Last checked at 2 Feb 2009 07:00
EMED MINING QUARTERLY REPORT
SUMMARY OF ACTVITIES FOR THE THREE MONTHS TO DECEMBER 2008
2 February 2009
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 31 December 2008.
Key Points
During the quarter, EMED Mining continued progressing matters to facilitate a restart of the Rio Tinto copper project in Spain ("Rio Tinto Mine") and to advance exploration of its Slovakian gold project towards an initial resource estimate that is compliant with the JORC Code.
Against the backdrop of the current global financial crisis the Company has taken actions to reduce expenditure levels whilst preserving its core assets, which the Board believes have a fundamental value well in excess of that implied by the Company's current stock market capitalization.
Corporate
Cash expenditure levels have been reduced from the 2008 level of £12 million to a budgeted £5.6 million for 2009, summarized as follows:
Rio Tinto copper project ("Rio Tinto Mine") = £3.6 million (2008 £7.5 million).
Slovakia gold exploration = £1.0 million (2008 £2.7 million)
Other projects = £0.1 million (2008 £0.4 million)
Corporate = £0.9 million (2008 £1.4 million)
Personnel numbers have been reduced by over 60%. The salaries of senior management have been significantly reduced and they will be appropriately compensated with enhanced incentive arrangements. Any changes under the incentive options scheme will be submitted to shareholders for approval as required.
It is planned to strengthen the capital base by establishing a £5 to £6 million (US$8.5 million) Convertible Debenture Facility with major shareholders. Negotiations are advanced with these shareholders and current convertible-debt provider YA Global and, should these negotiations be successful, a meeting of shareholders will be called to seek approval of the proposal.
Spain's largest metal mine - Rio Tinto Mine advancing towards copper production restart
On 1 October 2008 EMED Mining announced that it had become, through its wholly-owned subsidiaries, the sole owner of Rio Tinto Mine. This provides simple and clear ownership for the first time in many years. However, the major financial and operational commitments still remain contingent upon regulatory approvals for the restart and the completion of other conditions.
Since 1 October 2008 the following material developments have ensued:
Acquisition terms with the vendor, Rio Tinto Mine's copper product marketing agent MRI Group, have been renegotiated in principle to defer over several years certain payments that would otherwise have been due to them on project start-up, in return for a potentially larger payments contingent upon higher future copper prices. This would reduce the upfront funding required for the restart. The refined arrangements are currently being documented and, subject to completion, an appropriate explanatory announcement will be made.
The restart and operating plans have been revised to extend the mine life to 14 years, reduce the upfront funding required for the restart and reduce unit costs. These plans were reviewed by project advisers AMC Consultants (UK) Limited (refer Company announcement dated 25 November 2008).
Goldman Sachs was appointed as lead-arranger for the debt finance package (refer Company announcement dated 14 November 2008). Based on the revised arrangements with MRI Group and the revised operating plans, the estimated debt package required for the restart has been reduced to US$75 million. The Company would also need to arrange hedging for a portion of future copper sales, a guarantees & bonds facility which covers the regulatory requirements once clarified and an appropriate mining contract for the planned open-pit earthmoving fleet.
The Company recently withdrew its formal submissions made to the regulatory authorities in order to update (and then re-submit) these documents for a number of material changes to the project plans and the abovementioned related matters.
The legal process adopted by the regulatory authorities and the Company for the granting of mining rights to this unique property (created by a special act of parliament in 1873) have been confirmed by a recent judicial determination (in a court case between the regulatory authority and Rio Tinto Mine's previous owners).
The primary focus of the permitting process is no longer the legal documentation required for the transmission of the mineral rights. The process has now moved onto the Company's demonstration of its technical and financial competencies and the resolution of any remaining landholder-compensation issues.
Negotiations have not been completed with the major local holder of lands directly adjacent to the mine and which include much of the land upon which the tailings dams are located.
The restart of production at Rio Tinto Mine is now mostly a function of the Company completing:
the various agreements noted above;
the reports and commitments to the regulators (from the Company, its shareholders and financiers) that demonstrate its competencies and compliance with requisite standards; and
copper price hedging to adequately protect the project revenues at requisite forward Euro prices slightly higher than prevailing prices.
If the foregoing is accomplished in first half of 2009, the drawdown of restart finance facilities, the mobilisation of a mining contractor and recruitment of the large workforce could be triggered in second half of 2009 and copper production could commence in first half of 2010. This remains the Company's goal. But this timetable will be adjusted as required depending upon the completion of the outstanding commercial and regulatory matters as well as the global financial environment generally.
Finally, it should be highlighted that the Rio Tinto Mine is a particularly high profile project in Andalucia with a very poor recent history in economic, social and political terms. The Company has been confronted with more complexity and opposition than had been anticipated. Both the Company and the authorities are understandably cautious and careful to ensure the rectification of inherited deficiencies and the avoidance of a repeat of past disappointments.
Slovakia's largest gold district - containing a cluster of porphyry gold deposits
The Company's drilling team has completed the pattern drilling required for determination of an initial JORC-compliant resource estimate for the Biely Vrch gold deposit. An estimate is expected to released soon that will be in accordance with the JORC Code.
All assay results have been received from the 32 hole program and have broadly confirmed the Company's previous estimate that the Biely Vrch deposit contains approximately 1.2 million ounces of gold (refer to Company announcement dated 1 December 2008).
The geostatistical work has been completed and the estimation process is now focused on conceptual mine design.
Several other gold prospects are being explored within the Company's large (1,107km2), 100%-owned licences in central Slovakia.
Local governmental and community relationships have been reinforced.
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 over the entire island in a manner appropriate to the current re-unification efforts.
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 in Turkey and the region.
KEFI Minerals has strengthened its finances through a joint-venture agreement with Centerra Gold Inc. in respect of the Artvin Project in northeastern Turkey. The Artvin Project comprises 15 tenements, which cover approximately 254km2 and an initial drilling program has recently been completed.
KEFI is currently considering other similar joint venture arrangements.
Harry Anagnostaras Adams, Managing Director of EMED Mining, commented:
"Our operating and financial measures are intended to preserve core assets and to allow EMED the opportunity to achieve shareholder value significantly higher than that implied by our current stockmarket capitalization. It remains our objective to trigger the restart of Rio Tinto Mine this year, obviously subject to permitting and the copper price recovering a little further.
In Slovakia we intend to conduct low-cost testing of four porphyry prospects which appear analogous to our Biely Vrch discovery. The gold price is strong and our prospects in Slovakia are excellent."
OVERVIEW OF STRATEGY
EMED Mining was formed by Australian mining-industry specialists and is based in Cyprus, the site of its first project and a location geographically central to the Company's area of interest. EMED Mining 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 mining industry in Spain, Slovakia and Cyprus.
SPAIN - COPPER MINE
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 which encompasses:
JORC-standard Mineral Resources of 940,000 tonnes of contained copper (205 million tonnes at 0.46% copper) and Ore Reserves of 585,000 tonnes (123 million tonnes at 0.48% copper) 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). The Restart Plan envisages annual production of 36,000 tonnes of copper-in-concentrate per annum.
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 region that Rio Tinto Mine lies within is suffering a severe economic downturn and all major stakeholders are engaging constructively. Nevertheless the Company has met some opposition and the Company's progress has been slower than originally expected due to this opposition and to the financial and other obstacles created by previous owners.
Operationally, the project involves the relatively straightforward restart of 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. Some operational improvements have been planned across the full range of planned activities.
Most local townships have been financially distressed since the mine's closure eight years ago and local support is therefore understandably strong (but not unanimous). The mine operated successfully in the past at the same levels of throughput proposed by the Company in its restart plan and there is significant potential for expansion.
The Board is confident of success but warns shareholders to be cautious in the current global financial crisis. Funds may not be available much longer to preserve this opportunity in the absence of a wholehearted welcome by all stakeholders in Andalucia. This assessment will be made by full and open discussion with the major stakeholders and the regulatory authorities. If the Company is successful in restarting this mining operation, the mine is expected to operate for over 20 years and therefore our challenges and costs should, in due course, prove to have been worthwhile.
COPPER PRICE OUTLOOK
The current global financial crisis has taken its toll on recent copper consumption and the copper price has declined sharply, as have the prices of many 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 from 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 (operating plus capital) 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 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 and adapt the timetable to the financial environment;
concurrent with the 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; and
invest in exploration and operational improvements to further extend mine life, reduce unit costs and optimise value.
SLOVAKIA - GOLD EXPLORATION
EMED Mining's wholly-owned subsidiaries in Slovakia own 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 over 1.2 million ounces of gold. This conceptual estimate is not yet compliant with JORC standards. An estimate is expected to released soon that will be in accordance with the JORC Code.
Drilling to date has defined a zone of mineralisation containing over 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 over 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.
The recent pattern diamond drilling was on three lines spaced 100m apart across the Biely Vrch deposit. The assay results from all 32 holes, broadly support the Company's estimate of the size and grade of the Biely Vrch deposit.
Drilling Assays from Biely Vrch
| Hole Number | Easting | Northing | RL | Dip | Azimuth | Depth | From | To | Length | Au | |
| (m) | (m) | (m) | (m) | (g/t) | |||||||
| DVE1 | 380,039 | 5,379,851 | 420 | 60 | 95 | 108.2 | 0.0 | 108.2 | 108.2 | 1.26 | |
| DVE2 | 380,007 | 5,379,617 | 429 | 60 | 95 | 102.8 | 0.0 | 102.8 | 102.8 | 0.16 | |
| DVE3 | 380,036 | 5,379,798 | 434 | 60 | 99 | 220.0 | 0.0 | 220.0 | 220.0 | 0.49 | |
| DVE4 | 380,136 | 5,379,828 | 423 | 60 | 272 | 252.0 | 0.0 | 252.0 | 252.0 | 1.21 | |
| DVE5 | 380,297 | 5,379,877 | 405 | 55 | 275 | 559.0 | 228.0 | 559.0 | 331.0 | 1.05 | |
| DVE7 | 379,886 | 5,379,847 | 404 | 70 | 279 | 568.0 | 0.0 | 59.0 | 59.0 | 0.21 | |
| DVE8 | 380,013 | 5,379,856 | 420 | 70 | 275 | 262.5 | 0.0 | 154.0 | 154.0 | 1.34 | |
| DVE9 | 380,154 | 5,379,944 | 401 | 50 | 275 | 350.0 | 62.0 | 103.0 | 41.0 | 0.68 | |
| DVE10 | 379,942 | 5,379,698 | 431 | 70 | 275 | 368.3 | 25.0 | 33.0 | 9.0 | 0.83 | |
| DVE11 | 379,942 | 5,379,703 | 429 | 60 | 98 | 400.4 | 0.0 | 400.4 | 400.4 | 1.25 | |
| DVE12 | 380,047 | 5,379,694 | 451 | 60 | 93 | 400.0 | 0.0 | 400.0 | 400.0 | 0.55 | |
| DVE13 | 380,247 | 5,379,945 | 404 | 60 | 278 | 400.0 | 206.0 | 400.0 | 196.0 | 0.50 | |
| DVE14 | 380,103 | 5,379,792 | 426 | 60 | 99 | 300.0 | 0.0 | 213.0 | 213.0 | 0.67 | |
| DVE15 | 380,031 | 5,379,947 | 401 | 60 | 278 | 300.2 | 42.0 | 94.0 | 52.0 | 0.51 | |
| DVE16 | 379,935 | 5,379,587 | 407 | 60 | 92 | 272.5 | 0.0 | 272.5 | 272.5 | 0.10 | |
| DVE17 | 380,059 | 5,379,598 | 431 | 60 | 90 | 406.0 | 372.0 | 400.0 | 28.0 | 0.54 | |
| DVE27 | 380,092 | 5,379,803 | 433 | 60 | 270 | 460.0 | 0.0 | 460.0 | 460.0 | 1.14 | |
| DVE28 | 380,057 | 5,379,905 | 409 | 60 | 270 | 252.3 | 0.0 | 252.3 | 252.3 | 0.35 | |
| DVE29 | 380,051 | 5,379,801 | 435 | 60 | 90 | 251.4 | 0.0 | 251.4 | 251.4 | 0.76 | |
| DVE30 | 380,058 | 5,379,905 | 410 | 60 | 90 | 293.2 | 0.0 | 293.2 | 293.2 | 0.52 | |
| DVE31 | 380,005 | 5,379,796 | 431 | 60 | 90 | 444.7 | 0.0 | 444.7 | 444.7 | 0.78 | |
| DVE32 | 379,958 | 5,379,906 | 404 | 60 | 90 | 350.3 | 0.0 | 350.3 | 350.3 | 0.44 | |
| DVE33 | 379,902 | 5,379,809 | 412 | 60 | 90 | Abandoned | |||||
| DVE34 | 380,160 | 5,379,906 | 403 | 60 | 90 | 98.2 | 0.0 | 98.2 | 98.2 | 0.08 | |
| DVE35 | 380,155 | 5,379,709 | 444 | 60 | 90 | 143.0 | 0.0 | 143.0 | 143.0 | 0.29 | |
| DVE36 | 380,157 | 5,379,905 | 403 | 60 | 270 | 458.1 | 0.0 | 458.1 | 458.1 | 0.46 | |
| DVE37 | 380,154 | 5,379,708 | 444 | 60 | 270 | 471.5 | 0.0 | 471.5 | 471.5 | 1.14 | |
| DVE38 | 380,103 | 5,379,708 | 450 | 50 | 180 | 164.7 | 0.0 | 164.7 | 164.7 | 0.49 | |
| DVE39 | 380,053 | 5,379,700 | 451 | 60 | 270 | 254.2 | 0.0 | 254.2 | 254.2 | 0.89 | |
| DVE40 | 380,008 | 5,379,698 | 446 | 60 | 180 | 140.0 | 0.0 | 140.0 | 140.0 | 0.51 | |
| DVE41 | 379,895 | 5,379,811 | 412 | 60 | 90 | 461.4 | 0.0 | 461.4 | 461.4 | 1.21 | |
| DVE42 | 380,008 | 5,379,796 | 432 | 60 | 270 | 275.3 | 0.0 | 275.3 | 275.3 | 0.72 | |
| DVE 43 | 380,049 | 5,379,748 | 446 | 60 | 90 | 433.8 | 0.0 | 433.8 | 433.8 | 0.49 | |
| DVE 44 | 380,049 | 5,379,747 | 446 | 60 | 270 | 323.1 | 0.0 | 323.1 | 323.1 | 0.99 | |
Exploring Regional Prospects in Slovakia
It is intended that four more gold porphyries will be drilled this year with the Company's own drill rig and manned by company's personnel. The program is targeting deposits at least the size of Biely Vrch.
CYPRUS - COPPER ZINC
EMED Mining's 95%-owned copper project in Cyprus holds the island's largest portfolio of exploration licences. The Company 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 over the entire 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.
COMPETENT PERSONS FOR REPORTING OF RESOURCE AND RESERVES
Information in this announcement that relates to the Rio Tinto 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 the Rio Tinto 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 exploration results and potential have been approved for release by Mr Ron Cunneen and he 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, Gordon 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) 207 456 9111) | |
| Public Relations | Bishopsgate Communications - Nick Rome (+44 207 562 3350) | |
| Share Registrar | Computershare Investor Services Plc | |
| Issued Capital | 240.6 million shares on issue 37.1 million options on issue, with exercise prices ranging from 8.0p to 22p per share. | |
| Significant Shareholders (after dilution for options) | 20% Management and Board (mainly Australian citizens) 13% Resource Capital Funds, (Australia and USA) 11% MRI Group (Switzerland) 10% OZ Minerals (Australia) 4% RMB Australia Holdings Limited 5% Altima (UK) 4% Fidelity International (UK) | |
EMED Mining is listed on AIM (Code: EMED)
Enquiries:
Investors/Media: Harry Anagnostaras-Adams +61 412 369 710
General: Cyprus office: +357 2244 2705, Email: info@emed-mining.com