29 Nov 2012 07:00
Strategic Natural Resources Plc
("SNR" or the "Company")
Results of CPR Update and Maiden Reserve Statement
SNR, the AIM listed natural resources developer operating in South Africa, is pleased to announce that the update to the CPR (the "Report") undertaken on its 74% owned subsidiary, Elitheni Coal (Pty) Ltd ("Elitheni"), has now been completed in accordance with the SAMREC code and corresponding SAMVAL criteria by the Company's competent person, Minxcon (Pty) Ltd ("Minxcon"). Minxcon is an independent advisory company with expertise in working with mining and exploration companies.
Highlights:
·; Net present value ("NPV") of total mineable in situ coal resource of between £107m and £122m and reflects only 6% of Elitheni's total exploration rights area.
·; 34.1Mt of probable reserves.
·; 288.5Mt mineable in situ coal resource of which 161.9Mt is measured, indicated and inferred ("M,I&I").
David Nel, Chief Executive of SNR, said:
"I am pleased that the CPR update verifies our strong overall resource and reserve numbers and associated valuations, which robustly attest to the viability of the coalfield SNR is developing. As Elitheni continues its drilling programme we believe that we will be able to convert tonnes from those currently in prospecting areas into mining rights of the Company and enhance our resource and reserve levels, which should significantly increase the overall valuation of the Elitheni Mine."
Valuation
Minxcon have calculated an NPV for the Elitheni Mine in the range of ZAR1,508.75m (£107m) to ZAR1,709.26m (£122m), based on the 288.5Mt total mineable in situ coal resource, further details of which are provided below. The valuation range is the result of two valuation techniques; a discounted cashflow ("DCF") analysis and a market based approach. The valuation was carried out in accordance with SAMVAL requirements and was conducted by Minxcon based on independently verifiable information both provided by the Company and obtainable publicly by Minxcon.
Reserve statement
The Directors are pleased announce a maiden SAMVAL compliant probable coal reserve of 34.1Mt, based on 60.1Mt of the Company's total 266.3Mt gross in situ coal resource (M,I&I). In addition, the Company has opencast reserves of 120,000 tonnes. A portion of these probable reserves should be upgraded to proven reserves once the Company can demonstrate operational data to support the data and assumptions used with respect to the beneficiation of the coal. The reserve figure is based on current scheduled (detailed mine planning) tonnes, which is based only on existing mining rights and resources that fall into the measured and indicated category.
To arrive at a SAMVAL reserve, Minxcon only used the coal within Elitheni's mining rights area only at a mineable seam height cut off (in this case, 0.8m) and subtracted the inferred and reconnaissance resources, to arrive at an extractable in situ coal reserve. From this they subtracted the coal that is required to be left underground to serve as roof support in the form of pillars. The result is a mineable in situ coal reserve from which is subtracted geological and mining losses, to arrive at a run of mine reserve, being the coal available for beneficiation through the Company's wash plant.
The total reserve of 34.2Mt (which includes the opencast reserves of 120,000 tonnes) has been valued by Minxcon on a discounted cash flow basis and is calculated to be ZAR 909.46m (£64m).
Resource update
Following the announcement on 25 October 2012 of a M,I&I gross in situ coal resource of 266.3Mt, Minxcon has been able to confirm the following update to the Company's resource:
(Mt) | Gross in situ coal resource | Mineable in situ coal resource |
Measured | 79.1 | 48.3 |
Indicated | 73.5 | 44.3 |
Inferred | 113.7 | 69.2 |
Total M,I&I | 266.3 | 161.9 |
Reconnaissance* | 172.3 | 126.6 |
Total resource | 438.6 | 288.5 |
A 0.8m seam cut-off and geological loss factor of 15% was applied to the gross in situ resource when calculating the mineable in situ coal resource.
In assessing the reserve and valuation estimates Minxcon embarked on a process of technical assessment in terms of the mineability and washability of the in situ coal resource. This was followed by an assessment of related capital and operating costs, including regulatory expenses and modelled in a DCF over a period of 29 years.
This information was modelled financially and appropriate discounts have been applied to take into account various risk factors, both pertaining to the coal resource, the Company at its current stage of development, the mining industry and commodity markets.
The Company is planning to re-commence drilling in 2013, with a view to enhancing the resource and reserve levels before the end of 2013 as well as expanding Elitheni's mining rights area, planned for 2013/14.
*Reconnaissance resource classification is valued separately and at a significant discount to measured, indicated and inferred resources. The £107m best estimated value from the market approach includes £9.0m attributable to the 126.6Mt reconnaissance classification mineable coal resource.
An exchange rate of ZAR 14:1 GBP is used to translate all amounts throughout this announcement.
For further information, please contact: | |
Strategic Natural Resources plc | |
David Nel, Chief Executive Officer | +27 (0) 41 368 9650 |
Allenby Capital Limited―Nominated Adviser and Joint Broker | |
Nick Naylor/Mark Connelly/James Reeve | +44 (0) 20 3328 5656 |
SP Angel Corporate Finance Limited―Joint Broker | |
Tercel Moore | +44 (0) 20 3463 2260 |
FTI Consulting | +44 (0) 20 7831 3113 |
Ben Brewerton/Georgia Mann | +44 (0) 7703 329024 |
Competent persons statement:
The contents of the announcement have been reviewed by the following competent person:
Johan Odendaal (Director, Minxcon): B.Sc. (Geol), B.Sc. Hons (Min. Econ.), M.Sc. (Min. Eng.), Pr. Sci. Nat. Reg. No. 400024/04, FSAIMM Reg. No. 702615, MGSSA No. 965119, MAusIMM Reg. No. 220813, IAS
Johan has 25 years' experience in the mining and financial industry. This includes 7 years as an independent mining consultant specialising in the valuation of mining projects and 12 years as a mining analyst at two major
stockbroking firms
About Minxcon
Minxcon is a multi-faceted South African advisory company offering a wide range of exploration, resource, mining, metallurgical, financial valuation and advisory services to both local and international companies. Minxcon has the critical mass to advise mining and exploration companies on all mining disciplines and to assist such companies in undertaking new projects - from initial target generation stage right through to final mine closure.
Further information and detail on Minxcon clients can be accessed at www.minxcon.co.za
Long-term Prices Used in DCF:
2013 | 2014 | 2015 | 2016 | 2017 | Long-term | ||
Year | 1 | 2 | 3 | 4 | 5 | 6 | |
Exchange rate | ZAR/USD | 8.09 | 8.18 | 8.41 | 8.61 | 8.79 | 8.50 |
Inflation rate | SA | 5.40% | 5.40% | 4.40% | 4.60% | 4.60% | 4.60% |
Inflation rate | US | 1.98% | 1.94% | 2.40% | 2.40% | 2.40% | 2.50% |
Anthracite | USD/t | 120 | 120 | 120 | 120 | 120 | 120 |
Thermal Coal | USD/t | 75 | 75 | 75 | 75 | 75 | 75 |
Discard Tails | USD/t | 15 | 15 | 15 | 15 | 15 | 15 |
Glossary of technical terms:
Term | Definition |
SAMREC | The SAMREC Code sets out minimum standards, recommendations and guidelines for Public Reporting of Exploration Results, Mineral Resources and Mineral Reserves in South Africa. The first version of the SAMREC Code (the South African Code for Reporting of Mineral Resources and Mineral Reserves was issued in March 2000, and was incorporated in the JSE Listings Rules (Section 12) shortly thereafter. A revised edition was completed in 2007, and was accepted by the Councils of the Southern African Institute of Mining and Metallurgy (SAIMM) and the Geological Society of South Africa (GSSA) in mid-2007, and as such is binding on those members. This edition is currently being incorporated in the updated listings rules of the JSE Ltd. |
SAMVAL | The SOUTH AFRICAN CODE FOR THE REPORTING OF MINERAL ASSET VALUATION (SAMVAL or the Code) sets out minimum standards and guidelines for Public Reporting of Mineral Asset Valuation in South Africa. It has been drawn up by the SAMVAL Working Group of the SSC Committee under the joint auspices of the Southern African Institute of Mining and Metallurgy (SAIMM) and the Geological Society of South Africa (GSSA). The SSC consists of representatives of the SAIMM, the GSSA, the South African Council for Natural Scientific Professions (SACNASP), the Geostatistical Association of South Africa (GASA), the South African Council for Professional and Technical Surveyors (PLATO), the Association of Law Societies of South Africa, the General Council of the Bar of South Africa, the Department of Minerals and Energy (DME), the JSE Limited (JSE), the Council for Geoscience, the Banking Association of South Africa, the Minerals Bureau, the Chamber of Mines of South Africa (COM), and the University of the Witwatersrand. The process for establishing SAMVAL was initiated through an open meeting at a colloquium convened by the SAIMM in March 2002. Various papers and articles were published on the matter and the colloquium called for comment and mandates. Contact was also established with the Australasian Institute of Mining and Metallurgy (AusIMM), the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), the International Accounting Standards Board (IASB) and the International Valuation Standards Committee (IVSC). |
Mineral Reserve (SAMVAL code definition) | The economically mineable material derived from a Measured or Indicated Mineral Resource or both. It includes diluting materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a Pre-Feasibility Study for a project, or a Life of Mine Plan for an operation, must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal environmental, social and governmental factors. Where the term 'Ore Reserve' is used, this is synonymous with the term 'Mineral Reserve.' |
Measured Coal Resource (SAMREC Definition Standards) | A 'Measured Coal Resource' is that part of a Coal Resource for which tonnage, densities, shape, physical characteristics and coal quality can be estimated with a high level of confidence. It is based on detailed and reliable information from exploration, sampling and testing of material gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm physical and coal quality continuity. |
Indicated Coal Resource (SAMREC Definition Standards) | An 'Indicated Coal Resource' is that part of a Coal Resource for which tonnage, densities, shape , physical characteristics and coal quality can be estimated with moderate level of confidence . It is based on information from exploration, sampling and testing of material gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are appropriate to confirm physical continuity, while the locations are too widely or inappropriately spaced to confirm the continuity of the coal quality. However, such locations are spaced closely enough for such continuity to be assumed. |
Inferred Coal Resource (SAMREC Definition Standards) | An 'Inferred Coal Resource' is that part of a Coal Resource for which volume or tonnage and coal quality can be estimated only with low level of confidence. It is inferred from geological evidence and sampling and assumed physical continuity with or without coal quality continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill-holes, information that is limited or of certain quality and reliability. |
Reconnaissance Coal Resource (SANS 10320:2004 Definition Standards) | A 'Reconnaissance Coal Resource' is that part of a Coal Resource in the full seam where the coal seam is of economic interest and the distribution of physical points of observations is such that physical continuity may be assumed at a low level of confidence, and there is limited coal quality data, such that the available coal quality data includes coal quality of economic interest.. |
Mineable In Situ Coal Reserve (SAMREC Definition Standards) | Coal of tonnage and quality, at a specified moisture content, contained in coal seams, or sections of seams, which are proposed to be mined at the theoretical mining height, excluding dilution and contamination material, after a mine plan with a specific mining method has been developed and the relevant minimum and maximum cut-off mineable thickness and relevant coal quality cut-off parameters have been applied. |
Gross in situ coal resource (SANS 10320:2004 Definition Standards) | Tonnage and coal quality, at specified moisture content, contained in the full coal seam above the minimum thickness cut-off and relevant coal quality cut-off parameters, as defined by the competent person. The seam height does not include any external dilution or contamination material. No loss factors applied to a gross in situ coal resource. |
Mineable in situ coal resource (SANS 10320:2004 Definition Standards) | Tonnage and coal quality, at a specified moisture content, contained in the coal seams, or sections of the seams, which are proposed to be mined at the theoretical mining height, excluding dilution and contamination material, with a specific mining method and after the relevant minimum and maximum mineable thickness cut-off and relevant coal quality cut-off parameters have been applied. |
Probable (Coal) Reserves (SAMREC Definition Standards) | A 'Probable Coal Reserve' is the economically mineable material derived from a Measured or indicated Coal Resource or both. It is estimated with a lower level of confidence than a Proved Coal Reserve. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a Pre-Feasibility study for a project or a Life of Mine Plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environment, social and governmental factors, Such modifying factors must be disclosed. |
Proven (Coal) Reserves (SAMREC Definition Standards) | A 'Proven Coal Reserve' is the economically mineable material derived from a Measured Coal Resource. It is estimated with a high level of confidence. It includes diluting and contaminating materials and allows for losses that are expected to occur when the materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of Pre-feasibility Study for a project or a Life of Mine Plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such modifying factors must be disclosed. |
Run of Mine (ROM) Coal Reserve (SAMREC Definition Standards) | A 'Run of Mine' (ROM) Coal Reserve is the tonnage and coal quality of Mineable in Situ Coal Reserves that are expected after all geological losses, mining losses, mining dilution , contamination and moisture-content factors have been applied. |
Saleable Coal Reserve (SAMREC Definition Standards) | A 'Saleable Coal Reserve' is the tonnage and coal quality that will be available for sale, either in the raw ROM state at specified moisture content or after beneficiation of the ROM Coal Reserves has produced materials at specified qualities, moisture contents and size ranges. |
Competent Person (SAMREC Definition Standards) | The SAMREC Code defines a Competent Person as a person who is registered with any one of SACNASP, ECSA, PLATO or any other statutory South African or international body that is recognized by SAMREC. A Competent Person should have a minimum of five years' experience relevant to the style of mineralisation and type of deposit under consideration and to the activity, which that person is undertaking. |