Sydney, Dec 15, 2008 AEST (ABN Newswire) - Citadel Resource Group Limited (ASX:CGG) is pleased to announce an update on the Definitive Feasibility Study (DFS) for the Jabal Sayid Copper Gold Project, which remains on schedule to be delivered in July 2009.
There has been a material reduction in projected capital expenditure from US$380M to a range of US$250-290M. Additionally a startup scenario is available to utilise near surface mineralization at Lode 1 for early gold and copper production which adds up to US$40m to budgeted cashflows at current metal prices. The targeted internal rate of return of 20%, even using current depressed long term forecast copper prices is expected to be readily achievable.
The attached presentation is part of a roadshow being conducted with Australian institutional and retail investors this week and in the Middle East in January.
Summary Project Update
- Stage 1 DFS remains on track to be delivered in July 2009
- Stage 1 Project design fixed at 3.4MTPA producing an average of approximately 60,000 tpa copper in concentrate over the life of the mine
- Initial 10 Year Mine Life based on Lodes 2 and 4 only, with expectation of significant reserve extension and exploitation of the polymetallic mineralization of Lode 1 to further extend mine life
- Project capital expenditure has been reduced from US$380M to a range of US$250-290M
- Life of Mine average head grade of 1.9%Cu
- Selection of Sub Level Caving as the mining method for Lodes 2 and 4 will provide opportunity to target overall cash costs below US$1.00/lb copper produced
- Targeted internal rate of return of 20%, even using current depressed long term forecast copper prices is expected to be readily achievable
- Startup scenario available to accelerate production and maximize cashflow in the first 3 years by utilizing near surface mineralization at Lode 1 for early gold and copper production. Adds up to US$40m to budgeted cashflows at current metal prices.
- Potential to expand production to 5MTPA rapidly, as resource growth continues
Definitive Feasibility Study
In November 2008 SNC Lavalin was appointed to complete the Definitive Feasibility Study. Subject to performance and project development requirements SNC Lavalin will continue as the construction contractor, or EPCM contractor to enable seamless and rapid progress into construction. SNC-Lavalin (TSX:SNC) is one of the leading groups of engineering and construction companies in the world, and a key player in facilities and operations management, and in the ownership, operation and maintenance of infrastructure. The SNC-Lavalin companies employ over 18,000 people in offices across Canada and in 30 other countries around the world. Importantly SNC Lavalin has worked on Saudi Arabian projects previously and so have relevant in-country experience.
In November 2008 Citadel, with its mining consultants AMC, undertook a critical review of the proposed mining method for the Jabal Sayid project. Prior work on the prefeasibility study (PFS) was based on long hole open stoping and cemented backfill. Recent drilling results have shown that the top of the Lode 4 mineralization is much closer to surface than previously understood. This, combined with production schedule and cost advantages makes Sub Level Caving a significantly superior mining method for the project, and accordingly the project scope was amended to this in late November 2008.
The resultant reductions in water use, operating and development costs, combined with the dramatic falls in construction cost inputs seen over the last two months require a significant change to the PFS work that was underway. The PFS work being undertaken by Worley Parsons has now ceased and will now be completed by an integrated Citadel/SNC Lavalin team. The PFS results are expected to be available in Feb 2009.
While there is an expectation that both capital and operating costs will be reduced further the work is sufficiently advanced, and the capital cost reductions are considered significantly material, to provide an update to the market.
Project Startup and Timelines
The startup scenario currently being studied includes a number of measures designed to maximize cashflow in the initial years of production to allow Citadel greater flexibility given the current environment.
- Recent significant reductions in lead times for major items such as grinding mills has provided an opportunity to further accelerate the project construction schedule. First production by end 2010 is the project teams objective.
- The mine schedule for Lode 4 and 2 is to be optimized to maximise grade in early years, without impacting on long term extraction of the resource
- Near surface copper mineralization ( @1.6% Cu ) at Lode 1 will be open cut mined and used as commissioning ore for the concentrator, and to top up year 1 production to concentrator nameplate.
- The overburden removed at Lode 1 to access the early plant feed will largely comprise gold rich oxide "gold cap" material. This will mined, crushed and transported to tailings impoundment area where a low cost heap leach plant will be used to produce gold/silver dore.
- The early mining of near surface mineralization at Lode 1 will produce rapid cash flow from sale of gold/silver dore for several years, and also provide supplementary feed to the copper concentrator for commissioning and while the underground mine ramps up to full production.
Jabal Sayid 2009 Drilling Program and Resource Update
The immediate 2009 drilling priority at Jabal Sayid is now:
- in-fill ore zones in the first 7 years of Sub Level Cave mine to Indicated category
- test deeper targets in Lode 4 potential high grade zones
The Resource update will be completed on this basis in Q2 2009 so it can be incorporated into the DFS.
Higher grade core to Mineralisation
In response to a number of enquiries from shareholders Citadel wishes to advise shareholders that it is well placed to survive any protracted further weakness in commodity prices. The current DFS is based on a bulk underground operation exploiting the plus 1% copper envelope within Lodes 2 and 4 which contains resources of 31 Mt at 2.3% Cu. At current copper prices the project remains robust.
Citadel has previously not reported the resource at higher grade cut-offs. Using a 2% copper cut-off Jabal Sayid contains a resource of 19.4 Mt at 2.92% Cu as outlined in Table 2. Citadel has now undertaken a review of this high grade mineralization and like the plus 1% Cu envelope it is amenable to a mechanized underground operation. At current copper prices the current DFS scenario offers superior return for shareholders. However should commodity prices continue to fall this high grade core of mineralization, which contains wide zones of up to 10% copper, provides the opportunity (should it become necessary) to re-engineer Jabal Sayid into a smaller higher grade operation that will remain bankable at copper prices below US$1 lb.
For a more detailed Technical Summary of the Jabal Sayid project and the Regional Prospects please refer to the link on the home page of our website:
http://www.citadelrg.com.au
Contact
Citadel Resource Group Limited
Ines Scotland (CEO)
Tel: +61-400-039-664
ines.scotland@citadelrg.com.au
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