Zambia
Munali Nickel Deposit
The Munali nickel deposit is located approximately 60km south of Lusaka in southern Zambia. The project is well served by road, rail and power infrastructure as well as water supplies. Munali is 100% owned by Albidon. The project currently comprises two deposits, the Enterprise deposit, also referred to as the Munali Phase 1 project, and the Voyager deposit.
Development of the Enterprise nickel deposit commenced in September 2006 following a positive Bankable Feasibility Study ('BFS') and receipt of the necessary government permits and approvals.
The Enterprise project produces approximately 5900 tpa of nickel in concentrate from a 950000 tpa underground mining operation involving straightforward extraction methods and conventional processing technology. Enterprise forms the initial part of the Munali growth strategy, targeted to economically exploit the other identified lower grade nickel deposits at Munali through the effective application of additional process technology such as Dense Media Separation ('DMS').
The Munali Project is one of only a very few new nickel sulphide developments worldwide. The project will deliver a high quality bulk concentrate into a market characterised by strong demand and limited supply.
A highlight of 2007 was the Official Ground-Breaking Ceremony for the Munali project by His Excellency Levy Mwanawasa SC, the President of Zambia in the company of many distinguished guests from the diplomatic, political, commercial and local communities in Zambia, as well as Albidon's project partners.
The following paragraphs summarise the progress on key elements of project construction, as well as the Relocation Action Plan ('RAP'), through the course of 2007/2008.
Site Infrastructure
Construction of site infrastructure was commenced at Munali and substantial progress was made during the year. Key developments include the establishment of the following major infrastructure components:
- Road construction and perimeter fencing are complete;
- Construction of accommodation blocks, offices, stores and security buildings are close to completion;
- Commissioning of the Munali Concentrator is to be completed in the second half of 2008 and ramp up of mine production to full capacity early 2009.
- The permanent water supply to the concentrator is complete and has been tested;
- 4 MVA diesel power generator sets are currently on site supporting construction, with the long term dedicated sub-station currently in testing phase; and
- The underground support infrastructure is in place.
Mine Development
The Enterprise mine is an underground operation accessed via a 25m deep 'boxcut' excavation leading to a nominal 5.0m x 5.5m twin decline at a gradient of 1 in 7. The mine design utilises highly mechanised up-hole benching and long-hole open stope mining methods, resulting in efficient ore extraction and low mining costs.
These mining methods allow for mining from the top down which maximises early production of ore. Cleaning and hauling methods are also highly mechanised with applied tele-remote loading techniques in support of the drive for zero tolerance on safety. The Enterprise decline has advanced to 845ML levels and developments are being made along strike through the ore body.
The principal mining contractor is Byrnecut Mining International Limited, a group that is highly experienced in these mining methods and operating in Africa.
The initial project, Munali phase 1, is based solely on the Indicated portion of the Enterprise Resource which is located at the southeast corner of the Munali Intrusion. The present project design does not rely on, but can be modified to accommodate, possible future production from the Inferred Resource portion of the Enterprise Deposit.
From the outset, mine design and planning have been undertaken to allow maximum flexibility in project development, in particular expansion of mine production. Following completion of commissioning by mid-2008. The mine produced to 2009 and was placed on Care and Maintenance in March 2009. It recommenced operations in Dec 2009 and went on an aggressive optimization programme to attain design through put of 7500t per month which was achieved in Sept 2010.
Drilling was continued throughout 2007 with the objective of providing better detail of the mining reserve at Enterprise for the start-up of production, and also to provide an initial resource estimate for the Voyager deposit which is located some 600m to the north of Enterprise. . An update on the Indicated and Inferred Resources for the deposits at a revised cutoff grade of 0.6% Ni is as follows:
Total Published Resource as at September, 2007: 9.1Mt @ 1.23% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3 g/t Pt.
0.86Mt @ 0.82% Ni
8.24Mt @ 1.2% Ni, 0.2% Cu, 0.07%Co, 0.6g/t Pd, 0.3g/t Pt.
950000T@ 8.8% Ni, 0.1% Cu, 0.05% Co, 0.7g/t Pd, 0.4g/t Pt.
9.44Mt @ 1.16% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3g/t Pt.
This amounts to a current metal inventory at Munali of 109,500 tonnes of Ni and 246,800 ounces of platinum group metals ('PGM'). Over 70% of this total resource has been classified in the Indicated Resource category under the JORC Code.
Revised long term commodity price assumptions have lowered the cut-off from 0.7% to 0.6% Ni
Construction of Munali Concentrator
The ore is processed through a conventional flotation concentrator, comprising a simple crushing and grinding circuit, rougher, scavenger and cleaner flotation cells, followed by concentrate and tailings thickeners, producing a high grade nickel, copper, cobalt and PGM concentrate for sale to the Jinchuan Group of China for smelting.
Construction of the Munali Concentrator was done by GRD Minproc.
First Concentrate was produced in the second quarter of 2008. Following an initial ramp-up period through 2008, production will comprise approximately 10,000 to 10,500 tonnes of Ni, 1,650 tonnes of Cu, more than 480 tonnes of Co and 18,000 ounces of PGM in concentrate per annum.
Scoping studies are underway to assess the potential for further improvements to the process flow circuit. These studies include: mining at lower cutoff grade and head grade of ore; and optimisation of material flow.
The objective is to increase the mineable resource and annual production output, and to maximise metal recoveries.
Indicative specifications for nickel concentrate product from the Enterprise Deposit are as follows:
Ni:8.5%-11; Cu: 2%; Co: 0.7%; Pt: 1.9g/t; and Pd: 7.9g/t.
In addition, the concentrate is free of deleterious element impurities and also has low MgO content and a high Fe/MgO ratio, features that are particularly attractive for operators of flash-furnace type nickel smelters.
Offtake partner Jinchuan Group is currently assessing the feasibility of building a smelter in southern Africa and if this eventuates there may be scope to further optimise the project by increasing metal recoveries and concentrate tonnages by reducing the grade of metals in concentrate.
Key Milestones and Forward Programme
An Offtake Agreement was signed in December 2006 with Jinchuan Group, China's largest producer of nickel, cobalt and platinum group metals and a major producer of copper. The offtake arrangements include substantial project funding commitments from Jinchuan, as detailed below.
Capital Costs
Albidon successfully managed the construction of the Munali Nickel Project to be delivered ahead of time and with a capital cost increase of ~25% realised for the project to date when compared to the estimate developed in the Bankable Feasibility Study in 2006.
The increase in costs is attributable to the continuing escalation of costs in the mining industry worldwide. Cost increases cover all facets of the project, including raw materials, equipment, labour, power and fuel.
Project Funding
The Munali project was funded by a mix of debt and equity as follows:
Equity funding: US$40 million was raised from Albidon shareholders, US$15 million from Jinchuan Group and US$10 million from ZCCM Investment Holdings plc.
Debt financing: up to US$80 million of senior debt is being provided by Barclays Capital and the European Investment Bank as joint lead arrangers for the project. The Jinchuan Group will provide an additional US$20 million in subordinated debt.
Environmental Management at Munali
The Munali Project was constructed and operated in accordance with the Equator Principles and the conditions and guidelines approved by the Environmental Council of Zambia. The Environmental Management Plan ("EMP") is currently in draft format and is scheduled to be submitted for approval in April 2008. Environmental programmes are already in place in support of the EMP and environmental audits have been conducted with satisfactory results.
Relocation and Community Development Plan
The Relocation Action Plan ('RAP') is a key component of the overall Munali project. The RAP is the result of a detailed Social Impact Assessment undertaken as part of the Bankable Feasibility Study and it has as its primary objective the comfortable resettlement of members of the Munali community that formerly occupied areas that will be physically affected by the operations.
Planning for, and implementation of the RAP has involved continuous close consultation with the local community and its representatives. The Company particularly wishes to acknowledge the high level of support and cooperation it has received from the Munali community and the people throughout the Southern Province of Zambia.
A total of 27 households have been resettled and Phase 1 and 2. Phase 3 of the RAP program is being completed with 8 households. Phase 4 with 10 households is under construction. An estimated 36 households are yet be relocated. An estimated 51 households will not be resettled as they are in safe areas. Infrastructure development includes construction of cement brick houses, establishment of road infrastructure, provision of water boreholes and preparing crop fields to enhance food household security.
A local brick factory aimed at economically empowering the local community is on-going.
The company has decided to train and employ the local community as the RAP construction team. The programme is fully supported by the community, the traditional leaders, local and central government.
The community development programme covers HIV/AIDS awareness and prevention and Malaria Rollback programme both in the workplace and community. The HIV/AIDS awareness and prevention programme started in November 2010 in partnership with CHAMP (Community HIV/AIDS Management Programme).HIV/ADS awareness includes prevention, treatment care and support. Initiatives such as sustainable community economic empowerment are scheduled in the programme.
Malaria Rollback Programme
The Malaria Rollback programme started in October 2007 with the assistance of government support groups and has focused mainly on the following initiatives to date:
- Spraying of houses and buildings on site and community villages against mosquito's to a radius of 25 kilometres protecting about 18,000 people;
- Providing free testing to all employees, contractors and the community; and
- Providing free anti-malaria treatment to employees, contractors and the community through the establishment of a mobile clinic taking the service to the villages.
This effort has reduced the level of recorded malaria cases and the programme has continued with the input and support of local leaders and government.
Munali Growth Strategy
A number of initiatives have commenced to investigate options for the future growth of Munali.
A Scoping Study is underway to examine development options for the Voyager deposit which could either increase the annual production rate at Munali or alternatively could extend the life of the project beyond 10 years. Additional drilling will be undertaken in 2008 with the objective of locating more ore between Enterprise and Voyager and down-dip of both deposits.
The Company has recently approved an upgrade to the concentrator to increase production from the project to 10,000 - 10,500 tonnes of nickel in concentrate per annum. The concentrator capacity will be upgraded to 1,200,000 tpa. Capital costs for the upgrade are estimated at US$2.5 million and the upgrade will be funded from cash reserves.
This exploration refocus will include the Enterprise Mine and Voyager resource, as well as targets to the north of Voyager such as Intrepid (previously known as the North West Target) and Defiant. Enterprise, Voyager and Intrepid will be subject to additional drilling programmes in 2008 to update the resource definition.
A study on Paste fill Mining method has been done and this is likely to be implemented for the section N90000- N10200 from 895m RL to 720m RL where ore body thickness is viewed to be around 45m in certain parts.
To enhance confidence of the ore content and characteristic at this section of the mine on infill diamond drilling machine has been procured and arrived on site mid Nov 2010. A drill programme has been done and labour engaged. This will be an in house assignment as this will be more cost effective by Q1 2011 it is anticipated that all drilling will be complete and the machine will be deployed to other areas to improve the original drill spacing and achieve increased confidence of the ore.
Exploration for Additional Nickel Resources
As mentioned above, drilling at Enterprise and Voyager in 2007 was successful in increasing the confidence in the Enterprise resource and in providing an initial resource estimate for the Voyager deposit. More drilling will be done with the objective of locating additional ore between these two deposits and also down-dip.
Drilling will also be directed at assessing the resource potential of the Intrepid and Defiant target areas in the northern part of the Munali Intrusion, based on the fact that the geological setting of the mineralisation intersected along the southwestern side of the Munali Intrusion is consistent, with the same controls on nickel sulphides over the entire length of the intrusion (over 2.5km).
Future exploration programmes will be aimed at locating new zones of mineralisation to the north of the Munali Intrusion, based on structural geological work that suggests the Intrusion may plunge in a northerly direction.
Exploration drilling in the northwest portion of the Munali Intrusion near the Intrepid and Defiant exploration targets indicates a north-western plunge to the Munali intrusion. Ground EM was conducted in late 2008 covering the potential extension of the Munali intrusion to the northwest. Ongoing drilling and scoping work are planned for the Intrepid Target as potential sources of additional ore for the Munali plant.
Revised mapping at Munali has updated the geologic map of the Munali.
Zambia Regional Nickel-Copper Exploration
An evaluation of the Munali Fault Zone was initiated in the second quarter of 2006, commencing with an electromagnetic (VTEM) survey on a 60km corridor along the fault. This survey identified a number of conductive targets which were systematically evaluated through reconnaissance geological mapping and, where warranted, by geochemical soil sampling. The results generally indicated prospectivity for sediment hosted copper mineralisation rather than for mafic to ultramafic hosted nickel.
These programmes led the Company to focus exploration efforts in the Chikani area, approximately 25km to the south of Munali. Three reconnaissance diamond drill holes drilled in 2006 identified a zone of approximately 35m drilled width containing sulphide bearing black shale's with copper bearing sulphides. This appears to be the source of the copper anomalism in the stream and soil sampling. Ongoing work is focused on evaluating the potential for sediment hosted copper style targets similar to the Copperbelt.
Further interpretation of regional data led to the recognition of three additional major fault structures, as well as the south-easterly continuation of the Munali Fault. An extensive programme of stream sediment sampling to evaluate these four structures was commenced in 2006 and completed in 2007 with 1,575 stream sediment samples collected during the 2007 survey.
Drainages with copper values greater than 50ppm copper are clustered in the Chikani and Luwanya areas. Anomalous drainages were field checked and locations for grid soil sampling were selected in the Chikani and Luwanya areas. Approximately 2,400 soil samples were collected in late 2007 and results evaluated.
The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the 'JORC Code') sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information contained in this report has been presented in accordance with the JORC Code and references to "Indicated", "Inferred Resources" and "Probable Ore Reserves" are to those terms as defined in the JORC Code.
Information in this report relating to exploration results and mineral resources is based on data compiled by Mike Dunbar (a consultant to the Company and formerly a full time employee of the Mitchell River Group) and John Schloderer (an ex-employee of the Company), who are both members of The Australasian Institute of Mining and Metallurgy. Mike Dunbar and John Schloderer both have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they undertook to qualify as a Competent Person under the 2004 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Mike Dunbar and John Schloderer consent to the inclusion of the data in the form and context in which it appears.
