RGM.L Regulatory News (RGM)

REGENCY MINES PLC

Update - MamBare Nickel Laterite Project and Direct Nickel Limited

20 June 2012

Regency Mines plc ("Regency" or "the Company"), the mining exploration and mineral investment company with interests in nickel and other minerals in Western Australia, Queensland, Papua New Guinea and Pakistan reports on progress at its lateritic nickel project at Mambare, a joint venture with Direct Nickel Pty Ltd. ("DNi").

Highlights:

·; The JV operating company Oro Nickel Ltd. has engaged RMDSTEM consultants to undertake a Value Engineering Study to consist of a disciplined assessment of value, risks, and uncertainty of available options at Mambare

·; Value Engineering methodology seeks to obtain a deeper understanding of project variability in the form of a probability weighted risk profile on the key uncertainties and major value drivers, with a focus on those controllable and set to add the most value

·; Value Engineering differs from traditional engineering approaches and seeks to rapidly advance projects without intensive and expensive front-end engineering

·; The Oro Nickel Joint Venture's goal remains to mitigate study costs, while making the best use of shareholder funds, avoiding dilution during challenging market conditions, and simultaneously accelerating the project development of Mambare

·; The construction of Stage 1 of the Perth Test Plant has been completed and is ready for delivery of the first test material from Indonesia to commence plant commissioning

Mambare Nickel Project Update:

The JV operating company Oro Nickel Ltd plans to progress the Mambare Project by conducting a Value Engineering Study to identify the key drivers of project value to ensure resources are applied efficiently while progressing the project to production.

The perception of the JV partners at this stage, when a sizable resource has recently been declared, is that further drilling would not increase project or shareholder value to a degree proportionate to its costs, and ultimately might be value destructive. A Value Engineering Study will enable the partners to identify and assess the optimal pathways to progress the project.

Value Engineering Background:

The normal life cycle of a mining project requires a study phase between resource definition and commencement of mine construction when technical concepts and processes are defined, evaluated, and assessed with the aim of determining economic feasibility. This usually includes several steps from a conceptual or scoping study, to prefeasibility and ultimately a definitive or bankable feasibility study, and often takes several years. While study costs are low relative to the overall cost of bringing a mine into production, they can be significant for junior exploration companies such as Regency and the operating Joint Venture vehicle, Oro Nickel.

Traditional studies use a conventional engineering approach, with a consultant or engineer working towards a defined scope of work. The resulting design may be technically solid, but may fail to provide the solution for the project that delivers the greatest shareholder value. (Schrimpf and Bryan, The Application of Value Engineering Principles to Mining Studies, May 2012)

The scope of this study will therefore not be a narrowly defined engineering blueprint, but rather a broader based look at how to best create value and reduce both the timeframe and costs required.

Value Engineering Scope:

1. A desktop review of available information by experienced mining and processing specialists.

2. Establishing a techno-economic model for the flow sheet, including the likely mining methods, the Direct Nickel process, and any other infrastructure support. Model to be validated by discussion with key JV stakeholders and Mambare project staff and associates.

3. Determination of range estimates on key project parameters. These range estimates will be derived from previous feasibility study data updated with more contemporary costs, expert judgment, and internal RMDSTEM benchmark information.

4. Refinement of the techno-economic model to provide an engineering assessment for the project. We propose to keep this assessment limited to a "mine gate" model (with corporate overheads, finance costs, etc excluded).

5. Finalization of this model will involve uploading the range estimates, running simulations based on this range information, and reporting the project risk profile.

6. Scenario insights and sensitivity analysis will be performed based on the levels of uncertainty modeled to ascertain whether any particular drivers or scenario's consequentially alter the project viability and/or providing a significant value improvement.

Key Value Engineering Outputs:

1. Identification of the project value drivers and the quantification of their impact

2. Identification of the major project risks and uncertainties and the quantification of their impact on project value

3. Identification of the available development options, their relation to each other, and the added value achievable through these options

4. Identification of the optimal project implementation pathways through decision analysis

Direct Nickel's Perth Test Plant:

Direct Nickel recently announced the completion of construction of Stage 1 of its Perth Test Plant, which will produce an Intermediate Product Precipitate, a nickel-cobalt-iron oxide product, as well as a magnesium oxide co-product. Stage 2 will produce a marketable nickel-cobalt mixed hydroxide product (MHP), as well as high purity iron and magnesium oxide co-products. Completion of Stage 2 is subject to conclusion of funding arrangements by DNi, which are currently in progress.

A 150t bulk sample is currently being supplied from a nickel laterite deposit belonging to Direct Nickel's Indonesian partner. This sample will be the first bulk sample processed by the DNi Test Plant. Subject to funding, testing of this sample is expected to be completed by H2-2013. Testing of the Mambare bulk sample at a later date will be able to leverage the results obtained from the Indonesian ore testing with potential time and cost savings.

Milestones:

·; Maiden JORC resource with 2011 drilling results - delivered April 2012

·; Upgraded JORC resource with 2008 and 2011 drilling and Ground Penetrating Radar results - delivered June 2012

·; Value Engineering Study - June - August 2012

·; Pilot plant operation of the DNi Process - 2012 to 2013

Summary:

The recent announcement (13 June 2012) of the JORC compliant 162Mt @ 0.94% nickel Resource upgrade including most results from the 2008 drill campaign show that the Mambare project is on track to deliver the high resource potential previously identified.

DNi's completion of the Stage 1 construction of its Perth Test Plant and the delivery in the next quarter of a bulk sample from an Indonesian laterite deposit to run through it, are all positive steps in the process proving programme. Once funding for the design and construction for Stage 2 (the full flowsheet) is confirmed, the last steps in the proving program can be completed.

In parallel with the Perth programme, low-cost Value Engineering analysis efforts will go beyond traditional financial modeling and will show the key drivers for each significant development option and the specific sensitivities and risks they face. The final results of this work are expected in the early autumn, and will be used by the Joint Venture partners to determine the most value generative pathway to production for the Mambare project.

About:

Oro Nickel: Ltd is a 50:50 Joint Venture of Regency and DNi to progress the Mambare Nickel Project in Oro Province, PNG.

Direct Nickel Pty Limited: is an Australian private company, headquartered in Sydney, and with laboratories in Perth. DNi seeks to revolutionize the nickel industry through the commercialization of its proprietary technology for the treatment of nickel laterites at lower capital and operating costs and lower process intensities than offered by existing technologies.

RMDSTEM: is an Australian based firm, providing consulting, project development studies, operations improvement, and corporate services to the mining, mineral processing, and research sectors. Their clients include many of the largest global resources companies across a range of commodities, countries, and disciplines.

For further information contact: 

Updates on the Company's activities are regularly posted on its website, www.regency-mines.com.