Kagara-Western Areas JV first production

Kagara has announced the first ore production from its Lounge Lizard high grade nickel sulphide deposit thanks to a joint venture struck just eight months ago with project neighbour Western Areas.

Kagara executive chairman, Kim Robinson said production of the first ore at Lounge Lizard highlighted the significant benefits of the joint venture with Western Areas, which enabled mining to start much sooner and at a lower cost than had Kagara developed the project as a standalone operation.

The 744 tonnes of development ore produced so far was accessed by Western Areas as part of the joint development of its Flying Fox deposit and the connecting Lounge Lizard orebody. The ore has been stockpiled and is awaiting treatment through Western Areas' Cosmic Boy concentrator.

"The speed at which Lounge Lizard has been developed has been extremely impressive," Mr Robinson said in a statement.

"This will generate cash flow from the project far sooner and at significantly less expense than would have been the case had Kagara not struck the joint venture with Western Areas. It is also expected to result in even greater operating and capital cost benefits for both parties going forward.

"It should be remembered that Kagara only acquired these nickel rights in November 2006. This schedule could not have been achieved without the professional team at Western Areas who are mining the body on our behalf and we extend our thanks to all those involved."

Under the terms of the joint venture, Western Areas will mine Lounge Lizard using access from the Flying Fox decline.

Western Areas will manage and operate all aspects of the combined project and Lounge Lizard ore will be treated at the Cosmic Boy nickel concentrator and sold into Western Area's offtake agreements.

Full announcement below:

Kagara Ltd (ASX: KZL) 

ASX RELEASE 6 January 2010 

First Ore Production From Lounge Lizard Nickel Project

Kagara Ltd (ASX:KZL) is pleased to report that the first ore from its Lounge Lizard high grade nickel sulphide deposit in Western Australia has been mined , bringing to fruition the innovative joint venture agreement struck just eight months ago with project neighbour Western Areas.

The ore was accessed by Western Areas as part of the joint development of its Flying Fox deposit and the connecting Lounge Lizard orebody. Importantly, the ore produced so far is outside the indicated and inferred resource estimate of 1.15 million tonnes grading 4.6 per cent nickel previously announced by Kagara (see attached longitudinal projection and photographs of ore faces).

The 744 tonnes of development ore produced so far, grading 4.4 per cent nickel, has been stockpiled and is awaiting treatment through Western Areas' Cosmic Boy concentrator.

Kagara Executive Chairman Kim Robinson said production of the first ore at Lounge Lizard highlighted the significant benefits of the JV with Western Areas, which enabled mining to start much sooner and at a lower cost than had Kagara developed the project as a standalone operation.

"The speed at which Lounge Lizard has been developed has been extremely impressive," Mr Robinson said.

"This will generate cash flow from the project far sooner and at significantly less expense than would have been the case had Kagara not struck the joint venture with Western Areas. It is also expected to result in even greater operating and capital cost benefits for both parties going forward.

"It should be remembered that Kagara only acquired these nickel rights in November 2006.This schedule could not have been achieved without the professional team at Western Areas who are mining the body on our behalf and we extend our thanks to all those involved."

Under the terms of the joint venture, Western Areas will mine Lounge Lizard using access from the Flying Fox decline. Western Areas will manage and operate all aspects of the combined project and Lounge Lizard ore will be treated at the Cosmic Boy nickel concentrator and sold into Western Area's offtake agreements. In addition to accessing first ore at Lounge lizard a further 21 diamond drill holes have been drilled from the exploration drive on the 630 RL and assay results have been received for eight holes since the ASX release on 18 December 2009 (see below). When the drilling program outlined on the attached longitudinal projection is complete, a reserve for Lounge Lizard will be calculated and this will incorporate any ore drive development within the upper section of the ore body.