RUONI FLATS DRILLING UNCOVERS CONTINUATIONS TO TENGE MINERALISATION
24 MAY 2012
Baobab Resources Plc ('Baobab' or the 'Company') the mineral
exploration and development company with a portfolio of
assets in Mozambique, is pleased to provide an update on
drilling at the Tete pig iron, vanadium and titanium
project.
IFC (International Finance Corporation) hold a 15%
participatory interest in the Tete
Project with Baobab owning the remaining 85%.
HIGHLIGHTS
• Drilling programmes in the Ruoni prospect area are nearing conclusion with more than 7,500m of diamond and reverse circulation (RC) drilling completed to date.
• Drilling at Ruoni Flats, where a 120Mt to 260Mt Exploration Target has been estimated by consultant Coffey Mining, has intersected a heavily mineralised package, up to 100m thick, that clearly represents the down- dip continuations to the Ruoni North and Tenge resource blocks.
• Resource upgrade drilling is on-going at Chitongue Grande, Ruoni North and Ruoni South resource blocks.
• 2011 RC drilling of the down-dip portions of the 159Mt Tenge resource block terminated in mineralisation due to excessive water. Recently completed diamond twin holes have penetrated deeper through the sequence and demonstrate that the mineralised package is substantially thicker than that modelled in the resource estimate.
BAOBAB RESOURCES PLC27/28 Eastcastle Street London W1W 8DH United Kingdom
BAOBAB MINING SERVICES Pty Ltd Unit 25 South Terrace Piazza FremantleWestern Australia 6160
Australia Post: PO Box 1229 Fremantle Western Australia 6959 Australia Tel: (+61) 8 9430 7151
Fax: (+61) 8 9430 7664
Web: www.baobabresources.com
AIM : BAO
Commenting today, Ben James, Baobab's Managing Director,
said: "Baobab is very pleased with progress made in the
field, particularly at Ruoni Flats where drilling is
outlining a potentially substantial addition to the resource
inventory. An expanded resource in the tenge/Ruoni area will
enable the Company to credibly consider larger scale
production scenarios, the technical and commercial merits of
which will be further clarified as the results of the
marketing study and high level financial simulations are
finalised. Baobab looks forward to presenting the drill hole
analytical results as they become available.
"The pre-feasibility study is progressing on schedule. The
beneficiation test work is nearing completion, on the back of
which the process engineering can get underway. The
environmental impact assessment, plant and infrastructure
option studies and marketing report are all well underway. In
parallel to the technical programmes, the Company is
advancing corporate initiatives to ensure the project's
successful development.
"I encourage investors to download a copy of this
announcement from the Company's website as it includes a
cross-section through the Ruoni Flats / Tenge prospects that
illustrates the scale and continuity of the deposit."
AIM ANNOUNCEMENT | 24 MAY 2012 Page 1 of 5
DRILLING PROGRAMME
To date an aggregate total of c.3,000m diamond and c.4,700m
RC has been completed since drilling commenced on 27 February
2012. The purpose of the drilling programme is twofold: to
upgrade confidence in the Chitongue Grande, Ruoni North and
Ruoni South resource blocks from inferred to indicated
categories; and to define a new resource block in the Ruoni
Flats prospect area where consultant, Coffey Mining,
estimated an Exploration Target of 120Mt to 260Mt (please
refer to RNS dated 29 March 2012 for details).
Drilling at Ruoni Flats has intersected a heavily mineralised
package that clearly represents the down-dip continuations to
the Ruoni North and Tenge resource blocks. The package varies
in thickness from c.80m to c.100m and typically includes
minor intercalations of non-mineralised gangue material.
Depth to top of mineralisation commences from c.175m in the
north and east, deepening to up to 294m in the southwest.
Two diamond twin holes have also been completed at the Tenge
resource block. 2011 RC drilling of the down-dip portions of
the 159Mt Tenge resource terminated in mineralisation due to
excessive water. The diamond twin holes have penetrated
deeper through the sequence and demonstrate that the
mineralised package in the deeper portions of the block is
substantially thicker than that modelled in the resource
estimate.
Drill samples are composited to 0.5m or 1m intervals on site
before being sent to ACT-UIS laboratories in Tete, Mozambique
for crushing and splitting. Representative samples are then
despatch to ALS Chemex laboratories in Perth, Western
Australia for further compositing (maximum composite length
of 6m), Davis Tube Recovery (DTR) and X-ray Fluorescence
Spectrometry (XRF) analysis. The Company will announce
results as they come to hand.
A
copy of this RNS, including a drill hole location plan and
cross-section through the Ruoni Flats/Tenge prospects, is
available for download from the Company's website at: http://www.baobabresources.com/investor/aim-
announcements.
AIM ANNOUNCEMENT | 24 MAY 2012 Page 2 of 5
CONTACT DETAILS
Baobab Resources PLC
Ben James: Managing Director Tel: +61 8 9430 7151
Jeremy Dowler: Chairman Tel: +44 1372 450529
Grant Thornton Corporate Finance
Gerry Beaney / David Hignell Tel: +44 20 7383 5100
Shore Capital
Jerry Keen / Toby Gibbs Tel: +44 20 7468 7964
Fortbridge Consulting
Matt Beale Tel: +44 7966 389 196
AIM ANNOUNCEMENT | 24 MAY 2012 Page 3 of 5
NOTE TO EDITORS
TETE PROJECT OVERVIEW
The project is located in the richly endowed Tete province of
Mozambique. The province hosts some of the largest
undeveloped coal reserves on the planet and, with estimates
pointing towards the area producing up to
20% of the world's coking coal within the coming decade, is
fast-tracking to become a mining and industrial hub
of global significance.
Immediately south of Baobab's tenure, and sharing the
Company's licence boundaries, are c.15Bt of coking and
thermal coal resources being brought into production by two
of the world's largest mining houses, Rio Tinto and Vale,
along with premier steel producers, Tata Steel, Nippon Steel,
Jindal Steel and Posco. Other operators in the area include
AIM listed companies Beacon Hill Resources plc, Ncondezi Coal
Company plc and Eurasian Natural Resources Corporation plc
(ENRC).
Low tariff hydro-electric power is readily available from the
2,075 megawatt Cahora Bassa dam. Studies are underway to
expand the dam's capacity by an additional 1,300 megawatts. A
new 1,500 megawatt scheme at Mphanda N'kuwa, also on the
Zambezi, is in advanced planning stages and due to commence
production in 2015. The Company believes that it will be able
to negotiate tariff rates at a third, if not a quarter, of
typical power generation costs in Australia or west Africa
which will have a significant impact on future operating
costs.
The railway connecting Tete with the port of Beira is being
refurbished, as is the port. The deep water port of Nacala
and railway linking the port with the interior is also being
refurbished under the auspices of a consortium including the
Mozambique government, Vale and the World Bank. An order of
magnitude study has been completed on a dedicated heavy
haulage railway to a Greenfields port located within 500km of
Tete.
The Tete Project straddles the central portion of the Tete
Mafic Complex and contains two areas of titano- magnetite /
ilmenite mineralisation; the Singore area to the south and
the Massamba Group in the north. The Massamba Group is
composed of a series of three prospects (Chitongue Grande,
Chimbala and South Zone) forming an 8km long trend and the
3.5km long Tenge / Ruoni prospect to the east.
IFC (International Finance Corporation) hold a 15%
participatory interest in the project with Baobab owning the
remaining 85%. The Company announced on 6 February that IFC
has supported the 2012 pre-feasibility study (PFS) through a
pro-rata contribution of approximately US$1.9m.
Building on the successful exploration programmes of 2009 and
2010, Baobab accelerated activities in 2011 to achieve two
key milestones; to define a minimum resource base of 300Mt on
which a Scoping Study could be finalised. The Company
completed an aggressive c.40,000m drilling campaign that
resulted in the expansion of the global resource base to of
482Mt (please refer to RNS dated 5 March 2012 for a summary
of resources).
The Scoping Study, completed by independent consultants and
applying conventional beneficiation and smelting
technologies, assessed two production scenarios:
• Scenario 'A': base-case production of 3Mtpa titano-magnetite concentrate and 0.5Mtpa ilmenite concentrate products for export. Initial capital expenditure (capex) estimate of US$448m.
• Scenario 'B': capitalising on the Project's access to low tariff hydro-electric power and strategic
proximity to thermal coal reserves to add further value on
site through the mine-mouth smelting of
1Mtpa pig iron. Initial capex estimate of US$690m.
While the base-case model for scenario 'A' demonstrated
viable Project fundamentals, the optimisations and financial
modelling of Scenario 'B' at a 10% discount rate provided
compelling economics with pre-tax net present value (NPV10)
and internal rate of return (IRR) figures of US$1.4b and 34%
respectively. The estimated average annual net cash flow
after capex over the modelled 25 year mine life is
US$275m.
The Scoping Study results show very clearly the 'value add'
from the plans for on-site smelting of pig iron and
underlines the strategic advantages of the Project's unique
geography with respect to infrastructure and complementary
resources. Producing a higher value, high demand product will
not only broaden the market base, but also mitigate the
requirement to compete for rail and port access.
The vanadium potential remains to be modelled and could add
further to the value of this project. Reduced input costs
through long-term domestic coal contracts and on-site power
co-generation also need to be assessed, while the expanding
resource base at Tenge/Ruoni, underpinning a meaningful +30
year mine life, allows scope for ramping up production.
For a detailed summary of the Scoping Study, please refer to
RNS dated 29 November 2011.
PRE-FEASIBILITY STUDY
A detailed Pre-Feasibility Study (PFS) work programme is
underway. The Company has signed contracts with leading
mining, engineering and environmental consultancies to
complete the various aspects of the study.
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The PFS is being coordinated out of Australia by Baobab's
Project Manager, Christian Kunze. Mr. Kunze has a Master's
Degree in Mechanical Engineering / Business Administration
and 20 years international management experience in iron ore
project development, plant engineering and steel manufacture.
He has worked for industry specialists including Siemens VAI
and ProMet Engineers, and has a well-established network of
professional associates in Africa, USA, Europe, Asia and
Australia. Mr. Kunze's specific strength lies in a combined
technical and commercial understanding of projects.
The mineral processing component of the study is being
supervised by consultant, Dr. John Clout. Dr. Clout is a
leader in iron ore petrography, metallurgy, beneficiation,
downstream processing and marketing. He was the Head of
Resource Strategy at FMG in which role he was instrumental in
the success of the company. He is an ex- CSIRO manager and
has advised on mineral processing to companies including Rio
Tinto, BlueScope, OneSteel, Robe River, Hancock and WISCO.
John holds the position of Adjunct Professor in Mineral
Processing at the School of Mechanical and Chemical
Engineering, University of Western Australia.
Coffey Mining has been selected to complete the resource,
mining and environmental aspects of the PFS. Coffey has more
than 50 years' experience as specialist mining consultants
operating in over 60 countries across the globe and has
contributed to iron ore feasibility studies for clients
including FMG, Atlas Iron, Robe River, BHP Billiton, Gibson
Iron, OneSteel, Hancock Prospecting, Grange Resources,
Brockman Resources and Midwest Cooperation.
SNC-Lavalin has been selected as the engineering and
infrastructure consultant. SNC-Lavalin is one of the largest
engineering and construction groups in the world,
consistently ranked in the top ten international design firms
by Engineering News Record. As a provider of engineering,
procurement, construction and project management services
SNC-Lavalin has the capacity to take the Tete project from
feasibility level through to project execution. Recently
executed studies relating to the beneficiation of magnetite
and heavy mineral sands projects include FMG's North Star
Magnetite Project, Zammin Ferrous' Valentines Magnetite
Project and Grand Cote Mineral Sands Project.
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