MagIndustries Corp.: Update of the NI 43-101 Technical Report for MagMineral's Mengo Permit Area, Kouilou Region, Republic of...
14 November 2013 - 8:30PM
Marketwired Canada
MagIndustries Corp. ("MagIndustries" or the "Company") (TSX:MAA) is pleased to
report that it has received an updated National Instrument 43-101 Technical
Report entitled Update of the NI 43-101 Technical Report for MagMineral's Mengo
Permit Area, Kouilou Region, Republic of Congo (the "Technical Report") in
respect of the property owned by its 90% owned subsidiary MagMinerals Potasses
Congo SA. ("MPC"). Specifically, the Technical Report relates to the geology and
development of the Company's proposed 1.2 million tonnes K60 product per annum
Mengo Potash Project in the Republic of Congo (the "Project"). The Technical
Report updates the National Instrument 43-101 Technical Report filed on June 11,
2009 (see the Company's press release dated June 11, 2009). The authors of the
Technical Report are EurGeol Dr. Henry Rauche, EurGeol Dr. Sebastiaan van der
Klauw, and EUR ING Ralf Linsenbarth of ERCOSPLAN Ingenieurgesellschaft
Geotechnik und Bergbau mbH (collectively "ERCOSPLAN").
The Mengo Permit Area
The Mengo Exploitation Permit area (the "Mengo Permit Area") is located about
500 km west of Brazzaville, Republic of Congo (RoC), and about 15 km northeast
of the port city Pointe Noire. The Mengo Permit lies in the Kouilou province and
its boundaries are given by the following coordinates:
Longitude Latitude
11 degrees 55' 40" E 4 degrees 37' 37" S
12 degrees 01' 01" E 4 degrees 37' 37" S
12 degrees 01' 03" E 4 degrees 45' 00" S
11 degrees 55' 40" E 4 degrees 45' 00" S
Within the 136 km2 Mengo Permit Area the Company's exploration efforts have been
concentrated on an area of approximately 25 km2 (the "Mengo Mine Area") near the
village of Mengo, where the brine field for the Project will be located. The
study area represents approximately 18% of the Mengo Permit Area. MPC retains
exclusive rights to a further approximately 1,111 km2 of potentially developable
area through the Makola Exploration Permit as outlined in the map below:
To view Figure 1, please visit the following link:
http://media3.marketwire.com/docs/maa1114fig1.pdf.
The Basis of the Updated Technical Report
The updated Technical Report has been produced because significant changes have
been made to the development plan for the Project from the 2008 Feasibility
Study for the Project authored by SNC Lavalin International Inc. (the "FS") and
additional geological information has become available as a result of the
drilling of the first production wells. The basis for the description of mining,
brine processing, product transportation as well as supplementary infrastructure
for the operation as set forth in the Technical Report is based on the
Preliminary Design (PD) by the Changsha Design and Research Institute of
Ministry of Chemical Industry (CDI), which also supercedes the information in
the FS.
As disclosed by the Company in its Press Release of April 4, 2012, and its
subsequent Annual Information Form, the Company entered an engineering and
design contract with CDI. This contract is for the full design, engineering
services and procurement assistance associated with the construction of the
Mengo Project, including brine extraction, transportation, processing plant,
waste brine transportation, brine effluent handling, thermal power station,
offices and housing, public utility interfaces, auxiliary engineering and the
external transportation, external engineering work (including supply of water,
natural gas, electricity supply and access roads) and the water supply and
pumping. (The geographic layout of key elements in the PD is illustrated in
Figure 2.)
In addition to the PD, the information in the Technical Report is based upon
exploration, drilling and design studies which include:
-- Data collected and processed from a 2D seismic survey run and 2 VSP
surveys specifically for the Project,
-- Geological and geophysical evaluation, with sampling and assaying of
potash sections from 12 exploration drill holes and 1 production hole,
geophysical evaluation of 22 production holes,
-- Dissolution test work on core samples selected from different deposit
horizons of 2 drill holes,
-- Rock mechanical strength and creep property tests on core material from
2 drill holes,
-- Bench scale test work on crystallization of Carnallite, Sylvite and
Halite using brine obtained from dissolution test work.
To view Figure 2, please visit the following link:
http://media3.marketwire.com/docs/maa1114fig2.pdf.
Geology and Mineralization
The potash deposits occur in the form of carnallitite rock which underlies most
of the Makola Exploration Permit area. Carnallite is a
magnesium-potassium-chloride mineral or a double-salt with the chemical formula
KMgCl3-6H2O. The carnallitite rock occurs in multiple, horizontal horizons
ranging in thickness from 0.5 meters ("m") to 25 m with an average content of
about 70% Carnallite.
In the Mengo area, four potentially economic extractable carnallitite horizons
have been identified in depths between 500 and 1,000 m below the surface.
Thickness and grade of these horizons are:
Horizon 1 Carnallitite: 19.1 m thick at 17.0% KCl present as Carnallite;
Horizon 2 Carnallitite: 12.5 m thick at 11.7% KCl present as Carnallite;
Horizon 3 Carnallitite: 9.6 m thick at 23.9% KCl present as Carnallite;
Horizon 4 Carnallitite: 25.1 m thick at 17.9% KCl present as Carnallite.
Four carnallitite horizons are considered to have economic potential for
solution mining of carnallitite. In descending order they are Horizon 1
carnallitite, Horizon 2 carnallitite, Horizon 3 carnallitite and Horizon 4
carnallitite. Horizon 1 carnallitite has potential for solution mining, but
preliminary rock mechanical modeling has shown that a connection between caverns
and groundwater bearing strata cannot be excluded and therefore this horizon is
only considered part of the inferred mineral resources. Horizons 2, 3 and 4 have
mineral resources categorized depending on the distance from the 12 new drill
holes and 1 cored and assayed production hole.
The mineral resources have been categorized based on the distance surrounding
the recent drill holes that have complete geophysical logs and spot cores in the
horizons of interest. This is the best available practice in the potash
industry. The distances from the wells for inclusion in the inferred, indicated
and measured mineral resources are as follows:
-- measured: 750 m radius if a correlation is possible on 2 sides to other
drill holes with a comparable potash section, otherwise a 250 m radius
is used,
-- indicated: 1,500 m radius if a correlation is possible on 2 sides to
other drill hole with a comparable potash section, otherwise a 500 m
radius is used, minus the area of measured mineral resources,
-- inferred: 3,000 m radius is used minus the area of measured and
indicated mineral resources.
On the basis of the diameters discussed above, polygons were constructed around
the drill holes. The measured and indicated mineral resources were calculated
for each polygon, reducing the area by taking into account the presence of
geological (faults) and technical exclusion zones (steep slopes and villages,
from the updated Land Use and Occupation Survey. For the inferred mineral
resources an overall 35% area reduction for these factors was used. Furthermore,
mining losses due to safety pillars around caverns and non perfect cavern
recovery were accounted for in the mineral resource estimate. This mineral
resource estimate does not take into account any of the several relatively thin
(less than 5 m) and high grade carnallitite horizons, which together have a
combined thickness in the order of 20 m within the investigated evaporite
section, as they are only marginally mineable by solution mining. The estimated
mineral resources for each category are given in the following table.
These mineral resources can be solution mined and the resulting brine can be
economically processed to a saleable product (see next section). Therefore the
Measured and Indicated Mineral Resources can be transformed to Proven and
Probable Mineral Reserves. Units of Measurement in the Table below are millions
of tonnes.
Horizon 1 Horizon 2 Horizon 3 Horizon 4
----------------------------------------------------------------------------
Measured Mineral Resources
Millions of Tonnes of
Mineralized Material 46.9 33.3 95.5
Average KCl Grade (%) 11.9 24.1 17.8
----------------------------------------------------------------------------
Indicated Mineral Resources
Millions of Tonnes of
Mineralized Material 11.1 8.0 25.8
Average KCl Grade (%) 12.0 23.8 18.1
----------------------------------------------------------------------------
Inferred Mineral Resources
Millions of Tonnes of
Mineralized Material 406.2 235.2 169.4 494.8
Average KCl Grade (%) 17.0 11.6 23.9 17.9
The Measured and Indicated Mineral Resources for the Horizons 2 to 4 have been
transformed to Proven and Probable Mineral Reserves by superimposing a brine
field layout showing positions of the single caverns on the areas within the
Measured and Indicated Mineral Resources. Mineral Reserves are estimated to be
as follows:
Proven Mineral Reserves:
-- Horizon 2: 39.1 million tonnes of carnallitite at 11.9% KCl
-- Horizon 3: 27.1 million tonnes of carnallitite at 24.0% KCl
-- Horizon 4: 82.6 million tonnes of carnallitite at 17.8% KCl
Probable Mineral Reserves:
-- Horizon 2: 10.8 million tonnes of carnallitite at 12.0% KCl
-- Horizon 3: 7.8 million tonnes of carnallitite at 23.8% KCl
-- Horizon 4: 26.3 million tonnes of carnallitite at 18.1% KCl
From the Probable and Proven Mineral Reserves, the following amounts of KCl can
be mined: 25.88 Mt (proven) and 7.89 Mt (probable) totalling 33.77 Mt, which
compares well with the Mineral Reserve estimate from 2009, which stated a 33.23
Mt of KCl can be mined from the Probable and Proven Mineral Reserves. The amount
of Carnallite amounts accordingly to 96.46 Mt (proven) and 29.42 Mt (probable)
totalling 125.88 Mt, compared to 123.80 Mt of Carnallite from the 2009 report.
Based on the design work done by CDI and the brine field layout presented in the
ERCOSPLAN estimates that about 31.7 million tonnes of muriate of potash product
can be generated from Proven and Probable Mineral Reserves in the Mengo Permit
Area. With a planned capacity of 1.2 mtpy and a ramp up over two years with
annual production of 480,000 and 960,000 tpy, the Project lifetime is 27.2
years.
ERCOSPLAN noted in the Technical Report various 2D and 3D seismic surveys and
rock mechanical work that could have the effect of increasing or re-categorizing
mineral resources and mineral reserves within the study area.
It is proposed that this mineral reserve will be mined using hot leaching in
double well caverns. The brine produced will be processed at the proposed potash
facility located nearby. The processing concept will continually add Carnallite
(produced during a later stage) to the incoming brine, which will result in the
precipitation of Halite and Sylvite. The solid slurry will be separated from the
brine and processed using hot leaching and KCl crystallisation to produce a K60
product. The K60 product is to be transported as slurry to the port site, where
it will be dried and compacted to a marketable K60 material. The brine from the
Carnallite decomposition will be evaporated to produce Carnallite, which will be
recycled to the Carnallite decomposition stage. Remaining MgCl2 brine and solid
NaCl will be disposed of in the sea or mined out caverns.
The proposed process has a conservative estimated recovery of 89.2% of KCl from
the incoming brine, transformed to product.
Potash (muriate of potash or MOP) is commonly marketed as K60, which is defined
as potash with 60% K2O content. Pure KCl contains 63% K2O (or K63). To be sold
as K60, MOP must have KCl content equal to or greater than 95%. The remaining 5%
content of K60 is NaCl and other impurities. Potash mineral resources can be
specified as tonnes KCl or tonnes K60. To convert tonnes KCl to tonnes K60,
multiply by 1.0526. To convert from any K2O content to %KCl, divide by 0.6317.
Estimated Project Capital Expenditure and Operating Expenditures
Cost estimates in the PD are based on CDI's database, experience with other
potash projects and from quotations received from suppliers of key equipment,
materials and services. CDI has not explicitly stated the accuracy of the cost
estimation in the PD but looking at the amount of engineering done for the
Project and the detail of the equipment list and price calculations ERCOSPLAN
concluded that the accuracy of cost estimates is in the range of +/- 15% and is
at least on the level of a feasibility study.
For the 1.2 mtpy Project, the initial capital expenditure (CAPEX) is estimated
at US$1.270 billion and includes costs for the brine field, evaporation and
crystallisation plant including all related utilities and infrastructure, gas
and water supply, product transportation to the port site, drying and
compaction, product storage and a ship loading facility on a dedicated jetty.
The annual operating expenditures ("OPEX") for full production have been
estimated at US$131.8 million annually for the production of 1.2 mtpy of a K60
product. These operating costs include estimates for labour, maintenance power
generation, consumables, diesel, product transport and electricity. In addition,
sustaining CAPEX has been estimated for the operation at US$4.6 million.
Combined OPEX and sustaining CAPEX equate to approximately US$114/tonne of KCl.
Assuming a nominal discount rate of 10%, the economic analysis calculated a Net
Present Value (NPV) of US$1.263 billion before tax and US$1.002 billion after
tax. The Internal Rate of Return (IRR) is 21.6% before tax and 20.6% after tax.
Payback is achieved within Year 10 of the Project (or Year 8 of production)
considering discounted cash flows. Relative to the net cash flows from
operations in 2018, assumed for the purposes of the Technical Report to be the
first full year of production at 1.2 million tpy after a two year ramp up
period, payback is approximately four years (CAPEX/Cash Flow from Operations at
Full Production).
ERCOSPLAN's Conclusions
The results of the design study by CDI provide a reasonable basis to support a
decision by MagIndustries' board of directors to proceed with the development of
the Project.
The Project schedule in CDI's design calls for early site works to begin mid
2013. The construction period is approximately 36 months and onset of production
is planned to commence in the second quarter of 2016. Production will ramp up to
1.2 mtpy over a period of 3 years with an estimated 480,000 tonnes of production
in Year 1, 960,000 tonnes of production in Year 2 and full production reached in
Year 3. The Proven and Probable Mineral Reserves would on that basis be depleted
in Year 28 of production with 275,000 tpy production in the last year.
The design study for a solution mine on the Mengo Permit Area resulted in a
significant advancement of the level of definition of the Project. The Project
is financially robust and the path forward for developing the mine is well
understood.
Qualified Persons
The authors of the Technical Report, EurGeol Dr. Henry Rauche, EurGeol Dr.
Sebastiaan van der Klauw and EUR ING Ralf Linsenbarth of ERCOSPLAN
Ingenieurgesellschaft Geotechnik und Bergbau mbH ("ERCOSPLAN") are the Qualified
Persons with respect to the Technical Report and have reviewed and approved the
contents of this press release.
About MagIndustries Corp.
MagIndustries is a Canadian company whose common shares are listed on the TSX
and trade in Canadian currency under the symbol "MAA". The Company has
755,942,674 common shares outstanding. MagIndustries is focused on the
development of its potash assets in the Republic of Congo. More information on
the Company is available on its website, www.magindustries.com.
Except for historical information, this press release contains forward-looking
statements, which reflect the Company's current expectation regarding future
events. These forward-looking statements involve risks and uncertainties, which
may cause actual results to differ materially from those statements. Those risks
and uncertainties include, but are not limited to, country policy and political
risks, currency exchange risk, changing market conditions, force majeure events,
and other risks detailed from time-to-time in the Company's ongoing filings. The
"Update of the NI 43-101 Technical Report for MagMineral's Mengo Permit Area,
Kouilou Region, Republic of Congo" referred to in this press release includes
certain statements and information that contain forward-looking information
within the meaning of applicable Canadian securities laws. All statements, other
than statements of historical facts, including the requirements and potential
output of the Project, the likelihood of commercial mining, the likelihood of
securing a strategic partner and the ability to fund future mine development are
forward-looking statements and include forward-looking information. Such
forward-looking statements and forward-looking information specifically include,
but are not limited to, statements concerning: Company plans at the Project;
Company ability to fund the Project; the timing of granting of key permits;
approval of the Environmental Impact Statement (EIS); the estimated potash
production and the timing thereto; economic analyses; capital and operating
costs; mine development programs; future potash prices; cash flow estimates; and
economic indicators derived from the foregoing.
Forward-looking statements are based on the opinions and estimates set out in
the Technical Report as of the date such statements are made and they are
subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, level of activity, performance or achievements of the
Company to be materially different from those expressed or implied by such
forward-looking statements or forward-looking information, including: the
receipt of all necessary approvals; the ability to conclude a transaction;
uncertainty of future production; capital expenditures and other costs;
financing and additional capital requirements; the receipt in a timely fashion
of any further permitting for the Project; legislative, political, social or
economic developments in the jurisdictions in which the Company carries on
business; operating or technical difficulties in connection with mining or
development activities; and the risks normally involved in the exploration,
development and mining business.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required under the Company's continuous disclosure obligations. In
light of these risks, uncertainties and assumptions, the forward-looking events
in this press release might not occur.
Cusip: 55917T 102
FOR FURTHER INFORMATION PLEASE CONTACT:
MagIndustries Corp.
Mr. Rich Morrow
Director, Investor Relations and Corporate Development
416-368-7911
rmorrow@magindustries.com
www.magindustries.com
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