Pilbara focused Ascot Resources (ASX: AZQ) has reported a maiden iron ore reserve for its Wonmunna Iron Ore Project of 28.9 million tonnes at 58% iron (Fe).
Notably, the Project is adjacent to Rio Tinto’s (ASX:RIO) West Angelas and Hope Downs iron ore mines in the Pilbara region of Western Australia.
There is further mineable tonnage of 2.7 million tonnes at 58% Fe derived from the Inferred Resource inventory within the pit design for the CMM deposit.
This gives a potential mineable inventory estimate of 31.6 million tonnes at 58% Fe.
Based on a production rate of 5 million tonnes per annum from Year 2 onwards, initial mine life could be expected to be in the order of 7 years.
The Ore Reserve originates from a Resource estimate of 84.3 million tonnes at a 50% Fe cut-off grade resulting from an extensive drill programme in which over 1,200 holes were drilled for a total of 56,376 metres.
It was also derived from completion of a Pre-Feasibility Study that assessed the delivery of Direct Shipping Ore (DSO) fines from Wonmunna to a delivery point to be agreed with a third party at or before Port Hedland.
Unlike many of its peers, Ascot was sitting on cash reserves of $7.6 million in the September quarter after a successful placement in 2014 raised $10 million at an issue price of $0.25 to Resource Capital Fund V L.P. and Gunvor Group.
Ascot’s executive chairman, Paul Kopejtka, commented on the maiden Ore Reserve estimate:
“The maiden Ore Reserve is a major milestone for the Wonmunna Project and highlights the significant potential of this development as a supplier of high quality direct shipping iron ore to the North Asian market.
"Ascot continues to progress key approvals and a final product sales solution in order to position the Wonmunna Project for potential financing and execution in the future. The Ascot Board expects to consider options for financing the Project in Q1 2015.”
Ore Reserve in more detail
The Ore Reserve estimate is based on pit designs and mine schedules for the three initial mining areas at Wonmunna that contain Indicated Resource estimates.
The estimated ore tonnage is contained predominantly within the Mt Newman member of the Marra Mamba Iron Formation (MMIF), and has similar mineralogical characteristics to the orebody currently mined at the neighbouring West Angelas operation managed by Rio Tinto Iron Ore.
A variable cut-off grade policy between 52% Fe to 54% Fe was used to define ore, with material between 50% Fe and the pit cut-off to be stockpiled as a potential future low-grade product or for potential beneficiation.
Mining Plans
Ascot will look to develop a 5 million tonnes per annum DSO operation at Wonmunna including all associated road and mining/processing infrastructure.
The proposed production schedule is for an initial 3 million tonnes per annum rate in year 1, ramping-up to a 5 million tonnes per annum by year 2 and beyond.
A nominal minus 8mm DSO fines product would be produced using a two-stage crushing and screening plant.
Conventional open pit mining methods are proposed for all pits which are located within 5 kilometres from the main processing area.
Native Title Agreements in place
Native Title Mining Agreements are in place with the two claimant groups whose claims affect the Project. Heritage Surveys have been completed for the proposed Project footprint, including all planned mining and infrastructure disturbance areas.
The Company has been granted a Native Vegetation Clearing Permit for the proposed Project footprint and submitted a Mining Proposal including closure plan to the Department of Mines and Petroleum (DMP) in November 2014.
Final environmental and mining approvals required to implement the Project will be progressed after the anticipated approval of the Mining Proposal in early 2015.
Ascot has a granted miscellaneous license of a length of 180 metres for a haul road that will link the mining operation to a specified entry point onto the Great Northern Highway to allow quad road trucks to transport DSO product from Wonmunna to an agreed delivery point at or before Port Hedland.
Requirements in relation to gaining approval from the Mains Road Department are advanced for the design of the haul road and highway intersection obtaining a permit for the concessional loading and transportation of iron ore.
In discussions with third parties for sale of ore mined
Ascot has noted it is in advanced discussions with a third party in relation to a mine or port gate sale of DSO product at a delivery point to be agreed at or before Port Hedland. The company said these discussions remain confidential and incomplete at this point.
Analysis
Ascot continues on its merry way defining an initial iron ore reserve and with a strong cash balance while many of its peers find the going tougher with the fall in the price of iron ore.
In hindsight, Ascot timed its run to acquire the Wonmunna Iron Ore Project and raise funds, which denotes Resource Capital Fund V L.P. and Gunvor Group as key shareholders and supporters to perfection.
The location of Wonmunna, adjacent to Rio Tinto's West Angelas and Hope Downs iron ore mines is also of importance towards development options. Ascot has indicated it is in "advanced discussions" with a third party which could bring a mine or Port gate sale of future iron ore produced, which fuels further potential.
The initial ore reserve and funding position provide a platform for Wonmunna for financing and construction readiness during 2015.
The flip side to the lower iron ore price environment is that costs across the industry have fallen heavily which is a boon for the Company planning on delivering a relatively low capital and operating cost outcome for Wonmunna which could be in production in 2015/16.
Current market valuation of $18.4 million (less strong cash balance at Sept Qtr) values the resource and reserve and development potential at very little, providing an opportunity for long term investors.
Source: proactiveinvestors.com.
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