Study for tripling production in progress
Highlights
• Environmental permit granted for the Watershed project by the Department of Environment & Heritage Protection.
• The way for the granting of mining licenses by the
Department of Natural Resources & Mines is now free.
• Revised Definitive Feasibility Study (DFS) in progress with extended production scenario of 3Mtpa for Watershed - results expected for Q1 2014.
• Study on potential underground mine for Watershed
Watershed, with the opportunity to increase project value and uptime, started.
• Work plans for the upcoming exploration period in
Burkina Faso were created and tested.
The quarter ending in September includes further major advances for Vital Metals' flagship Watershed tungsten project in Queensland, with the environmental authority (EA) granted by the Queensland State Department of Environment & Heritage Protection.
The EA was the final regulatory hurdle before the Department of Natural Resources & Mines could consider granting mining licenses, which are a prerequisite for starting production at Watershed.
Receiving the EA takes the Watershed project to a new level and makes it stand out clearly from the crowd of its competitors. Watershed will have completed the regulatory approval process with the forthcoming grant of mining licenses - expected by the end of the year - 2013.
Issuing the EA is a significant milestone for any mining project - especially for those in Australia that set a very high standard of environmental protection - and the company wants to highlight the efforts of all those who contributed to its success.
During the quarter, the company announced that it would begin two key studies to optimize the Watershed mining plan.
First, in July, the company announced that it would extend the Definitive Feasibility Study (DFS) for Watershed, which is currently being carried out with the support of our joint venture partner JOGMEC (Japan, Oil, Gas and Metals National Corporation) in terms of tripling annual mine production to 3 million tons of ore per year. Furthermore, Vital began the preparation of a preliminary study for a potential underground operation which is to follow the open pit mine on Watershed.
The Company believes that both initiatives have great potential to deliver significant economic and productive improvements over the life of the Watershed Mine operation.
The results of these two studies will play an important role in the ongoing DFS
whose completion is now planned for the first quarter of 2014.
divisions
Watershed Tungsten Project DFS - Queensland (Vital 70%)
environmental authorization
As reported in the Highlights, a key milestone was reached this quarter with the Queensland Department of Environment & Heritage Protection's final Environmental Authority (EA) being issued for the Watershed Project following a public review.
Obtaining the EA is the final step required before the Queensland Department of Natural Resources & Mines is able to consider obtaining the mining license. It is expected that these licenses will be issued before the end of 2013. This means that the project will have all the necessary permits to begin construction of the mining operation.
Vital wishes to highlight the support and assistance of the Department of Environment & Heritage Protection during the approval process, and it has been encouraged in its efforts by the high level of support and interest in the project from all government levels of the Queensland government.
Obtaining this grant is a key element in Vital's strategy to develop and advance the Watershed Tungsten Project. The parallel work on risk minimization of the technical aspects as well as the securing of the necessary permits make it possible to advance the project to the design and production phase.
Extension of DFS
During the quarter, Vital made the decision to extend DFS for the Watershed project for the possibility of increasing production to three million tonnes of ore per year. This decision follows an evaluation of the preliminary results of the study, which are based on a capacity of one million tonnes of ore per year. These showed the opportunity to substantially reduce the ongoing production costs while increasing the production profile.
This material increase in throughput is carried by the Watershed resource, which is 49.32 million tons of ore at 0,14% WO3 at a threshold grade of 0.05% WO3 (the resource estimate is reported according to the JORC Code & Guidelines 2004).
Preliminary results indicate that the increase in capacity can be achieved with an investment of approximately AU $ 150 million, with the associated benefit of a reduced capital intensity ratio.
Vitals' decision to investigate the 3 million-tonne scenario was also fueled by the new strength of the tungsten price, as well as the predicted high demand and price levels for the metal and the recent depreciation of the Australian dollar.
The detailed analysis of preliminary DFS results by Tetratech consultants has also identified a number of technical areas that require further engineering work. These are done as part of the studies for the 3 million ton scenario.
Work on Watershed DFS during the quarter included the following areas:
• Completion of the geotechnical studies for the open pit mining of the 3 million
Tons of scenarios;
• Start of a request regarding the connection of Watershed by Ergon
Energy;
• revaluation of metallurgy;
• completion of an assessment of port and freight options;
• completion of budget proposals regarding mining contractors;
• beginning of a geotechnical assessment of the mining infrastructure;
• Start of a civil engineering study.
A report on a geotechnical study involving the 3 million ton option is currently in the evaluation stage. An 3D mining mass balance model of the relevant rock mass parameters and their assessment has been prepared. This was used for an analysis of the design for the open pit mining. The positive results indicate that the average slope angles from 45⁰ to 47⁰ to 55⁰ can be increased.
Ergon Energy was commissioned to conduct a formal investigation to connect
Watershed to the electricity network. A report is expected shortly.
Based on an independent evaluation of the test work carried out, Vital was informed that there are very good options for optimizing the treatment process - by cleaning the <10mm fraction, which bypasses the pre-sorting. This would have effects in the form of lower capital requirements, since the subsequent flotation can be projected to be smaller. There would also be savings in operational costs, as the lower proportion of gangue leads to a reduction in the consumption of flotation reagents.
Study on underground mining
Vital has started a study to investigate the civil engineering potential on Watershed. This study examines:
• The potential for underground mining; and
• The likely transition point as well as mining strategies for a
Civil engineering scenario and the interaction with the opencast mine.
At the moment geotechnical information is used, which was collected for the work on the open pit. Depending on the results of the study, it may be possible that further geotechnical data is needed to be able to evaluate a detailed underground operation.
A civil engineering operation after the end of the open pit operation on Watershed would bring benefits in terms of the project value and the operating time of the mine. After completion of the study, an optimization of the overall project is needed. As a result of this work and other initiatives, completion of Watershed DFS is expected in the first quarter of 2014.
Watershed exploration
For Watershed, new geological cross-section through the deposit was made in ENE-WSW direction, along the alignment of the lower "pod" tunnel, which served the bulk sampling. The new cross section includes lithological, structural, alteration and mineralization data.
Other completed work included a review of available historical reconnaissance reports relating to Vital's exploration licenses. Additional data was found, which was not included in the GIS format in our database. The inclusion of this new data into a digital dataset that can be examined by GIS methods is of high value to identify potential targets for future exploratory programs.
It is worth noting that the reconnaissance data compiled by the Utah Development Company Ltd ("Utah"), the original explorer of the Watershed deposit, is of world class standard and above what is normally available to junior exploration companies. Utah had a large number of thin sections of Watershed drill cores and rock samples from the present-day exploration areas Vitals create. The thin section studies, which include petrographic descriptions as well as qualitative and quantitative mineralogical data, are currently being digitized and will be of high value for the further geological interpretation of Watershed and the surrounding areas.
tungsten market
Following the strong price increase in the middle of the year, tungsten prices during this quarter fell from their high for the year following the European and Chinese holiday season, which led to reduced purchasing activity. As a result, Chinese and European APT prices are currently around US $ 400 per mtu. These are still good prices and are well above the situation at the beginning of this year.
The Australian dollar made a comeback against the US dollar, eroding the price premium reflected in Australian dollar stocks.
To view the full press release please follow the link:
http://www.irw-press.com/dokumente/VitalMetals_041113_DE.pdf
There is a positive consensus regarding increasing demand for tungsten, which was expressed at the annual meeting of the International Tungsten Industry Association (ITIA). The summary of the conference is that there will be average demand and growth in Western markets while demand in China will be much stronger. Labor force and production costs continue to increase in China and exert additional pressure on Chinese metal producers.
Chinese market trend
• The estimated total consumption of tungsten in the year 2013 should increase by 4%
36.000t rise.
• The tungsten export quota remains at 15.400t.
• Tungsten consumption in the carbide industry will continue to increase by 10% per year. The demand comes mainly from the domestic market and increases with the growing vehicle production. One of the goals of the Chinese government is to increase Chinese capacity in this sector.
• Chinese labor costs continue to increase year on year. The
Labor costs are no longer considered cheap.
• The government requires the closure of polluting and unprofitable mines.
Japanese market trend
• The extraction of tungsten stocks started in 2012 and reached one
Low point. Buyers started negotiations for future supply contracts.
• The Japanese tungsten industry seeks to secure 10% world market share through technological innovation and high quality products.
• The Japanese tungsten industry is heavily dependent on the automotive industry in Asia
from (80%). Japan's three largest carmakers reported a sharp increase in sales in China in recent months, with some deliveries doubling to a mid-month 21 high.
US market trend
• 2013 will end up with an increase compared to the first half, and
Growth is predicted for the first quarter of 2014.
• Demand for tungsten increased by about 7% in the first half of the year
2013.
Russian market trend
• Deficiencies in tungsten raw materials impacted military orders as well
Government stocks.
• Recent higher prices for APT have enabled foundries to make new ones
Invest in equipment and revise technological processes.
• Major resource projects continue to remain out of the possible due to internal disputes.
European market trend
• In 2013, non-EU demand was the main driver of the European economy, and in 2014, domestic demand will play the role of the main demand driver.
• The tungsten market in Europe is driven by the global automotive industry, machine tool manufacturers and the mining industry. As a result, the tungsten market surpasses the GDP growth of the European Union.
Doulnia Gold Project - Burkina Faso
Acquisition of 100% ownership of the Doulnia project
During this quarter, Vital acquired 100% of the Doulnia Gold ownership
Project through a deal with its joint venture partner Ampella Mining.
As part of this deal, Ampella will transfer 30% of its 2 4 licenses, which make up the Doulnia Project, to Vital, which secures Vital 100% ownership of all licenses.
In return, Ampella receives a 2.25% royalty on all gold produced on Doulnia. Vital owns the right of first refusal to purchase Ampella's tax credit.
Ampella has the right to reclaim its 30% share of the same two Doulnia licenses if the JORC resource of the 1 project exceeds million ounces of gold over the next two years. In this case, Ampella will be required to reimburse Vital for the reimbursement of the Shares, and pay an additional 500% of that sum in cash. A repurchase of the shares would nullify the tax credits.
The licenses to which Ampella held 30% of the shares are Doulnia and Kampala.
Exploration Activities
No field work has been done on Doulnia this quarter, but plans have been completed for a drill program to fill gaps in the Collo-South and Collo-Central areas. In these areas interesting mineralized structures were discussed during the previous drill program.
In total, 20 drilling was planned using 2.000 boring meters. It is expected that these holes could detect another mineralized area the size of colloidal and near-surface ounces.
For the Kampala license, it was recognized that further Auger drilling should be carried out in higher-coverage areas to complete the sampling program begun in January 2013.
An Auger program was proposed on the Zeko license to geochemically survey an area southeast of Boungou-Süd. The proposed program covers an area of meta-sediments in contact with the Boungou-South Granite / Granodiorite. This area was previously sampled with an insufficient sample density to be able to reliably prove an exploration target of the size of Boungou-Süd in the flat areas. The previous geochemical exploration program includes areas with anomalous results including two samples of> 67ppb gold in relatively flat-lying quartz boulder farmland.
Company
Vital Metals Ltd had liquid funds of AU $ 1.47M for 30 September 2013. The company requested the reimbursement of development costs for 2012-13, which is expected in the December quarter. JOGMEC continued to pro-rate the cost of the feasibility study, which is the equivalent of its
30% share of the project.
The overwhelming impression of Vital's management after attending the annual meeting of the International Tungsten Industry Association (ITIA) in Sydney was that JOGMEC's investment in the Watershed project was a strategic and far-sighted decision.
JOGMEC's support was invaluable to the development of the project, and the investment made by JOGMEC provided the necessary capital for Vital to minimize the project's risk to a point that would allow the future participation of Japanese tungsten consumers in the project.
JOGMEC recently signed a Memorandum of Understanding with the State of Queensland for future cooperation in the exploration of metals and energy commodities, which highlights the level of concern with which Japan will meet the safe and reliable supply of commodities in the future.
The strategic importance of tungsten and the need for metal producers to ensure a reliable supply in the future are increasingly starting to attract attention also in the professional and general press. This was vital due to an increasing number of inquiries about project information.
Vital's goal is to establish with Watershed a stable and reliable supplier of tungsten concentrate, which is necessary for the production of tungsten metal, which is so critical in so many aspects of our modern world.
For more information, visit our website: www.vitalmetals.com.au
Contact: Mark Strizek MD
Vital Metals Ltd
Phone: + 61 8 9388 7742
Email: ppgad@pucrs.br
Press inquiries:
Nicholas Read / Paul Armstrong
Read Corporate
Phone: + 61-8 9388 1474
Email: ppgad@pucrs.br
Information about the competent person
The information in this report, which relates to exploration results and resource resources, is based on information compiled by Mr. Mark Strizek (MD), an employee of the Company. Mr. Strizek is a member of the Australian Institute of Mining and Metallurgy (AusIMM) and has sufficient factual experience to assess the types of deposits under review and the activities undertaken to qualify as a Qualified Person as defined in the 2004 edition of the Joint Ore Reserves Committee (JORC). Australasian code for reporting on exploration results, resource resources and ore reserves.
ABOUT VITAL METALS
Vital Metals Ltd (ASX: VML) is a development and exploration company focused on
to advance two high-perspective projects: the advanced Watershed Tungsten Project in northern Queensland, Australia, and the Doulnia Gold Project in southern Burkina Faso, West Africa.
Watershed Tungsten Project - Queensland
The Watershed Scheelite Project (Scheelite - Calcium Tungstate), in the far north of
Queensland, 150 kilometers northwest of Cairns, is the company's flagship project. Vital entered into a formal agreement with JOGMEC (Japan Oil, Gas and Metals National Corporation), under which JOGMEC acquired an 30% stake in the project for AU $ 5.4
Millions acquired (with a value of the project at the time of the contract of
AU $ 18M). The funds were used to carry out the feasibility study which was carried out in the
2013 should be completed.
Doulnia Gold Project - Burkina Faso
The Doulnia Gold Project (100% Vital) is located in southern Burkina Faso, West Africa. The
Project consists of 4 related exploration areas; The Doulnia and Kampala Exploration Areas recently secured as part of a trade with Ampella Mining Ltd as well as the Mediga and Zeko Exploration Areas. The project is located in the highly prospective Birimian greenstone belt with 850 km2 related exploration areas, which are based on the trend of the Markoye fault zone and the Bole Scheer Zone and include the Kollo Gold Project and Boungou South Gold Prospect.
About JOGMEC
The Japan Oil, Gas and Metals National Corporation (JOGMEC) was founded in the year 2004. JOGMEC is a state-owned enterprise that combines the functions of the former Japan National Oil Corporation, which was responsible for the safe supply of oil and gas, and the former Metal Mining Agency of Japan, which is responsible for ensuring a safe supply of non-ferrous and mineral resources as well had implemented measures to reduce pollutant emissions from mines. The company has an annual budget of about 1.564 billion yen (AU $ 18
Billions) and provides financial support, technology development and technical assistance to Japanese companies and their foreign subcontractors.
To view the full press release please follow the link:
http://www.irw-press.com/dokumente/VitalMetals_041113_DE.pdf
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