| Tue 14 Dec 2010, 9:26 | | MMH - Miranda Mineral Holdings Limited - Miranda Coal Division: Dannhauser |
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MMH
MMH
MMH - Miranda Mineral Holdings Limited - Miranda Coal Division: Dannhauser
Project Area Valuation Update
Miranda Mineral Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/001940/06)
Share code: MMH ISIN: ZAE000074019
("Miranda" or "the Company" or "the Group")
Miranda Coal Division: Dannhauser Project Area Valuation Update
1. Summary
The board of directors of Miranda has mandated Venmyn to complete independent
technical resource and valuation statements for six of the Mining and
Prospecting Rights held by its wholly-owned subsidiary Miranda Coal (Pty) Ltd.
This announcement summarises the results for two of the properties in Miranda
Coal`s Dannhauser project area, namely Sesikhona and Majestic. Both the
Sesikhona and Majestic reports may be accessed on Miranda`s website at:
www.mirandaminerals.com.
The SAMVAL-compliant valuations attributed to respectively the Sesikhona
property, holder of a Mining Right, and the Majestic property, holder of a
Prospecting Right, are summarised underneath:
Valuation Miranda Miranda
of 100% Coal Attributable
of Project Interest Value
Sesikhona ZAR120.8m 73% ZAR88.2m
Majestic ZAR 8.5m 65% ZAR 5.5m
Dannhauser Project Area ZAR129.3m ZAR93.7m
2. SAMREC/ SAMVAL Compliance
The key features of the Sesikhona and Majestic projects, respectively, have been
prepared in the format of separate Short Form SAMREC Code compliant Technical
Resource and Valuation Statements, dated 31 May 2010. These Short-form Technical
Resource and Valuation Statements are based on the guidelines set out in Table 1
of the SAMREC Code and Table 2 of the SAMVAL Code. A full SAMREC Code Compliant
CPR has not been compiled by Venmyn. SAMREC Table 1 and SAMVAL Table 2
checklists have been completed, respectively, for each of the Sesikhona and
Majestic projects.
3. Competent Persons and Valuators
The Technical Resource and Valuation Statements to which this announcement
refers, have been prepared by Venmyn and have been compiled for the purposes of
outlining the features, identifying potential risks and making recommendations
in respect to areas of potential downside and upside in the Sesikhona and
Majestic projects, respectively. In the preparation of the Statements, Venmyn
utilised the results of studies conducted by various consultants for Miranda
Coal. Where possible, Venmyn has verified this information after making due
enquiry into all material issues that are required in order to comply with the
SAMREC and SAMVAL Codes.
The Competent Persons and Valuators responsible for the Statements are:
Ms. Catherine A Telfer, B.Sc. Hons (Geol.), (DMS) Dip Bus Man, Pr. Sci. Nat.,
MGSSA, MAusIMM, Director, Venmyn; and
Mr. Derick R De Wit, Pr Tech Eng, B Tech (Chem Eng) (Cum Laude), MAP (WBS),
MIASSA, MSAIMM, MAusIMM, MECSA, Mineral Industry Analyst, Venmyn.
They were assisted by the following Key Technical Personnel:
Ms. Mpai M Motloung, B.Sc. Hons (Geol.), MGSSA, ASAIMM, Mineral Project Analyst,
Venmyn.
The Competent Persons and Valuators are independent, and approved the
information contained in this announcement in writing in advance of its
publication.
4. Sesikhona
4.1 Introduction
Venmyn`s work considered the results of the areas where Miranda had been
actively drilling and which will form effectively the first phase, open pit
operations of Sesikhona. Miranda is planning further exploration both on the
Sesikhona Mining Right area and on adjacent Prospecting Right areas.
4.2 Resource Statement
Historical Resource Statement
Gross Total Ave
Tonnes Geol. Tonnes Thick- Ave
In Situ Losses In Situ ness Depth
(mill) (%) (mill) (m) (m)
Top Seam - Deep 2.003 15 1.703 1.83 29.4
Top Seam - Shallow 2.372 15 2.016 2.28 14.4
Bottom Seam 1.065 15 0.905 0.98 16.9
Total 5.440 15 4.624 1.70 20.2
The following assumptions and modifying factors were taken into account when
creating the historical resource model:
* raw RD for the seams were assumed to be 1.45;
* quality cut-off parameters for resource calculation was not
applied;
* bituminous coal was considered to have Vols>8% and anthracite
coal Vols=6-8%;
* mining width cut-off thicknesses were not applied;
* geological losses of 15% were assumed; and
* all tonnages and qualities are quoted air dry.
The historical resource statement on Sesikhona was prepared by Mr PC Meyer
(Pr.Sci.Nat. 400025/03), a SAMREC-registered Competent Person, member of the
GSSA and Fossil Fuel Foundation, and proprietor of PC Meyer Consulting CC, an
independent geological consultancy.
Adjusted Resource Statement
Gross Total
Tonnes Geol. Tonnes
In Situ Losses In Situ SAMREC
(mill) (%) (mill) Classification
Top Seam - Shallow 2.372 15 2.016 Measured
Top Seam - Deep 2.003 20 1.603 Indicated
Total Top Seam 4.375 17 3.619
Bottom Seam 1.065 25 0.798 Inferred
Total 5.440 19 4.417
Notes to the Venmyn adjusted resource statement:
* All resources are considered to be open cast;
* According to SANS, reconnaissance resources cannot be included for JSE Limited
reporting purposes;
* No minimum seam thickness cutoff was applied;
* Coal intruded by dolerites was excluded;
* Weathering, unknown dolerites and faults were taken into account
in geological losses;
* Delineation between opencast and underground resources was
applied at a seam depth from surface of 55m; and
* No strip ratio cut-off was applied to open castable resources.
4.3 Valuation
Venmyn`s valuation of the Sesikhona project is based on a 100% project value and
uses the Market Approach and the Cash Flow Approach.
Market Approach
The Market Approach relies on the principle of "willing buyer, willing seller"
and requires that the amount obtainable from the sale of the asset is determined
as if in an arm`s length transaction. The Market Valuation Approach requires
comparison with relatively recent transactions of assets that have similar
characteristics to those of the asset being valued. It is generally based upon a
monetary value per unit of resource (where available) or per unit of defined
mineralisation.
Venmyn has compiled a Coal Valuation Curve on Income Graph, which represents
over 50 properties valued by Venmyn within the major South African coalfields
over the last four years. This approach is highly useful in setting the unit
values of different coal projects in different coalfields in South Africa that
have various combinations of Mineral Resource categories. The graph shows the
average values per tonne of coal that are likely to be paid in an arm`s length
transaction involving a willing buyer and willing seller.
Using the Mineral Resources and Reserves of the Sesikhona project and the above-
mentioned approach, Venmyn obtained an upper per tonne value of ZAR50.00 and
lower per tonne value of ZAR30.00. The total Mineral Resource tonnes
attributable to the Sesikhona project are 3.566Mt. Using the Market Approach, a
"fair" value for Sesikhona of ZAR142.64m was determined, with an upper value of
ZAR178.30m and a lower value of ZAR106.98m.
Cash Flow Approach
The Cash Flow approach relies on the "value in use" principle and requires
determination of the present value of future cash flows over the useful life of
the asset. The asset is valued using the free cash flow capitalisation, i.e. the
discounted cash flow (DCF) methodology. A table summarising the projected cash
flow stream for the Sesikhona project is available in the report on Miranda`s
website.
Key assumptions made in the DCF model are:
* the model assumes constant money;
* the discount rate is 12%;
* a coal price of ZAR310/tonne (unwashed, at the gate) is used;
* the tax rate is 28%;
* the royalty payment is based on the formula for unrefined
minerals; and
* no interest earnings or financing costs are included.
To calculate a range of values attributable to the Sesikhona project, a
sensitivity analysis was done on income, operating expenditure (Opex) and
capital expenditure (Capex), respectively. Based on the DCF model, Venmyn
concluded that the Sesikhona project has an upper value of ZAR159.059m and a
lower value of ZAR82.476m. The "fair" value on a 100% project basis for the
Sesikhona project, based on the DCF, is ZAR120.768m.
Concluding Opinion of Value
The table underneath summarises the "fair", upper and lower values of the
Sesikhona project using the Market Valuation and Cash Flow Approaches:
Method "Fair" Value Upper Value Lower Value
(ZARm) (ZARm) (ZARm)
Market 142.6 178.3 107.0
Cash Flow 120.8 159.1 82.5
The Cash Flow Approach was chosen by the Competent Valuator as the preferred
valuation method based on the advanced stage of project, and the confidence in
the parameters used in the model. Consequently, the total value for the
Sesikhona project, calculated on a 100% basis, is as follows:
* the upper and lower valuation range is ZAR159.1m and ZAR82.5m, respectively;
and
* a "fair" value is ZAR120.7m.
4.4 Conclusions and recommendations
A total resource of 5.4M gross in situ tonnes was declared by PC Meyer in
September 2007 applying no modifying factors, besides a 15% geological loss, and
declaring no classification for the resource. Venmyn estimated a resource of
4.4Mt total tonnes in situ, applying geological losses of 15% and a cutoff of
0.5m. The resource was classed in the Measured category.
The fair value of the Sesikhona project is ZAR120.8m with total saleable tonnes
of 3.6Mt. Miranda Coal`s attributable value is ZAR88.2m. The anticipated life of
mine (LOM) for the Sesikhona project is 5 years.
5. Majestic
5.1 Introduction
Venmyn`s work considered the results of the areas where Miranda had been
actively drilling. Miranda is planning further exploration both on the Majestic
Prospecting Right area and on adjacent and nearby Prospecting Right areas.
5.2 Resource Statement
Historical Resource Statement
Gross Total Ave
Tonnes Geol Tonnes Thick- Ave
In Situ Losses In Situ ness Depth
(mill) (%) (mill) (m) (m)
Top Seam - Block 1 1.239 30 0.867 0.99 94.4
Top Seam - Block 2 1.226 30 0.858 0.83 90.0
Top Seam - Block 3 0.297 30 0.208 0.93 104.6
Top Seam - Total 2.762 30 1.933 (inferred
resource)
Bottom Seam - Block 1 2.083 30 1.458 1.47 97.6
Bottom Seam - Block 2 2.289 30 1.602 1.48 91.8
Bottom Seam - Block 3 0.546 30 0.382 1.64 105.8
Bottom Seam - Total 4.918 30 3.442 (inferred
resource)
Total 7.679 30 5.376
The entire SAMREC resource of 5.4 million tonnes was classified at inferred
resource status. The following assumptions and modifying factors were taken into
account when creating the historical resource model:
* mined-out areas are excluded;
* raw RD for the seams were laboratory determined;
* areas of low volatile content were excluded (Vols <5%);
* bituminous coal was considered to have Vols>8% and anthracite
coal Vols=6-8%;
* areas where seam thickness is below 0.8m were omitted;
* geological losses of 30% were assumed due to the complexity of the deposit and
undetermined extent of dolerite and mined out areas; and
* all tonnages and qualities are quoted air dry.
The historical resource statement on Majestic was prepared in December 2009 by
Mr PC Meyer (Pr.Sci.Nat. 400025/03), a SAMREC-registered Competent Person,
member of the GSSA and Fossil Fuel Foundation, and proprietor of PC Meyer
Consulting CC, an independent geological consultancy.
Adjusted Resource Statement
Gross Total
Tonnes Geol. Tonnes
In Situ Losses In Situ SAMREC
(mill) (%) (mill) classifi-
cation
Top Seam - Block 1 1.072 20% 0.857 Indicated
Top Seam - Block 2 1.637 25% 1.228 Inferred
Top Seam - Total 2.709 23% 2.085
Bottom Seam - Block 1 2.180 20% 1.744 Indicated
Bottom Seam - Block 2 3.009 25% 2.256 Inferred
Bottom Seam - Total 5.189 23% 4.000
Total 7.89 23% 6.086
Notes to the Venmyn adjusted resource statement:
* According to SANS, reconnaissance resources cannot be included
for JSE Limited reporting purposes;
* Coal intruded by dolerites was excluded;
* A dry ash free volatile cutoff of 26% was applied to take into
account any burning by dolerites;
* A seam thickness cutoff of 0.8m was applied to underground
resources;
* Weathering, unknown dolerites and faults were taken into account
in geological losses; and
* Delineation between opencast and underground resources was
applied at a seam depth from surface of 55m.
5.3 Valuation
The valuation of the Majestic project is based on a 100% project value and uses
the Cost Approach and the Market Approach.
Cost Approach
The SAMVAL Code definition states that the Cost Approach relies on historical
and/or future expenditure on the Mineral Asset. In the case where insufficient
confidence exists in the technical parameters of the mineral asset, valuation
methods rely almost entirely on the principle of historical cost, implying that
an asset`s value is correlated to the money spent on its acquisition, plus a
multiple of expenditures. A prospectively enhancement multiplier (PEM) is a
factor applied to the total cost of exploration, at different stages of
exploration and project advancement. The magnitude of the PEM is determined by
the level of sophistication of the exploration for which positive exploration
results, applying the concept of successful efforts, have been obtained.
To date, Miranda Coal has spent ZAR1.5m on the Majestic Project on in-fill
drilling, detailed coal analyses and washability testwork, establishing coal
qualities, market potential, detailed resource tonnage estimation, washabilities
and advanced inferred and indicated coal resource classification. The PEM
attributable to the Majestic Project lies between an upper value of 11 and a
lower value of 5. Using the Cost Approach, a "fair" value for the Majestic
Project of ZAR11.9m was determined with an upper value of ZAR16.4m and a lower
value of ZAR7.5m.
Market Approach
The description of the Market Valuation Approach followed by Venmyn was given
above.
Using the Mineral Resources of the Majestic Project and the Venmyn Coal
Valuation Curve on Income Graph, Venmyn obtained an upper per tonne value of
ZAR2.00 and lower per tonne value of ZAR0.70. The total Mineral Resource tonnes
attributable to the Majestic Silver Project are 6.1 million tonnes. Using the
Market Approach, a "fair" value for the Majestic Project of ZAR8.5m was
determined with an upper value of ZAR12.2m and a lower value of ZAR4.3m.
Concluding Opinion of Value
The table underneath summarises the "fair", upper and lower values of the
Majestic Project using the Cost and Market Valuation Approaches:
Method "Fair" Value Upper Value Lower Value
(ZARm) (ZARm) (ZARm)
Cost 11.9 16.4 7.5
Market 8.5 12.2 4.3
Venmyn`s database provides a comprehensive and reliable benchmark for recent
relevant transactions in the coal industry. Venmyn`s confidence in the Market
Approach led the Competent Valuator to prefer the results of the Market Approach
versus the Cost Approach.
Consequently the concluding opinion of value (attributable) for the Majestic
Project is based on the Market Approach as follows:
* the upper and lower valuation range of ZAR12.2m and ZAR4.3m respectively; and
* with a "fair" value of ZAR8.5m.
5.4 Conclusions and recommendations
This update of the coal resources of the Majestic Project quotes 7.9Mt of gross
in situ coal resource at an RD of 1.41. This resource tonnage is based on a cut-
off of 0.8m commonly applied to underground mining resources.
Centurion
14 December 2010
Sponsor:
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Corporate Adviser:
Touchstone Capital (Pty) Ltd
Date: 14/12/2010 09:26:01 Produced by the JSE SENS Department.
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