Last checked at 26 Aug 2008 07:00
EMED MINING QUARTERLY REPORT
SUMMARY OF ACTVITIES FOR THE THREE MONTHS TO JUNE 2008
26 August 2008
Key Points
EMED Mining, the European-based minerals exploration and development company, is pleased to provide shareholders with an operational update for the three month period ending 30th June 2008.
EMED Mining is currently concentrating on its key projects in Spain and Slovakia where it believes that there is presently the most potential to add significant value.
Spain's largest mine - Rio Tinto Mine advancing towards copper production restart
Submissions continue to be made to the Andalucian regulatory authorities with a view to satisfying all aspects of permitting for the Rio Tinto Mine's restart of production.
The permitting process has been enhanced by recent progress in clarifying the legal structure for the mine ownership going forward and settling past disputes amongst key stakeholders. In this regard, EMED Mining's 51% subsidiary, EMED Tartessus, now conditionally holds the title to the Rio Tinto Mine and the associated industrial complex and has taken full control of the site for the purposes of the permitting process and restart plans.
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.
Subject to such restart election, recruitment of the large workforce and mobilisation of a mining contractor is expected to proceed in H109 and production six months later. This production facility, built and operated by the RTZ, is fully intact and can be restarted easily.
During the quarter Company management and independent experts signed off on JORC-standard Mineral Resources of 940,000 tonnes of contained copper and Ore Reserves of 585,000 tonnes of contained copper for the project. Drilling programs are being designed with the objective of significantly increasing resources and reserves after the mine restart.
Restart plans have been updated by international project advisers AMC Consultants (UK) Ltd with an initial 10-year base case to produce 36,000 tonnes per annum of copper-in-concentrate which is based on substantiated historical and fully-permitted production levels.
Extensive testing of the processing plant has been successfully completed including mill bearings and motors and operation of floatation circuit. Repairs carried out where required.
The Company has identified expansion and improvement opportunities to be considered after the workforce and production has settled down at the historical levels of production. Such initiatives would be subject to separate regulatory permitting processes in due course.
The Company will improve the inherited environmental condition of the site as soon as manpower and equipment arrive with the restart. A public consultation process will then be established to ensure a balance of long term social, environmental and economic plans.
To trigger 100% ownership requires a financing package of £60-70 million comprised partially as performance guarantees and partially as funds to be applied to the restart and acquisition and other on-going costs. Project payback is under 3 years based on current metal market prices. Financing discussions are in progress.
Slovakia's largest gold district - containing a cluster of porphyry gold deposits
The Biely Vrch porphyry gold deposit is currently estimated to contain approximately 1.2 million ounces of gold. The most recent drill-hole within known Biely Vrch mineralisation returned an impressive 460 metres at 1.1g/t gold. This is a better result than had been expected and two drill rigs are now pattern diamond drilling on 100-metre spacing. Further in-fill drilling is required to raise these estimates of the deposit size to JORC standards.
Soil geochemistry surveys have recently been completed on 3 other gold porphyries to assist with design of the initial drilling programs. Assay results are pending.
Many other porphyry targets are being inspected within the Company's large (1,107km2), 100%-owned licences in central Slovakia to select further targets in locations conducive to mine development if exploration results warrant.
Slovakia recently joined the European Union and is achieving higher-than-average growth in its economy. Unlike some of its neighbouring countries in Central Europe, the parliament recently legislated to permit gold project developments subject to compliance with EU and other relevant standards and subject to local consultation and support.
EMED Mining Head of External Relations Dr Demetrios Constantinides has moved from Spain to Slovakia to head the team there. The Company recently supported the Slovakian folklore festival in the town of Detva where we operate. The festival was attended by thousands of people including the President of the Slovakia Republic.
Other Assets:
Cyprus's leading copper explorer - Copper projects under review across the island
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 of 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.
Georgia - Early-stage gold exploration
Following an internal assessment of project risk, the Company suspended field work and closed its Tbilisi office in July 2008. EMED Mining's local 100%-owned subsidiary and licence holdings are preserved. Our associates in Georgia maintain a watching brief on opportunities within the country.
No personnel were directly affected by the recent military hostilities in August and all have been redeployed to alternative employment with other companies or within the Group.
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.
EMED Mining is pleased with KEFI Minerals' rapid progress and with the potential for it to add value via both its existing portfolio and other opportunities.
Shareholders and Financing
An equity placing was completed in May 2008 raising £10 million with new ordinary shares issued at 20p each. The Company is well supported despite turbulent financial markets.
The Annual General Meeting was held on 4 June 2008 at Rio Tinto in Andalucia, Spain.
Significant shareholders include Management and internationally experienced mining-industry investors Resource Capital Funds, Oz Minerals (formerly Oxiana), RMB Australia, Altima and Fidelity International.
About EMED Mining Public Limited
OVERVIEW OF STRATEGY AND STRUCTURE
EMED Mining Public Limited ("EMED Mining") was admitted to AIM in May 2005 (AIM Code: EMED). The Company's market capitalisation has since increased from approximately £4 million upon admission to approximately £46 million currently. The Company's share price has increased from the IPO price of £0.08 per share to the current share price of £0.23 per share.
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 and 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 in the region. We have established a position of prominence for the industry in Spain, Slovakia, Cyprus and, to a lesser extent, Georgia.
The sunk costs of investment in the group since its flotation three years ago is £16 million (£23 million has been raised to date and £7 million was held as cash at 30 June 2008).
The assets assembled include:
51% of EMED Tartessus in Spain which conditionally owns (subject to regulatory permits, to our election to proceed to restart of the mine and to meeting various payment obligations) the currently mothballed Rio Tinto Mine which encompasses:
JORC-standard Mineral Resources of 940,000 tonnes of contained copper and Ore Reserves of 585,000 tonnes of contained copper. Per the initial restart plan the recoverable sale value of the copper reserves over the ten years starting 2009 would exceed £1 billion assuming an average copper selling price of $2.61/lb; and
An extensive industrial complex including mine, processing plant, tailings facility and waste dumps which operated for many years and is currently on care & maintenance.
A 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 believed to contain 1.2 million ounces of gold. This estimate is subject to ongoing drilling and is not compliant with JORC standards.
Other assets in Cyprus and Georgia along with the shareholding in KEFI Minerals
The Board is pleased by the Company's progress in the 3 years since admission to AIM. The main risk vis-a-vis the rate of ongoing progress is the administrative process in Andalucia which we observe very carefully as a responsible corporate citizen. We are confident of success as all major stakeholders are supportive and we undertake to manage the restart to proper standards and to comply with proper operating, safety and environmental performance standards. An operational restart to international standards will significantly improve the condition of the site.
The Rio Tinto Mine is very worthwhile for the Company and for the region of Andalucia which has the potential to once again become a metal producing region of international standing. In recent years there have been more permits for major mining operations issued in this world-class Iberian Pyrite Belt than elsewhere in Europe.
As a result of EMED Mining's initiative, leading international laboratory group ALS Laboratory Services is establishing a base at Rio Tinto. More initiatives are likely to follow and support the establishment of long-term sustainable enterprises alongside the restarted Rio Tinto Mine - the largest in Spain. 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.
OVERVIEW OF FINANCING ISSUES
EMED Mining continues to build its financial capacity in tandem with its growth plans.
Cash at bank totaled £7 million (€10 million) at 30 June 2008.
The full acquisition and restart of the Rio Tinto Mine is envisaged to be funded largely by a range of debt and guarantee facilities. Current engineering and financial analysis indicate that a total of approximately £60 to £70 million is required for the acquisition, restart and other group activities. Rio Tinto's annual average EBITDA following restart is estimated to be in the order of £40 million, based on an average copper selling price of $2.61/lb (current market price in the order of $3.50/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.
The Company's discussions with potential financiers are encouraging.
OVERVIEW OF PERMITTING PROCESS FOR RIO TINTO MINE
EMED Mining continues to work towards satisfying all aspects of permitting required for copper production to restart at Rio Tinto. The following matters have been completed by EMED Mining since becoming involved with the project in May 2007:
Completed the required technical due diligence of the project, including:
establishment of Mineral Resources and Ore Reserves in compliance with the leading international standards, the JORC Code;
testing of the critical components of the processing plant from the viewpoint of resolving the restart timetable. Engineering work done mainly by local specialists Promotein with oversight by Company personnel and GBM (UK). Mains power required to complete the testing;
completion by AMC Consultants (UK) of Restart Project Execution Plan, including scheduling of critical path items; and
completion of operating, blasting and safety plans.
Completed the required economic and financial due diligence of the project, including:
establishment of an expanded shareholder base which is founded on including leading mining companies and international mining project investors;
re-establishment of working dialogues with traditional Rio Tinto Mine customers, with independent advice from metals group LM Trading;
identification of alternative copper-price protection plans for the initial years of production based on independent advice received from treasury advisers Oakvale ; and
building of detailed economic models by independent analysts, AngloLatin Partners.
Transferred the title to the project from the vendor company, MSA (who had previously unsuccessfully applied for the required permitting) to a subsidiary of EMED Mining, EMED Tartessus, for the purposes of appropriately working through the permitting process. EMED Mining has since taken possession of the site and installed new leadership for the project.
Established EMED Tartessus Board of Directors in Spain Chaired by Guillermo Guiterrez, former Minister for Industry in Andalucia.
Established a co-operative approach with parties previously in dispute over the project.
Principal matters which remain to be completed prior to restart of Rio Tinto are:
Review and approval by regulatory authorities of:
the new ownership structure for the project and its mineral rights;
the financial and technical competence of the applicant, EMED Tartessus;
the detailed plans for operations, safety, blasting and rehabilitation;
updates to the Environmental Impact Assessment so that the restart can proceed;
the proposed levels of insurance, bonding and other required forms of indemnification and guarantees required for environmental and personnel protection; and
the terms for use of electricity, water and public services the infrastructure for which remains in place.
Conclude negotiations with the following key commercial stakeholders:
49% partner in EMED Tartessus MRI Group which is also a significant creditor of the project's vendor company MSA;
landowner of some project areas, Rumbo 50;
copper concentrate customers; and
financiers for the project.
It is understandable that the authorities and other stakeholders conduct themselves in a cautious manner due to the poor performance of this project since the mid-1990's. Nevertheless EMED Mining and EMED Tartessus consider that all relevant parties are dealing constructively and professionally. We are confident that the project will proceed as our proposals offer to fulfill the relevant requirements as we understand them. It is in the best interests of the community and other stakeholders that the project be approved and restart in 2009. Permitting involves many steps and the Company will report progress as appropriate after consulting the authorities.
MINERAL RESOURCES AND ORE RESERVES AT RIO TINTO MINE
Mineral Resource and Ore Reserve Statement
The Rio Tinto Mine Mineral Resource and Ore Reserve estimates are reported below in Tables 1 and 2 in accordance with the most widely accepted international reporting standard, the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, December 2004 (The JORC Code).
Mineral Resources for the Cerro Colorado deposit (previously subdivided into Cerro Colorado East and Cerro Colorado West) have been estimated at a 0.20% copper cut-off grade within a non-optimised pit shell based on a long-term copper price of US$3.00 per pound.
Table 1 Mineral Resource Statement for Rio Tinto Mine (100% basis)
|
| Tonnes (000s) | Cu Grade (%) | Cu Tonnes ( 000s) |
| Measured | 48,000 | 0.38 | 180 |
| Indicated | 155,000 | 0.48 | 750 |
| Inferred | 2,000 | 0.50 | 10 |
| Total | 205,000 | 0.46 | 940 |
Note : Figures rounded to two significant figures
Ore reserves have been estimated at a 0.20 % economic cut-off applied to the above resource.
Table 2 Ore Reserve Statement for Rio Tinto Mine (100% basis)
| Tonnes (000s) | Cu Grade (%) | Cu Tonnes (000s) | |
| Proved | 38,000 | 0.37 | 140 |
| Probable | 85,000 | 0.52 | 440 |
| Total | 123,000 | 0.48 | 585 |
Note : Figures rounded to two significant figures
The Ore Reserves reflect a viable mine plan for Rio Tinto Mine which meets all the corporate objectives including a minimum mine life of ten years. This plan has been evaluated using the latest cost data and a copper price declining from $3.73/lb in 2009 to a flat $2.00/lb from 2014 onwards. This and other development options for Rio Tinto Mine are still being evaluated in detail.
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.
CORPORATE DIRECTORY
| Directors | Ronald (Ronnie) Hugh Beevor (Non-Executive Chairman) Aristidis (Harry) Anagnostaras-Adams (Managing Director) John Edward Leach (Finance Director) Dr Michael Price (Non-Executive Director) Gordon Leonard Toll (Non-Executive Director) | |
| 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) GMP Securities Europe - James Hannon (+44 20 7647 2803) | |
| Public Relations | Bishopsgate Communications - Nick Rome (+44 207 562 3350) | |
| Share Registrar | Computershare Investor Services Plc | |
| Issued Capital | 199.6 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 (23%) Resource Capital Funds (13%) Oz Minerals (formerly Oxiana) (9%) Altima (4%) RMB Australia Holdings Limited (4%) Fidelity International (4%) | |
Enquiries:
Investors/Media: Harry Anagnostaras-Adams +61 412 369710
General: Cyprus office: +357 2244 2705, Email: info@emed-mining.com