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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Gippsland | LSE:GIP | London | Ordinary Share | AU000000GIP1 | ORD SHS NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 2.125 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
TIDMGIP RNS Number : 5259M Gippsland Limited 30 January 2009 Gippsland Limited ("Gippsland" or "the Company") QUARTERLY ACTIVITIES REPORT Period: October - December 2008 HIGHLIGHTS ABU DABBAB * Review of Definitive Feasibility Study completed * Production of synthetic tantalum concentrate (Syncon) * Project Finance Due Diligence well advanced * Project eligible for German Government Untied Term Loan * Lycopodium appointed as Engineering, Procurement & Construction Management (EPCM) contractor * Environmental & Social Impact Assessment (ESIA) completed and submitted to the project finance banks * Delineation of 760 tonne alluvial tin metal resource SUCCESSFUL CAPITAL RAISING ABU DABBAB The prime assets of Gippsland Limited (ASX/AIM "GIP"; FRA "GIX") are the world-scale 44.5 million tonne Abu Dabbab and the 98 million tonne Nuweibi tantalum deposits located in Egypt. The Company has completed a Definitive Feasibility Study based upon a design mill-feed rate of 2 million tonnes per annum. It is scheduled to produce 650,000 pounds of tantalum pentoxide (Ta2O5), plus 1,530 tonnes of LME grade tin metal per year. The Company has concluded a 10-year tantalum off-take agreement with the German tantalum major HC Starck GmbH for the supply of 6 million pounds of tantalum pentoxide, representing more than 90% of the total initial tantalum production during this period. The Abu Dabbab project alone is expected to have a mine life of 20 years, however, given that Gippsland's total JORC Code Resources exceed 140 million tonnes, the Company will look to increase tantalum and tin production substantially following commencement of operations. Review of definitive feasibility study completed During the quarter the Definitive Feasibility Study was reviewed and it was determined that the total capital expenditure ('CAPEX') will amount to US$173 million, an increase of US$48 million over the previous November 2007 estimate. This updated figure includes contingency and pre-production costs, owner's costs and all Project finance costs during construction. Importantly however, it also now includes provision for the installation of additional plant and equipment associated with the significant increase of tantalum product grades from 20% to 55% Ta2O5. The revised CAPEX figure was determined in the context of record high construction material costs as well as high plant and machinery costs and record high fuel prices. The Directors believe that this CAPEX figure is quite conservative and given the probable economic circumstances ahead, these costs are likely to decline. PRODUCTION OF 55% TANTALUM SYNTHETIC CONCENTRATE (SYNCON) The increase in CAPEX is in part associated with the production of a high purity tantalum synthetic concentrate, known in the industry as SynCon, containing 55% Ta2O5. The recent initiative to advance to the SynCon route results from the Company's on-going evaluation and optimisation of past testwork and the availability of computer metallurgical modelling techniques. This new initiative is a major advance for the Project as it represents the first stage in the tantalum refining process, producing a premium grade material containing less than 0.1% combined uranium (as U3O8) and thorium (as ThO2). This very significant down-stream, value-adding step also results in a reduction of a number of other unwanted metallic impurities. Whilst the production of a premium grade SynCon entails increased CAPEX, this is offset by the enhanced value of the tantalum end-product, plus savings to the Project and its tantalum customers. It also reduces ocean shipping and inland SynCon transportation costs, as well as reduced disposal costs for waste generated by the Project's customers during the tantalum refining process. The production of this 55% SynCon at Abu Dabbab is considered to be a groundbreaking change for the industry as mining companies have traditionally produced a relatively low value, low grade, impure tantalum mineral concentrate. This significant change to the global tantalum supply chain results directly from the Board's practical industrial experience and depth of knowledge in fields of chemistry, chemical engineering and metallurgy. PROJECT FINANCE DUE DILIGENCE During the period, the German banks KfW IPEX-Bank GmbH ("KfW") and Deutsche Investitions und Entwicklungsgesellschaft mbH ("DEG") ("Banks"), both being part of the SP-AAA rated German banking major KfW Bankengruppe, advanced their technical due diligence. The Company is advised that the Abu Dabbab legal due diligence being undertaken on behalf of the Banks by City of London lawyers Milbank, Tweed, Hadley, & McCloy LLP is nearing completion. As a result of the regular contact with the Banks and the due diligence undertaken to date, the Directors believe that the Banks have maintained a positive attitude towards the Project in spite of the recent international financial turmoil. The KfW Bankengruppe, which is 80% owned by the German Federal Government and 20% owned by the Federal German States or Bundesländer, has been providing banking services to the private sector and industry worldwide for more than 50 years. DEG has been financing and structuring the investments of private enterprises in developing and transition countries for more than 45 years. DEG is one of the largest European development finance institutions for the promotion of the private sector. UNTIED TERM LOAN GUARANTEE - UNGEBUNDENER FINANZKREDIT ('UFK') In November the Directors announced that the German Inter-ministerial Committee ('IMC') led by the German Federal Ministry of Economics and Technology had confirmed the eligibility of the Abu Dabbab Project for an Untied Term Loan or Ungebundener Finanzkredit ('UFK'). The German government's UFK facility provides German lenders insurance against commercial and political risk, which in turn enables German banks to offer Project finance at a reduced interest rate. The UFK is subject to the Project finance due diligence process presently being undertaken by KfW and DEG. The German Federal Government provides UFK coverage in the form of loan guarantees for loans awarded by German lenders to debtors in emerging and developing countries. Untied loan guarantees are granted for financing eligible projects abroad. Eligibility requirements are that: * the project must be of special interest to the Federal Republic of Germany * it must contribute to the supply of natural resources into Germany in the form of a long term sale and off-take contract between the borrower and a German off-taker * it must contribute to the economic development of the host country and be part of a balanced development program * the technical, economical and environmental soundness of the project must be verified * the financing of the project must be assured * the duration of the loan must be consistent with the duration of the sale and off-take contract Coverage is provided for untied term loans with regard to: * securing the raw material supply to the Federal Republic of Germany on the basis of long-term off-take agreements * banks, with the purpose of establishing and promoting free-enterprise structures (SME promotion) Untied loan guarantees may be granted in combination with export credit and investment guarantees. The eligibility of Abu Dabbab for UFK cover is a significant step as it reflects the Project's outstanding importance for the Federal Republic of Germany in securing a reliable long-term supply of this vitally important strategic metal. While a UFK facility clearly provides significant direct benefits regarding debt finance, it also serves to provide equity investors with increased confidence in the Project in general. ENGINEERING, PROCUREMENT & CONSTRUCTION MANAGEMENT ('EPCM') Gippsland invited a number of international engineering groups to tender for the EPCM contract for the Abu Dabbab project. Following an evaluation of the various tenders, Lycopodium Minerals Pty Ltd has been appointed as the EPCM contractor for the Project. The Directors believe Lycopodium is the logical choice for this project as they have been involved in the development process from pre-feasibility study through to the present day and consequently have a detailed knowledge of the operation. Additionally, Lycopodium has extensive experience operating in Africa and has an excellent reputation for delivering on time and on budget. The EPCM documentation has been submitted to senior management of KfW for final approval. ENVIRONMENTAL & SOCIAL ENVIRONMENTAL IMPACT ASSESSMENT ('ESIA') During the quarter the Company took delivery of the updated ESIA undertaken by the Egyptian environmental group Environics. The ESIA update covered changes in the Project associated with the relocation of the plant site to within 1km of the planned open pit mine, production of SynCon and the option to use of seawater for the majority of the process plant. The findings of the ESIA were positive, not raising any significant matters of concern. The study was prepared according to the Egyptian environmental legislation as well as the principal guidelines and standards outlined by the International Finance Corporation ('IFC') and the World Bank. The IFC provided input and guidance on the preparation of the ESIA with regard to compliance with IFC guidelines and World Bank standards. The ESIA has been presented to KfW and DEG for approval. ALLUVIAL TIN RESOURCE A scoping study in relation to an extensive alluvial tin deposit contained within the 20km2 Exploitation Licences covering the 44.5 million tonne Abu Dabbab tantalum-tin-feldspar project was completed during December. Based on exploration data gathered during the early 1970s and using a high tin cut off grade of 1.2kg/m3, the Company has estimated an Inferred Resource of 438,000m3 of alluvium containing in excess of 760 tonnes of recoverable tin metal within the alluvial tin deposits explored. Given that the current Inferred Resource only includes the higher-grade basal parts of the channels, the Directors are confident that additional resources of alluvial tin will be delineated within the Exploitation Licences, as the previous exploration work utilised the same high tin cut-off grade, effectively excluding large quantities of the overlying tin-bearing alluvium. These areas are currently being evaluated as part of the Company's continuing tin exploration programme within the region. The overlying tin-bearing alluvium is being re-assessed and additional sampling has been completed, which is expected to support the promotion of a large proportion of the presently defined Inferred Resource to the higher Indicated Resource classification. The study indicated that the alluvial tin can be efficiently recovered by screening the alluvium, following which the fines will be delivered to the gravity circuit of the main Abu Dabbab tantalum-tin production facility. Accordingly, minimal additional plant and equipment will be required to process and recover the alluvial tin, making it an extremely cost effective process. The alluvial tin concentrate will be smelted in the Abu Dabbab submerged arc electric furnace to produce London Metal Exchange grade tin metal. Based upon the present tin price of US$11,500 per tonne, the scoping study indicated that the alluvial tin has the potential to generate additional US$8.7 million revenue during the one year it will take to process the material. CORPORATE SUCCESSFUL SHARE PLACEMENT In early October the Company completed a placing of 17,080,000 fully paid ordinary shares ("Placing Shares") to UK institutional investors and Australian investors at a price of 2.5 pence (approximately 5.73 Australian cents) per ordinary share ("Placing"). The Placing, undertaken by the Company's UK broker Fox-Davies Capital Limited, raised the sum of UKGBP427,000 (approximately A$978,500) before costs. RJ (Jack) Telford Executive Chairman Gippsland Limited www.gippslandltd.com For further information, please contact: +-----------------------------------------+----------------------------------------+ | Jack Telford | Nandita Sahgal | +-----------------------------------------+----------------------------------------+ | Gippsland Limited | Seymour Pierce Limited | +-----------------------------------------+----------------------------------------+ | T: +61 8 9340 6000 | T: +44 20 7107 8000 | +-----------------------------------------+----------------------------------------+ | E: jtelford@gippslandltd.com | E: Hnanditasahgal@seymourpierce.comH | +-----------------------------------------+----------------------------------------+ | | | +-----------------------------------------+----------------------------------------+ | Oliver Stansfield | Daniel Fox-Davies | +-----------------------------------------+----------------------------------------+ | Fox-Davies Capital Limited | Fox-Davies Capital Limited | +-----------------------------------------+----------------------------------------+ | T: +44 20 7936 5200 | T: +44 20 7936 5200 | +-----------------------------------------+----------------------------------------+ | E: oliver.stansfield@fdcap.com | E: daniel@fox-davies.com | +-----------------------------------------+----------------------------------------+ | | | +-----------------------------------------+----------------------------------------+ Note: In accordance with Listing Rule 5.6 of the Australian Stock Exchange Limited and Part 2 of the AIM Guidance Notes for Mining, Oil and Gas Companies, the geological information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data compiled by Dr John Chisholm, a Fellow of The Australasian Institute of Mining and Metallurgy. Dr Chisholm, who is an Executive Director of Gippsland Limited with over 25 years experience in the mineral industry including the evaluation of exploration data, mineral resources and ore reserves, consents to the issue of the information in this report in the form and context in which it appears. This information is provided by RNS The company news service from the London Stock Exchange END MSCSDWSUSSUSELF
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