Last checked at 26 Oct 2009 07:00
EMED MINING QUARTERLY REPORT
26 October 2009
EMED Mining Public Limited ("EMED Mining" or "the Company"), the European-based minerals exploration and development company, is pleased to provide shareholders with a summary of the Company's activities for the three month period ending 30 September 2009.
Key Points
Rio Tinto Mine ("Proyecto Rio Tinto" or "PRT") - Copper in Spain:
Detva Gold Project - Gold in Slovakia:
Harry Anagnostaras Adams, Managing Director of EMED Mining, commented:
"The recovery of our industry has continued over the past few months and our Company's projects have attained increased economic importance in their respective regions which are suffering economic downturns due to the global financial crisis.
"In Spain we are working with the authorities to facilitate the start-up of production at the Rio Tinto Mine by the end of 2010. The due diligence is taking longer than we anticipated but the intention of the Andalucian Government has been made clear.
"In Slovakia we have commenced preparing permit applications for development of the Biely Vrch Gold Deposit in 2012. We have been welcomed in both Spain and Slovakia as members of the community and work well with the regulatory authorities.
"Both projects have expansion potential. We are focused on developing both of them to their optimum in full compliance with European Union and Company environmental and mining policies. The implementation of these projects will make economic contributions to their regions with the expenditure of approximately €100 million per year at Rio Tinto in the Huelva region of Andalucia and €20 million per year at the Biely Vrch Project near Detva in Central Slovakia."
OVERVIEW OF STRATEGY
EMED Mining is led by international mining industry specialists with corporate headquarters in Cyprus which is a growing European financial centre, is geographically central to the Company's areas of interest and is a member of both the European Union and the British Commonwealth. EMED Mining is committed to responsible development of metal production operations in Europe, with an initial focus on copper and gold.
The strategy is to evaluate and prioritise exploration and development opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation.
Over the longer term, it is our goal to develop a multi-mine group across several jurisdictions from the operations base in Spain. Since becoming a publicly listed company in 2005, EMED Mining has achieved 100%-ownership of two major projects:
Rio Tinto Mine in Spain with substantial processing infrastructure in place and a JORC-compliant Mineral Resource containing 940,000 tonnes of copper. This was an acquisition of a large copper mine on care and maintenance with a view to organisational restructuring, project improvement, start-up and expansion; and
Detva Gold Project in Slovakia with a JORC-compliant Mineral Resource of 1.1 million ounces of gold at the Biely Vrch Deposit. This was the pegging of a large tenement position in a prolific mining district, the discovery of a large gold deposit and now its refinement and the commencement of development planning having completed a positive Scoping Study.
The Company also has earlier-stage activities in Cyprus and, via associate KEFI Minerals, in Turkey and the Kingdom of Saudi Arabia. EMED Mining is managed by a multi-cultural team drawn initially from Australia and the Americas and the group now mainly comprises Spanish citizens. The main priority for the short term is to safely and efficiently start up the Rio Tinto Mine once EMED Mining has completed the regulatory approval process, financed the start-up and obtained shareholder approval.
Multi-lingual introductory videos are available on www.emed.tv for the information of interested parties. Also, notable media articles are available on www.emed-mining.com.
SPAIN - RIO TINTO MINE
The photo shown in the full version of this announcement on the Company's website shows the Rio Tinto Mine tailings facility, copper concentrator and part of the mine in the foreground.
The established open-pit mine, copper-concentrator plant and other infrastructure at the Company's Rio Tinto Mine provide an excellent opportunity to bring a large copper mine into production at a relatively low total cost. EMED Mining has accomplished much since acquiring an option over the project in mid-2007 and particularly since the move to full ownership in late 2008.
Timetable Management and Past Performance
The restart of the Rio Tinto Mine has taken longer than initially expected, for the following reasons:
Since taking an option over the project in mid-2007, EMED Mining lost nine months following judicial intervention in December 2007 by the project vendor's financier MRI, with whom EMED Mining subsequently proceeded to renegotiate and clean-up the legal structure. The Company moved to 100% ownership of the Rio Tinto Mine in October 2008; and
The global financial crisis stalled the project as the copper price dropped from circa US$9,000 per tonne in August 2008 to under US$3,000 per tonne in December 2008. The Company then refined the project by extending mine life and expanding planned annual output. Initial regulatory applications were then resubmitted to the authorities in May 2009.
The Company is pleased to have maintained its plans to restart the mine and re-set the target date for start-up to end-2010. Fortunately the copper price has recently recovered to over $6,000 per tonne. The Company has also identified project expansion potential and maintained its targets for value accretion.
The reliability of the timetable rests foremost on the pace of permitting. Such processes are always long and complex and extra caution is required in this project due to its legacy of distrust created by malpractice by past project controllers - people who failed some years ago to earn the support of authorities for a restart and who are now being prosecuted by several parties including their former colleagues and financier. Nevertheless timetable performance as regards permitting will essentially remain a function of the Company's ability to make the regulators' task straightforward. The Government and community are also striving to achieve the restart by the end of 2010. Following the completion of the permitting process, progress will depend on operational performance.
Project Planning Issues and Outlook
1. Permitting
In-principle support was given by the Government of Andalucia for the Company's proposals to start up production. "The Junta de Andalucia and (EMED Mining's wholly-owned subsidiary) EMED Tartessus are working in close collaboration on Rio Tinto Mine with the goal of starting operations as soon as possible and always in strict compliance with the legislation in force" - see EMED Mining announcement dated 30 September 2009, as approved by the Head of Government and Head of the Socialist Party in Huelva, Andalucia, where PRT is regulated.
As this process has been set out to date, an intial step is the administrative approval of the transmission of mineral rights - applied for May 2009. A final step is the approval of the Environmental Impact Assessment, submitted in July 2009 and normally processed in about eight months.
EMED Mining must also obtain/renew the full set of operating licences and permits on the various aspects of operation such as dust emission, noise control, safety policies and procedures and blasting practices. As the mine previously operated for many years, the regulatory authorities and the Company's personnel have extensive familiarity with the specific issues and realities of the situation at the mine site. Therefore, these aspects of permitting should be more straightforward than would be the case for a new mining operation. Nevertheless full due diligence and regulatory compliance is appropriate and the Company is in no position to dictate deadlines for permitting.
2. Regional Context
Two other large copper mines (Las Cruces and Aguas Teñidas) have recently started production in Andalucia, which also hosts one of Europe's largest copper smelters.
Unlike the other recent start-ups, the Rio Tinto Mine is a project which is essentially intact from an infrastructure viewpoint albeit that a comprehensive operational improvement plan has been set out. The economic outlook for the Rio Tinto Mine provides an incentive to expedite implementation of the start-up and expansion with a view to extending planned mine life beyond the current 14 years and facilitating economic diversification in this economically suppressed region.
The Company's initial commitments to complement Government initiatives for regional economic diversification are:
to re-open the Company's historic Corta Atalaya open-pit mine for tourism as soon as desired by the community; and
to hand over the mine laboratory to international group ALS Environmental Services. The laboratory is in the process of international accreditation.
The Company has also committed in-principle to donate excess land to the relevant communities in due course when no longer required for mining and once the land has been fully rehabilitated.
3. Landholder Settlements
The Company also needs to settle compensation for landholders and the regulatory process provides a framework to facilitate a resolution of compensation sums in such cases where negotiation fails, without causing delays to the relevant project timetable.
4. Project Execution Plan
The Project Execution Plan is an independently reviewed plan for operationally implementing the start-up. The project team is currently focused essentially on fulfilling regulators' requirements and already includes the functional heads for geology, planning, safety, environment, plant maintenance, plant refurbishment, legal, human resources, regulatory compliance, finance and the chief executive in Spain.
5. Prerequisites to Triggering Project Execution Plan
Prior to triggering the start-up, the Company needs to complete many tasks including permitting, contract tendering, project financing, recruitment and shareholder approvals.
SLOVAKIA - DETVA GOLD PROJECT
Biely Vrch Deposit
The photo shown in the full version of this announcement on the Company's website shows the hill above the Biely Vrch deposit (marked "BV"), with senior personnel in the foreground.
Based on the current knowledge of the Biely Vrch deposit, AMC Consultants have derived the following parameters for developing Biely Vrch:
3.0 million tonne per annum, valley-leaching operation;
Waste to ore stripping ratio of 0.9 to 1.0;
Processing a total of 27.5 million tonnes at an average grade of 0.86g/t gold;
Overall gold recoveries averaging 81%;
Average cash operating cost of US$590/ounce or US$13/tonne processed, split 42% for contract mining costs and the remainder for processing and administration costs;
Total development capital costs of US$45 million; and
Gold production averaging 60,000 ounces per annum.
Based on estimated operating costs, the breakeven cut-off grades were calculated for each ore type over a range of gold prices. Pit optimisations were carried out and evaluated at breakeven cut-off grades based on estimated operating costs and a range of gold prices from US$700/ounce to $1,200/ounce. The optimisation open-pit shell based on a US$800/ounce gold price was selected as the base case for financial modelling of the mining parameters.
The Biely Vrch Scoping Study included assessments of the various potential impacts of the project on the environment, as well as reviewing key mining legislation.
Several key areas of immediate focus identified from the Scoping Study are:
Identification and procurement of the land areas, which are required for the project, particularly the leaching pads and the waste dumps;
Understanding the limitations imposed by an industrial complex in proximity to the open pit;
Refining pit slopes based on geotechnical drilling; and
Determining the saleability of waste material as gravel for local road-building.
Once these issues are understood the timetable for permitting will be finalised and the next phase of geological, geotechnical and metallurgical work will commence.
Other Prospects
During 2009, many more porphyry gold systems have been identified and five of these systems are currently being focused on (Pstrusa, Zupkov, Jakalovci, Strbov Stal and Prencov).
The results of the 2009 regional porphyry gold exploration program will be reported around the end of the year. Further drilling is planned for Pstrusa and Beluj during 2009, both of which are interpreted as larger mineralised systems than that which EMED Mining discovered at Biely Vrch.
At Biely Vrch Deeps, observations to date include that gold grade increases with depth and holes in the core of the deposit ended in mineralisation with a grade more than 1.5 grams per tonne.
KEFI MINERALS (29%- OWNED BY EMED MINING)(29%-owned)
KEFI Minerals is the operator of exploration joint ventures in Turkey with Centerra Gold Inc of Canada and in Saudi Arabia with local construction and investment group ARTAR.
CORPORATE
Major Shareholders
The EMED Mining ownership structure is dominated by a group of international mining industry specialists in mine development, operation and marketing. The following parties hold, between them, 64% of the fully-diluted capital:
Resource Capital Funds ("RCF") - a large development equity fund based in Australia and the USA which invests exclusively in the mining industry;
RMB Holdings - a mining financier and banker based in Australia, South Africa, UK and USA;
MRI Group - an international metal trading group based in Switzerland and China;
OZ Minerals - a leading Australian copper and gold mining company which introduced EMED Mining to the Rio Tinto Mine opportunity; and
Directors and Management - specialists who moved to Europe from Australia and the Americas in order to establish EMED Mining and its projects.
Other significant shareholders include institutions Fidelity, Goldman Sachs and Standard Life.
Funding capacity, pending execution of project finance for the triggering of the Rio Tinto Mine funding, is underwritten by cash reserves and a £10 million standby equity facility at a small discount to prevailing share market prices.
The share market capitalisation of the Company on a fully-diluted basis is £63 million (523 million shares fully-diluted at 12p) and the base-case estimated Net Present Value (NPV at 10% discount rate) of the two major projects at current metal prices is £326 million (Rio Tinto Mine £277 million and Biely Vrch £49 million). The NPV measure merely serves to indicate that a worthwhile value target exists for the Company and its long-term shareholders.
The funding required to start the Rio Tinto Mine aggregates to approximately £50 million including project acquisition costs, discharge of relevant pre-existing liens, capital expenditure and working capital. In addition the Company will arrange insurances and guarantees as required by the authorities for protecting personnel entitlements and environmental obligations. Goldman Sachs International is lead-arranger for project finance and the hedging of revenues and currencies.
COMPETENT PERSONS FOR REPORTING OF RESOURCES AND RESERVES
Information in this report as regards the Rio Tinto Mine that relates to Mineral Resource estimates is based on information compiled by Mr. Pat Stephenson, BSc (Geology) and Mr. Ron Cunneen, BSc (Geology), Mr. Stephenson taking responsibility for the Mineral Resource estimates and Mr. Cunneen taking responsibility for the data on which the estimates are based. Mr Stephenson is Regional Manager, Vancouver and Principal Geologist with AMC Mining Consultants (Canada) Ltd and a full-time employee of that company. He is a Fellow of The Australasian Institute of Mining and Metallurgy. Mr. Cunneen is Head of Exploration for EMED Mining and a full-time employee of that company. He is a Member of The Australian Institute of Geoscientists. Mr. Stephenson and Mr Cunneen have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activities which they are undertaking to qualify as Competent Persons as defined in the JORC Code.
Information in this report as regards the Rio Tinto Mine that relates to Ore Reserve estimates is based on information compiled by Mr. Andy Robb, BSc (Mining Engineering). Mr. Robb is Principal Mining Consultant with AMC Consultants and a full-time employee of that company. He is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the JORC Code.
References in this report as regards the Mineral Resources or exploration results and potential in Slovakia, Cyprus or elsewhere have been approved for release by Mr. Ron Cunneen.
DUE DILIGENCE EXPERTS
The principal due diligence experts are listed below:
AMC Consultants UK Ltd ("AMC") - mining operational and project economics;
GBM Minerals Engineering Consultants Ltd - plant inspections and assessment;
United Research Services España S.L. - tailings dam classification;
EPTISA - tailings dam capacity and integrity;
LN Metals International Ltd - product marketing;
Oakvale Capital Ltd - hedging and currency advice;
Baker McKenzie - Spanish legal - Madrid;
León y Olarte - Spanish legal - Seville;
Field Fisher Waterhouse LLP- UK legal;
Chrysostomides & Co - Cyprus legal;
Anglo Latin Partners - financial modeling; and
Moore Stephens - auditors.
In addition to due diligence processes, for the Company's own planning, the following is notable:
relevant specialists in Andalucia certify aspects for the regulatory process; and
the Company's principal financiers conduct their own legal and other due diligence.
As an aide for investors generally, the Company occasionally arranges independent research organisations to inspect the projects, question any personnel and specialist consultants and publish reports which we upload to the Company website. Such reports are due this month from Edison Investment Research, Equity Development and Growth Equities & Company Research and will be uploaded to the Company website (http://emed-mining.com/site/research-reports.html).
CORPORATE DIRECTORY
| Directors | Non-Executive Chairman - Ronnie Beevor Managing Director - Harry Anagnostaras-Adams Finance Director - John Leach Non-Executive Directors - Ross Bhappu, Ashwath Mehra, Gordon Toll | |
| Nominated Adviser | RFC Corporate Finance - Stuart Laing (+61 8 9480 2500) | |
| Broker | Fox-Davies Capital Limited - Jason Bahnsen (+44 207 936 5230) | |
| Public Relations | Bishopsgate Communications - Nick Rome (+44 207 562 3350) | |
| Share Registrar | Computershare Investor Services Plc | |
| Issued Capital | 308.8 million shares on issue 59.2 million options on issue, with exercise prices ranging from 4.1p to 22p per share. 522.8 million shares on issue on a fully-diluted based on the assumption that convertible loans principal and interest paid with the issuance of shares. | |
| Significant Shareholders (fully diluted) | 13% Management and Board (mainly Australian citizens) 31% Resource Capital Funds, (Australia and USA) 9% RMB Australia Holdings Limited (Australia and elsewhere) 6% MRI Group (Switzerland) 5% OZ Minerals (Australia) | |
EMED Mining Share Price - 12 pence
EMED Mining is listed on AIM (Code: EMED)
Share turnover currently averages approximately 1 million shares per day.
Enquiries:
Investors/Media: Harry Anagnostaras-Adams +357 99457843
General: Cyprus office: +357 2244 2705, Email: info@emed-mining.com