Conceptual Study completed Ka

RNS Number : 9719H

Beowulf Mining PLC

03 March 2010

 



Beowulf Mining Plc

("Beowulf" or the "Company")

Independent Conceptual Study completed on the

Kallak Iron Ore Deposit

Highlights:

·     Conceptual study by Raw Materials Group ("RMG") shows the Kallak deposit containing a significant resource of iron ore close to the surface and therefore amenable to open-pit mining.

·     Kallak is one of Scandinavia's largest known iron ore deposits still awaiting commercial exploitation. Similar economic potential to that of Beowulf's Ruoutevare deposit.

·     Conceptual study shows Kallak to be a "robust project" with a total potential cash flow, after capital and operating costs, of approximately US$2.9bn over a 15 year mine life.

·     Pay back period of 3.6 years at the higher forecast range for market prices of iron ore.

Beowulf (AIM: BEM; Aktietorget: BEO), the AIM and Aktietorget traded mineral exploration company which owns several exploration projects in Sweden, is pleased to announce that the Raw Materials Group ("RMG"), an independent Swedish natural resource consultancy firm, has now completed its conceptual study on the Company's wholly owned Kallak iron ore deposit aimed at defining the project's commercial viability.

Economic forecasts, based on a simplified cash flow analysis and various price and cost assumptions for a potential open-pit mining operation, made by RMG in their conceptual study on Kallak include:

·      Gross revenues of approximately US$6.8 billion generated over a 15 year mine life at an extraction rate of 10 million tonnes ("M/t") per annum, representing 150Mt in aggregate, at a forecast market price of US$1.39/Fe unit (where 1 Fe unit = 1% Fe/tonne).

·      Total operating costs for 15 years of mining are estimated at US$3.0 billion with total capital costs of approximately US$0.91 billion.

·      Total potential net cash flow in the order of US$191 million per annum (US$12.7/tonne of ore), representing approximately US$2.86 billion in aggregate for a 15 year mining operation. 

·      RMG's economic model shows a pay back period on total investment as low as 3.6 years.

Selected significant highlights from RMG's report are as follows:

·      "The Kallak deposit contains a significant resource of iron ore that is close to the surface and very amenable to open pit mining. At its present stage of evaluation, it is of similar magnitude to the recently announced Ruoutevare study, and one of the largest known iron ore deposits not yet in production in Scandinavia. Application of mining and metallurgical economic factors to the resource has demonstrated that a conceptual mine plan containing 150Mt of ore at a grade of 39% Fe with a stripping ratio of 1.5:1 tonnes of waste to ore is potentially feasible." 

·      "The mining, processing and transport facilities required to extract the iron ore and deliver it to customers in Northern Europe and the Middle East have been outlined and likely capital and operating costs have been estimated. A financial model has been constructed to test the economic viability of the project. From the results of the conceptual financial analysis it is concluded that the project is robust and certainly warrants further work."

As a next step in the development of the Kallak iron ore deposit, RMG recommends moving towards a pre-feasibility study and thereafter, if merited, a full feasibility study, in conjunction with an application to upgrade the existing exploration permit into an exploitation or mining licence.

RMG also recommends further drilling on the Kallak deposit should be carried out in order to confirm the identified potential for an additional mineral resource, based on geophysical data between two targets at Kallak identified by the Geological Survey of Sweden ("SGU"). The resource model could then be updated with such further drilling results and geological interpretations to potentially enable much of the current inventory to be upgraded and therefore increase the amount of ore that can be included in a JORC (or NI 43-101) compliant reserve statement. This would also serve to increase confidence in the geological model and hence the financial model.

In addition, RMG suggests that further metallurgical testing is necessary in order to prove process routes and assist in reducing the project's development time. Pilot scale production is also required in order to provide sufficient concentrate to assist with market studies and the targeting of specific customers.

When released by RMG, full copies of their conceptual studies on both the Kallak and Ruoutevare iron ore deposits will shortly be made available on the Company's website at: www.beowulfmining.com. As in all aspects of mining evaluation, there are uncertainties inherent in the interpretation of geological and technical data and economic factors. All conclusions by RMG represent only their informed professional judgements.

Clive Sinclair-Poulton, Executive Chairman of Beowulf commented:

"This study represents independent confirmation of the excellent commercial viability and potential of Kallak. We believe that, with further work, we can increase the tonnage available and hence the expected mining life of the project. RMG have now shown that both Kallak and Ruoutevare are outstanding iron ore projects which we shall continue to develop."

Dr Jan Ola Larsson, Technical Director of Beowulf commented:

"RMG's economic indications on Kallak are very positive.  Based on historic geological studies by SGU, it is believed that the Kallak resource can be increased through additional drilling, thereby extending the potential mine life and reducing the overall anticipated unit costs. Metallurgical test work by MINPRO AB to further improve the concentrate grade is currently ongoing."

Dr Jan Ola Larsson (Fil. Kand, PhD, DIC), has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Dr Larsson is Technical Director of the Company and has over 30 years relevant experience within the natural resources sector.

Enquiries:

Beowulf Mining Plc
Clive Sinclair-Poulton, Chairman	Tel: [phone]
Strand Hanson Limited
Matthew Chandler / Simon Raggett	Tel: [phone]
Alexander David Securities Limited
David Scott / Nick Bealer	Tel: [phone]
Lothbury Financial Limited
Gary Middleton / Ron Marshman	Tel: + 44 (0) 207 011 9411
or visit http://www.beowulfmining.com

Notes to Editors:

The Kallak Iron Ore Deposit

The Kallak Iron Ore Deposit is located north of the Arctic Circle in the Norrbotten county in northern Sweden approximately 40km northwest of the Jokkmokk municipality centre. The project covers an area of 500 hectares of forested, low hilly and freely drained ground. The deposit benefits from excellent infrastructure with a network of local forestry roads in the project area located very close to the main paved road between Kvikkjokk (Ruoutevare) and Jokkmokk. A major hydroelectric plant with associated electric power lines is located only a few kilometres away. With respect to its future planning, the Company recognises the important potential synergies that could arise from the fact that both the Kallak and Ruoutevare deposits are located relatively close to each other, only about 100km apart, along the same main transport road to Jokkmokk.

The Kallak deposit was originally discovered in 1947 and was assessed by the SGU in the early 1970s during which time detailed ground geophysics, diamond drilling and trenching were completed. The deposit is made up of two mineralised bodies that are separated in distance by only several hundred metres along the same geological structure which extends in a north south direction and they may well be connected at depth. The two mineralised bodies are defined as the "Kallak North deposit" and the "Kallak South deposit" respectively.

Both deposits are outcropping and consist of relatively massive magnetite and minor hematite, interlayered with quartz, feldspar and some hornblende. The dominant host rock is a grey volcanite. The ores occur in a north-south oriented syncline of highly altered sediments and felsic volcanic rocks of early Proterozoic age within granitic gneisses.

The deposits are up to 300 metres wide and the confirmed extension for the Kallak North deposit is more than one kilometre.

The Kallak North deposit is by far the largest known deposit of the so called "quartz banded iron ore type" that is still awaiting commercial exploitation in northern of Sweden. SGU have historically generated an estimated tonnage for the Kallak North deposit of 92Mt and 29Mt for the Kallak South deposit. The deposits are very close to each other and may be geologically connected at depth with grades varying between 35-42% of iron. Low background values have been noted for titanium (< 0.1%), phosphorous (0.04%) and sulphur (<0.6%). For the purposes of their conceptual study, RMG has assumed that further drilling will increase and upgrade the outlined historic total mineral resource of 121Mt, such that 150Mt is estimated to be mineable by way of conventional open-pit mining methods.

There appears to be good potential to substantially increase the Kallak resource by drilling extensions to the existing resource and by testing other magnetite bearing zones in the vicinity of the deposit. 

High grade pellet feed product from the Kallak deposit

Preliminary results of ongoing bench scale metallurgical studies being conducted for the Company by MINPRO AB's research laboratory at Stråssa in Central Sweden on ore grade material from the Kallak deposit, show that a high grade pellet feed product containing 68% of iron can be obtained. This result has been used in RMG's conceptual study on the Kallak deposit. With levels of contaminants like phosphorous, titanium and sulphur only at analytical detection levels this pellet feed product is believed to be of high commercial interest to potential clients.

About RMG

RMG (Raw Materials Group), founded in 1990, is one of Europe's leading, independent groups of mineral economists and mineral strategy/policy analysts. Since 2002, it has prepared the annual iron ore analysis published by the UNCTAD Trust Fund Project on Iron Ore Information. In recent years, RMG has conducted market studies for iron ore mines in Sweden, Finland and Russia and also identified potential acquisition targets amongst iron ore deposits in Latin America and Africa for various steel companies.

 

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