Berg Aukas Pre Feasibility Study Results

RNS Number : 0019I

China Africa Resources PLC

27 May 2014

 



China Africa Resources plc

("China Africa Resources" or the "Company")

Berg Aukas Pre Feasibility Study Results

China Africa Resources plc ("CAR") today announces the result of the Pre feasibility study ("PFS") on Berg Aukas. The PFS has been calculated on the basis of four different processing options, details of which are set out below. The PFS report is available on the company's web site.

Highlights:

·      Berg Aukas shown to be a viable project.

·      Pre-tax Net Present Values (10%) (NPV's) of between US$49 million and US$51 million (best-estimated value), dependent on the processing option selected.

·      Post tax NPV's of US$29 million on best-estimated value.

·      Pre-tax Internal Rate of Return (IRR) of 25% in real US$ terms.

·      Minxcon stated that under the current economic environment the Project is robust and have recommended that the project move to the next decision level.

Pre feasibility study (PFS) overview of results

As a result of the successful 2012 diamond drilling campaign, and subsequent maiden JORC Mineral Resource Estimate, the Company has engaged a number of consultants who completed a PFS for the re-development of the Berg Aukas Zinc-Lead-Vanadium Mine in northern Namibia. The major contributors to the study are summarised in the table below:

Company	Responsibilities
CSA Global	Drill Programme Design and Supervision to Industry Standards, Including Training and QAQC.
EV Cameras	Video Inspection of No.2 Shaft
TWP Projects	Supervision and Reporting of Shaft Inspection
Coffey Mining	Maiden JORC Indicated Mineral Resource Estimation
Lund Mining	Mining Study, Ore Reserves
Redden Mining	Mining Study
Mintek	Metallurgical Testwork
Logiman	Phase 1 - Supervision of Mintek Testwork and Preliminary PFD
Logiman	Phase 2 - PFS Processing Options and Report Complication
Skorpion Zinc	Initial Testwork on ZnO Sample for Amenability to Processing at Skorpion Mine, Namibia
Huludao	Potential descloizite off-take, testing descloizite concentrate sample
Louis Dreyfus	Product Marketing
Minxcon	Financial analysis,

Project Description

The Berg Aukas Mine is located approximately 19km east of the town of Grootfontein in northern Namibia. The Berg Aukas mine operated as a low tonnage, high grade producer of zinc, lead and vanadium between 1958 and 1978, and hoisted an estimated 2.3Mt at an average grade of 15% Zn, 3.9% Pb and 0.85% V₂O₅ over this period. The mine ceased operations in 1978 due to depressed zinc prices and significant resources remain in situ. The majority of the remaining resource is located between the 14 and 19 levels (approximately 400m to 590m below surface where extensive development is already in place providing good access to the orebodies.

The mineral rights to the Berg Aukas mine and surrounds are held by China Africa Resources Namibia (Pty) Ltd (a wholly owned subsidiary of CAR) under two slightly overlapping mining licenses (ML), ML-14/2/3/2/1 and ML-14/2/3/2/24B. The mining licences expire on 31 March 2019 and encompass all known hard rock ore bodies, the slag dump and the tailings storage facilities and cover an area of 904ha.

Geology and Mineral Resource Estimate

The three major ore bodies are confined to a narrow (<250m wide) NNE-SSW trending corridor on the northern limb of a syncline. They have been shown to extend to the keel of the syncline, around 23 Level (750mbs), but have only been significantly developed to the 19 Level (590mbs).

Mineralisation is predominantly breccia hosted and intimately related to the extensive cavity system developed from surface to the lowest levels of the mine. Mineralisation consists of zinc and lead oxides and sulphides, with minor vanadium rich muds and cavity infill.

In April 2013 Coffey Mining Pty Ltd (Coffey) completed a maiden JORC Mineral Resource Estimate (Table 1) based on the CAR 2012 diamond drilling and historical drilling data (Whittaker, 2013). Mineral Resources are reported inclusive of Ore Reserves.

Classification	Cut-off Grade (Zn%)	Tonnes	Average Grade (Zn%)	Average Grade (Pb%)	Average Grade (V2O5%)
Indicated	2.0	1,339,600	14.74	3.69	0.329
	2.5	1,303,880	15.09	3.76	0.330
	3.0	1,264,800	15.47	3.84	0.331
	3.5	1,217,930	15.94	3.95	0.333

Table 1: Coffey 2013 Mineral Resource Estimate (Whittaker, 2013)

JORC Compliant Ore Reserve Estimate

Classification	Cut-off Grade (ZnEq%)	Tonnes Mt	Average Grade (Zn%)	Average Grade (Pb%)	Average Grade (V2O5%)
Probable	5%	1.691	11.16	2.76	0.23

Table 2: Lund Mining 2013 Ore Reserve Estimate (Lund, 2013)

The Zinc equivalent is based on the combined zinc and lead content only at USD 2,000/tonne for both zinc and lead. While silver is not included in the ore reserve estimate due to insufficient data to be estimated in the Mineral Resource, the average Ag grade in the ore reserve blocks is 8.7g/t.

This is the reserve conversion of the Coffey Mineral Resource and does not include the material from the historic resource outside the Coffey model. This has been accounted for separately as mineral inventory within the life of mine (LOM).

Mining

Currently it is envisioned that the mining rate will ramp up to 250,000 tonnes per annum (tpa) hoisted by Year 3 of the operation. This is considered feasible as during the final six months of operation in 1978 the mine was hoisting at an annual rate of 258,000 tpa. After gravity pre-concentration the plant is expected to mill and process approximately 80,000tpa.

The average LOM Ore Reserve grades, including dilution and after applying appropriate modifying factors, are expected to be approximately 11.16% Zn, 2.76% Pb, 0.23% V₂O₅ and 8.7 g/t Ag.

Processing

Metallurgical testwork was undertaken by Mintek in Johannesburg, under the supervision of Logiman.

The testwork regime is focused on replicating and improving the successful sequential floatation process flow sheet used when the mine was in operation. In addition, considerable effort is being made to improve the pre-milling concentration of the ore using gravity separation. The PFS evaluated four processing options:

Option 1:          Construction of a crusher, gravity pre-concentration plant, mill and flotation processing plant on site - the 'historical flowsheet'.

Option 2A:        Construction of a crusher and gravity pre-concentration plant on site, with the pre-concentrate product trucked to an existing concentrator facility at Tsumeb (approx. 80km by road), and rehabilitation of parts of the Tsumeb concentrator.

Option 2B:        Construction of a crusher and gravity pre-concentration plant on site. Direct sale of the pre-concentrate product.

Option 3:          Trucking all ore to Tsumeb, construction of a gravity pre-concentration plant at Tsumeb, crusher, mill and flotation section rehabilitated at Tsumeb concentrator.

Gravity separation testwork results from Mintek indicate that a high zinc grade pre-milling product can be achieved using gravity separation alone (shaking tables and Dense Media Separation (DMS)) at 30% Zn and 10% Pb, with recoveries of 87% and 86% respectively. Significantly, over 90% of high gangue acid consuming material (Mg, Ca and CO3) is rejected using the gravity separation. A preliminary costing exercise for this has been undertaken by Logiman as Option 2B.

The flotation testwork undertaken by Mintek has demonstrated that the historical five-stage sequential flotation is verifiable and achievable. In addition, significant improvements have been made in the overall Zn and Pb grades to their respective primary sulphide concentrates (Table 3), and significant reductions in Zn reporting to the slimes and Pb reporting to the V₂O₅ concentrate (Table 4).

	Logiman MB 2013		Historical		Comments
Concentrate	Zn%	Pb%	Zn%	Pb%
Zn Sulphide	66.5	1.4	54.3	4.6	Significantly improved Zn grade
Pb Sulphide	20.0	70.8	17.7	52.3	Significantly improved Pb grade
Zn Oxide	47.7	1.0	44.1	2.0
Pb Oxide	8.8	58.1	10.2	57.5
V2O5	7.1	39.7	17.4	42.6	Reduced Zn grade
Slimes	15.5	2.2	20.0		Reduced Zn grade

Table 3: 2013 Concentrate Grades (From MB) vs Historical Production (Historical Production Based on Final Three Years of Production)

	Logiman MB 2013		Historical		Comments
Concentrate	% Zn Recovered	% Pb Recovered	% Zn Recovered	% Pb Recovered
Zn Sulphide	28.0	2.3	16.6	4.5	Increase in Zn reporting to conc
Pb Sulphide	4.2	56.9	2.2	20.4	Increase in Pb reporting to conc
Zn Oxide	56.6	4.8	37.1	6.6	Increase in Zn reporting to conc
Pb Oxide	0.4	9.7	0.1	1.9	Increase in Pb reporting to conc
V2O5	0.7	14.9	4.5	35.2	Decrease in Zn & Pb in conc
Slimes	1.7	0.9	30.0	0.0	Significant decrease in Zn to slimes
Recovered	91.6	89.5	90.5	68.6	Sig increase in Pb recovered

Table 4: Percentage of Metals Recovered In The Various Concentrates from MB (Historical Production Based on Final Three Years of Production)

Overall the 2013 testwork programme demonstrated that it is feasible to improve on the historical concentrate grades, especially the most significant Zn concentrates, and also to improve the recoveries of both Zn and Pb metals reporting to the major Zn and Pb concentrates. Significantly the amount of Zn metal reporting to the Zn slimes has been reduced from approximately 30% historically to less than 2%, mainly as a result of improved gravity separation.

Infrastructure

The existing electrical substation close to the mine site was initially constructed for the mining operation in the 1970's. The substation is now the major substation for Grootfontein and surrounding areas. After initial discussions with Nampower it is expected that up to 3MW will be available at the mine site, including the 750kVA currently used by Namwater in its pumping operations.

Process water will be readily available from the dewatering of the underground workings. Currently NamWater (the parastatal water supply company) maintains a water pumping station in the No.2 Shaft for the supply of water regionally. The mine dewatering will generate far more water than will be used by mining or any of the processing options.

Environmental and Permitting

If the project proceeds to development a new Environmental Clearance Certificate (ECC) will be required. This will require submission of an Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP) to the Ministry of Environment and Tourism. It is expected that there will be considerable local support for the project to proceed and that during operation the considerable environmental legacies from previous mining operations will be rehabilitated and/or retreated.

Product Marketing

The mine produces five products as summarised in the previous table 5. zinc sulphide, lead oxide and sulphide concentrates are readily saleable to most smelters with standard treatment charges applicable.

The zinc oxide concentrate in its current form is of most interest to smelter/refineries that use solvent extraction prior to eletrowinning (SX-EW) in their process.

The descloizite (V₂O₅) concentrate has a limited market, with Huludao smelter in China being the only potential client identified. Unfortunately the annual production of this type of concentrate from Berg Aukas is insufficient to warrant the reactivation of Huludao's (currently dormant) vanadium recovery circuit. This may change in the future but for the purposes of this study it has been assumed that the descloizite concentrate is treated as a lead oxide concentrate with no credit for the vanadium content.

Process Pant and Infrastructure Capital Cost Estimate

Logiman (Part 3) has costed the capital requirements for the various options based on indicative quotes for the major items and factoring other costs where appropriate (Table 13).

These costs are considered to be +/- 30%.

Item	Option 1	Option 2A	Option 2B	Option 3
DIRECT FIELD COSTS (USDm)
PROCESSING
Civils	0.80	0.76	0.46	0.62
Structural	0.72	0.69	0.51	0.73
Mechanical	11.59	12.18	4.78	9.17
Electrical	1.99	2.85	2.04	1.94
Instrumentation	0.17	0.17	0.08	0.17
Transport	0.20	0.20	0.15	0.20
Valves	0.30	0.30	0.20	0.30
Piping	0.50	0.50	0.30	0.50
Non-Processing Items	0.45	0.31	0.30	0.19
Mobile Equipment	0.50	0.50	0.50	0.50
Startup & Commissioning Spares	0.43	0.43	0.20	0.40
P&G	4.75	5.18	2.47	5.39
Total Processing Pre-Production Capex (USDm)	22.40	24.07	11.99	20.11
INDIRECT FIELD COSTS (USDm)
EPCM	3.36	3.61	2.37	4.04
Total Indirect Costs (USDm)	3.36	3.61	2.37	4.04
TOTAL (USDm)
Total Pre-Production Capex (USDm)	25.76	27.68	14.36	24.15

Table 13: Summary of Processing Capital Costs

The sustaining capex has again been calculated at 4% of the mining opex per year.

Option 1: All processing takes places on site and Nampower supplies 3MW of electrical power at Berg Aukas, with the remaining requirements supplied by generators on site. Sufficient generator power will be available to run critical systems (mainly dewatering and hoisting) in event of a power failure.

Option 2A: The gravity separation takes place on site, with trucking of the pre-concentrate to a refurbished Tsumeb concentrator. Nampower supplies 3MW to the site, with the remaining requirements supplied by generators. Sufficient generator power will be available to run critical systems in event of a power failure. Nampower supplies all power to the rehabilitated Tsumeb Concentrator.

Option 2B: Gravity separation on site with the sale of the gravity separation product. All power supplied by Nampower with sufficient generator capacity on site to run critical systems in the event of a power failure.

Option 3: All ore trucked to Tsumeb with the processing at a rehabilitated concentrator. Nampower supplies 3MW to site, sufficient for all needs, and that there is standby generator capacity in case of power failure for critical systems such as dewatering and hoisting.

Basis of Valuation of the Mining Assets

In generating the Financial Model and deriving the valuations, the following was completed:-

·      A Cash Flow Model with an effective date of November 2013.

·      The free cash flow to equity holder ("FCFE") was set up in calendar years.

·      A discount rate of 10% was applied as per the in-house model.

·      The impact of mineral royalties has been included.

·      Sensitivity analyses have been performed to ascertain the impact of discount factors, commodity prices, total working costs and capital expenditure.

·      Capitalised expenses of USD2 million prior to start-up was included.

·      A total of 10 years' production life and 11 years' project life was calculated.

·      For tax purposes, assets other than freehold property are written off over three years.

Economic Input Parameters

Spot Prices

The commodity prices displayed in Table 8 (sourced from the in-house model) were used in the DCF. Price forecasts are illustrated against the current price levels and highs and lows forecast prices, which were sourced from analysts as reported in Consensus Economics Inc.

Table 8: Macro-Economic Forecasts and Commodity Prices over the LoM (Real Terms)

Commodities	Unit	LoM	Current1	Low2	High2
Silver	USD/oz.	20	19.87	16	25
Zinc	USD/tonne	2,000	2,065	1,900	2,975
Lead	USD/tonne	2,000	2,100	1,984	2,700
Vanadium Pentoxide	USD/tonne	13,000	14,550

Notes:  

1.   As at 14 May 2014.

2.   Consensus Economics Inc.

Payability

The PFS investigated two different concentrate scenarios each of which attract a range of payabilities for the commodities at a discount to spot prices. The zinc oxide in its current form has a limited market and the obvious treatment route is through the Skorpion refinery, owned by Vedanta, at Rosh Pinah in Southern Namibia. The Skorpion refinery is a Solvent extraction and electrowinning ("SX/EW") operation and should not be affected by any deleterious elements.

In 2012 Skorpion conducted initial test work on Berg Aukas samples collected from the waste dump and concluded that the low Gangue Acid Consuming ("GAC") material would be amenable to processing at their facility (David-Howoses, 2012). Further test work carried out by Skorpion on the zinc oxide concentrate bulk sample produced by Mintek in 2013 confirmed the suitability of treating the zinc oxide concentrate at Skorpion refinery and subsequently Skorpion provided indicative treatment terms.

The descloizite (V₂O₅) concentrate also has a limited market, with Huludao in China being the only potential client. Currently, the financial analysis assumes that the descloizite concentrate is treated as a lead oxide concentrate with no credit for the vanadium content.

 

DMS Concentrates

For the concentrates upgraded to DMS concentrates only, a significant discount adjustment is made to the price.

Table 9: Payability of Metal in DMS Concentrates

Commodities	Payability
Zn	50%
Pb	35%
V2O5	35%
Ag	35%

Source: China Africa Resources PFS Study.

Float Concentrates

Based on the current mass balance the potential concentrate grades are as follows:-

Table 10: Grades in Float Concentrates

Concentrate	Concentrate Grade
	Zn %	Pb %	V2O5 %	Ag ppm
Zn Sulphide	66.5	1.4	0.3	50
Pb Sulphide	20.7	70.8	0.4	165
Zn Oxide	47.7	1.0	0.2	75
Pb Oxide	9.1	58.1	0.6	175
V2O5	7.1	38.6	13.0	0

Source: Mintek Testwork.

Indicative Treatment and Refining Charges (TC/RCs) for the lead sulphide and oxide and zinc sulphide concentrates for the PFS were sourced from Louis Dreyfus.

Table 11: Indicative Zinc Sulphide Treatment and Refining Charges

Items	Units	Charges
Zn content	% Payable	85%
Minimum Zn deduction	Units	8
Ag content	% Payable	90%
Ag deduction	Grams	50
Zinc TC/RC	USD per tonne concentrate	170
Ag RC	USD/ oz	1.5

Source: China Africa Resources PFS.

Zinc smelters normally pay for silver credits, but not for lead content.

Table 12: Indicative Lead Sulphide Treatment and Refining Charges

Items	Units	Charges
Pb content	% Payable	95%
Minimum Pb deduction	Units	3
Zn content	% Payable	10%
Ag content	% Payable	90%
Ag deduction	Grams	50
Pb TC/RC	USD per tonne concentrate	170
Ag RC	USD per oz	1.5

Source: China Africa Resources PFS.

Lead smelters normally pay for silver and zinc credits and do not receive a zinc TC/RC for zinc in the lead concentrates.

Table 13: Indicative Lead Oxide Treatment and Refining Charges

Items	Units	Charges
Pb content	% Payable	95%
Minimum Pb deduction	Units	3
Zn content	% Payable	10%
Ag content	% Payable	90%
Ag deduction	Grams	50
Pb TC/RC	USD per tonne concentrate	230
Ag RC	USD per oz	1.5

Source: China Africa Resources PFS.

Silver RC is based on USD/oz payable.   

Indicative Zinc Oxide concentrate TC/RCs were obtained from Skorpion (Vedanta):-

·      EITHER 85% payable & 25-30 cents per lb production costs for finished metal; and

·      OR 60% payable and no further deductions.

The financial analysis has used the latter for simplicity as there is no material difference between the two options.

Table 14: Overall Payability

Project Duration		Overall Payability
Zinc Sulphide	Zinc	57%
Zinc Oxide	Zinc	60%
Lead Sulphide	Lead	67%
Lead Oxide	Lead	55%
V2O5  Treated at Pb Oxide	Lead	5.48%

Source: China Africa Resources PFS.

 

Transport/Shipping

Table 15: Road Distances

From	To	Distance
Berg Aukas	Tsumeb	80 km
Berg Aukas	Walvis Bay	650 km
Berg Aukas	Rosh Pinah	1,350 km

Source: China Africa Resources PFS.

The expected cost of trucking ore or pre-concentrate to Tsumeb from Berg Aukas is USD 12.50/tonne; this is based on the experience of Weatherly International at its Namibian operations at Otjihase and Matchless Mines. Based on the current concentrate transport costs from Otjihase to Walvis Bay, the estimated cost of concentrate transport from Tsumeb/Berg Aukas to Walvis Bay is USD 30/wet metric tonne ("WMT"), and to Rosh Pinah USD 60/WMT. Other realisation costs are based on WTI experience in Namibia (Table 16).

Table 16: Realisation Charges

Item	Unit	Amount
Moisture Content	%	10
Concentrate BA/Tsumeb to Walvis Bay	USD/WMT	30
FOB/Handling	USD/WMT	45
Ocean Freight	USD/WMT	30
Insurance	USD/WMT	2
Concentrate to Skorpion	USD/WMT	60

Source: China Africa Resources PFS.

Taxes and Royalties

This section highlights the salient tax issues in Namibia as they may apply to CAR Namibia. Mining companies in Namibia, excluding those mining diamonds and petroleum, pay tax at a flat rate of 37.5%. Further detailed tax advice should be confirmed with the Namibian tax counsel as applicable. Value added tax ("VAT") is fully reclaimable, on a two-month cycle. Tax and royalties to the following amounts are expected to be paid:

Table 17: Tax and Royalties Payable over LOM (Real terms)

Item	Unit	Option 1	Option 2A	Option 2 B	Option3
Tax	USD million	40.347	41.777	21.584	37.424
Royalties	USD million	8.805	8.805	5.747	8.805

Timing of Deductions and Income

As a general rule, taxable profits and receipts are included for purposes of taxation in the tax year in which the taxpayer delivers the goods or renders the services giving rise to the income. Similarly, expenses are generally deducted on an accruals basis in the year during which the obligation to pay arises. The amount payable for customs duties varies but no duties are payable if imported from South Africa.

Deductions and Allowances

According to the Namibian tax law:

·      The cost of machinery, motor vehicles, utensils, articles, ships and aircraft may be deducted in three equal annual amounts, starting in the year of acquisition.

·      An initial allowance of 20% of construction cost is permitted for commercial buildings in the year the buildings are first used. An allowance of 4% is permitted in each of the following 20 years. For industrial buildings of a registered manufacturer, an initial allowance of 20% and an annual allowance of 8% are allowed. No allowance is granted for employee housing.

·      Prospecting and development expenses incurred in mining operations are not subject to the tax depreciation rules described above. In general, prospecting expenses may be deducted in the year production begins.

·      Costs incurred on infrastructure may be deducted over three years, starting in the year production begins.

·      All companies may carry forward unused losses indefinitely to offset taxable income in future years. Losses may not be carried back.

·      Companies that carry on mining operations may offset current-year and prior-year trading losses from mining against other trade income and vice versa. However, such losses must be apportioned on a pro-rata basis between mining and other trade income to determine taxable income from each source in the current year.

The Berg Aukas Project has an unredeemed loss of USD2 million for tax purposes. This figure was considered in the tax calculation.

Mining Royalties

Namibia applies a 3% mining royalty. The result is shown as a decrease in net income and thus a decrease in income tax liability.

Discount Rate

A company has different sources of finance, namely common stock, retained earnings, preferred stock and debt. Free cash flow is based on either free cash flow to the firm ("FCFF") or free cash flow to equity ("FCFE"). FCFF is the cash flow available to all the firm's suppliers of capital once the firm pays all operating expenses (including taxes) and expenditures needed to sustain the firm's productive capacity. The expenditures include what is needed to purchase fixed assets and working capital, such as inventory. FCFE is the cash flow available to the firm's common stockholders once operating expenses (including taxes), expenditures needed to sustain the firm's productive capacity, and payments to (and receipts from) debt holders are accounted for.

The cashflow was shown at 100% equity, hence the cash flow is shown as the FCFE. A discount rate of 10% was applied to the in-house model. Using this discount rate and Capital Asset Pricing Model ("CAPM") Minxcon illustrates the potential Beta or Project risk assumed for the Project in the calculation by:-

·      Calculating from the 10% real discount rate used;

·      converting to a nominal discount rate;

·      using the 30 years US Government Bond as risk-free rate - 3.40%;

·      using a market risk premium of 5%, a rate generally considered as being the investor's expectation for investing in equity rather than a risk-free government bond; and

·      reflecting a Beta of 1.87, which Minxcon believes is fair for this Project.

Table 18: Berg Aukas Cost of Equity

Cost of Equity	Rate
Risk-free rate (US Long Bond rate)	3.40%
Risk premium of market	5.00%
Base beta (Project Premium)	1.87
Nominal Cost of equity (CAPM)	12.75%
Real Cost of Equity (CAPM)	10.00%

Discounted Cash Flow Analysis

Minxcon's in-house Discounted Cash Flow ("DCF") model was used to illustrate the FCFE net present value ("NPV") for the operation in real terms. The NPV is derived from post-royalties and tax, pre-debt real cash flows, using the techno-economic parameters, commodity price and macro-economic projections

This valuation is based on a free cash flow and measures the economic viability of the orebody to demonstrate if the extraction of the Mineral Reserve is viable and justifiable under a defined set of realistically assumed modifying factors. The model is based on calendar years running from January to December. The peak funding requirement for the annual model (See Option 1) is expected in 2015 for all the scenarios.

Pre-tax NPV and IRR's for the four scenarios are shown below

Table 19: Pre-Tax NPV's and IRR's (Real Terms - Pre-Tax)

Item	Unit	Option 1	Option 2A	Option 2B	Option 3
IRR (%)		31.53%	31.43%	25.27%	30.58%
NPV @ 0%	USD million	111	115	61	103
NPV @ 3%	USD million	88	91	47	81
NPV @ 5%	USD million	75	77	40	69
NPV @ 10%	USD million	49	51	24	45

Table 20displays the NPV of the four scenarios in constant money terms at various discount rates. A best-estimated value calculated at a real discount rate of 10% is either Option 1 or 2A. This is also reflected in the IRR of 25% for these two options.

Table 20: NPV at Various Discount Rates (Real Term - Post Tax)

NPV @ Different Discount Rates	Unit	Option 1	Option 2A	Option 2B	Option 3
NPV @ 0%	USD million	71	73	40	66
NPV @ 3%	USD million	55	57	30	51
NPV @ 5%	USD million	46	47	24	42
NPV @ 10%	USD million	29	29	13	26

Table 21 illustrates the profitability ratios of the Project.

Table 21: Profitability Ratios

Item	Option 1	Option 2A	Option 2B	Option 3
IRR (%)	25.08%	24.98%	19.96%	24.31%
LoM	10	10	10	10
PV of Income Flow	99	102	63	94
PV of Investment	47	49	36	45
Benefit-Cost Ratio	2.11	2.10	1.73	2.06
Capital Gain	111%	110%	73%	106%
Average Payback	3.77	3.77	4.29	3.82

Next Steps

The Company's board will review the PFS in detail at their next board meeting planned for June and a further update will be supplied thereafter.

Abbreviations used

amsl	Above Mean Sea Level
CAR	China Africa Resources Ltd
CARN	China Africa Resources Namibia (Pty) Ltd
COB	Central Ore Body
COG	Cut-Off Grade
CPR	Competent Persons Report
CRM	Certified Reference Material
DMS	Dense Media Separation
ECC	Environmental Clearance Certificate
EIA	Environmental Impact Assessment
EMP	Environmental Management Plan
GAC	Gangue Acid Consuming
HWOH	Hanging Wall Ore Horizon
ILZSG	International Lead Zinc Study Group
JORC	Joint Ore Reserves Committee 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
LME	London Metal Exchange
LOM	Life Of Mine
Ma	Million Years
MET	Ministry of Environment and Tourism
MME	Ministry of Mines and Energy
ML	Mining Licence
Mt	Million Tonnes
Mbs	Metres Below Surface
MRE	Mineral Resource Estimate
NOH	Northern Ore Horizon
PFS	Pre Feasibility Study
QAQC	Quality Assurance Quality Control
SWACO	South West Africa Company
tpa	Tonnes Per Annum
tpm	Tonnes Per Month
TSF	Tailings Storage Facility
USD	United States Dollars
USDm	Millions of United States Dollars
ZnEq	Zinc Equivalent

Competent Persons Statement

The contents of the announcement have been reviewed and approved by the following competent person:

Johan Odendaal (Director, Minxcon): B.Sc. (Geol), B.Sc. Hons (Min. Econ.), M.Sc. (Min. Eng.), Pr. Sci. Nat. Reg. No. 400024/04, FSAIMM Reg. No. 702615, MGSSA No. 965119, MAusIMM Reg. No. 220813, IAS

Johan has over 25 years' experience in the mining and financial industry. This includes 7 years as an independent mining consultant specialising in the valuation of mining projects and 12 years as a mining analyst at two major stockbroking firms.

About Minxcon

Minxcon is a multi-faceted South African advisory company offering a wide range of exploration, resource, mining, metallurgical, financial valuation and advisory services to both local and international companies. Minxcon has the critical mass to advise mining and exploration companies on all mining disciplines and to assist such companies in undertaking new projects - from initial target generation stage right through to final mine closure.

Further information and detail on Minxcon clients can be accessed at www.minxcon.co.za

For further information contact:

Rod Webster, Chief Executive Officer                   Weatherly International               [phone]

Max Herbert, Company Secretary

Samantha Harrison / James Biddle                      RFC Ambrian Limited                 [phone]

Nominated Advisor

 

END

 

 

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