Avalon Minerals has released the results of its pre-feasability study for its Copper-Magnetite Project in Sweden, which has found it is an economically robust long-life project.
Avalon Minerals has released the results of its pre-feasability study for its Copper-Magnetite Project in Sweden, which has found it is an economically robust long-life project.
The PFS put forward several proposals to move the project forward including the 'Base Case' based on mining 1.5Mtpa over 10 years or 3Mtpa over 5 years and the 'Development Case' which allows for further exploration.
The PFS found that Viscaria project will require capital investment of between $US120 million and $US160 million depending on which proposal Avalon used.
Net Cash Flow after tax from the life of the project is estimated to be up to $US356 million.
Avalon said the study found defined resource of 66.6Mt sufficient to underpin the initial 5 or 10 year production profile.
See company statement below:
Avalon Minerals Ltd (ASX:AVI) is pleased to announce the results of the Pre-Feasibility Study (PFS) for its 100%-owned Viscaria Copper-Magnetite Project in Sweden's Kiruna region, which is being developed in close proximity to LKAB's Kirunavarra Iron Ore Operation.
The PFS has confirmed that the Viscaria Copper-Magnetite Project is an economically robust, long-life copper and iron ore concentrate project which will generate substantial returns for Avalon shareholders.
Under the mining proposal defined in the PFS, it is proposed that copper concentrates will be produced at a new processing facility at Viscaria and railed to smelters in either Sweden or Finland which currently receive other Scandinavian-area product. High-grade magnetite concentrate will also be produced and sold to LKAB for use in their pelletising facilities at Kirunavarra. Refer to Figure 1 for the locations of key infrastructure in the area.
Scandinavian copper smelters and LKAB have expressed strong interest in the concentrates to be produced from Viscaria.
The existing Mineral Resources, together with the potential for future significant exploration discoveries at Viscaria, underpin a long-life operation and provide Avalon with the ability to lock in competitive long-term contracts for the supply of key services for the project.
Summary of Key PFS Outcomes:
Capital investment of US$123M or US$145M in the Base Case and US$160M in the *Development Case
Net Cash Flow (NCF) after tax from the life of the project of US$148M or US$129M in the Base Case and US$356M in the *Development Case
Defined Resource of 66.6Mt (10.8Mt Measured and Indicated) sufficient to underpin the initial 5 or 10 year production profile;
Completion of mine planning and initial mine design confirms a favourable production output.
PFS DETAILS
Mineral Resources
Avalon announced an updated resource estimate for the Viscaria Copper-Magnetite Project on 1 October 2010 and this announcement should be referred to for specific details.
The Mineral Resources for the Viscaria deposits have been estimated by Avalon and CSA Global in accordance with the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves.
Pit Optimisation and Mining
Pit optimisation studies and preliminary open pit mine designs were completed over resource wireframes for the A, B and D Zones. Preliminary mine designs were completed by CSA Global with input from Avalon and metallurgical, mining and geotechnical consultants.
Feed for the proposed processing facility is provided by the mining of wireframed copper and magnetite mineralisation using conventional open pit mining methods. Pre-existing underground mine openings will be intersected in and around the proposed A Zone open pit. Open voids potentially impacted by the proposed mine design will be backfilled prior to or during the mining phase.
Processing
For the purpose of the PFS, mining and processing rates of 1.5Mtpa and 3.0Mtpa were chosen. Conventional crushing, grinding, classification and concentration circuits comprising the following key processing steps have been proposed:
- Crushing and screening of ROM ore to 35mm
- Grinding and classification of feed to P80 of 106µm
- Copper recovery in Rougher, Scavenger and Cleaner flotation circuits with concentrate thickening and filtration
- Magnetite recovery incorporating Rougher LIMS, regrinding of LIMS concentrate to P80 of 38µm, Cleaner LIMS, concentrate and tailings thickening
- Tailings disposal to the existing partially-filled facility with periodic increases to capacity
- Loading of bulk copper concentrates for rail transport to Scandinavian smelters
- Pumping of thickened iron concentrates to neighbouring pellet facilities
- Water supply from existing underground facilities and open pit dewatering
- Site services from existing rail, power and transport facilities in and around the site.
PFS Case Details
The PFS has established two cases to consider the financial outcomes of mining and processing the identified mineralisation at Viscaria. The 'Base Case' is considered under two mining scenarios, based on mining 1.5Mtpa over 10 years or 3Mtpa over 5 years. The PFS is considered to have an accuracy of +/- 30%.
PFS key production outcomes include:
- Mining of 15.5Mt at 0.7% Cu and 20% Fe in the Base Case and 30Mt at 0.6% Cu and 23% Fe in the *Development Case;
- Ore feed rates of 1.5Mtpa or 3.0Mtpa in the Base Case and 3.0Mtpa in the *Development Case;
- Average copper concentrate production of 37,800 or 75,700 dry metric tonnes per annum (dmtpa) in the Base Case and 63,300dmtpa in the *Development Case;
- Average copper concentrate grade of 25% Cu, 3% Zn and 48gpt Ag;
- Average magnetite concentrate production of 362,400 or 725,000 dry metric tonnes per annum in the Base Case and 735,000dmtpa in the *Development Case; and
- Average magnetite concentrate grade of 69.5% Fe, 1.5% SiO2, 0.1% Al2O3, 0.01% P, 0.03% Cu and 0.1% S at 24.1% weight recovery.
PFS Development Case
Avalon has identified extensions to the D Zone mineralisation which continue south of the D Zone Resource for approximately 5km. Geological investigation has confirmed the continuation of the D Zone stratigraphy and the presence of both copper and magnetite mineralisation similar in style to the D Zone mineralisation.
Avalon has established an exploration target for this area between 30 and 50 million tonnes of material at 0.4% to 0.7% Cu and 25% to 30% Fe.
Avalon has modelled the effect of an additional 15 million tonnes of production of D Zone material over and above the 10-year Base Case mining scenario at the rate of 1.5 Mtpa to determine the impact on the financial outcomes of the project.
Financial Evaluation
Extensive financial modelling has been undertaken for both the copper and magnetite concentrate operations in Sweden. A summary of the financial analysis and model outcomes is shown below.
The financial results in the PFS are based on a copper price of US$5,510 per tonne of copper (US$2.50/lb. copper) and US$95.90 (US$1.38/dmtu) per tonne of iron concentrate. Exchange rates of 0.75 Euro = 1.00 US$ have also been used throughout the financial analysis.
SUMMARY
Avalon's Board is delighted with the outcome of the PFS, which has demonstrated the robust nature of the Viscaria Copper-Magnetite Project from both a technical and financial perspective and provides a strong foundation for the Company to proceed with a Bankable Feasibility Study (BFS) for the Project. The BFS will commence immediately and study the 3.0Mtpa throughput option for both the Base Case and *Development Case mining scenarios.
The successful development of the Viscaria Project is expected to bring significant benefits to the City of Kiruna and the country of Sweden through increased employment and construction of a second major mining operation in the region.
The key areas of focus for Avalon over the coming months will be to secure all the required environmental approvals for the Viscaria Project in a timely fashion and to complete the resource drilling programs at B and D Zones to convert Inferred Resources to Measured and Indicated. Drilling to define the extent of mineralisation within the 30-50Mt D Zone Extension exploration target is also planned and is set to commence in November 2010.
The board of Avalon would like to take this opportunity to thank all of its staff, consultants and contractors for the significant effort in delivering the PFS on time, which paves the way for the development of a substantial new copper/iron ore development in Sweden.
The successful development of the Viscaria Project will deliver substantial long-term returns for Avalon shareholders and make an important contribution to the continued expansion and development of Sweden's world class copper and iron ore mining industry.
