TIDMENK
RNS Number : 5546I
ENK PLC
26 July 2012
COMPANY UPDATE AND QUARTERLY ACTIVITIES REPORT
FOR THE PERIOD ENDED 30 JUNE 2012
HIGHLIGHTS
-- Acoje Bankable Feasibility Study continues to make
significant progress
- The Acoje BFS is currently on track to be finalised during the
current quarter. Much of the test work is now complete and entering
the economic evaluation and write-up stage.
- The estimated remaining cash cost to complete the BFS is $6.5m.
- Resource upgrade at Acoje resulted in increase in contained nickel of 36%
-- DSO Revenues
- Cash received from ore sales during the quarter was $1.4
million. Total ore shipped for the quarter was 242,913 wmt earning
$927k in profit share. Mining has now been discontinued as the site
is prepared for construction of the tank leach processing
plant.
-- Strong Cash Position
- Cash on hand as of 30 June was $30.3 million, equivalent to
7.5 pence (11.6 cents) per share. Further cash inflows of $11.0
million, equivalent to 2.7 pence (4.2 cents) per share, are
expected before end of December 2012.
- Potential to fund project construction with minimal shareholder dilution.
-- Sale of Non-Core Assets
- Sale of Berong shareholding completed for $6.55 million. Sale
undertaken of 60% interest in local partner Montemina Resources
Corporation for $11.0 million.
Managing Director Rob Gregory commented "The Company is in a
very strong position with a robust cash balance of over $30
million, contracted cash receivables of $11 million and a known
cash cost to complete the Tank Leach BFS.
"I strongly believe that ENK has the world's most advanced
technical team when it comes to leaching of tropical nickel
laterites.
"Following the successful release of the BFS, the company
intends to enter into a strategic partnership with an off-take
partner to fund the project with minimal shareholder dilution."
Acoje Project
The Bankable Feasibility Study ('BFS') for the Acoje tank
leaching project in the Philippines remained the principal area of
focus for the Company during the past quarter. In addition a
further drilling plan was completed with results expected soon.
Acoje Bankable Feasibility Study
The Acoje BFS being undertaken by Jacobs Engineering of Perth,
is now entering its final stages. The detailed test work and design
programs on the leaching and solid liquid separation by Outotec Oyj
are now with Jacobs for final costing and write up, as is the
comminution circuit by Orway Mining Consultants, continuous ion
exchange design by PuriTech and infrastructure details by GHD.
The Company is planning to run a parallel costing exercise with
Chinese engineering firms that will more likely and realistically
estimate costs for construction in the Philippines. Based on its
experience in dealing with Chinese construction firms at Caldag and
more recently Acoje, the Company believes that there are
significant savings to be found utilising Asian based contractors
as opposed to Western contractors. This is especially so when most
Australian firms are stretched with bulk commodity projects and
skill shortages.
Off-take discussions are proceeding well and are expected to
progress to a conclusion as key components of the BFS are
completed. As part of the process the Company has now sent a number
of detailed analysis reports on the Nickel Hydroxide Product
('NHP') compiled by the Natural History Museum ('NHM') in London to
potential off-take partners. Several parties engaged in more
advanced negotiations have also received test samples. The NHP is a
significantly more advanced product than the Mixed Hydroxide
Product ('MHP') that was proposed to be produced at Caldag and
requires little to no refining for final application. The company
believes NHP will be highly sought after by end users. The Company
intends the off-take arrangements to form a significant part of its
financing requirements for the project.
Public meetings on the amendments to the existing Environmental
Clearance Certificate ('ECC') have been undertaken without any
significant concerns emerging. The amendment document is in final
stages and will be submitted to the Environment Management Bureau
in due course. The Company is not anticipating any delays in this
process.
Subject to the successful completion of the BFS the Company
intends to proceed to financing of the construction of the nickel
processing plant utilising a combination of bank debt and equity.
It is proposed to utilise funding from a strategic off-take partner
to minimise the equity funding required and reduce dilution for
shareholders.
ENK Research Facility ('ERF')
The Acoje heap leach trial, which originally commenced on 16
April 2011, has now entered the next phase in the heap leach cycle,
which is the rinsing of the heap with water to displace any in-situ
pregnant leach solution. The heap rinsing is expected to take a few
months before the heap outflow meets applicable standards. Once the
heap has been rinsed the rehabilitation stage will commence.
As was observed with the column leach tests, the nickel
extraction has increased after the heap was drained and with the
commencement of rinsing. Current nickel extraction is 71.3%, cobalt
extraction is 88.3% and iron extraction is 23.1%, in line with
expectations. As reported previously, the second batch of 370
kilograms of NHP was produced in the ERF downstream plant, using
Magnesia[1] as a precipitant. The washed product was studied by the
NHM and confirmed to contain 53.24% nickel which is significantly
higher grade and higher payability than MHP.
Acoje Resource Upgrade
In mid March 2012 ENK announced the completion of the infill
drilling programme and an updated Indicated and Inferred JORC
(2004) Resource estimate (at a 0.8% Ni cut-off) for Acoje of:
Indicated: 40.9 million tonnes grading 1.08% Ni, 0.05% Co
Inferred: 29.0 million tonnes grading 0.96% Ni, 0.06% Co
This represents a total of over 720,000 tonnes of contained
nickel at the Acoje Project.
This represented an increase of 36% in contained nickel from the
November 2008 Resource estimate. Nearly all of the Inferred
material reported in the 2008 estimate has been converted to
Indicated and a further 20 million tonnes have been delineated
(seven million tonnes Indicated and 13 million tonnes
Inferred).
Due to the additional Inferred material that was delineated, the
Company determined that an additional drill programme at Acoje,
designed to convert a proportion of the Inferred material to
Indicated status, would benefit the BFS. This programme is now
complete and all assays and drill data have been received by
Snowden Mining Consultants ('Snowden') for a further JORC update
during the current quarter.
The new resource upgrade, together with the Zambales resource,
will result in a mine life in excess of 25 years.
Direct Shipping Ore
During the quarter there were three full shipments and four part
shipments of nickel laterite direct shipping ore ('DSO') at an
average nickel grade of 1.80% under the mining agreement with
partner DMCI Mining Corporation, totalling 242,913 wet metric
tonnes.
Total revenue recognised for these shipments was $927,000. This
amount was lower than the prior quarter as there were no high-grade
(+2.0% Ni) shipments. Receipt of cash from ore sales during the
quarter was $1,406,779.
Mining at Acoje has now been discontinued as the site is
prepared for construction of the tank leach processing plant.
Zambales Resource Upgrade
During June the Company announced that in consultation with its
resource consultant, Snowden, that the historic Falconbridge test
pit data collected in the 1970's, which was used to calculate the
previous JORC Inferred resource estimate of 23.5 million tonnes
grading 1.18% Ni and 0.05% Co, is of insufficient detail to be used
in the calculation of a JORC Indicated resource estimate due to the
lack of ancillary elements and detailed logging data that the newer
drilling data has provided. As such the Company is now undertaking
the drilling of additional holes, adjacent to the historic test
pits, to collect this required data.
The drill programme, of 194 holes for 1,916 meters, commenced on
26 June 2012 and is now 42 % complete. Drilling is expected to be
completed by the end of August and all data should be provided to
Snowden by mid September to enable them to provide a JORC Indicated
resource estimate for this tenement. The Zambales resource update
is now expected to be available in early October 2012. The delay in
the Zambales resource update should not impact the Acoje
Feasibility Study as it is being planned to utilise limonite ore
from the Zambales tenement only as an ore "top-up", and sufficient
data exists to model this. The Zambales tenement is situated
approximately 5 kilometres north of the Acoje tenement on the
island of Luzon, Philippines
The JORC resource upgrade will add previously undrilled ore to
the resource estimate including the previously untested saprolite
horizon of the Zambales tenement.
Philippine Mining Policy
The Aquino administration issued its Executive Order for its new
Mining Policy in the Philippines. The policy is largely a forward
looking document focussing on increased environmental and social
protection as well as equitable revenue sharing among stakeholders.
The Policy states that no proposed changes will be retrospective.
As the Acoje and Zambales tenements are existing contracts, they
should not be affected by the new policy. ENK's tenements are also
protected under Foreign Investment Protection Agreements between
the UK and the Philippines providing further comfort that they will
be unaffected by the policy.
ENK CORPORATE
Cash Position
As of 30 June 2012 total cash in hand was $30.3m, including
$2.01m in local partner Montemina Resources Corp ('MRC'), which
provides a strong working capital base for the Company and its
proposed activities.
In addition to cash on hand of $30.3 million, expected cash
receipts over the near term total $11.0m including: $2.0m in mid
August and $2.0m in mid November from the sale of an interest in
MRC; $0.812m receivables from DSO sales; $5.9m in late December
from Toledo Mining Corporation in relation to the sale of Berong
Nickel Corporation; and $0.3m from the sale of the Abogado
Exploration Permit. Further details on these transactions are set
out below.
Over the mid-term a further $5.0m is receivable from the sale of
the interest in MRC, as well as final settlement of the sale of
surplus exploration properties which is expected to result in cash
of $0.55m and shares in listed entities valued at $3.0m. In
addition, the recommencement of DSO at the Zambales property should
result in further sales receipts.
The estimated cost to completion of the Acoje BFS is $6.5m,
which will leave the Company with significant cash resources to
meet its ongoing working capital requirements and to commence
preliminary works on the nickel processing plant. The Company's
strong cash position will enable it to progress its key projects
significantly without recourse to the equity markets.
Sale of Interest in Toledo Mining and Berong Nickel
Corporation
In early May 2012 the Company announced the sale of its 5.01%
interest in AIM-listed Toledo Mining Corporation ('TMC') for
$698,000 in cash and the conditional sale of its 18.7% interest in
Berong Nickel Corporation ('BNC') for $6,552,000 in cash to World
Fund Pte Limited. Both assets were considered non-core by the
Directors.
In early July the Company announced that, in accordance with the
terms of the Berong Nickel Corporation Shareholders Agreement
('SA'), Toledo Mining Corporation plc ('Toledo') had exercised its
pre-emptive rights in respect of the sale of ENK's 18.7% interest
in BNC. The other shareholder of BNC, Atlas Consolidated Mining
Corporation, did not exercise its pre-emptive rights in accordance
with the SA.
In accordance with the terms of the SA, the Company received a
non-refundable deposit from Toledo of $655,200, being 10% of the
purchase price of ENK's BNC interest. The balance of the $6,552,000
purchase price, being $5,896,800, is due by no later than 30
December 2012.
Sale of Interest in Montemina Resources Corporation
In early June the Company announced that its local partner and
60% per cent owner of the Zambales Project, Montemina Resources
Corporation ('MRC'), has entered into an agreement with Philippine
company, Golden Harvest Global Corporation ('GHGC') wherein GHGC
will acquire a 60% interest in MRC for total consideration of
$11,000,000.
Payment terms for the sale are:
-- $2 million upon signing,
-- $2 million by no later than 15 August 2012,
-- $2 million by no later than 15 November 2012, and
-- $5 million linked to DSO revenues from the Zambales tenement
(see below), but in any event, payable no later than the second
anniversary of signing.
The proceeds will be used by MRC to repay loans from members of
the ENK group which will result in all of the funds (less taxes and
costs) being available for use by ENK.
GHGC has also entered into a Mining Agreement with Zambales
Chromite Mining Corporation, owner of the Zambales tenement and a
40% per cent owned subsidiary of ENK. This agreement provides for
the mining of nickel laterite ore for DSO on the basis that GHGC
provides all mining equipment, capital, labour, trucking, marketing
and port facilities in return for a 50% profit share of ore sales.
DSO will commence once Zambales and GHGC obtain the required
permits for this operation.
In addition to the above agreements, GHGC has entered into an
Exploration Services Agreement ('ESA') with Zambales Diversified
Metals Corporation ('ZDMC'), holder of the Acoje tenement and an 80
per cent owned subsidiary of ENK, for the exploration of chromite
and other underground minerals on the Acoje tenement. The ESA is
for a period of 2 years with annual options to extend thereafter,
subject to minimum performance requirements and payment of advance
royalties.
If a decision to develop the chromite or other underground
minerals is made by GHGC then ZDMC has, at its option, the ability
to require payment of $20,000,000 to enable GHGC to acquire 100% of
the rights to these minerals, or, to elect to have a free carry for
ZDMC for a 20% interest in this project. In the event the lump sum
payment is chosen, mining royalties at a rate to be agreed, will
also be payable to ZDMC.
Personnel/ Directors
During the quarter a further two senior appointments were made:
Ray Gomm as Project Engineer and Dr Keith Halford as Manager,
Occupational Health Safety & Environment Both are working on
the Acoje project.
In April the Company announced the appointment to the Board of
Guy Walker, a nominee of major shareholders Montoya Investments Ltd
and D&A Income Ltd.
Web Site
The Company has now launched its new website which contains a
number of recent and historical photos of the Company's activities.
Please see www.enk.co.uk.
Yours faithfully,
Robert G M Gregory
Managing Director
For more information or to view a copy of this document, please
visit www.enk.co.uk or contact:
Robert Gregory, Managing Director, ENK Tel: +63 917 513 4970
Mark Hanlon, Finance Director, ENK Tel: +61 8 9226 1111
Chris Sim, Neil Elliot, Investec Tel: +44 20 7071 4300
Tim Blythe or Robert Kellner, Blythe Weigh Communications Tel: +44 20 7138 3204
The information in this report that relates to Mineral Resources
is based on information compiled by Mr Robert Gregory, who is a
Member of The Australasian Institute of Mining and Metallurgy. Mr
Gregory is Managing Director of European Nickel PLC, and has
sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration results, Mineral Resources and Ore
Reserves". Mr Gregory consents to the inclusion in this report of
the matters based on his information in the form and context in
which it appears.
[1] Trace Mg in product is much preferred by end users to trace
Na which occurs when using soda ash as the precipitant.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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