combined life of mine EBITDA for both deposits totals US$491 million.

 

The Maly Kurumkon / Flangovy life of mine open pit only EBITDA totals US$552 million.  The underground EBITDA indicates that the Maly Kurumkon / Flangovy open pit can be reduced in size.  The ores no longer contained within the reduced pit can potentially be recovered by underground mining and additional ores previously not economically recoverable by open pit methods may also be recovered by underground operations.  The open pit EBITDA component is now estimated to be US$363 million with an additional US$318 million in underground production.  The combined production scenario is projected to be US$681 million, an increase of US$129 million (23%).

 

The Kubuk life of mine, open pit only, production option has an EBITDA of US$138 million.  The UA indicates that the Kubuk open pit production will remain as previously reported, however, previously uneconomic open pit material may be economically recovered using one of the two underground methods.  The underground Kubuk EBITDA value is projected to be US$101 million bringing the total Kubuk life of mine EBITDA to US$240 million.  This is an increase of 72% in the EBITDA at Kubuk.

 

The life of mine EBITDA using the combination of open pit and underground value by deposit is estimated to be in the order of US$1.4 billion.  By inclusion of the underground production and reduction in the size of the Maly Kurumkon / Flangovy open pit, the the life of mine EBITDA is projected to increase by 19%.

 

A critical factor derived from the analysis is the substantial increase in projected mineable reserve and the extension of the mine life.  The information below confirms that the 19% increase in the global life of mine EBITDA has also increased the projected mine life from 11 years (all open pit production) to 15 years based on an annual production rate of 6.0 million ore tonnes per year.  Over the 15 year life, approximately half of the production will be derived from open pits with the remainder being generated from underground.

 

Production	Total Tonnes (Mt)	Total Ore (Mt)	Total Waste (Mt)	Strip Ratio	Ni (%)	Cu (%)	Co (%)	Pl (g/t)	Pd (g/t)
Open Pit Only	406.1	66.8	339.4	5.1	0.60	0.16	0.01	0.13	0.14
Open Pit / Underground	174.8	90.2	128.6	2.8	0.58	0.16	0.01	0.13	0.13
Open Pit Portion	174.8	46.2	128.6	2.78	0.61	0.16	0.01	0.14	0.16
Underground Portion		44.1			0.55	0.16	0.01	0.13	0.11

 

Also noted in the analysis is the amount of lost value due to toll smelter fees.  The value of the metal kept by the smelter and not recovered by the Company totals approximately US$3.45 billion dollars.  For this reason, the next step being implemented by the Company is an assessment of the economic viability of constructing and operating its own smelter.  The analysis requires that the Company determine the type and quality of the final saleable product that can be generated as well as the costs to construct and operate its own captive smelter.  Analysis of this is in progress and shall be reported as key results are determined.  The value of the lost metal due to smelter charges is presented below.

 

By Commodity	% of Total	Contained Value	Commodity Price
Loss of Nickel	31%	$2,242,084,567	$16,530 Per Tonne
Loss of Copper	50%	$378,610,112	$6,062.65 Per Tonne
Loss of Cobalt	100%	$202,920,230	$31,305.32 Per Tonne
Loss of Platinum	100%	$379,761,779	$46.66 Per Gram
Loss of Palladium	100%	$247,226,612	$26.68 Per Gram
Total Loss		$3,450,603,300

 

Robin Young, CEO of Amur Minerals Corporation, commented:

 

"The results from our analysis of the potential to mine additional ores from underground advance us another step forward in establishing the final design bases of the proposed Kun-Manie operation.  The ability to reduce the pit size at Maly Kurumkon / Flangovy while simultaneously expanding the reserve through economic underground extraction of uneconomic open pit reserves has provided additional upside to the project economics.  We can now realistically establish a long term mine life thereby sustaining a large scale operation at six million tonnes per year subject to completion of in-fill drilling within two deposits." 

 

"There is one more objective we must complete leading to our finalisation of our update to the Pre-Feasibility Study completed in 2007; this is whether we can produce a final saleable product from our own smelter and cover the substantial cost to construct our own facility.  This requires our determination of the final product as a low grade matte, a high grade matte, or final cathode product.  We will keep shareholders informed of our progress.  This will allow us to release our final results of the all in project design basis and financial projections.  This work is being rapidly progressed."

 

Enquiries:

 

Company Amur Minerals Corp.	Nomad and Broker S.P. Angel Corporate Finance LLP	Public Relations Yellow Jersey
Robin Young CEO	Ewan Leggat Katy Birkin	Dominic Barretto Kelsey Traynor
+44 (0) 79 8112 6818	+44 (0) 20 3470 0470	+44 (0) 77 6853 7739

 

 

Notes to Editors

 

The information contained in this announcement has been reviewed and approved by the CEO of Amur, Mr. Robin Young.  Mr. Young is a Geological Engineer (cum laude) and is a Qualified Professional Geologist, as defined by the Toronto and Vancouver Stock Exchanges.  An employee of Amur for 10 years, previously Mr. Young was employed as an independent consultant with Fluor Engineers, Fluor Australia and Western Services Engineering, Inc. during which time his responsibilities included the independent compilation of resources and reserves in accordance with JORC standards.  In addition, he was the lead engineer and participant of numerous studies and projects requiring the compilation of independent Bankable Studies utilised to finance small to large scale projects located worldwide.  Mr. Young is responsible for the content of this RNS that has included information derived by SRK, RPM, SGS and AMC's staff of professionals.

 

For further information, see the Company website at www.amurminerals.com. 

 

Additional Information

 

The proposed Kun-Manie nickel-copper sulphide project located in Amur Oblast of the Russian Federation will require smelting of a concentrate to generate revenues.  In 2007, the design configuration and project economics were reported in a Pre-Feasibility Study ("PFS") by SRK Consulting Ltd ("SRK").  Subsequent work has substantially modified the original design concept and results of the PFS.  As a result, the design basis has been modified taking into account subsequently derived information.

 

The changes to the design along with inflation and the recent devaluation of the Ruble have also resulted in the need for a comprehensive update of the operating costs.  In Q1 2015, the operating costs were calculated by the Company using first principle engineering practices based on the updated design described below.

 

The Current 2015 Design Basis - 25 March 2015

 

The current design basis as of Q1 2015 consists of a single simple concept.  As the ore is sulphidic in character, a saleable nickel - copper concentrate is to be generated for subsequent sale and smelting on the international market.  Conventional open cast mining and flotation is planned.  The flotation concentrate will be trucked from the site over a 320 kilometre road for delivery to the rail head at Ulak located on the Baikal Amur railroad in the Amur Oblast. From there, it will be transported by rail to a commercial smelter.

 

The project requires the construction of a 320 kilometre road to provide access and allow for the supply of the operation and the delivery of the concentrate to the rail station located on the Baikal Amur rail line.  The road design has been substantially upgraded to handle year round operations with widening to two lanes and the inclusion of a larger maintenance fleet for the road.

 

Power will be generated on site using diesel fueled generator sets.  A total of 40 mW of installed capacity is planned.

 

The site is to be operational year round.  Mine production will be derived from four pits and two underground operations located along the Kurumkon Trend.  Production is planned for 6.0 million tonnes of ore per year to be treated by the processing plant located at site.  The plant will crush, grind and float the sulphide ore generating about 400,000 tonnes of concentrate per annum.  The recovery of nickel is estimated to be 80% of the mine delivered grade of 0.55% nickel.  Copper recoveries are projected to be approximately 90% with a grade of 0.16%.  Mill tailings will be stored within an impoundment area adjacent the mill site.

 

The concentrate produced will be truck transported to the rail station with monthly shipments being directed to a smelter.  The toll smelter will pay for approximately 70% of the nickel and 50% of the copper.  No additional payable value will be derived from the by-product metals of cobalt, platinum and palladium.