Drilling Report

SRK Completes Positive Phase 2 Feasibility Study for

    Messina Platinum

 

    Phase 2 Resource Increases by 12 Percent to 6.3 Million Ounces

    Shares Issued and Outstanding: 51,580,800

    TSX: SUF

    AIM: SRE

 

    TORONTO, Aug. 27 /CNW/ - SouthernEra Resources Limited announced today

the successful completion of the Bankable Feasibility Study for its Messina

Phase 2 Project on the Doornvlei property by SRK Consulting, a leading

international engineering consulting group. The Doornvlei property is 100

percent owned by Messina Limited, which in turn is 70.4 percent owned by

SouthernEra Resources Limited.

    Doornvlei is located on the Bushveld Igneous Complex, a geological

formation well known for its production of Platinum Group Metals (PGM's) as

well as chromite ores. The project is located about 12 kilometres to the east

of Messina's 100 percent owned Voorspoed Mine, which is currently under

development and in early production, and immediately adjacent to the newly

acquired Dwaalkop property. The PGM reefs are continuous over these three

properties - Voorspoed (Phase 1), Doornvlei (Phase 2) and Dwaalkop.

    The Bankable Feasibility Study estimates an after tax internal rate of

return (IRR) of 22.6 percent with a net present value (NPV) of US$73.3 million

at a 10 percent discount rate for the Messina Phase 2 Project. The expected

annual average production rate is approximately 173 000 ounces of 5PGM+Au at

an average estimated operating cost of US$107 per ounce over the life of mine,

after netting out nickel and copper by-product credits. The metal splits for

the two reefs are as follows:

 

    ------------------------------------------------------------------------

    ELEMENTS                        MERENSKY REEF             UG2 REEF

    ------------------------------------------------------------------------

    Platinum                        53.7%                     39.5%

    ------------------------------------------------------------------------

    Palladium                       27.4%                     36.9%

    ------------------------------------------------------------------------

    Rhodium                          2.8%                      6.2%

    ------------------------------------------------------------------------

    Iridium                          1.4%                      2.5%

    ------------------------------------------------------------------------

    Ruthenium                        6.9%                     13.0%

    ------------------------------------------------------------------------

    Gold                             7.8%                      1.8%

    ------------------------------------------------------------------------

    Platinum / Palladium Ratio    1.96: 1                   1.07: 1

    ------------------------------------------------------------------------

    Platinum / Rhodium Ratio     19.18: 1                   6.37: 1

    ------------------------------------------------------------------------

 

    The peak capital requirement for the project is US$84.7 million, which is

estimated will be paid back approximately 5 years after production start-up.

The expected operating mine life is 23 years with full production of 120,000

tonnes per month to be achieved by mid-2005 following a 24 month construction

period.

    SouthernEra President and CEO Patrick Evans stated: 'We are proving, step

by step, that the Messina Project in its various phases will make SouthernEra

one of the world's leading and most profitable producers of PGM's. Once we

have achieved full production from Phase 2, PGM production from Messina will

total approximately 400,000 ounces per year at a cash production cost of

approximately $100 per ounce.'

    At an annual production rate of 173,000 ounces, average annual net

revenues (inclusive of base metal revenue and net of smelter and refining

charges) are estimated at US$64.7 million based on an average price of $374

per ounce of 5PGM's+Au. Metal prices used for the Bankable Feasibility were

based on London Metal Prices at August 16, 2002. The following table

summarises the metal prices and expected annual metal output.

 

    ------------------------------------------------------------------------

    Metals                          Feasibility Prices        Annual Output

    ------------------------------------------------------------------------

    Platinum                        $556 per ounce            76,800 ounces

    ------------------------------------------------------------------------

    Palladium                       $320 per ounce            58,200 ounces

    ------------------------------------------------------------------------

    Rhodium                         $740 per ounce             8,700 ounces

    ------------------------------------------------------------------------

    Iridium                         $280 per ounce             3,700 ounces

    ------------------------------------------------------------------------

    Ruthenium                       $125 per ounce            18,900 ounces

    ------------------------------------------------------------------------

    Gold                            $312 per ounce             6,700 ounces

    ------------------------------------------------------------------------

    Nickel                          $6650 per tonne            1,670 tonnes

    ------------------------------------------------------------------------

    Copper                          $1473 per tonne            1,000 tonnes

    ------------------------------------------------------------------------

 

 

    South African-based operating and capital cost estimates were converted

at an exchange rate of R10.5 (equal sign) US$1.00 for 2002, increasing to   

R11 (equal sign) US$1.00 by the end of 2003 and this rate was maintained over

the remainder of the project life.

    The previous Phase 2 resource estimate was 15.180 million tonnes at a

grade of 5.81 grams per tonne of 5PGE+Au (2.83 million ounces) in the

Indicated category, plus an additional 15.030 million tonnes grading 5.80

grams per tonne (2.80 million ounces) in the Inferred category. As part of the

Bankable Feasibility Study, SRK re-estimated the Phase 2 resource using the

histogram method, which assigns a global mining grade and width. The mining

widths selected, excluding dilution, were 1.05 metres for the Merensky Reef

and 2.0 metres for the UG2. Although the reefs outcrop at surface on Phase 2,

the resource tonnage has been estimated from 100 metres below surface to 1 000

metres and by applying a bulk density of 3.2 tonnes per cubic metre for the

Merensky reef and 3.8 tonnes per cubic metre for the UG2 reef.

    SRK has applied a 25 percent geological loss for both reefs at Phase 2,

in close concordance with common industry practice. Incorporating the

abovementioned mining widths, SRK estimates the Merensky resource is 11.89

million tonnes at a grade of 4.47 grams per tonne (5PGM+Au). The corresponding

UG2 values are 26.9 million tonnes at 5.35 grams per tonne. This 6.3 million

ounce resource, at an average grade of 5.08 grams per tonne, has been placed

in the Indicated category in terms of South Africa's SAMREC Code of reporting

of mineral resources and mineral reserves, which conforms to the requirements

of Canada's National Instrument 43-101 and the equivalent United Kingdom code

for reserve and resource classification. Comparing the SRK resource to the

previous estimate, total 5PGM+Au resources have increased by 12 percent.

    SRK has estimated a mining reserve by discounting the new resource

tonnage for mining layout losses and diluting the resource grade. The mining

layout calls for an extraction of 78 percent, including shaft pillars.

Dilution has been added at 0.20 metres to the stoping width for both reefs

giving 19 percent and 10 percent dilution for the Merensky and UG2 reefs

respectively. Further tonnage increases at the expense of grade have been

included to account for all development dilution. The effects of all these

additions resulting from dilution and subtractions for pillars is to lower the

resource tonnage by 21.4 percent for Merensky reef and 29.5 percent for the

UG2.

    Accordingly, the reserves for Phase 2 are 11.12 million tonnes at 3.69

grams per tonne for the Merensky reef and 20.85 million tonnes at 4.81 grams

per tonne for the UG2. This total reserve of 4.5 million ounces at an average

diluted grade of 4.42 grams per tonne has been classified in the Probable

Reserve category. The Independent Competent Person in respect of the Phase 2

reserve and resource statement is Dr. Anthony Martin, B.Sc., D.Phil. of SRK

Consulting.

    Both the Merensky and UG2 reefs will be mined at a combined rate of   

120 000 tonnes per month. The sublevel open stoping mining method has been

proposed, as it is the safest and most practical for this environment. A total

of 11.12 million Merensky and 20.85 million UG2 reef tonnes will be mined over

a life of 25 years, resulting in a total production tonnage of 31.97 million

tonnes.

    The development strategy is to first access the ore bodies by means of

two decline ramp systems, each of which will cater for one half of the     

3.7-kilometre strike available at Phase 2. The top three levels (175 metres,

250 metres and 325 metres) will be mined via the declines, with reef being

trucked up to surface for processing in the plant. The portion of the ore body

between 400 metre level and 700 metre level will be accessed via a vertical

shaft to 700 metres, the sinking of which will begin in Year 5 and will be

operational by Year 7. The shaft will then be deepened in Years 14 and 15 in

order to access the remainder of the resource between 700 and 1 000 metres.

The project reserves, those above 1 000 metres, are depleted in project Year

25. Potential exists however, to extend the project life beyond this date, by

considering resources below this level.

    The plant has been designed as a two-stage milling and flotation (MF2)

type plant capable of treating 120 000 tonnes of ore per month at a UG2:

Merensky feed ratio of 65:35. A single flotation will be produced as a filter

cake and will be transported by road for smelting and refining. The average

life of mine head feed grade is 4.42 grams per tonne 5PGM+Au resulting in an

average plant recovery of 84 percent. Concentrate production will be

approximately 2 400 tonnes per month, based on a mass pull of 2 percent.

    Subject to the securing of the necessary government permits and the

conclusion of financing, the Company plans to commence development of the

Messina Phase 2 in January 2003. It is expected that the mine will be in full

production by mid 2005.

    SouthernEra Resources Limited is an independent producer of platinum

group metals and diamonds. The Company also has an extensive PGM and diamond

exploration program. The common shares of SouthernEra are traded on the

Toronto Stock Exchange (SUF) and the London Stock Exchange's AIM (SRE).

 

 

    For further information: please contact - SouthernEra Resources Limited

- Patrick C. Evans, President and CEO; or Dr. Sally Eyre, Vice President

Corporate Affairs, Telephone: [phone], Fax: [phone],

e-mail: inbox(at)southernera.com

    (SUF. SRE)