Preliminary Report and Antimony Roaster Update

RNS Number : 0462W

Tri-Star Resources PLC

20 December 2013

 



Tri-Star Resources PLC ("Tri-Star" or the "Company")

Preliminary Report on the Application of Roasting Technology to the Processing of Refractory Gold Ores and Antimony Roaster Project Update

20 December 2013

Tri-Star (AIM: TSTR), the integrated antimony development company, noted in its announcement dated 9 October 2013 that it had commissioned a third party preliminary technical and economic report (the "Report") on the potential feasibility of applying  the antimony roasting technology developed by the Company to treat refractory gold concentrate. The Report, prepared by an independent engineering consultancy, has now been received by the Company.

Key points:

·     In developing its antimony roasting project (the "Roaster Project"), Tri-Star has created technology and knowhow that it believes can be applied to the processing of refractory gold ores with significant potential.

·     Refractory gold, or gold trapped in sulphide minerals, is a large market that now represents
 over 30% of the world's remaining gold resources in the ground.

·     The Report confirms that, at this preliminary stage, a gold roasting facility would be
 technically viable and could generate high economic returns, with an estimated NPV of
 US$532m and an IRR of 31%.

·     Tri-Star has engaged with parties who have expressed interest in the gold roasting
 technology and intends to explore further with them and other owners of refractory gold
 assets how it may best be able to monetise the value in this intellectual property.

The Company's objective in commissioning the Report was to provide an independent evaluation of the feasibility of applying the technology that Tri-Star has developed for its antimony Roaster Project to the processing of refractory gold ores. The Report also considers, at a preliminary level, the potential economics of a gold roasting plant.

The findings of the Report demonstrate, at this preliminary stage, both technical and economic viability for such a project and reaffirm the potential value that exists in the roasting technology and knowhow that the Company has developed for its antimony Roaster Project. The Company has engaged with parties who have expressed interest in the gold roasting technology and intends to explore further how it may best be able to monetise the value in this intellectual property.

The Report has been based on a 500,000 tonne per annum gold concentrate processing facility located in Sohar, in Oman, processing sulphide gold concentrates with an average delivered grade of 35 grams per tonne. The facility is designed to satisfy full EU environmental standards and produce high quality gypsum as the by-product of sulphur scrubbing.  The Report concludes that annual gold production from such a facility would be approximately 500,000 ounces with an estimated capital cost (including contingencies and working capital) of US$342m with a payback period of 4.2 years, a project IRR of 31% and a post tax NPV (at a discount rate of 10%) of US$532m, per plant.

Roaster Project

Further to the announcement made on 9 October 2013, the Company continues, with its joint venture partners, to progress the legal, engineering and environmental due diligence workstreams associated with the antimony Roaster Project. 

Tri-Star has duly executed and lodged, on behalf of the joint venture, a formal application in respect of the prospective site for the antimony roaster facility with the appropriate authorities in Sohar, Oman.   This application forms an important part of the process relating to the joint venture company establishing its base in Sohar Free Trade Zone.

The Environmental Impact Assessment is expected to be completed early in the New Year.

A further update on the antimony Roaster Project will be given to shareholders when appropriate.

Commenting on the Report, Emin Eyi, Managing Director of Tri-Star, said;

"Refractory gold, or gold trapped in sulphide minerals, now represents over 30% of the world's remaining gold resources in the ground and yet processing it is currently one of the biggest challenges in the mining industry.  More and more of the world's gold now is sulphide in nature and requires a further stage of pre-treatment before conventional cyanide leach recoveries can be applied.  The near surface, easy to treat material is rapidly being exhausted and this has some very important implications for the gold mining industry and its costs going into the future. Finding a low cost and environmentally compliant solution to bring these vast resources into economic production is an important and significant challenge.  Many gold miners are currently reluctant to spend money on capital, especially as alternative refractory gold processing technologies have had variable performances recently. 

Tri-Star's processing of high value sulphide minerals, such as stibnite (antimony sulphide) for the recovery of antimony, has led the technical evaluation towards the treatment of other high value sulphide concentrates; such as gold.  Other typical sulphide minerals in which gold is emplaced and difficult to separate include pyrites, arsenopyrites, stibnite and tellurides.  Tri-Star recognised the commercial changes in the world market, with historically high gold prices against a backdrop of declining world shipping and transport rates, making it economically viable for gold concentrates, with grades as low as one ounce per tonne or less, to be shipped from the mine site to a centralised merchant processing facility.  This shift in commodity prices versus shipping and logistics rates, together with the development by Tri-Star of environmentally compliant roasting technology (originally developed for antimony sulphides) has opened up this market opportunity in gold sulphides, which is some 100 times larger in value terms than the antimony market at present.  It is interesting to note that the term 'Refractory Gold' is derived from the old practice of treating such ores in furnaces and roasters.

The ability for these mines to produce a gold sulphide concentrate which can be shipped to a merchant processing facility to produce a saleable end product, allows them bring their gold sulphides into production at a much lower capital cost than having to build a plant themselves and brings immediate cashflow from these once difficult to process orebodies.  The Board believes that the market opportunity is substantial and that more than one facility could be built in the Middle East region alone.  For example, one of the largest pyritic gold belts in the world is in the Arabian Central Gold Region.

The Report produced demonstrates that the Company's bespoke technology and intellectual property developed with regard to the processing of antimony has far-reaching and potentially very significant value creation opportunities if applied to refractory gold.  The Company will now take on the findings of the Report and move forward by continuing to develop its technology and decide which strategy is best to maximise its potential, either as a technology vendor or via multiple site opportunities with its existing partners or in conjunction with third party investors, as appropriate. 

Whilst this Report demonstrates the potential value in the Company's technology, the immediate focus of the Company remains the development of the antimony roaster with its joint venture partners. The Company has made steady progress on all fronts, engineering, environmental and legal, and expects to be in a position to make further announcements in the New Year."

The Report's principal findings are summarised below:

Background

The Report has assessed the potential of constructing a merchant plant for the processing of a range of refractory gold concentrates to produce gold doré (the "Middle East Refractory Gold Project").  It considers a plant to be developed in the free trade zone in Sohar, Oman.  Sohar as well as having a large industrial port, contains the infrastructure required to support such a development.

Project Description

The MERGP would operate as a toll processor, accepting gold bearing flotation concentrates from a wide variety of sources with two roasting lines, each of two kilns; to allow separate feeds to be treated based on their unique characteristics.

In the absence of testwork or firm concentrate sources, Tri-Star has based the design of the MERGP on the work previously carried out on the Oman antimony roaster project, which is well developed by Tri-Star and in the same location at the port of Sohar.  This means the design is based on rotary kiln roasting of concentrates.

The feeds are expected to vary widely in all the key parameters such as gold content, recovery, sulphur content, arsenic content and particle size.  This will have different impacts on the size and cost of the plant, depending on which technology is chosen, and may render some technologies unsuitable.  In order to accurately design a process plant, testwork will be required on a range of concentrates.

Project Infrastructure

The proposed site is located within an industrial park on the outskirts of the city of Sohar, only a short drive from the port of Sohar.  There are excellent road links to the port for the transport of heavy equipment during construction. There are frequent flights from the region to all of the world's major airport hubs, and Sohar has numerous shipping, logistics and cranage companies in operation locally.

A significant amount of construction is taking place in the region.  It can be demonstrated that the area has sufficient infrastructure in place to support the project.

Environmental & Social Impact

Tri-Star is committed to designing a plant to globally recognised environmental standards including World bank criteria, European Union criteria and Omani criteria (being the only criteria that legally applies to the project).

The two main environmental hazards associated with the process are the release of sulphur dioxide and arsenic during the roasting process. As a result, roasting is perceived to be very hard to permit in a western country due to the difficulties and costs associated with capturing the sulphur dioxide and arsenic in the gas emissions. The design work undertaken by Tri-Star demonstrates that these challenges can now be overcome.

The Omani regulatory environment is seen to be more favourable, due to the country's desire to move from a petrochemical to a diversified economy.  The plant will be located in an industrial park with a large number of other heavy industries.

Project Economics

The total capital cost is estimated at US$342million, including contingencies and working capital.

The base case financial model prepared is a constant dollar type model which assumes purchasing power does not change with time.  This means the cost of capital; operating costs and revenue are constant through time in a like-for-like manner.  A scenario analysis is undertaken to assess the impact of time varying changes in the cost of the CAPEX, OPEX and sale price of products.

The Report summarises the economic performance of the plant based on the results of economic modelling for the production schedule under the capital and operating cost and economic parameters as set out in the table below.

Economic performance

Parameter	Value	Unit
Life of plant	20.00	years
Price	1,300	USD/Oz gold
Purchase price	65.0%	of contained gold
Revenue	2,128	USD/t feed
	2,101	USD/Oz gold
OPEX	183.0	USD/t feed
	180.7	USD/Oz gold
Cost of sales	1,550	USD/t feed
	1,530	USD/Oz gold
Margin	395.3	USD/t feed
	390.3	USD/Oz gold
Payback period	4.18	years
Discounted payback period	4.98	years
IRR	31.1%
NPV	531,867,496	USD

The Report concludes that, on this basis, the project would have an NPV of US$532m and an IRR of 31.1%.

The NPV and IRR were subjected to a sensitivity analysis. The project economics were assessed against the following variables and the sensitivities calculated. The result is summarised here:

·     Recovery (high sensitivity)

·     Purchase price of concentrates (high sensitivity)

·     Gold price (medium sensitivity)

·     Grade variance (medium sensitivity)

·     Discount rate (low sensitivity)

·     OPEX variance (low sensitivity)

·     CAPEX variance (low sensitivity)

·     Gypsum price (low sensitivity)

These results show that the greatest improvements in project economics can be achieved by increasing the gold recovery and reducing the price paid for concentrates, as demonstrated by the following table:

	IRR%	Grade (g/t)
		25	30	35	40	45	50	55	60
Concentrate purchase price % of contained gold	55	34%	41%	49%	56%	63%	69%	76%	82%
	60	27%	34%	40%	46%	52%	58%	63%	68%
	65	20%	26%	31%	36%	41%	46%	50%	54%
	70	13%	17%	22%	26%	30%	34%	37%	41%
	75	4%	8%	12%	15%	18%	21%	24%	27%
	80	-10%	-5%	-1%	2%	5%	7%	9%	11%
	Net Present Value (US$ millions)
		Grade (g/t)
		25	30	35	40	45	50	55	60
Concentrate purchase price % of contained gold	55	579.2	799.9	1020.6	1241.3	1462.0	1682.7	1903.4	2124.0
	60	404.7	590.5	776.2	962.0	1147.8	1333.6	1519.3	1705.1
	65	230.1	381.0	531.9	682.7	833.6	984.5	1135.3	1286.2
	70	55.5	171.8	287.5	403.5	519.4	635.4	751.3	867.3
	75	-124.7	-40.1	42.9	124.2	205.2	286.3	367.3	448.4
	80	-317.4	-264.3	-211.4	-161.9	-113.3	-65.5	-17.3	29.9

Enquiries:

Tri-Star Resources Plc Emin Eyi, Managing Director Brian Spratley, Technical Director	Tel: [phone] Tel: [phone]
SP Angel Corporate Finance (Nomad and Broker) Robert Wooldridge / Katy Birkin	Tel: [phone]
Yellow Jersey PR Limited (Financial PR) Dominic Barretto / Kelsey Taynor Keith, Bayley Roger & Co (Joint Broker) Brinsley Holman	Tel: [phone] Tel: [phone]

About Tri-Star Resources

Tri-Star Resources is a focused antimony company whose management has many years experience in trading and mining this critical mineral.  The Company's objective is to become the leading integrated antimony metal and products manufacturer to western economy consumers utilising an environmentally advanced 20,000 tonnes per annum name plate capacity antimony metal and tri-oxide production facility in the Gulf, with raw material supplied from its upstream resource projects in Turkey and Canada and from third party producers. The Company is seeking to utilise the technology of clean roasting of high value sulphide concentrates to apply to the processing of refractory gold ores.

www.tri-starresources.com

www.antimonyworld.com

This news release may contain "forward-looking information", as defined under applicable Canadian securities laws. Forward-looking information typically contains statements that relate to future, not past, events and often contains words such as "anticipate", "believe", "plan", "estimate", "expect", and "intend", statements that an action or event "may", "might", "could", "should", or "will" be taken or occur, or other similar expressions. There can be no assurance that the forward-looking information contained in this release will prove to be accurate, and actual results and future events could differ materially from those anticipated in such information.

All statements, other than statements of historical fact, included in this release including, without limitation, relating to the Report, its contents, the market for gold or refractory gold, the associated viability of chemical processes, the financial assumptions, bases and outputs mentioned and the Roaster Project, constitute forward-looking information. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect, including, but not limited to, assumptions in connection with the ability to deliver any of the outcomes referred to in the Report, the ability to complete construction of the Roaster project, the availability of financing for the cost of the Roaster project on acceptable terms, or likewise any facility that might process refractory gold, and general economic and market conditions. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, risks associated with changes in laws applicable to the Roaster project, the ability to raise finance on acceptable terms for any of the projects or facilities mentioned, the volatility of commodity and raw material prices, currency exchange rates and interest rates, global economic conditions and the additional risks identified in the Company's Annual Report and Financial Statements for the year ended 31 December 2012 or other reports and filings with applicable securities regulators. Forward-looking information in this release is based on the Directors' beliefs, estimates and opinions on the date of this release and the Company does not undertake to update publicly or revise the forward-looking information contained in this release, except as required by applicable securities laws.

Any financial outlook or future-oriented financial information in this release, as defined by applicable Canadian securities laws, has been approved by the Directors as of the date of this release. Such financial outlook or future oriented financial information is provided for the purpose of providing information about the Company's current expectations and plans relating to the future. Readers are cautioned that such outlook or information should not be used for purposes other than for which it is disclosed in this release.

 

END

 

 

DRLLLFVAFLLALIV