AAA.L Regulatory News (AAA)

8 Mar 2006 13:13

Adastra Minerals Inc08 March 2006 Adastra Receives Positive Kolwezi DFS and Completes ESIA Trading: TSX and AIM: AAA London, UK (March 8th, 2006) Adastra Minerals Inc. ("Adastra" or the "Company")has received a positive independent Definitive Feasibility Study ("DFS"), andhas completed the Environmental and Social Impact Assessment ("ESIA"), for itsKolwezi Copper and Cobalt Tailings Project ("Kolwezi" or the "Project") in theDemocratic Republic of Congo ("DRC"). Highlights of the two studies are shown below: DFS: • The independent DFS, completed by the Kolwezi Study Engineers ("KSE"), a joint venture of Murray & Roberts Engineering Solutions and GRD Minproc Pty Ltd., shows a project post tax real internal rate of return ("IRR"), on a financed basis, of 31% and a real post tax IRR for Adastra of 40%. • Net present value of Adastra's 65% interest in the project, at a real12% discount rate, is shown as US$284 million, which equates to CDN$3.93 per Adastra common share, on a fully diluted basis. • The DFS shows a total capital cost of approximately US$271 million, with an additional US$34 million for spares and inventories, first fill, insurances and owners' team, and includes a 10% contingency allowance of US$27 million. • Potential cost savings of US$7 million have been identified, which would reduce total capital cost to US$298 million, ahead of any further savings generated by the value engineering process. • Plant capacities have been expanded from previous estimates by 11% for copper and 7% for cobalt, to 33,200 tonnes per annum and 5,900 tonnes per annum, respectively. • Operating costs have been calculated on a co-product basis at US$0.57 per pound of copper and US$2.08 per pound of cobalt. On a by-product basis the costs of production are either minus US$0.99 per pound of copper or minus US$0.17 per pound of cobalt Tim Read, President and CEO of Adastra said: "The completion of the DFS is amajor accomplishment that allows Kolwezi to move ahead, on schedule, towardsfirst metal production in 2008. We can now proceed to complete the projectfinance. We have developed a conservative mine plan, and undertaken extensivemetallurgical test-work and risk analysis. We are confident that we will, overthe next months, unlock Kolwezi's potential to be one of the world's lowest costproducers of LME grade copper cathode and high purity cobalt." Concurrently with the DFS completion, the ESIA and the accompanyingEnvironmental and Social Management Plan ("ESMP") have been completed by Adastrain association with its consultants, SRK Consulting Limited. ESIA: • The ESIA concludes that "overall, the Project will generate significant benefits to the area both in terms of environmental improvements and socio-economic development." • • Completion of the ESIA and ESMP follows the submission to the DRC Ministry of Mines of the Environmental Adjustment Plan, which fulfilled all legislative requirements of the DRC's Mining Code and was approved by the DRC Government in August 2005. • ESIA and ESMP have been prepared in line with the Policy and Performance Standards of the International Finance Corporation ("IFC"), which meet with both the Equator Principles and World Bank guidelines. • The IFC has confirmed that the ESIA and ESMP were completed to " international best practice on social and environmental assessment". • The ESIA highlights the commitment of Adastra to high standards of environmental management and community development. Details of the Definitive Feasibility Study The independent DFS details a project that is both financially and technicallyrobust and indicates that the project capital cost required to bring the mineinto production in 2008 will be approximately US$305 million. This total,calculated in December 2005 terms, includes both a sum of approximately US$34million for spares, first fill, buffer inventories, insurances and owners' teamand a contingency allowance of US$27 million. The KSE have identified potentialcost savings of more than US$7 million, which may reduce this total toapproximately $298 million, ahead of any further savings generated by the valueengineering process to be conducted over the next two months. This new estimate compares with a scoping study estimate of US$278 millionprepared by the KSE in December 2004. It is important to note, however, that thecapacity of the plant in this current estimate has been expanded by 11% forcopper and 7% for cobalt, to 33,200 tonnes per annum and 5,900 tonnes per annum,respectively, with a throughput capacity of 2.30 million tonnes of tailings perannum. The DFS gives an IRR for Kolwezi, in real terms and post tax, of 31.1% and anIRR for Adastra's 65% equity ownership of the Project of 40.4%, based on CRU'sFebruary 2006 forecast for the cobalt price (US$15/lb in 2008 declining to along term US $12/lb from 2011, all in 2006 prices) and a copper price based onthe March 1 2006 forward curve to 2011 and US$1.10/lb (2006 prices) thereafter).The corresponding net present values ("NPV's") for Adastra, calculated at realdiscount rates of 10%, 12% and 14%, are respectively, US$375m (equal to CDN$5.14per fully diluted Adastra common share), US$284m (equal to CDN$3.93 per fullydiluted Adastra common share), and US$220 million (equal to CDN$3.07 per fullydiluted Adastra common share). Fully diluted per share values include proceedsfrom the exercise of all currently outstanding warrants and options. Thesereturns include not only the 'as-built' capital costs, but also a provision tocover other costs, such as import duties, exchange rate volatility, and the costof conversion to an EPC contract, as required. Operating costs have been calculated on a co-product basis at US$0.57 per poundof copper and US$2.08 per pound of cobalt. On the other hand, the calculatedby-product operating cost of copper from Kolwezi is minus US$ 0.99 per pound netof cobalt credits of US$12 per pound. The by-product operating cost of cobalt,is minus US$ 0.17 per pound net of copper credits at a price US$1.10 per pound. The DFS study schedule allows for the first production of copper and cobalt tobe achieved in the second half of 2008. Details of the ESIA Adastra has also completed, on schedule, the ESIA and Environmental and SocialManagement Plan ("ESMP"), in association with SRK Consulting Limited ("SRK").The ESIA concludes that "overall, the Project will generate significant benefitsto the area both in terms of environmental improvements and socio-economicdevelopment. SRK does not deem there to be any socio-economic issues that cannotbe managed." Following the Environmental Adjustment Plan, which fulfilled all legislativerequirements of the DRC's Mining Code and was approved by the DRC Government inAugust 2005, Adastra submitted the ESIA and ESMP. These were prepared in linewith the IFC's Policy and Performance Standards which meet with both the EquatorPrinciples and World Bank guidelines. In a letter addressed to Adastra dated February 28th, the IFC has confirmed that"(the ESIA) has been prepared in line with IFC's Policy and PerformanceStandards on Social and Environmental Sustainability. In its current version ...it is an acceptable set of reports in line with international best practice onsocial and environmental assessment." The ESIA examines all environmental and social aspects of the Project. Itexamines a number of project alternatives to ensure that positive impacts aremaximized and negative impacts fully mitigated. A comprehensive programme ofpublic consultation has been undertaken and is ongoing. A full explanation ofthe assessment will be conveyed to the DRC Government next month. Identifiedenvironmental improvements include the reduction in ambient dust concentrationsand ongoing rehabilitation of the two tailings areas; restoration of the Musonoiriver valley to a usable landscape, and the removal of a major source ofpollutants, creating a valuable water body for the local communities; improvedwaste water quality and the protection of biodiversity resources of value in theconcession area. Identified socio-economic benefits of the Project include: the generation ofemployment, and the payment of wages to, and improvements in the standards ofliving of, its workers through the provision of health services, education andassistance with housing; significant tax and foreign exchange earnings;contributing to the revival of the physical and social infrastructure of theDRC's copper belt; and the payment of appropriate compensation to affectedcommunities for economic displacement and loss of access to resources within theconcession area. The Company has also established the Kolwezi Foundation - afund to support initiatives and projects prioritised by the local community. Tim Read commented: "This is another crucial step in the development of Kolwezi,and will permit the project financing to proceed. The approval by the IFC ofthis exhaustive document further emphasises Adastra's commitment to bestpractice in project development." The IFC's endorsement includes ongoing requirements for ESIA documentation anddata collection and an ongoing consultation process with all stakeholders in theDRC. About Adastra Adastra is an international mining company listed on the Toronto Stock Exchangeand on AIM, in London, under the symbol "AAA". It is currently developingmineral assets in Central Africa, including the Kolwezi tailings project, andthe possible rehabilitation of the Kipushi zinc mine, in the DRC. Adastra'sgrowth strategy emphasizes the creation of shareholder value through thedevelopment of world-class resources in stable of stabilizing politicalenvironments. About the Kolwezi Project Adastra's Kolwezi Project consists of two dams containing 112.8 million tonnesof oxide tailings, grading 1.49% copper and 0.32% cobalt, as determined by Dr.Isobel Clark of Geostokos Limited, a "qualified person" as defined by theCanadian Securities Administrators' NI 43-101. This resource has the potentialto host one of the world's largest and lowest cost cobalt producers. Adefinitive feasibility study is expected to be completed in the first quarter of2006. If this study is favourable, construction is expected to commence beforeyear-end, with first production in mid 2008 and a mine life in excess of 50years. Such a project would generate significant taxation, royalty and dividendrevenues to the Government, as well as providing local employment andcontributing to the regeneration of the DRC's copper belt infrastructure. About the IFC The International Finance Corporation is the private sector arm of the WorldBank Group and is headquartered in Washington, D.C. IFC coordinates itsactivities with the other institutions of the World Bank Group but is legallyand financially independent. Its 178 member countries provide its share capitaland collectively determine its policies. The mission of IFC is to promote sustainable private sector investment indeveloping and transition countries, helping to reduce poverty and improvepeople's lives. IFC finances private sector investments in the developing world,mobilizes capital in the international financial markets, helps clients improvesocial and environmental sustainability, and provides technical assistance andadvice to governments and businesses. From its founding in 1956 through FY05,IFC has committed more than $49 billion of its own funds and arranged $24billion in syndications for 3,319 companies in 140 developing countries. Formore information, visit www.ifc.org. Contact us: London AdastraTim Read, President and Chief Executive OfficerTel.: +44 (0)20 7257 2040 Parkgreen CommunicationsJustine Howarth / Annabel LeatherTel.: +44 (0)20 7493 3713 Toronto EquicomMartti KangasTel.: +1 (416) 815 0700 Forward Looking Statements: This news release includes "forward-lookingstatements" within the meanings of the United States Securities Act of 1933, asamended, the United States Securities Exchange Act of 1934, as amended, and "forward-looking information" within the meaning of the Securities Act (Ontario)(together, "forward-looking statements"). All statements, other than statementsof historical facts, included in this news release that address activities,events, transactions or developments that Adastra expects or anticipates will ormay occur in the future, including such things as future business strategy,competitive strengths, goals, expansion and growth of Adastra's business,operations, plans and other such matters are forward-looking statements. Whenused in this news release, the words "estimate", "plan", "anticipate", "expect","intend", "believe" and similar expressions are intended to identifyforward-looking statements. Forward-looking statements include, but are not limited to, those with respectto the price of copper and cobalt, the timing and costs of project development,financing and implementation, the timing and amount of estimated futureproduction and costs of production. These statements involve known and unknownrisks, uncertainties and other factors which may cause the actual results,performance or achievements of Adastra to be materially different from anyfuture results, performance or achievements expressed or implied by suchforward-looking statements. Such factors include, among others, risks relatedto international operations, including those in the Democratic Republic ofCongo, risks related to the development of the Kolwezi Project, risks related toobtaining necessary project financing on the terms currently anticipated (or atall), actual results of current exploration activities, actual results ofreclamation activities, risks related to construction, conclusions of economicevaluations, changes in project parameters as plans continue to be refined,future prices of copper and cobalt, as well as those factors discussed inAdastra's Annual Report on Form 20-F for the year ended October 31, 2005 andother public disclosure documents filed with the securities regulatoryauthorities in the United States and Canada. Although attempts have been madeto identify important factors that could cause actual results to differmaterially, there may be other factors that cause results not to be asanticipated, estimated or intended. There can be no assurance that suchstatements will prove to be accurate, as actual results and future events coulddiffer materially from those anticipated in such statements. Accordingly,readers should not place undue reliance on forward-looking statements. This information is provided by RNS The company news service from the London Stock Exchange