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Ferrex plc, the AIM quoted iron ore and manganese development company in Africa,has signed a contract, on a part equity payment basis, to complete a minimum 1,200m drilling programme at the Malelane Iron Ore Project in South Africa.
The drilling programme, due to commence in July 2014, is aimed at increasing the current Inferred Resource of 139Mt at 37% Fe. To view this release with maps and illustrations please see the following link.
Highlights:
· 1,200m to 1,600m diamond drill programme to be completed on the southern banded iron formation (‘BIF’) adjacent to historic mine workings
· Current Inferred Resource only defined over 1.5km of a 14km BIF strike at Malelane
· New drill campaign aimed at increasing and proving up an additional resource in the southern target area (3km BIF strike) and will assist in Pre-Feasibility Study planning (see figure 1)
· Total Exploration Target at Malelane of 1.6 to 2.0Bt at 28-30% Fe
· Scoping study based on current resource has detailed robust economics for an initial 1.8Mtpa open pit, low strip ratio operation with a 57% Fe product over a 16.6 year LOM
· FRX to pay approx 35% of the drill cost in cash with 65% of the drill cost being paid in Ferrex shares
Ferrex Managing Director Mr. Dave Reeves said, “I am pleased to announce the commencement of the drilling programme at Malelane, which should see us increase the resource at this project where the previously completed Scoping Study showed positive economic results. This new exploration programme has been facilitated by the drilling contractor, who understands the tight capital markets in which we operate and suggested the proposed payment system. We aim to use this as the base case for potential co-operation with the contractor on our other iron ore and manganese projects in Africa to maximise shareholder value with the company’s available funds.
“The new drill campaign will be centred on an old ochre mine 6.5 km east of the previous drilling, where there is potential enrichment of the banded iron horizon. Results of the drilling will be used in on-going studies and to allow flexibility in the mining permit submission”.
Drilling Details:
A drill programme has been planned to test the eastern part of the southern BIF at Malelane. The programme constitutes 8-10 holes for 1,200m to 1,600m, covering just over 3km of BIF strike. Holes will be drilled along 5 section lines nominally spaced 800m apart, with one to two holes on each line. Section lines are orthogonal to the strike of BIF, with holes to be angled at 60 degrees to the north-northwest or south-southeast. Planned drill hole locations are shown on Figure 1.
The drilling will be undertaken using a diamond rig, which will allow the collection of geotechnical information as well as analytical samples, plus additional material that can be used for metallurgical testwork. The drill programme has been designed to provide sufficient information for estimation of a mineral resource compliant with the JORC Code.
Under the terms of the contract, Ferrex will pay approximately 35% of each invoice in cash and the remainder in shares in lieu of cash payment based on the invoiced amount divided by the monthly VWAP in the invoicing month with the shares to be issued in one tranche at the conclusion of the drill programme. Total share based payments are expected to total GBP110,000.
Project Background:
Three distinct BIF horizons have been identified on the Malelane property, with a combined strike length of 14km and mapped horizontal widths of up to 300m. Ferrex has drilled 14 RC holes in two campaigns for a total of 2,032m and 5 diamond holes (4 complete holes and one tail on an RC hole) for a total of 618.75m. Drilling focussed on a 1.1km strike length of the northern BIF centred on the historical Spago workings. High grade hematite mineralisation was discovered at Spago in 1954, with 28,155t of ore grading up to 66% Fe extracted in the 1950s and 1960s.
A maiden JORC Code compliant Inferred Resource of 139Mt @ 37% Fe was calculated by Widenbar and Associates based on the results of Ferrex’s drilling. The resource includes higher grade components of 50.9Mt at 44.3% Fe and 4.9Mt at 52.2% Fe. Widenbar and Associates also estimated a total exploration target at Malelane of between 1.6 and 2.0Bt at 28-30% Fe including a higher grade portion of 900Mt to 1.2Bt at 36-38% Fe
The resource was used by the Company as the basis for a Scoping Study, which underpins the robust economics of the project and its viability as an open pit mining operation producing 1.8Mt per annum at 57% Fe over a 16.6 year mine life. At these production rates, the project has a Net Present Value (‘NPV’) of US$523m at a discount rate of 10% and an Internal Rate of Return (‘IRR’) of 72%, with a capital cost of US$139m and capital intensity of US$77/t, which places it in the lowest quartile for capital intensity of new iron ore projects globally.
