| Thu 14 May 2009, 15:02 | | ARQ - Anooraq - Anooraq And Anglo Platinum Report Results Of Lebowa Technical |
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ARQ
ARQ
ARQ - Anooraq - Anooraq And Anglo Platinum Report Results Of Lebowa Technical
Review
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
JSE share code: ARQ
TSXV share code: ARQ
NYSE Alternext share code: ANO
ISIN: CA03633E1088
("Anooraq" or "the company")
ANOORAQ AND ANGLO PLATINUM REPORT RESULTS OF LEBOWA TECHNICAL REVIEW
Lebowa Technical Review completed
Revised Production Scheduling and Cost estimates
Revised Lebowa Life of Mine plan (100%) indicates positive Net Present Value
Anooraq announces that, together with Anglo Platinum Limited ("Anglo
Platinum") (referred to collectively as "the parties"), it has completed the
technical review of Lebowa Platinum Mine ("Lebowa") reported in the November
14, 2008 news release. The technical review was undertaken as a joint
initiative between the parties resulting from the material decline in global
economic conditions and commodity markets during the second half of 2008.
The primary purpose of the joint technical review was to determine and adopt
an optimal mine plan, production schedule and capital expenditure program at
Lebowa in terms of current and estimated future market conditions ("the
revised plan").
Pursuant to definitive transaction agreements entered into between the parties
in March 2008, Anglo Platinum will sell to Anooraq an effective 51% of Lebowa
(currently 100% owned by Anglo Platinum), and an additional 1% interest in
each of the Ga-Phasha Platinum Group Metals ("PGM") Project ("Ga-Phasha"),
Boikgantsho PGM Project ("Boikgantsho") and Kwanda PGM Project ("Kwanda")
("the Lebowa transaction"). Anooraq currently holds interests in Ga-Phasha,
Boikgantsho, and Kwanda by way of 50/50 joint ventures with Anglo Platinum and
will increase its interests in each of these projects from 50% to 51% on
completion of the transaction . All of these projects are located in the
Bushveld Complex of South Africa. Upon completion of the Lebowa transaction,
Anooraq will control the third largest PGM resource base in South Africa.
Revised Lebowa Operations & Growth Plan
Lebowa is an operating mine located on the North-Eastern limb of the Bushveld
Complex, north of and adjacent to the Ga-Phasha property.
Lebowa consists of a vertical shaft and a number of decline shaft systems to
access the underground development on the Merensky and UG2 Reefs, as well as
two concentrator plants.
Production at Lebowa in 2008 was approximately 147,600 refined ounces of
platinum, palladium, rhodium and gold ("4E") from 1.1 million tonnes ("Mt") of
ore milled.
In terms of the revised plan, the parties have determined to implement an
initial plan at Lebowa by:
extending current Merensky production at the Vertical shaft and UM2 incline
shaft. At the same time the Merensky production profile at the new Brakfontein
decline shaft system will ramp up to steady state production of approximately
120,000 tonnes per month ("tpm"). Once Brakfontein Merensky production is at
steady state, production from the Vertical and UM2 shafts will be phased out;
and
retaining the existing UG2 production levels at Middelpunt Hill
(approximately 45,000 tpm) and deferring the Middelpunt Hill Delta 80
expansion project ("MPH Delta 80 project").
Once the initial plan has been executed, the parties intend to increase the
existing UG2 production profile to approximately 125,000 tpm at steady state
through commissioning of the MPH Delta 80 project commencing in 2016, thereby
increasing Lebowa production to approximately 245,000 tpm at steady state by
2019.
The revised plan will be reviewed by the parties on a regular basis in terms
of current and estimated future market conditions.
Pursuant to the completion of the revised plan, Anooraq engaged Deloitte
Mining Advisory Services ("Deloitte") to update the technical review of Lebowa
completed in 2008 (see April 14, 2008 news release).
The technical review confirmed the following Mineral Reserves and Resources,
published by Anglo Platinum in their 2008 annual report.
December 2008 Mineral Reserves
Category Tonnage (Mt) 4E grade (g/t) 4E contained
metal (Moz)
MERENSKY REEF
Proven 21.71 4.34 3.03
Probable 5.43 4.16 0.73
Total Reserve 27.14 4.31 3.76
UG2 REEF
Proven 32.10 5.43 5.60
Probable 9.10 5.17 1.50
Total Reserve 41.20 5.37 7.10
Notes:
The Mineral Reserves stated are for 100% of Lebowa. Anooraq`s interest would
be 51% of the above Mineral Reserves once the transaction is completed.
Mineral Reserves are exclusive of Mineral Resources. Tonnes and ounces have
been rounded and this may have resulted in minor discrepancies.
The 4E elements are the sum of platinum (Pt), palladium (Pd), rhodium (Rh) and
gold (Au).
Only Measured and Indicated Resources have been converted to Mineral Reserves.
Mineral Reserve grade is based on the hoisted ore grade.
The Mine Call Factors used in the estimations of Proven and Probable Reserves
are 97% and 98%, respectively.
December 2008 Mineral Resources
Category Tonnage 4E 4E Pt Pd Rh Au
(Mt) grade contained grade grade grade grade
(g/t) Metal (g/t) (g/t) (g/t) (g/t)
(Moz)
MERENSKY
Measured 25.92 5.64 4.71 3.63 1.5 0.21 0.30
Indicated 27.39 5.51 4.85 3.46 1.52 0.20 0.33
Measured 53.31 5.58 9.56 3.54 1.51 0.20 0.32
and
Indicated
Inferred 102.9 5.30 17.53 3.34 1.45 0.20 0.31
UG2
Measured 108.5 6.60 23.03 2.70 3.23 0.55 0.12
Indicated 71.91 6.56 15.18 2.70 3.20 0.53 0.13
Measured 180.38 6.58 38.21 2.70 3.22 0.54 0.12
and
Indicated
Inferred 145.00 6.61 30.82 2.72 3.23 0.53 0.13
Notes:
The Mineral Resources stated are for 100% of Lebowa. Anooraq`s interest would
be 51% of the above Mineral Resources once the transaction is completed.
Mineral Resources are exclusive of Mineral Reserves.
Tonnes and ounces have been rounded and this may have resulted in minor
discrepancies.
The 4E elements are platinum (Pt), palladium (Pd), rhodium (Rh) and gold (Au).
The UG2 Resources include areas of bifurcated UG2 reef.
Approach to the technical review and report
The technical report ("TR"), written in compliance with National Instrument 43-
101 and the Canadian Institute and Mining and Metallurgy ("CIM") Definition
Standards, describes the Lebowa mineral exploration, development and mining
production. The TR is based on Deloitte`s detailed technical review of work
performed by others. The TR was completed by the following independent
qualified persons, who have reviewed the contents of this release: J.
Schweitzer, Pr.Sci.Nat., FSAIMM and S. de Waal, Pr.Sci.Nat., (geology,
mineralization and mineral resources), G. Guler, PrEng, FSAIMM (mineral
reserves and mine planning), T. Naidoo, Pr.Sci.Nat. (exploration, drilling,
sampling and data verification), and P. Kramers, PrEng., FSAIMM (mineral
processing and metallurgical testing).
Both the 2007 and 2008 Mineral Resource and Reserve estimates were compiled by
Anglo Platinum personnel, have been stated to be in accordance with the
Australasian Code for the Reporting of Mineral Resources and Mineral Reserves
("JORC 2004") and with the South African Code for Reporting of Mineral
Resources and Mineral Reserves ("SAMREC 2007"). In the opinion of Deloitte,
there would not be a material difference in the estimations if done under CIM
2005.
Deloitte has accepted Anglo Platinum`s Mineral Resource and Reserve estimates,
subject to certain qualifications as detailed in the TR. In the qualified
persons` opinions, these qualifications will not have a material effect on
future mineral resource estimates, as indicated in the TR.
Results of the technical review - Economic analysis
The economic analysis undertaken for the technical review used South African
Rand ("ZAR") as the base currency and takes into consideration relevant taxes
and royalties. The technical review used projected metal prices based on
analyst consensus estimates to 2012 resulting in the following average price
forecast over the next five years:
Metal 2009 2010 2011 2012 Trend
Prices (Real
2008)
Platinum Nominal 1052 1237 1369 1398 1339
(Us$/oz)
Palladium Nominal 235 293 349 363 378
(US$/oz)
Rhodium Nominal 2831 3421 4049 4436 3700
(Us$/lb)
Nickel Nominal 5.6 6.7 7.5 7.9 7.2
(US$/lb)
Copper Nominal 1.9 2.3 2.7 2.6 1.9
(US$/lb)
Following is the weighted unit revenue for the 4E basket of metals for the
first four years of production.
2009 2010 2011 2012 LOM (34
years)
4E basket Nominal 753 888 999 1035 -
(US$/oz)
Real 753 868 950 956 967
Exchange Nominal 9.67 9.42 9.43 9.81 -
rate
(ZAR/US$)
Real 9.67 9.21 9.02 9.17 9.60
4E basket Nominal 234,238 268,718 302,764 326,336 -
(ZAR/kg)
Real 234,238 256,901 275,404 281,904 297,371
SA CPI 0.0% 4.6% 5.1% 5.3% -
US CPI 0.0% 2.3% 2.8% 2.9% -
Tax
The current South African Income Tax regime for companies applies to Lebowa
and the Discounted Cash Flow ("DCF") model therefore includes the following
tax regime:
Company income tax rate of 28 % on taxable income.
Secondary tax on companies, a tax on dividends declared, of 10 %.
A withholding tax of 10 % for dividends payable to non-residents.
The South African mining sector enjoys immediate tax relief on capital
expenditure i.e. capital expenditure can be off-set against gross profit in
the year it is incurred (or can be carried forward to create a tax shield)
i.e. capital expenditure is not depreciated or amortised for tax purposes.
Royalty
The South Africa Royalty Act, which has been deferred for a year, was used as
a basis for calculating estimated Royalties.
The DCF uses the third and final draft average rate to calculate royalties
payable to the State, which is based on gross sales less allowable
beneficiation related expenses and transport expenses between the seller and
buyer of the final product. The effective royalty rate over the Lebowa Life of
Mine ("LOM") is 5.6%.
Financial indicators
The table below shows the real term financial indicators of the revised plan
over the expected first 34 years of the LOM at Lebowa.
Units Total Units Total
Material Tonnes 92,740,000 Tonnes 92,740,000
Treated
Grade (4E 4E g/t 5.06 4E g/t 5.06
head grade)
PGM produced 4E oz 13,684,167 4E oz 13,684,167
Revenue ZAR millions 126,749 CAD millions 17,507
Gross ZAR millions 134,226 CAD millions 18,540
revenue
Royalties ZAR millions -7,477 CAD millions -1,033
Operating ZAR millions 64,067 CAD millions 8,849
cost
Unit ZAR/t 703.34 CAD/t 97.15
operating
cost
Gross profit ZAR millions 62,682 CAD millions 8,658
Capital Cost ZAR millions 12,468 CAD millions 1,722
(CAPEX)
Real term ZAR millions 14,937 CAD millions 2,063
tax
Effective % 22.00 % 22.00
tax rate
Working ZAR millions 1,303 CAD millions 180
CAPEX
Net profit ZAR millions 33,974 CAD millions 4,693
(after
working
CAPEX)
Margin % 24.70 % 24.70
Certain additional mineral resources, that had been the subject of
prefeasibility-level studies and hence could be considered mineral reserves
but not included in "approved mine plans" by Anglo Platinum, have been used
for the economic analysis. This includes 25.7 million tonnes from the UG2 and
1.3 million tonnes in the Merensky Reef.
Cashflow & NPV
Based on the assumptions stipulated above, the DCF analysis at Lebowa for the
first 34 years of mine plan yields Net Present Values ("NPV") at different
discount rates as follows :-
Discount Rate NPV ZAR millions
5.0% 14,001
7.5% 9,290
10.0% 6,440
DCF sensitivity analysis
Sensitivities have been calculated in the DCF model for revenue, operating
costs and working costs.
The valuation is most sensitive to a change in revenue. A 10.0% decrease in
revenue results in a 28% decrease in value in the case of NPV at a discount
rate of 7.5%.
The valuation is not particularly sensitive to capital expenditure. An
increase in capital of 10 % decreases the value by just 4.0% in the case of
NPV at a discount rate of 7.5%.
The valuation is sensitive to a variance in operating costs. An increase of
10.0 % decreases the NPV by 14.1% in the case of NPV at a discount rate of
7.5%.
A series of sensitivities for various changes in combined operating costs and
revenue, have been calculated for NPVs at a discount rate of 7.5% and are
included in the table below. The base case uses a LOM Real Average Basket
price of ZAR 297,371 per kg and a LOM Real Average Operating Cost of ZAR
690.83 per tonne
NPVs at 7.5% discount rate
LOM Real Average Basket price
ZAR 297,371/kg
LOM Real Avg Op -20% -15% -10% -5%
Cost ZAR 690.83 per
tonne
-20% 6,710 8,008 9,299 10,598
-15% 6,056 7,355 8,652 9,942
-10% 5,399 6,702 8,000 9,294
-5% 4,740 6,047 7,347 8,645
0% 4,076 5,388 6,694 7,992
5% 3,399 4,728 6,036 7,339
10% 2,714 4,058 5,376 6,684
15% 2,012 3,381 4,715 6,024
20% 1,288 2,694 4,040 5,365
Table continue
NPVs at 7.5% discount rate
LOM Real Average Basket price
ZAR 297,371/kg
LOM Real Avg Op 0% 5% 10% 15% 20%
Cost ZAR 690.83 per
tonne
11,908 13,215 14,523 15,837 17,154
11,240 12,550 13,857 15,164 16,478
10,584 11,882 13,192 14,498 15,805
9,937 11,227 12,525 13,833 15,139
9,290 10,579 11,869 13,167 14,474
8,637 9,935 11,221 12,512 13,809
7,984 9,282 10,577 11,863 13,154
7,331 8,629 9,927 11,220 12,505
6,672 7,976 9,274 10,573 11,862
Anooraq`s President and CEO, Philip Kotze, commented:-
"This technical review confirms Anooraq`s view of the high quality of the
Lebowa ore body, together with its potential for effective depletion through a
phased approach to operations. Management will be required to adopt a focused
and determined effort to ensure delivery of optimum production based on the
revised plan from the updated technical review. Anooraq now looks forward to
moving ahead with the final steps for completion of the Lebowa transaction,
which will transform Anooraq into a PGM producer with significant growth
potential."
On behalf of the Board of Directors
Philip Kotze
President and CEO
For further information please contact:
Anooraq (South Africa) +27 11 779 6800
Philip Kotze, CEO
Joel Kesler, Corporate & Business Development
Anooraq (North America)
Investor Relations +1 604 684 6365
Toll free +1 800 667 2114
Sandton
14 May 2009
Sponsor : QuestCo Sponsors
The TSX Venture Exchange does not accept responsibility for the adequacy or
accuracy of this release.
NYSE Amex has neither approved nor disapproved the contents of this press
release.
Cautionary and Forward Looking Information
This release includes certain statements that may be deemed "forward looking
statements". All statements in this release, other than statements of
historical facts, that address, future production, reserve potential,
exploration drilling, exploitation activities and events or developments that
Anooraq expects are forward looking statements. Anooraq believes that such
forward looking statements are based on reasonable assumptions, including the
assumptions that: the Lebowa acquisition will complete; Lebowa will continue
to have production levels similar to previous years; the planned Lebowa
expansions will be completed and successful; Anooraq will be able to obtain
future debt and equity financing on favourable terms. Forward-looking
statements, however, are not guarantees of future performance and actual
results or developments may differ materially from those in forward looking
statements. Factors that could cause actual results to differ materially from
those in forward looking statements include market prices, exploitation and
exploration successes, changes in and the effect of government policies with
respect to mining and natural resource exploration and exploitation and
continued availability of capital and financing, and general economic, market
or business conditions. Investors are cautioned that any such statements are
not guarantees of future performance and those actual results or developments
may differ materially from those projected in the forward looking statements.
For further information on Anooraq, investors should review the Company`s
annual Form on 20-F with the United States Securities and Exchange Commission
and its home jurisdiction filings that are available at www.sedar.com.
The following are the principal risk factors and uncertainties which, in
management`s opinion, are likely to most directly affect the conclusions of
the study. Some of the mineralized material at the classified as a measured
and indicated resource has been used in the cash flow analysis. For US mining
standards, a full feasibility study would be required, which would require
more detailed studies. Additionally all necessary mining permits would be
required in order to classify the project`s mineralized material as an
economically exploitable reserve. There can be no assurance that this
mineralized material will become classifiable as a reserve and there is no
assurance as to the amount, if any, that might ultimately qualify as a reserve
or what the grade of such reserve amounts would be. Data is not complete and
cost estimates have been developed, in part, based on the expertise of the
individuals participating in the preparation of the study and on costs at
projects believed to be comparable, and not based on firm price quotes.
Costs, including design, procurement, construction and on-going operating
costs and metal recoveries could be materially different from those contained
in the study. There can be no assurance that mining can be conducted at the
rates and grades assumed in the study. There can be no assurance that these
infrastructure facilities can be developed on a timely and cost-effective
basis. Energy risks include the potential for significant increases in the
cost of fuel and electricity, and fluctuation in the availability of
electricity. Projected metal prices have been used for the study. The prices
of these metals are historically volatile, and the Company has no control of
or influence on the prices, which are determined in international markets.
There can be no assurance that the prices of platinum, palladium, rhodium,
gold, copper and nickel will continue at current levels or that they will not
decline below the prices assumed in the pre-feasibility study. Prices for
these commodities have been below the price ranges assumed in study at times
during the past ten years, and for extended periods of time. The project will
require major financing, probably a combination of debt and equity financing.
Interest rates are at historically low levels. There can be no assurance that
debt and/or equity financing will be available on acceptable terms. A
significant increase in costs of capital could materially adversely affect the
value and feasibility of constructing the expansions. Other general risks
include those ordinary to large construction projects, including the general
uncertainties inherent in engineering and construction cost, the need to
comply with generally increasing environmental obligations, and accommodation
of local and community concerns. The economics are sensitive to the currency
exchange rates, which have been subject to large fluctuations in the last
several years.
Information Concerning Estimates of Measured, Indicated and Inferred Resources
This news release also uses the terms "measured resources", "indicated
resources" and ""inferred resources". Anglo Platinum and Anooraq advise
investors that although these terms are recognized and required by Canadian
regulations (under National Instrument 43-101 Standards of Disclosure for
Mineral Projects), the U.S. Securities and Exchange Commission does not
recognize them. Investors are cautioned not to assume that any part or all of
the mineral deposits in these categories will ever be converted into reserves.
In addition, "inferred resources" have a greater amount of uncertainty as to
their existence, and economic and legal feasibility. It cannot be assumed that
all or any part of an Inferred Mineral Resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of Inferred Mineral Resources
may not form the basis of feasibility or pre-feasibility studies, or economic
studies except for a Preliminary Assessment as defined under National
Instrument 43-101. Investors are cautioned not to assume that part or all of
an inferred resource exists, or is economically or legally mineable.
Date: 14/05/2009 15:02:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
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completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
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information disseminated through SENS.
