SouthGobi Resources Announces Updated NI 43-101 Compliant Coal Resources and Reserves for Its Ovoot Tolgoi Complex in Mongolia
30 März 2011 - 11:00PM
Marketwired Canada
SouthGobi Resources Ltd. (TSX:SGQ)(HK:1878) announced today that new,
independent estimates prepared by Minarco-MineConsult ("MMC"), have updated coal
Resources and Proven and Probable Mineral Reserves contained at the Company's
Ovoot Tolgoi Complex, (comprised of the Ovoot Tolgoi Coal Mine and the Ovoot
Tolgoi Underground Deposit). Independent estimates for coal Resources have also
been updated by MMC for the company's Soumber Deposit (comprised of the Soumber
Field and the Biluut Field).
Total Proven and Probable surface coal Reserves estimated at the Ovoot Tolgoi
Complex as of December 11, 2010, are estimated to be 106.8 million tonnes (Table
4). Approximately 59% of the Reserves are classified in the Proven reliability
or assurance category; the remaining 41% are in the Probable category.
Estimate of Resources - Ovoot Tolgoi Complex, Mongolia
SouthGobi is pleased to announce that the Company has received an updated
independent NI 43-101 compliant Resource estimate for the Ovoot Tolgoi Complex.
Ovoot Tolgoi surface and underground Resources contain Measured plus Indicated
coal Resources of 266.2 million tonnes (approximately 7% increase), with an
additional Inferred coal Resource of 97.1 million tonnes (approximately 190%
increase). The Mineral Reserves (Table 4) are included in the Mineral Resources
(Table 1).
Ovoot Tolgoi Resources are found in two different Resource areas, referred to as
the Sunrise and Sunset fields. The Resources identified have been determined to
be suitable for surface mining to a maximum depth of 300 metres below surface
and potential underground mining between a depth of 300 metres below surface to
a maximum depth of 600 metres. The Resource estimate is current as of December
11, 2010.
Table 1: Total (Surface and Underground) In-Place Coal Resources as of December
11, 2010
----------------------------------------------------------------------------
Resource
Limits Resources (Million Tonnes)
Depth ASTM ------------------------------
Area Type (metres) Group Measured Indicated Inferred
----------------------------------------------------------------------------
Sunrise Surface to hvB to
Field Surface 300m hvA(i) 54.5 19.9 11.0
----------------------------------------------------------------------------
Sunset Surface to hvB to
Field Surface 300m hvA 81.8 15.9 1.9
----------------------------------------------------------------------------
Sub-Total 136.3 35.8 12.9
----------------------------------------------------------------------------
Sunrise 300m to hvB to
Field Underground 600m hvA 5.4 21.2 70.8
----------------------------------------------------------------------------
Sunset 300m to hvB to
Field Underground 600m hvA 46.6 20.9 13.4
----------------------------------------------------------------------------
Sub-Total 52.0 42.1 84.2
----------------------------------------------------------------------------
Total 188.3 77.9 97.1
----------------------------------------------------------------------------
(i) hvB to hvA - high-volatile bituminous coal B to A rank based on ASTM
D388 standards
Quality analyses performed to date by SGS Mineral Labs in Denver, Colorado and
Tianjin, China, rank Ovoot Tolgoi coal as high-volatile B to A bituminous based
on the ASTM D388 standard. High-volatile B and A bituminous coals are hard black
coals. High-volatile B produces between 7,212 to 7,785 kCal/kg and high-volatile
A produces greater than 7,785 kCal/kg heat output.
Resources have been estimated in December 2010 using the Minex geological
models. The Resources have been classified in the same manner as previous
estimates. Recent pit optimization studies have shown that open cut mining is
possible up to depths of at least 300m.
The Resource estimations are on a clean basis, i.e., as an in-situ tonnage and
not adjusted for mining losses or recovery. However, minimum mineable seam
thickness and maximum removable parting thickness are considered; coal intervals
not meeting these criteria are not included in the Resources.
Table 2: Criteria used to define assurance of existence for coals of complex
geology type
----------------------------------------------------------------------------
Assurance of Existence Category
----------------------------------------------------------------------------
Criteria Measured Indicated Inferred
----------------------------------------------------------------------------
Cross-section spacing (m) 150 300 600
----------------------------------------------------------------------------
Minimum # data points per section 3 3 3
----------------------------------------------------------------------------
Mean data point spacing (m) 100 200 400
----------------------------------------------------------------------------
Maximum data point spacing (m) 200 400 800
----------------------------------------------------------------------------
The independent Resource and Reserve estimates were prepared by MMC. The updated
Ovoot Tolgoi surface and underground Resource estimates were prepared in
conformance with CIM Standards and the requirements set out in NI 43-101, and
were based on drilling activities to the end of November 2010. An updated NI
43-101 compliant prefeasibility study, which will include detailed mine plan,
will be filed with the Company's Annual Information Form ("AIF").
Data Verification (Ovoot Tolgoi Complex)
All geologic, geophysical, and sampling data was entered and maintained on site
in an electronic database maintained by Norwest and/or Sapphire. All mapping was
entered and maintained in electronic format on a CAD-based system. Data entry of
all geologic data was managed by Norwest at the project site. All electronic
data was forwarded on a routine basis to Norwest's office in Salt Lake City.
Results from coal quality testing were added into the database in the Salt Lake
office. From 2006 onwards similar procedures were in place with data routinely
sent through to The Americas Group's ("TAG") office in Lakewood Colorado. During
the 2010 field season, data was managed at site by McElroy Bryan Geological
Services personnel.
MMC was not in a position to verify the data used in the resource estimates
since this information was stored in individual databases maintained by Norwest
and TAG and at present does not reside with SouthGobi. This approach of relying
on third party consultants to maintain and to verify SouthGobi's database has
inherent risks in terms of data provenance and integrity. In each of the
individual technical reports produced on the project, the data has been
independently verified and signed off but this verified data has not been
incorporated into a central SouthGobi database that can then be cross checked
against original records. It is intended that in future SouthGobi will maintain
its own database incorporating the data stored at TAG and Norwest together with
soft copies of original logs and a record of all coal quality information.
However, MMC has audited a subset of the data. Scanned field lithology logs and
geophysical logs were provided to MMC. A representative number were checked
against the seam picks used to generate the geological model. Drill hole collars
were also compared to elevations in a digital terrain model ("DTM"). No material
errors were encountered.
Estimate of Resources - Soumber Deposit, Mongolia
SouthGobi is pleased to report that it has received an updated independent NI
43-101 compliant Resource estimate for its Soumber and Biluut coal fields at the
Company's Soumber Deposit. The estimate also was prepared by MMC.
The Soumber Deposit consists of a single exploration licence. The Soumber Field
is approximately 20 km east of SouthGobi's Ovoot Tolgoi Complex, whilst the
Biluut Field lies immediately to the east of the Soumber Field. The Soumber
Deposit is approximately 45 kilometers north of the Mongolia-China border
crossing at Shivee Khuren-Ceke.
The deposit area is estimated to contain Measured plus Indicated coal Resources
of 61.4 million tonnes (approximately 187% increase), with an additional
Inferred coal Resource of 65.8 million tonnes (approximately 19% increase)
(Table 3) as of January 25, 2011. The Resource estimate incorporates exploration
data down to a depth of 250 metres below surface.
The coal Resources at Soumber are classified as bituminous coal and the rank
ranges from low-volatile bituminous to medium-volatile bituminous, based on ASTM
standard D388. Calorific values range between 5,000 kCal/kg to 7,800 kCal/kg.
Coal quality data suggests that there is good potential to produce a blend or
washed coking coal product from shallow (low stripping ratio) sources.
Table 3: Soumber in-Place Coal Resources Summary as of January 25, 2011
---------------------------------------------------------------------------
Measured Indicated Inferred
(million (million (million
Resource Area ASTM Coal Rank tonnes) tonnes) tonnes)
---------------------------------------------------------------------------
low-medium volatile
Soumber Field bituminous(i) 36.8 24.6 13.6
---------------------------------------------------------------------------
low-medium volatile
Biluut Field bituminous(i) - - 52.2
---------------------------------------------------------------------------
Total 61.4 65.8
---------------------------------------------------------------------------
(i) low-medium volatile bituminous coal based on ASTM D388 standards
The Qualified Person was provided with geological models for the Soumber and
Biluut fields by SouthGobi. These models had been created by McElroy Bryan in
2010 using Minex software. In order to verify the models, the author recreated
models for the Soumber and Biluut fields in Minescape. Graphical output -
contours and sections - were created from both sets of models and compared. In
general, comparison was good, allowing for differing modelling techniques. A
subset of the drill hole data was also checked against original field lithology
and geophysical logs. The drill hole collars were also compared against the
topographic model. No material errors were encountered.
The independent Resource estimates were prepared by MMC. The Soumber and Biluut
Resource estimates were prepared in conformance with the CIM Standards and
requirements set out in Canada's NI 43-101. A NI 43-101 technical report will be
filed with the AIF.
Data Verification (Soumber Deposit)
All geologic, geophysical, and sampling data was entered and maintained on site
in an electronic database maintained by Norwest and/or Sapphire in early
exploration programs. All mapping was entered and maintained in electronic
format on a CAD-based system. Data entry of all geologic data was managed by
Norwest at the project site. All electronic data was forwarded on a routine
basis to Norwest's office in Salt Lake City. Results from coal quality testing
were added into the database in the Salt Lake office. From 2006 onwards similar
procedures were in place with data routinely sent through to TAG's office in
Lakewood Colorado. During the 2010 field season, data was managed at site by
McElroy Bryan personnel.
Coal quality data was subjected to a series of statistical analysis to identify
any errata in reported values. The electronic geologic database was subjected to
a series of checks designed to locate data entry errors or inconsistencies.
MMC was not in a position to verify the data used in the Resource estimates
since this information was stored in individual databases maintained by Norwest
and TAG and at present does not reside with SouthGobi. This approach of relying
on third party consultants to maintain and to verify SouthGobi's database has
inherent risks in terms of data provenance and integrity. In each of the
individual technical reports produced on the project, the data has been
independently verified and signed off but this verified data has not been
incorporated into a central SouthGobi database that can then be cross checked
against original records. It is intended that in the future SouthGobi will
maintain its own database incorporating the data stored at TAG and Norwest
together with soft copies of original logs and a record of all coal quality
information.
However MMC has audited a subset of the data. Scanned field lithology logs and
geophysical logs were provided to MMC. A representative number were checked
against the seam picks used to generate the geological model. Drill hole collars
were also compared to elevations in a DTM. No material errors were encountered.
Estimate of Reserves - Ovoot Tolgoi Complex, Mongolia
Table 4: Open Cut Mineral Reserves as of December 11, 2010
---------------------------------------------------------------------------
Proven Probable Total
(million (million (million
Reserve Area ASTM Coal Rank tonnes) tonnes) tonnes)
---------------------------------------------------------------------------
Sunset Field hvB to hvA(i) 35.3 35.3 70.6
---------------------------------------------------------------------------
Sunrise Field hvB to hvA 27.5 8.7 36.2
---------------------------------------------------------------------------
Total 62.8 44.0 106.8
---------------------------------------------------------------------------
(i) hvB to hvA - high-volatile bituminous coal B to A rank based on ASTM
D388 standards
The Reserves of the Ovoot Tolgoi Coal Complex occur in two fields - the Sunset
Field (formerly named the West Field) and the Sunrise Field (formerly named the
South-East Field).
The Qualified Person was provided with geological models for the Ovoot Tolgoi
Deposit by SouthGobi. These models had been created by McElroy Bryan in 2010
using Minex software. In order to verify the models, the author recreated models
in Minescape. Graphical output - contours and sections - were created from both
sets of models and compared. In general, comparison was good, allowing for
differing modelling techniques. A subset of the drill hole data was also checked
against original field lithology and geophysical logs. The drill hole collars
were also compared against the topographic model. No material errors were found.
The software was then used in order to apply a Lerchs-Grossman ("LG")-based
algorithm in order to indicate the economically feasible portions of the
deposit. Mine pits, considering practical mining issues, were then designed
based on the LG results. With a demonstrated economic viability, a portion of
the Resource base may be classified as Proven and Probable Reserves. This
exercise extended the pit to approximately 320m below the surface.
The estimate of Resources and Reserves was generated using the best information
available concerning issues related to environmental, permitting, legal, title,
taxation, socio-economics, marketing and political factors that could have a
material influence on MMC's findings. MMC is not aware of any additional factors
which may materially affect its Reserves estimate.
The mining method employed at Ovoot Tolgoi could be described as open cut
terrace mining utilizing large scale hydraulic excavators and shovels and
trucks. Terrace mining is utilized where coal seams dip steeply and operating
machinery on the coal seam dip is not possible. Terraces, or benches, are
excavated along fixed horizontal horizons. Slices of coal seams are excavated
from each of these horizons when the bench intersects the coal seam. This mining
method allows large scale open pit mining to occur productively in steeply
dipping coal seam environments. All waste is dumped ex-pit, as the steep dips
preclude in-pit dumping.
For the purposes of the Preliminary Feasibility Study ("PFS") for this Reserves
estimate, MMC considered a production rate for the Ovoot Tolgoi Mine of 8.0
million tonnes per annum ("Mtpa") of run of mine coal, comprising 5.2 Mtpa from
Sunset Field and 2.8 Mtpa from Sunrise Field.
MMC is currently working with the company to review additional data (including
higher received prices for some coal types), which could result in a larger
pit-shell and a larger run of mine coal production scenario for the Ovoot Tolgoi
Mine.
Qualified Persons
Merryl Peterson, a Geologist at Runge Limited (Minarco-MineConsult is a trading
division of Runge Limited), and a Qualified Person as defined by NI 43-101, has
reviewed the data underlying the resource estimate and approved the technical
and scientific information pertaining to Ovoot Tolgoi, Soumber and Biluut
contained in this release.
Robert Mackenzie, a mining engineer and Executive Consultant at
Minarco-MineConsult and a Qualified Person as defined by NI 43-101, has reviewed
the data underlying the reserve estimate and approved the technical and
scientific information pertaining to Ovoot Tolgoi contained in this release.
About SouthGobi Resources
SouthGobi Resources is focused on exploration and development of its Permian-age
metallurgical and thermal coal deposits in Mongolia's South Gobi Region. The
Company's flagship coal mine, Ovoot Tolgoi, is producing and selling coal to
customers in China. The company plans to supply a wide range of coal products to
markets in Asia.
Forward-Looking Statements: This document includes forward-looking statements.
Forward-looking statements include, but are not limited to, plans to supply a
wide range of coal products to markets in Asia; and other statements that are
not historical facts. When used in this document, the words such as "plan",
"estimate", "expect", "intend", "may", and similar expressions are
forward-looking statements. Although SouthGobi believes that the expectations
reflected in these forward-looking statements are reasonable, such statements
involve risks and uncertainties and no assurance can be given that actual
results will be consistent with these forward-looking statements. Important
factors that could cause actual results to differ from these forward-looking
statements are disclosed under the heading "Risk Factors" in SouthGobi's
Management Discussion and Analysis of Financial Condition and Results of
Operations for the year ended Dec. 31, 2010, which are available at
www.sedar.com.
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