Last checked at 29 Oct 2008 07:01
EMED MINING QUARTERLY REPORT
SUMMARY OF ACTVITIES FOR THE THREE MONTHS TO SEPTEMBER 2008
29 October 2008
EMED Mining Public Limited ("EMED Mining" or "the Company"), the European-based minerals exploration and development company, is pleased to provide shareholders with an update for the three month period ending 30 September 2008.
Key Points
EMED Mining is concentrating on further strengthening and protecting itself against the current world financial crisis. The Company is focused on two key projects in Spain and Slovakia which hold the most potential to add major value.
Corporate
The shareholding structure has been strengthened with:
MRI Group now becoming a 13.1% shareholder (11.4% fully-diluted);
Resources Capital Fund increasing its shareholding to 14.7% (12.7% fully-diluted);
OZ Minerals increasing its shareholding to 11.2% (9.7% fully-diluted), and
Altima increasing its shareholding to 5.5% (4.8% fully-diluted)
The Board of Directors has been strengthened with Messrs Ashwath Mehra and Ross Bhappu becoming Non-Executive Directors. Mr. Mehra is the Chief Executive of MRI Group and Mr Bhappu is a Partner of Resource Capital Funds;
Cash expenditure levels are being reduced on all projects;
Spain's largest mine - Rio Tinto Mine advancing towards copper production restart
EMED Mining has become the sole owner of the Rio Tinto Mine. This important development provides simple and clear ownership for the first time in many years. However, the major financial and operational commitments still remain contingent upon receipt of regulatory approvals for the restart and the completion of other conditions.
MRI Trading AG has been appointed marketing and sales agent for copper-concentrate produced by the Rio Tinto Mine.
Submissions have been made to the Andalucian regulatory authorities in the next stage of the permitting process which is ratification of the ownership structure and the mineral rights. This phase of permitting is considered to be the main potential blockage to the restart of the project and other aspects of permitting will follow.
Proposals have been made to applicable parties dealing with all unresolved commercial matters surrounding the restart and negotiations continue.
The mobilisation of a mining contractor and recruitment of the large workforce is expected to proceed in the first half of 2009. Copper production is expected to begin by the end of 2009. This timetable will be adjusted as required depending upon the completion of the outstanding commercial and regulatory matters as well as the financial environment generally.
Slovakia's largest gold district - containing a cluster of porphyry gold deposits
The Company's drilling team continues to pattern drill at the Biely Vrch deposit.
Assay results from the first 20 drillholes, including the first three infill holes of 2008, have broadly confirmed the Company's previous estimate that the Biely Vrch deposit contains approximately 1.2 million ounces of gold.
Further drilling is being undertaken throughout 2008, and is continuing in order to further define the shape and grade of the known porphyry gold mineralisation at Biely Vrch to a depth of 300m below surface. The objective of this program is to acquire data for an initial JORC compliant Mineral Resource estimate.
Several other gold prospects are being explored within the Company's large (1,107km2), 100%-owned licences in central Slovakia.
Cyprus's leading copper explorer - Copper projects under review across the island
EMED Mining continues to assess its large geological database of historical copper mining in Cyprus. Discussions are progressing with stakeholders on both sides of the island in a manner appropriate to current re-unification efforts.
Georgia - Gold project suspended
Company activities were suspended in Georgia in July prior to military hostilities in August.
KEFI Minerals (32%-owned) - Separately listed with an exploration portfolio in Turkey
KEFI Minerals, admitted to AIM in December 2006, has established an exploration portfolio in Turkey and continually examines complementary opportunities there and elsewhere.
KEFI Minerals has strengthened its finances through a joint-venture agreement with Centerra Gold (KB) Inc in respect of the Artvin Project in northeast Turkey.
Harry Anagnostaras Adams, Managing Director of EMED Mining, commented:
"Encouraging progress continues to be made across our two main projects. In Spain we now have 100% ownership of the Rio Tinto Mine and are confident that the remaining hurdles can be surmounted allowing us to bring the mine back into production in 2009.
"In Slovakia work has progressed as planned and continues to affirm the Company's belief that the Biely Vrch deposit is a world class gold target. We continue to drill the prospect so as to define a JORC compliant resource estimate."
OVERVIEW AND STRATEGY
EMED Mining is based in Cyprus and has a strong commitment to responsible development of metal production operations in Europe, with an initial focus on copper and gold.
The strategy is to evaluate exploration and development opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation. EMED Mining plans to implement sustainable development practices through compliance with European Union and other leading-edge international standards.
This strategy has been successfully implemented to date with the Company now enjoying first-mover advantage across our projects. The Company has established a position of prominence for the industry in Spain, Slovakia and Cyprus.
Please see link at the end of the announcement for a map of the EMED Mining prospects.
SPAIN - RIO TINTO COPPER MINE
The restart of the Rio Tinto Mine is a very worthwhile project for both the Company and for the region of Andalucia which has the potential to once again become a metal producing region of international standing..
EMED Mining owns 100% of EMED Tartessus which conditionally owns (subject to regulatory permits, our election to proceed with the restart of the mine and to meeting various payment obligations) the Rio Tinto Mine that encompasses:
JORC-standard Mineral Resources of 940,000 tonnes of contained copper and Ore Reserves of 585,000 tonnes of contained copper; and
An extensive industrial complex including mine, processing plant, tailings facility and waste dumps which operated for many years and is currently on care and maintenance.
EMED Mining has been refining plans since early 2007 to restart this long-standing and essentially intact major copper production complex. The Company completed a full Restart Plan in August 2007 (updated since) and submitted initial applications to the regulatory authorities in December 2007. The Restart Plan envisages annual production of 36,000 tonnes of copper-in-concentrate per annum and is currently being updated again in light of the recent drop in the copper price from over $3/lb ($6,600/tonne) to around $2.00/lb ($4,400/tonne).
Major accomplishments since EMED Mining became involved with the project are:
transformation of the ownership structure;
verification of resources and reserves;
successful testing of key sections of the processing plant;
establishing a credible corporate reputation in Spain, and
submission of applications for regulatory consent to the restart.
EMED Mining continues to resolve the permitting process and to resolve the remaining negotiations with private landholders and government agencies.
The permitting process has been enhanced by recent progress in clarifying the legal structure for the mine ownership going forward and settling past disputes among key stakeholders.
The principal regulatory approvals still required are:
Approval by the Junta de Andalucia of the transfer of mineral rights to EMED Tartessus; and
Approval of the restart, operating and rehabilitation plans; all of which are based on long-standing and previously approved practices at the Rio Tinto Mine, which are being updated as appropriate.
In considering the likelihood of being granted the regulatory consent to proceed with this operationally straightforward restart, it is notable that in recent years there have been more permits for new mine developments and redevelopments in the world-class Iberian Pyrite Belt than any other part of Europe. These projects include Las Cruces, Aguas Tenidas and Aguasblancas in Andalucia and Neves Corvo in Portugal.
The Rio Tinto Mine is the most significant known mineral deposit in Andalucia and its potential restart would be a major event. The region is suffering an economic downturn and all major stakeholders are engaging constructively. However the Company's progress has been slower than originally expected due to financial and other issues created by previous owners which are in the process of being resolved.
The approvals from the regional government, the Junta de Andalucia, are currently anticipated to be received over the next six months. Permitting involves many steps, the timing for many of which is outside the Company's control, and the Company will report upon progress as key steps are achieved.
Operationally, the project involves restarting the existing open-pit mine, copper concentrator and associated infrastructure. It is anticipated that the reactivation of the mine and plant will take six months following financial commitment, with commencement of copper-concentrate production now forecast for the fourth quarter of 2009.
The Board believes that Rio Tinto Mine will be the largest employer in the area. Most local townships have been financially distressed since the mine's closure eight years ago and local support is therefore understandably strong. The mine operated successfully in the past at the same levels of throughput proposed by the Company in its restart plan.
The Board is confident of success as all major stakeholders are supportive and EMED Mining has undertaken to manage the restart to the highest standards observing high operating, safety and environmental performance standards. We expect the mine to operate for over 20 years and therefore the current negotiation and permitting process will, in due course, prove to have been worthwhile.
SUMMARY OF MRI TRANSACTION
The MRI Group is a private group owned by the founding shareholders and management comprising Marc Rich + Co. Investment A.G. ("MRI") and its subsidiaries ("the MRI Group"). One of MRI's subsidiaries, MRI Trading AG, markets copper concentrate, zinc concentrate, lead concentrate and also deals in secondary non-ferrous materials, precious metals, copper cathodes, cobalt and molybdenum concentrates.
In September 2008, EMED Mining entered into various arrangements with the MRI Group to acquire the remaining 49% of its subsidiary EMED Tartessus, and therefore now has 100% ownership of EMED Tartessus which conditionally owns 100% of the Rio Tinto Mine.
The MRI Group was issued 39.1 million shares in EMED Mining, of which 7.9 million shares were subsequently sold by MRI to other EMED Mining shareholders.
Deferred consideration in relation to the acquisition totals £35.0 million and comprises:
£14.0 million payable when both (a) the authorisation from the Junta de Andalucia to restart mining activities in the Rio Tinto Project has been granted and (b) EMED Tartessus or another company in the EMED Group has secured senior debt finance and guarantee facilities for a sum sufficient for the acquisition and re-start of mining operations at the Project. These milestones will effectively remain at the discretion of the Company and will not in practice be triggered until approval from the Company's shareholders has been received for the restart;
£10.5 million within 20 business days following the first anniversary of the restart of mining activities at a level of 400,000 tonnes per month production of ore processing ("Restart"); and
£10.5 million within 20 business days following the second anniversary of Restart.
EMED Mining also conditionally acquired the benefit of loans owed to members of the MRI Group which were incurred in relation to the operation of the Rio Tinto Mine amounting to £7.3 million.
The funds required to make these payments, should EMED Mining proceed with the restart, are envisaged to be sourced from planned banking facilities and from project cash flow.
This transaction with MRI reflects the settlement of all outstanding matters with the Project's principal counterparty. It provides for, amongst other things, the acceptance of a structure, the removal of certain litigation risks and an agreement to withdraw all claims against the authorities. Accordingly, this transaction is expected to significantly assist the implementation of the restart-permitting process.
OVERVIEW OF FINANCING FOR RIO TINTO
EMED Mining continues to build its financial capacity in tandem with its growth plans.
In light of the Project's current status and targeted timetable, EMED Mining currently expects to call a meeting of its shareholders in the first quarter of 2009 to seek approval to proceed with the restart of the Rio Tinto Mine subject to finalisation of finance and regulatory consents. The Company would then expect the restart to follow approximately six months later upon satisfactory conclusion of permitting and access to finance.
The Company now estimates that approximately £60 million will be required to restart the now 100%-owned Rio Tinto Mine. This estimate includes all identified outlays including:
the contingent deferred payments to the MRI Group totalling £35.0 million as detailed above;
anticipated settlements with all the vendor's creditors, landholders and government agencies for bonding (environmental, personnel protection and unmet past social-security obligations);
restart costs (repairs, capex, drilling, spares, fills etc); and
EMED Mining Group working capital.
Cash at bank and available standby facilities totaled £5 million (€10 million) at 30 September 2008.
To trigger 100% ownership requires a financing package of £60-70 million according to current engineering and financial analysis. Part of that package is required for performance guarantees and the other part is to fund the restart, acquisition and other on-going costs. Discussions have been maintained with bankers for securing the required financing.
The full acquisition and restart of the Rio Tinto Mine is envisaged to be funded largely by a range of debt and guarantee facilities. Rio Tinto's annual average EBITDA following restart is estimated to be in the order of £30 million, based on an average copper selling price of $2.50/lb (current spot price is in the order of $1.90/lb and the forward market price over 5 years is above $2/lb).
EMED Mining will continue refining plans and verifying costs in consultation with its advisers and independent consultants. This may result in changes to the above estimates.
Long term commitments by the Company would only be triggered after unconditional ownership is established and operational permits are fully granted. Shareholder approval would be sought at that time for the mine restart and the associated financial commitments.
COPPER PRICE OUTLOOK
The current global financial crisis has taken its toll on many market sectors and the copper price has declined sharply, as have the prices of many other commodities.
Many industry commentators agree that:
the recessionary outlook will constrain near-term copper demand growth
copper demand will however continue to increase due to growing demand due to the industrialization of emerging countries, particularly China;
copper supply growth is very constrained as bottlenecks restrict development of new copper mines and supply disruptions among established producers continue to mount, and
average costs in the industry have risen towards $2.00/lb ($4,400/tonne)
Their conclusion is that the fundamentals of the copper outlook continue to point towards a strong rebound in the copper price even though the short term outlook is affected by current financial market turmoil.
EMED Mining's policy is to protect the project and the associated financial obligations by a package of arrangements including the following elements:
complete the preparations for restart and adapt the timetable to the financial environment;
upon restart:
install bonding to cover environmental responsibilities and personnel entitlements;
install hedging to insure product prices and currency exchange rates for the first 5 years during which period it would be intended that all debts are repaid and capital recouped;
introduce the latest international operating practices to ensure unit costs are minimised. It is notable that the historically verified project unit costs, when combined with its estimated capital and acquisition costs, place PRT below the average of total costs for major new copper projects being developed internationally.
SLOVAKIA - GOLD EXPLORATION
EMED Mining's wholly-owned subsidiary in Slovakia which owns 100% of:
Exploration licences in central Slovakia covering 1,107km2 and including the main historical production centre for precious metals; and
A significant gold discovery at Biely Vrch which is estimated to contain 1.2 million ounces of gold. This estimate is subject to ongoing drilling and is not yet compliant with JORC standards.
In late 2006, EMED Mining discovered the Biely Vrch porphyry gold deposit in central Slovakia. Drilling to date has defined a zone of mineralisation containing approximately 50 million tonnes with a grade range of 0.2g/t to 1.9g/t gold (typically 0.8g/t to1.1g/t gold), containing approximately 1.2 million ounces of gold based on preliminary estimations. Initial metallurgical testwork of Biely Vrch drill core samples indicates the gold mineralisation is not metallurgically complex.
Further drilling is being undertaken during 2008 in order to better define the shape and grade of known mineralisation at Biely Vrch to a depth of 300m below surface. This program is designed to collect the necessary data for an initial Mineral Resource estimate that is compliant with the JORC Code.
Currently pattern diamond drilling is on three lines spaced 100m apart across the Biely Vrch deposit. Assays have been received for 20 drillholes to date at this deposit. Assays are awaited from a further six completed drillholes. The Company plans to drill another 4-6 drillholes this year.
The assay results from the first 20 holes, including the first three infill holes of 2008, broadly support the Company's estimate of the size and grade of the Biely Vrch deposit. As previously reported, drillhole DVE27 on Line 79,800N intercepted 460m averaging 1.1g/t gold from surface to the bottom of the hole. Drillholes DVE28 and DVE30 on Line 79,900N both also intercepted gold over their entire length, assaying 252m at 0.35g/t gold and 293m at 0.46g/t gold, respectively.
The current drilling program is planned to be completed by November 2008.
Exploring Regional Prospects
EMED Mining has discovered a gold district containing a large number of previously unrecognised mineralised prospects. To date, in addition to Biely Vrch, EMED Mining discovered porphyry gold deposits at the Kralova Prospect in November 2007 and at the Slatinske Lazy Prospect in January 2008.
Slatinske Lazy is located 7.5km southwest of the Biely Vrch discovery. Gold mineralisation at Slatinske Lazy is hosted within a quartz-vein stockwork in a potassic-altered andesite porphyry - a similar suite of rocks to Biely Vrch.
As previously reported, the first five drill holes at Slatinske Lazy all returned strongly anomalous gold over their entire length of approximately 250m each, with the strongest gold mineralisation in the two most northern holes (SLE4 & SLE5). Results from recently completed soil geochemistry show a strong anomaly continuing 150m further to the north.
Additional drilling is in progress to test for further mineralisation in this northern portion of the Slatinske Lazy Prospect.
During 2008, EMED Mining has investigated further promising prospects within the Company's large (1,107km2), 100%-owned licences in central Slovakia.
The Stozok Prospect is located approximately 3km east of the Slatinske Lazy Prospect and on the edge of a gravity anomaly similar to that at Biely Vrch. Historical drilling by the Slovakian government intersected weak gold porphyry mineralisation at Stozok. Three drill holes are planned to test the Stozok Prospect.
The Sementlov and Zlatno Prospects are located approximately 40km to the west in the southern portion of the Hodrusa tenement. Historical exploration and recent fieldwork by EMED Mining indicate that both of these prospects have excellent potential for large copper-gold porphyry deposits. Further work is in progress to define drill targets at Sementlov and Zlatno.
CYPRUS - COPPER-ZINC
EMED Mining's 95%-owned copper project in Cyprus holds the island's largest portfolio of exploration licences and also owns the largest geological database including coverage of the large mines operated by once-multinational Cyprus Mines Corporation which stopped production in 1974 due to the military and political division on the island at that time.
Discussions are taking place with stakeholders on both sides of the island with a view to optimizing the future exploration and development potential for the benefit of all stakeholders. The Company works carefully to ensure its efforts assist re-unification efforts.
Whilst the Company considers its Klirou Copper-Zinc Project is worthy of further work, development is unlikely to be considered until further resources can be delineated through exploration.
COMPETENT PERSONS FOR REPORTING OF RESOURCES AND RESERVES
Information in this announcement 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. Mr Stephenson and Mr Cunneen consent to the inclusion in the announcement of the matters based on their information in the form and context in which it appears.
Information in this announcement that relates to Ore Reserve estimates is based on information compiled by Mr Andy Robb, BSc (Mining Engineering). Mr Robb is Regional Manager UK and Principal Mining Consultant with AMC Consultants (UK) Ltd 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. Mr Robb consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears.
References in this report to resources, exploration results and potential have been approved for release by Mr Ron Cunneen, B.Sc. (Honours). Mr Cunneen is Head of Exploration for EMED Mining and has more than 20 years' relevant experience in the field of activity concerned. He is a member of The Australian Institute of Geoscientists ("AIG") and has consented to the inclusion of the material in the form and context in which it appears.
CORPORATE DIRECTORY
| Directors | Non-Executive Chairman - Ronnie Beevor Managing Director - Harry Anagnostaras-Adams Finance Director - John Leach Non-Executive Directors - Ross Bhappu, Ashwath Mehra, Michael Price, Gordon Leonard Toll | |
| Nominated Adviser | RFC Corporate Finance - Stuart Laing (+61 8 9480 2500) | |
| Brokers | Fox-Davies Capital Limited - Richard Hail (+44 207 936 5230) Lewis Charles Securities Ltd - Kealan Doyle (+44 (0) 20 7456 9111) | |
| Public Relations | Bishopsgate Communications - Nick Rome (+44 207 562 3350) | |
| Share Registrar | Computershare Investor Services Plc | |
| Issued Capital | 239.7 million shares on issue 36.3 million options on issue, with exercise prices ranging from 8.0p to 22p per share. | |
| Significant Shareholders (after dilution for options) | Management and Board (20%) Resource Capital Funds (13%) MRI Group (11%) OZ Minerals (10%) Altima (5%) RMB Australia Holdings Limited (4%) Fidelity International (4%) | |
EMED Mining Share Price (pence)
Please see links at the end of the announcement for the Map and EMED Mining share price graph.
EMED Mining is listed on AIM (Code: EMED)
Enquiries:
Investors/Media: Harry Anagnostaras-Adams +61 412 369710
General: Cyprus office: +357 2244 2705, Email: info@emed-mining.com
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