Last checked at 5 Jul 2011 07:00
ECR Minerals plc is pleased to announce that the Company has secured an exclusive option to acquire an ownership interest of up to 80% in the Unchimé iron ore project in Salta Province, Argentina. The acquisition is subject to due diligence.
Highlights
Unchimé is a haematite deposit with historic indicated resources of 23.5Mt and historic inferred resources of 372.8Mt across multiple zones with reported grades of 35-45% Fe. 11,000 hectare tenement package; railway within 3km of project area. ECR can acquire an initial 70% interest in Unchimé for staged cash payments totalling US$2 million and a further 10% interest for US$10 million payable in either cash or shares. An additional payment is due on estimation of a JORC/NI43-101 reserve exceeding 30Mt. Due diligence has commenced and will include metallurgical testwork and a limited drilling programme.Unchimé Project
The Unchimé project is located 35km from the city of General Güemes and 80km from the city of Salta, which has a population of approximately 500,000. The project comprises approximately 11,000 hectares of granted mining and exploration concessions plus applications for additional tenements.
The Unchimé deposit is a Clinton style oolitic haematite iron ore deposit discovered in the 1940s. The deposit was exploited on a small scale during the 1950s and 1960s. The project area is characterised by a series of discrete hilltop orebodies overlain by varying thicknesses of overburden and separated by deep valleys. The iron bearing formation occurs as near horizontal layers within the hills. The project area is wooded and the agricultural value of the land is low. Salta Province is located on the tropic of Capricorn, and climatically receives both tropical and temperate influences.
There is a Chinese controlled project currently underway 60km to the north of Unchimé to develop an iron ore mine on the same iron bearing geological formations.
Historic Exploration
Unchimé has historic (1965-72) indicated resources of 23.5Mt and historic inferred resources of 372.8Mt estimated across numerous zones reportedly grading 35-45% Fe. These historic estimates are based largely on trench sampling data and are not compliant with JORC, NI43-101 or equivalent standards.
Metallurgical test work carried out in the same period indicated that an iron ore product containing more than 52% Fe was obtainable from Unchimé ore by dense media concentration. The Unchimé ore is metallurgically complex and will require detailed testwork to define an optimum process route and identify the saleable product most likely to be profitable.
ECR's technical personnel consider that the overall resource potential of the Unchimé project may be significantly larger than indicated by historic resource estimates.
It is believed based on historic metallurgical testwork that the phosphorous content of the ore as indicated by historic data (approximately 0.4%) could be reduced by means of a hydrochloric acid wash. Levels of other common impurities are not believed to pose a problem, and phosphorus mitigation might not be necessary if the Unchimé ore were to be blended with low phosphorous ore by an end user.
Mining
Due to the flat dipping nature of the Unchimé ore bodies it is anticipated that the project may be developed by open cast mining, with ore mined as an advancing strip and the waste material ahead of the operating ore bench immediately returned to the void left by removal of the ore. The topography of the area lends itself to this potentially highly efficient and economic method of mining.
Local Infrastructure
Access to Unchimé is via paved highway from Salta and unpaved local roads to the entrance of the project area. There are numerous disused internal roads and tracks requiring rehabilitation.
A railway line of the Belgrano Carga railway network, which is in the process of being upgraded by the Argentine government, passes within 3km of the Unchimé project area and a natural gas pipeline passes within 5km. There are 2 substantial power plants with associated electrical distribution networks within 20km. Water is available in quantity from local rivers.
The availability of local natural gas is positive with respect to the energy requirements of any eventual mining operation. ECR will also assess the possibility of producing pig iron in Salta as an alternative to the sale of concentrate or direct shipping iron ore. Pig iron production would be more energy and capital intensive but may deliver superior economics by producing a high purity iron product highly marketable for steelmaking.
Argentina presently produces over 6 million tonnes of steel per annum, importing all raw material requirements. Imported iron ore reaches the Argentine port of Rosario from Brazil after transport by rail and river barge and transhipment through Paraguay.
Indicative rail transport costs from the Unchimé project to Rosario 1,100km southeast of Unchimé are estimated to be in the order of US$20-30 per tonne. The port of Rosario (Argentina's largest) can receive large bulk carriers and has direct loading facilities.
Consultants
The Company has appointed the following consultants to assist with the evaluation and development of Unchimé:
Turgis Consulting, an international mineral engineering consultancy with extensive experience in the iron ore sector. N H Cole & Associates Pty Ltd, being Neil Cole, an independent Australian consultant with considerable iron ore experience. Local geologists with prior knowledge of the project area.Plan of Assessment
Following receipt of the necessary government permission (expected within the next month), ECR intends to complete an initial diamond drilling programme in order to provide essential information on the iron bearing formation in section XII of the Hornitos zone of the Unchimé project. This area has been selected based on historic data, ease of access and the shallow nature of the drill holes required.
The drilling will seek to confirm the extent and grade of the Hornitos zone, which has a historic indicated resource estimate of 23.5Mt. To date limited sampling carried out by ECR geologists has broadly confirmed the grade of the iron horizons of the zone.
Initial metallurgical test work on ore from Unchimé is presently being carried out on behalf of ECR by AML, a laboratory in Perth, Western Australia specialising in the metallurgy of mineral sand and iron ore deposits. Successful testwork indicating that ore from Unchimé can be processed to yield a marketable iron ore product would add substantial value to the project, and this work is being pursued as a high priority as part of ECR's due diligence.
Turgis Consulting Review
ECR commissioned Turgis Consulting to undertake a review of available historic data for Unchimé as well as a site visit as part of the Company's initial due diligence.
Turgis reported that:
"The exploration done thus far indicates that the Unchimé Resource Estimate of 400 million tonnes (approximate) is conservative but remains to be properly defined.
Ø Turgis is satisfied that the Unchimé Project has sufficient potential to warrant additional exploration and recommends that ECR continues the current trench verification programme and progresses the proposed drilling project.
Ø Turgis is satisfied that there is suitable infrastructure in place to operate the proposed Unchimé Mine.
Ø The ECR Argentina Team is well led, motivated and competent and Turgis is satisfied that ECR has the capability to progress the Unchimé Project satisfactorily.
Ø The "Belgrano Cargo" national railway modernisation programme will provide more than sufficient capacity for transporting the ore to port for export.
Ø Should the indicated orebody configuration in Unchimé Hornitos zone section XII prove to be correct, mining will be simple and relatively cheap.
Ø The environmental impact of mining could be mitigated by concurrent mining, backfilling and rehabilitation. This could preclude the necessity for a tailings dam and large waste dumps.
Ø The land in the mining area has low agricultural value.
Ø The Provincial Administration of Salta is pro-mining."
Terms of Acquisition
ECR can purchase a 70% interest in the Unchimé project for staged cash payments totalling US$2 million; this interest can be increased to 80% for an additional payment of US$10 million in cash or shares (mode of payment at vendors' election). ECR holds the right of first refusal with respect to the remainder of the project. Of these payments, US$200,000 has been paid as an option fee, US$1.3 million is due 60 days from the date on which permission for the initial drilling programme described above is granted by the Argentine authorities, and a further US$500,000 is due not more than 9 months from the date of the US$1.3 million payment. Once the payments totalling US$2 million have been made ECR would receive 70% ownership of the project. The vendors may at their discretion grant an extension of 30 days to the 60-day period. ECR may continue with its due diligence until the time at which the US$1.3 million payment is made. Prior to that time, ECR is under no obligation to proceed with the Unchimé acquisition. It is expected that the permit to drill will be granted shortly, and the drilling programme will form a key part of the Company's due diligence. If the acquisition proceeds, ECR is required to complete a bankable feasibility study (BFS) for the project as sole funder; the vendors of the project are required to provide pro rata funding from completion of a BFS or suffer dilution. ECR has sole management control until completion of a BFS. Estimation of a JORC/NI43-101 reserve at Unchimé exceeding 360 million tonnes triggers a payment of US$20 million to the vendors; estimation of a JORC/NI43-101 reserve less than 360 million tonnes but greater than 30 million tonnes triggers a payment of US$0.05 per metric tonne. These payments can be made in cash or shares (mode of payment at vendors' election). Should the vendors be diluted to an interest of less than 5%, their interest converts to a 2% net royalty. ECR can transfer any and all of its rights in respect of the project. The above represent binding heads of terms; definitive terms are to be agreed.Patrick Harford, Managing Director of ECR Minerals plc, comments:
"We are very excited by the possibility that with further work, the Unchimé project may have the potential to become a major iron ore mine, perhaps by way of a staged development process. It may be feasible to develop a relatively small initial operation to supply the local market, with a larger export operation being developed at a later stage.
Oolitic iron ore deposits such as Unchimé represent considerable metallurgical challenges. However the development of such deposits has been shown to be technically and commercially feasible elsewhere and the development of the Zapla project to the north of Unchimé by Chinese investors gives us considerable encouragement.
Should the results of the planned drilling programme and ongoing metallurgical testwork prove encouraging the Company intends to move rapidly to complete the acquisition of Unchimé and to further define the extent of iron mineralisation at the project whilst commencing the feasibility studies necessary to define its commercial merit.
ECR has been able to agree favourable terms for the acquisition of Unchimé with the local vendors, who will become ECR's partners in the project and who have prior experience of successful bulk mineral production in Argentina. This partnership will add a valuable extra dimension to the venture, and discussions with the provincial government in Salta have indicated that development of Unchimé would enjoy strong local support."
About ECR Minerals plc
ECR is a mineral development company with interests in the USA, Argentina, Indonesia, Thailand and Australia.
| ECR Minerals plc |
| Michael Silver, Chairman |
| Patrick Harford, Managing Director |
| Stephen Clayson, Director |
| +44 (0)20 7929 1010 |
| info@ecrminerals.com |
| www.ecrminerals.com |
| or |
| Daniel Stewart & Company plc |
| Oliver Rigby/Tessa Smith |
| +44 (0)20 7776 6550 |
| or |
| Old Park Lane Capital plc |
| Michael Parnes, +44 (0)20 7493 8188 |
| or |
| Blythe Weigh Communications |
| Ana Ribeiro, +44 (0)20 7138 3204 |
| or |
| Barry Kaplan Associates |
| Larry Kaplan, +1 732 747 0702 |
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