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22 November 2019
Strategic Minerals plc
("Strategic Minerals" or the "Company")
Leigh Creek Copper Mine - Feasibility Study Updates
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing mineral company actively developing projects prospective for battery materials, is pleased to provide the following update on the Company's operations at Leigh Creek Copper Mine ("LCCM") including the results from a completed feasibility study on the first stage development at Paltridge North and an updated feasibility study on the Lynda and Lorna Doone deposits.
Highlights
· US$30m combined pre-tax cash surplus from Paltridge North, Lynda and Lorna Doone
· Adoption of a long term, three-phase development programme for the existing licenses and surrounds
· Full scale production to commence with lower risk Paltridge North deposit
· Identification of the need to increase capacity at Mountain of Light plant to 300 tonnes per month
· The feasibility study on the first element, Paltridge North, undertaken by Mining One and other internal consultants, indicates a cash surplus going forward, of US$6.4m (see assumptions following)
· Updated internal feasibility of the second stage development of Lynda and Lorna Doone indicates a cash surplus of US$29m (see assumptions following)
· Analysis by Mining One indicates that an owner operated mining approach will provide quicker payback and greater flexibility in mining
· Stage 1 provides a solid platform to expand LCCM both by developing known resources with further exploration and provides M&A potential from nearby tenements
Commenting, John Peters, Managing Director of Strategic Minerals, said:
"The Company's development of the Leigh Creek Copper Mine has been undertaken carefully to identify all the key risks associated with this project, and especially those that impacted previous options. The feasibility study and associated documentation is ready to be submitted for permitting and soon thereafter, subject to regulatory approval and financing, recommencement of operations with a very short lead time. The Company has been focussed on ensuring this project is on the surest footing for both the Company and for prospective partners and investors.
"Throughout this de-risking process, the Company has been in talks with various parties to secure adequate funding to recommence sales at LCCM. Advanced discussions are ongoing and whilst no agreement has yet been reached, the Board remains confident that there will be a successful outcome to move LCCM forward."
Three-stage development plan
The Board and Management have identified a three-stage approach to unlocking the value associated with the JORC copper resources at LCCM and surrounds. This involves:
Stage 1: Restarting the existing plant at Mountain of Light processing plant and debottlenecking the plant to produce a sustainable monthly production of up to 300 tonnes of saleable copper (contained in circa 500 tonnes of copper cement) with a minimum grade of 70% Cu.
Additional potential is known to exist with the existing mining leases that are yet to be tested with exploration.
Stage 2: Expanding existing resources through exploration on current mining leases and exploration tenements.
LCCM has a major tenement position in the northern Flinders Ranges with both mining and exploration leases, covering a total holding of 1,250km2. Within these tenements are both JORC resources (Paltridge North, Lynda and Lorna Doone) and many known surface occurrences of copper oxide mineralisation which need additional exploration. Additional exploration initially targeting oxide mineralisation and also the potential for deeper sulphide mineralisation is likely to commence during Stage 1 once regular cash flows build up and will run concurrent with mining and processing at the Lynda and Lorna Doone deposits.
The final development plan for the Lynda and Lorna Doone deposits has a completed feasibility study produced by the previous owners, and it is proposed that this will require an update following the commencements of operations at Paltridge North.
Stage 3: Development of a regional scale strategy for creation of economic value from all copper in the North Flinders Ranges, including projects that are not currently owned by LCCM. Stage 3 is designed to extend the mine life to more than 15 years.
Paltridge North and Rosmann East Feasibility Study
The Board took the view that the development of the Paltridge North and Rosmann East deposits should be undertaken as a priority, due to the lower development risk and lower restating capital associated with the type of material to be found at these deposits and most critically the proximity of these deposits to the existing Mountain of Light processing plant. This is partially offset by the higher strip ratio (waste to ore ratio) of the Paltridge North and Rosmann East deposits which results in the need for start-up working capital and a lower overall profitability.
In line with this approach, SML has, through LCCM, extensively invested in metallurgical studies, to ensure the potential commercial capacity to mine LCCM deposits, and in the restart of operations through the retreatment of existing heaps. While LCCM has received encouraging results from the metallurgical studies, the demand for laboratory time by larger corporations significantly increased the time it has taken to receive these results. Additionally, LCCM successfully commenced trial operations at the Mountain of Light processing facility, including sale of material under its offtake arrangement.
a) Mountain of Light Resources
LCCM completed a drilling programme during the early stages of the feasibility study. This was primarily to provide metallurgical samples, but also allowed confirmation of historic drilling at both the Rosmann East and Paltridge North deposits as well as testing below the previous known base of mineralisation. Extensions to the resource were identified and have resulted in a moderate increase of the global JORC mineral resource. The JORC compliant mineral resource on the Mountain of Light Mining Lease are summarised in Table 1:
Table 1 Mountain of Light Resources
Location |
Category |
Mineralisation Type |
Tonnes |
Grade
(% Cu) |
Contained Cu (t) |
Paltridge North |
Indicated |
Oxide Zone |
633,000 |
0.75 |
4,700 |
Indicated |
Chalcocite Zone |
276,000 |
0.92 |
2,500 |
Inferred |
Oxide Zone |
114,000 |
0.63 |
700 |
Inferred |
Chalcocite Zone |
400,000 |
0.69 |
2,800 |
Total Oxide Zone |
747,000 |
0.73 |
5,500 |
Total Chalcocite Zone |
676,000 |
0.78 |
5,300 |
Total Indicated |
909,000 |
0.80 |
7,300 |
Total Inferred |
514,000 |
0.68 |
3,500 |
Grand Total Paltridge North |
1,423,000 |
0.76 |
10,800 |
Rosmann East |
Indicated |
Oxide Zone |
108,000 |
0.78 |
800 |
Indicated |
Chalcocite Zone |
203,000 |
0.61 |
1,200 |
Inferred |
Oxide Zone |
89,000 |
0.63 |
600 |
Inferred |
Chalcocite Zone |
36,000 |
0.43 |
200 |
Total Oxide Zone |
197,000 |
0.71 |
1,400 |
Total Chalcocite Zone |
240,000 |
0.58 |
1,400 |
Total Indicated |
311,000 |
0.67 |
2,100 |
Total Inferred |
125,000 |
0.57 |
700 |
Grand Total Rosmann East |
436,000 |
0.64 |
2,800 |
Total MoL |
Total Indicated |
1,220,000 |
0.77 |
9,400 |
Total Inferred |
639,000 |
0.66 |
4,200 |
Grand Total |
1,859,000 |
0.73 |
13,600 |
Both deposits have been extensively drilled on 30m spaced sections, with holes typically spaced at 10m intervals on each section. The mineral resource estimates are based on 9,223.4m (Paltridge North) and 1,886.9m (Rosmann East) of percussion, reverse circulation and diamond drilling undertaken by Adelaide and Wallaroo Fertilizers Limited between 1983 and 1989, and a further 496.2m of PQ diamond drilling at Paltridge North and 830.2m of reverse circulation and PQ diamond drilling at Rosmann East by LCCM in 2018 and 2019.
Mineralisation at Paltridge North occurs as a broadly flat lying body of oxide copper mineralisation (malachite and azurite) from approximately 10-15m below the surface. The mineralised body has maximum dimensions of over 700m x 140m and an average thickness of around 15m. It is hosted by sericitic siltstone and is adjacent to a diapiric breccia. The oxide mineralisation straddles the water table at approximately 15-20m below surface.
Supergene chalcocite mineralisation (with minor native Cu) occurs below the oxide mineralisation to approximately 50m below the surface. Pyrite is a minor accessory and the deposit generally has a low sulphur content.
Mineralisation at Rosmann East occurs from a surface abutting a steeply dipping diapiric breccia. It is hosted by weakly to moderately indurated siltstone. Remnant oxide mineralisation (malachite and azurite) occurs below the existing pit floor and continues along strike, with a total strike continuity of almost 400m. Supergene chalcocite dominated mineralisation with common pyrite (and chalcopyrite at depth) occurs below the oxide to a depth of at least 75m.
b) Paltridge North Mine Plan
A mine plan was designed based on a staged mining approach with the objective to design an oxide only starter pit without potentially sterilising transitional ore in later stages of mining. It was proposed that this be achieved through a three-stage development program:
• Stage 1: Smaller Starter Pit - Oxide Only
• Stage 2: West Pit - Oxide Only
• Stage 3: Combined Pit - Oxide and Transitional
The summary of the mining production details from Paltridge North are summarised in Table 2 below;
Table 2 Paltridge North Pit Statistics
|
Description |
Units |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Oxide Tonnes |
kt |
68 |
175 |
177 |
420 |
Oxide Grade |
% Cu |
0.84 |
1.05 |
0.75 |
0.89 |
Trans Tonnes |
kt |
- |
2 |
265 |
267 |
Trans Grade |
% Cu |
- |
2 |
265 |
267 |
Total Ox + Trans |
|
|
|
|
|
Ore Tonnes |
kt |
68 |
176 |
442 |
687 |
Cu Grade |
% Cu |
0.84 |
1.05 |
0.94 |
0.96 |
Contained Cu |
T |
574 |
1,850 |
4,143 |
6,568 |
Waste Tonnes |
kt |
433 |
880 |
635 |
1,947 |
Total Tonnes |
kt |
501 |
1,056 |
1,077 |
2,634 |
Stripping Ratio |
|
6.34 |
4.99 |
1.43 |
2.83 |
In light of LCCM's experience in restarting the treatment of the existing heaps, capital expenditure requirements were identified to ensure that processing rates could be increased to enable 300 t/month of saleable copper in cement to be produced (circa 500 t of actual copper cement). This involves 120 t excavator mining at 110,000 bcm/month.
The proposed pit design revolved around a 60° batter angle, 4m safety berm, bench height 10 m with a ramp that would be 17m wide with a 1:10 grade. The mine plan reflects the inclusion of a 5% mining dilution and 100% mining recovery.
c) Mining Strategy
Mining is expected to occur on a day shift only (10 hr days) basis, 7 days a week with all material to be free-dug or ripped (no blasting). It is to utilise a 120t excavator (PC1250) and up to 5 x 40 t trucks (Cat 740B). A nominal mining rate of 7,000 t/d is expected to be maintained.
LCCM has assessed the utilisation of a contractor mining fleet and an owner operator fleet. To reduce the overall costs and maintain maximum flexibility the mining strategy of carefully selected second-hand mining fleet and an owner operator fleet has been chosen. Multi taking operators, lower operating cost, with a minimal capital cost, an ability to stand down equipment or redirect to heap leach pad construction with a minimum incremental cost were the key criteria for this strategic direction. The equipment can be re-directed to the other potential deposits when required. In order for LCCM to operate the mine, it will require a proposed mining fleet of:
• 1 x 120 t capacity excavator (Komatsu PC1250 or similar)
• 5 x 40 t capacity trucks (Caterpillar 740B or similar)
• 1 x Dozer (Cat D11R or similar)
• 1 x Grader (Cat 12H or similar)
• 1 x Water Truck
• 1 x Service Truck
• 1 x Front End Loader (back up for Excavator)
d) Treating the Ore
Paltridge North copper oxide mineralisation provides a simple treatment path with heap leaching of the copper oxide minerals and then recovery out of solution via reaction with iron scrap in 2 Kennecott cones. However, The Paltridge North ore presents a processing challenge for copper recovery, which was poorly acted upon in previous operations, due to the high fines content of the ore. The fines present if allowed to be present in the heap leach pads would act to blinker the heaps, thus preventing acid percolation flow through the heaps, and would also tend to wash out copper and deposit this in the pipes and ponds of the process plant, resulting in a poor heap leach recovery.
Accordingly, it is intended to wet screen the ore to 1 mm as metallurgical analysis has indicated that 90% of the copper tends to remain with the plus 1 mm size fraction. Test work also shows that between 40% and 70% of the mass of the ore is minus 1 mm. The screening to 1 mm overcomes the fines problem with copper concentrated into less mass for leaching.
The outcome of pretreatment screening to 1 mm is that, while some loss of copper occurs, a substantial cost saving arises. Leaching tests of the oxide ore, after the fines have been removed, shows very good copper leaching recovery and kinetics.
Leaching tests of the transitional ore continues, although the expectation is that whole of ore leaching will be appropriate for the transitional ore.
e) Planned Paltridge North Overall Material Flow
Based on the metallurgical testwork completed during the feasibility study, LCCM has developed a simplified flowsheet that includes the following materials handling steps. This provides LCCM confidence that the leaching dynamics will be sufficiently improved and supports the positive economics of the project.
i) Free dig/ripped mining
ii) Transfer ore to ROM
iii) Ore crushed to minus 35mm
iv) Ore passed through a wet scrubber
v) Screening (desliming/dewatering) with material less than 1 mm sent to waste
vi) Material over 1 mm combined with a binding agent and passed through an agglomerator
vii) Material placed on heap leach pads
f) Permitting and Approvals
There is a mining lease (ML) in existence for the Mountain of Light property. To operate under this ML, a Program for Environmental Protection and Rehabilitation (PEPR) is required. This PEPR wraps up all necessary approvals from the various regulators to operate. The process for the development and submission of the PEPR is well advanced with continuing interaction with the regulators to facilitate this process and is ready for submission. Normal expectation of approval process is circa 3 months after lodgement.
g) Paltridge North Economics
A summary of the economics associated with the Paltridge North and Rosmann East feasibility and the assumptions employed are as follows:
Measure |
Unit |
Value |
Copper Price |
US$/t |
6,614 |
Exchange Rate |
AUD / USD |
0.70 |
Sold Copper |
Tonnes |
5,298 |
LOM |
Months |
58 |
Pre-Tax Cash |
USD Mill |
6.5 |
EBITDA Margin |
% |
41% |
IRR |
% |
105% |
Cost of production |
US$/lb Cu |
1.5 |
Start-up capital |
USD Mill |
1.75 |
Lynda and Lorna Doone
LCCM has internally reviewed the previously completed feasibility study published in November 2016 for the Lynda and Lorna Doone deposits, which formed the basis of the due diligence undertaken by SML when acquiring LCCM. The deposit shows excellent upside potential with approximately 17,000 tonnes of Indicated Resource. Both deposits are within an existing Mining Lease and are located approximately 70km to the north of the Mountain of Light project. Accordingly, mining of these deposits would require a new plant or relocation of some components of the Mountain of Light facility (for an approximate capital estimate of circa US$3.5m). While this does increase risks due to the relative distance from the Mountain of Light infrastructure, this is offset by a much lower waste strip ratio with an estimated waste to ore ratio of 1.1:1 and the simpler metallurgical nature of the deposit compared to Paltridge North. Permitting is still required.
A summary of the economics associated with the combined Paltridge North, Lynda and Lorna Doone feasibility and the assumptions employed are as follows:
Measure |
Unit |
Value |
Copper Price |
US$/t |
6,614 |
Exchange Rate |
AUD / USD |
0.70 |
Sold Copper |
Tonnes |
13,549 |
LOM |
Months |
95 |
Pre-Tax Cash |
USD Mill |
30.0 |
EBITDA Margin |
% |
52% |
IRR |
% |
117% |
Cost of production |
US$/lb Cu |
1.23 |
Start-up capital |
USD Mill |
1.77 |
Competent Person Statement
The information in this report that relates to Mineral Resource estimates is based on information compiled by Mr David Larsen, who is a Member of the Australian Institute of Geoscientists. Mr Larsen is the Principal of D&J Larsen Consulting Pty Ltd and is a consultant to the Company. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and a qualified person as defined in the AIM Note for Mining and Oil & Gas Companies dated June 2009. Mr Larsen has over 35 years' Australia and international experience in exploration, mining geology and resource estimation for gold, base metals and iron ore deposits.
Notes to Editors
Strategic Minerals plc is an AIM-quoted, operating minerals company actively developing projects prospective for battery materials. It has an operation in the United States of America and Australia along with development projects in the UK and Australia. The Company is focused on utilising its operating cash flows, along with capital raisings, to develop high quality projects aimed at supplying the metals and minerals being sought in the burgeoning electric vehicle/battery market.
In September 2011, Strategic Minerals acquired the distribution rights to the Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating asset, which it brought into production in 2012 and which continues to provide a revenue stream for the Company. This operating revenue stream is utilised to cover company overheads and invest in development projects orientated to supplying the burgeoning electric vehicle/battery market.
In January 2016, the portfolio was expanded with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia prospective for cobalt, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In September 2018, the Company entered contracts for the sale of certain CARE tenements identified as gold targets.
In May 2016, the Company entered into an agreement with New Age Exploration Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds from the Company's investment were utilised to complete a drilling programme that year. The drilling programme resulted in a significant upgrade of the resource. This was followed in 2018 with a 12-hole 2018 drilling programme has now been completed and the resource update that resulted was announced in February 2019. In March 2019, the Company entered into arrangements to acquire the balance of the Redmoor Tin/Tungsten project. This was completed on 24 July 2019.
In March 2018, the Company completed the acquisition of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and brought the project into production in April 2019.
