LONDON (Alliance News) - Ferrex PLC Tuesday said it has signed up a drilling contractor for a new programme at the Malelane Iron Ore Project in South Africa, and has agreed to pay the unnamed company in both cash and shares.
The exploration and development company, with iron ore and manganese deposits in Africa, said the contract, which is to complete 1,200 metres to 1,600 metres worth of drilling, is aimed at increasing the current inferred resource at the site of 139 million tonnes at 37% iron. The programme is due to start in July.
The drilling will be carried out on the site's southern banded iron formation, as the current inferred resource is only defined over a 1.5 kilometre part of a 14 kilometre strike body at Malelane.
Ferrex said the new drill campaign will also help it build a pre-feasibility study for the site, which has a total exploration target of 1.6 to 2.0 billion tonnes at 28% to 30% iron.
The previously defined inferred resource was used by the company to complete a recent scoping study for the site, showing robust economics for an initial 1.8 million tonnes per year open pit mining operation with a 57% iron product over a 16.6 year life of mine.
The deal announced on Tuesday is for a unnamed drilling contractor to test the site, and Ferrex said it will pay the company roughly 35% of each invoice in cash and the remainder in shares.
"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," Managing director Dave Reeves said in a statement. "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."
Ferrex shares were down 0.4% to 1.72 pence on Tuesday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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