13 Apr 2012 07:00
13 April 2012
FORTUNE OIL PLC
("Fortune Oil" or the "Company")
Armenia Iron Ore investment - Update
Fortune Oil (LSE: FTO.L) focuses on oil, natural gas and resource supply operations and investments, primarily in China. Fortune Oil is listed on the Main Market of the London Stock Exchange.
Fortune Oil today announces its maiden JORC Mineral Resource Statement reported in accordance with the terms and definitions of the JORC code for its Hrazdan Iron Ore Project ("HIOP") located 50km north east of Yerevan, the capital city of the Republic of Armenia and also an increased effective interest in its three Armenian iron ore mines.
Highlights
·; Mineral Resources totalling 21.4 Million tonnes grading 26.7%FeT (Total Iron), 7.1%Al2O3 (Alumina), 30.0%SiO2 (Silica) and 0.039%P (Phosphorus);
·; Exploration drilling (completed from June to November 2011) totalling 45 diamond drillholes for a total of 6,590 metres of which 37 drillholes were sampled for a total of 2,880 metres;
·; Plans to build and operate a 2.5 Million tonnes per annum concentrate facility, providing a foundation for a profitable resource business in Armenia;
·; Fortune Oil has renegotiated various Joint Venture agreements and has increased its effective interest in its three mines to 73.34% for the same consideration of US$16 million.
Mr Tee Kiam Poon, Chief Executive of Fortune Oil, commented:
"Today's announcement is further evidence of Fortune Oil's commitment towards creating a profitable and sustainable resource business capable of delivering long term shareholder value.
Achieving our maiden JORC Mineral Resource Statement represents a significant milestone in progressing the development and realising the value of the project. As a result of this Mineral Resource Statement we have commenced planning to build and operate the mine and processing plant at Hrazdan. We have also gained greater control over our investment and the development process in Armenia. With our staff on the ground we are making significant progress and we are excited about the potential of our resource business making a material contribution to the Group."
Hrazdan Iron Ore Project
HIOP comprises mining license HA-L-14/453 with a term of 25 years commencing 26 January 2007 and with an area of 2.4 km2 which is in the name of Fortune Resources LLC. To advance the technical studies for HIOP, Fortune Oil has also established offices and a local technical team in Armenia to co-ordinate the activities of local approvals and external consultants as well as to progress the development of the project.
Mineral Resource Declaration
SRK Consulting (UK) Limited ("SRK") was appointed to prepare a JORC Mineral Resource Statement for HIOP which is reported in accordance with the terms and definitions of the JORC Code (as defined below). This declaration follows the completion (from June to November 2011) of exploration drilling (managed by SRK and SRK Exploration Services Limited) totalling 45 diamond drill holes for a total of 6,590 metres of which 37 drill holes were sampled for a total of 2,880 metres.
The total Mineral Resources reported by SRK, further details of which are set out in the table below, is 21.4 Million tonnes grading 26.7%FeT, 7.1%Al2O3, 30.0%SiO2 and 0.039%P which comprises:
§ Total Indicated Mineral Resources of 17.3 Million tonnes grading 26.0%FeT, 7.3%Al2O3, 30.3%SiO2 and 0.037%P;
§ Total Inferred Mineral Resources of 4.1 Million tonnes grading 29.4%FeT, 6.0%Al2O3, 28.5%SiO2 and 0.045%P; and
§ Mineral Resources are further subdivided into weathered (3.2 Million tonnes) and fresh material (18.2 Million tonnes) with densities ranging between 3.66 and 3.71 g/cm3.
All Mineral Resources are deemed to be potentially economic by open-pit methods and are constrained within an optimised shell derived using the following assumptions:
§ Iron ore price of USc170/dmtu (US cents per dry metric tonne unit) as derived by assuming a 30% premium to Fortune Resources LLC's assumed long term price ("LTP") of USc130/dmtu for iron ore concentrate fines;
§ Operating expenditures incorporating: mining (US$2.50/t); processing (US$3.70/t - including G&A); transportation (US$12.65/t concentrate);
§ Metallurgical assumptions for weathered ore: Fe recovery 53%, concentrate grade (66%Fe) and mass yield (24%);
§ Metallurgical assumptions for fresh ore: Fe recovery 61%, concentrate grade (66%Fe) and mass yield (23%);
§ Mining royalty at 4% of product selling price;
§ Mining dilution (3%) and mining dilutant (assumed at 0% for all grades); and
§ Mining losses (3%).
Mineral Resources | Tonnage | Grade | |||||||||
(Mt) | (%FeT) | (%Al2O3) | (%SiO2) | (%Mn) | (%P) | (%LOI) | (%MgO) | (%CaO) | (%S) | (%TiO2) | |
Weathered | |||||||||||
Inferred | 3.2 | 31.0 | 6.1 | 27.9 | 0.25 | 0.047 | 2.5 | 1.2 | 20.3 | 0.1 | 0.4 |
Fresh | |||||||||||
Indicated | 17.3 | 26.0 | 7.3 | 30.3 | 0.33 | 0.037 | 2.3 | 1.9 | 20.3 | 0.2 | 0.3 |
Inferred | 0.9 | 23.6 | 5.4 | 30.7 | 0.36 | 0.038 | 3.2 | 1.5 | 23.4 | 0.2 | 0.3 |
Subtotal | 18.2 | 25.9 | 7.2 | 30.3 | 0.33 | 0.037 | 2.4 | 1.9 | 20.4 | 0.2 | 0.3 |
Weathered + Fresh | |||||||||||
Indicated | 17.3 | 26.0 | 7.3 | 30.3 | 0.33 | 0.037 | 2.3 | 1.9 | 20.3 | 0.2 | 0.3 |
Inferred | 4.1 | 29.4 | 6.0 | 28.5 | 0.27 | 0.045 | 2.7 | 1.3 | 21.0 | 0.1 | 0.3 |
Total | 21.4 | 26.7 | 7.1 | 30.0 | 0.32 | 0.039 | 2.4 | 1.8 | 20.4 | 0.2 | 0.3 |
The Mineral Resources as reported comprise some 80% of the mineralised material reporting within the block model and are relatively insensitive to up-side price assumptions (23.0 Million tonnes grading 25.7%FeT at USc200/dmtu) and extremely sensitive to down-side price assumptions: 18.4 Million tonnes grading 26.4%FeT at USc150/dmtu; 15.2 Million tonnes grading 27.1%FeT at USc130/dmtu; and 8.0 Million tonnes grading 28.3%FeT at USc110/dmtu.
The reporting standard adopted for the reporting of the Mineral Resource Statement for HIOP is that defined by the terms and definitions given in "The 2004 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the "JORC Code") as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia". The JORC Code is an internationally recognised reporting code as defined by the Combined Reserves International Reporting Standards Committee.
The Competent Person who assumes responsibility for reporting of the Mineral Resources is Mr Howard Baker, CP, MAusIMM, and MSc, who is an employee of SRK. He is a Member of the Australian Institute of Mining and Metallurgy ("AusIMM"). Mr Howard Baker is a mining geologist with 18 years' experience in the mining and metals sector and has been involved in the reporting of Mineral Resources on various properties internationally during the past five years.
As a result of the above Mineral Resource Statement, Fortune Resources LLC has commenced planning to build and operate a run of mine 2.5 million tonnes per annum concentration plant. This plant, which targets production in excess of 500,000 tonnes of concentrate of approximately 66% to 68% iron, will be designed jointly by Sinosteel and Fortune Resources LLC's own technical team as a state of the art, low cost of production facility providing the foundation for establishing a profitable resources business in Armenia.
Application for final regulatory and governmental development approval will follow completion of the mining plan and the plant and on-site logistic designs. Negotiations have commenced on the financing of the mine and the plant and off-take agreements for the iron ore concentrate.
On 12 January 2011 Fortune Oil announced an initial investment of US$26 million in three Armenian Iron Ore Mines (Hrazdan, Abovyan and Svarants). On 14 June 2011, Fortune Oil announced that had it has successfully amended an option agreement to allow it to increase its effective interest in the mines to 65 percent for consideration of US$16 million.
Fortune Oil has since renegotiated various agreements to increase its effective interest in the three mines to 73.34 percent for the same initial consideration of US$16 million (through increases in equity interests in Bounty Resources Armenia Limited (BRAL) to 90% and BRAL has also acquired an additional 8% equity interest from its local partner, Suren Ayvazyan for US$ 2 million - resulting in Caspian Bounty Steel Limited owning 80% of Fortune Resources LLC and Suren Ayvazyan owning the remaining 20%) The US$16 million consideration was financed from the Company's existing cash reserves and will be invested in the operations in Armenia, including the financing of the drilling programme for Abovyan and to progress the development work for HIOP.
For further details:
Fortune Oil PLC Tee Kiam Poon - Chief Executive Bill Mok - Chief Financial Officer |
Tel: 00 852 2583 3125 Tel: 00 852 2583 3120
|
Pelham Bell Pottinger Archie Berens Zoe Sanders | Tel: 020 7861 3112 / 07802 442486
|
Background on Fortune Oil
Fortune Oil is a leading independent energy company engaged in the investment and operations of oil and natural gas supply projects in China. With almost 20 years of operating history in China, Fortune Oil has acquired a unique portfolio of high quality oil and natural gas projects across the country and has formed a strong partnership with domestic and international market leaders. Fortune Oil recently started an expansion outside China securing resource projects. Fortune Oil is listed on the Main Market of the London Stock Exchange with its operational headquarters in Hong Kong.