To Earn 75% in Forrestania Nickel Sulphide Proj/Acquisition
Document date:
Wed 17 Apr 2002
Published:
Wed 17 Apr 2002 00:00:00
Document No:
214495
Document part:
A
Market Flag:
Y
Classification:
WESTERN AREAS NL 2002-04-17 ASX-SIGNAL-G HOMEX - Perth +++++++++++++++++++++++++ HIGHLIGHTS * Agreement signed for an option to earn 75% JV interest in the Forrestania Nickel Project with existing resources in three nickel sulphide deposits containing over 55,000 tonnes nickel. * Agreement signed for an option to acquire the Ravensthorpe nickel processing plant from Tectonic Resources, by way of a series of staged payments. * Tremendous exploration potential for massive and disseminated nickel sulphide deposits in identified exploration targets outside the known resources, on granted mining leases. The board of Western Areas is pleased to announce the following significant developments: FORRESTANIA NICKEL PROJECT After completion of due diligence, WSA has signed an agreement with Outokumpu Mining Australia Pty Ltd, Sons of Gwalia Ltd and Ferrier Hodgson, the administrators of Viceroy Australia Pty Ltd, for an option to acquire Viceroy's rights to earn 75% interest in commodities other than precious metals, in a joint venture with leading metals and technology group, Outokumpu. The Forrestania Nickel Project includes the high-grade New Morning nickel resource, the large Diggers South nickel resource, a residual resource at the Cosmic Boy mine, many defined exploration targets and significant exploration potential within the Forrestania nickel province in Western Australia's Yilgarn Craton. In terms of size, prospectivity, recent production and remaining resources, Forrestania is one of Australia's major nickel provinces after Mt Keith-Leinster and Kambalda. The Forrestania project includes the following resources outlined by Outokumpu. The New Morning and Diggers South resources have been confirmed by Western Area's geological consultants, Newexco Services Pty Ltd: * New Morning (North Shoot only): indicated Mineral Resource of 207,500 tonnes @ 5.14% Ni containing 10,600 tonnes nickel. 100m-400m depth, 1% Ni cutoff. * Diggers South: indicated Mineral Resource of 2.4 million tonnes @ 1.63% Ni containing 39,500 tonnes nickel. 5m minimum true thickness, 1.2% Ni cutoff, open at depth, along strike. * Cosmic Boy: in-situ resource of 210,000 tonnes @ 2.4% Ni containing 5,400 tonnes nickel. Two areas within 50m of existing Outokumpu decline, 1.5% Ni cutoff. WSA's interest in the Outokumpu JV includes all minerals, other than precious metals, on 37 granted mining leases covering most of the 80km strike length of the Forrestania nickel province. In addition, major infrastructure items including grid power, borefield, roads and an airstrip have already been established by Outokumpu at Forrestania. WSA anticipates that this infrastructure will provide a considerable saving in capital expenditure for any future mine development. Nineteen of the joint venture tenements are subject to plaints that are currently being defended by Viceroy, with the final court hearing for many of the plaints due on 23 April. The Diggers South and Cosmic Boy tenements are not subject to plaints. Based on substantial recent project expenditures, WSA is confident that a plaint over the New Morning tenement will be dismissed at an early date, and is optimistic that plaints over the regional tenements will also be dismissed. Outokumpu has been active at Forrestania since 1989, conducting open cut and underground mining on three ore bodies between 1992 and August 1999. During this period, Outokumpu mined a total of 3.8 million tonnes of ore, at an average grade of 1.46% Ni, producing 55,000 tonnes of nickel. In 1999, following a period of low nickel prices, Outokumpu ceased mining at Forrestania and moved the treatment plant to the high grade Black Swan mine located near Kalgoorlie. Total consideration for the acquisition of the rights to the Outokurnpu JV interest is $1.3 million payable to Viceroy in four stages. The first stage involves an initial payment of $100,000 for an option to purchase the rights. WSA can elect to continue by making a further option payment of $400,000 by 30 June 2002. To exercise the option, WSA must make a payment of $200,000 by 30 December 2002, a final payment of $600,000 by 30 June 2003 and commit to a royalty of between 1% and 2%, payable on production between 3,000 and 10,000 tonnes of nickel metal. In addition, WSA must spend $2 million on exploration or mining before March 2005 to earn the 75% joint venture interest from Outokumpu. Expenditure may rise to $3m if Sons of Gwalia withdraws from earning precious metals rights in the joint venture after 31 December 2002. NICKEL PROCESSING PLANT WSA has signed a separate option agreement with Tectonic Resources NL to acquire the 150,000 tonnes per annum RAV - 8 nickel sulphide treatment plant, which ceased operation in December 2001. The plant is located near Ravensthorpe, 130km south of Forrestania, on the main coast road to Esperance. Esperance is Australia's major export port for nickel concentrate. Western Areas will consider a number of alternatives for producing nickel concentrate from Forrestania. These alternatives include transporting high-grade ore from New Morning to the Ravensthorpe plant and toll treating ore at one of the other plants in the region. Total consideration for the acquisition of the Ravensthorpe plant is $400,000. This includes an initial option fee of $50,000 payable on completion of due diligence, which is in progress. WSA can elect to continue by making a further option payment of $150,000 by 30 June 2002. To exercise the option, WSA must make a final payment of $200,000 by 30 September 2002. The Ravensthorpe plant does not include the crushing circuit or ball mill, which is leased by Tectonic from Allied Mining and Processing. If WSA exercises the option and acquires the plant, it will assume responsibility for rehabilitating the immediate plant site, when activities are complete. EXPLORATION TARGETS A comprehensive geological, geophysical and research database exists from Outokumpu's exploration and mining activities at Forrestania over the past 13 years. Interpretation of the data by Western Area's staff and consultants has resulted in many high quality exploration targets being identified. Targets have been selected for a combination of factors including favourable geology, existing downhole electromagnetic (EM) anomalies and previous drillhole intersections. Diamond drilling is planned to commence in May to test a number of targets that have the potential to host significant disseminated or massive nickel sulphide deposits that could take the project to a new level. COMMENT Western Area's Managing Director Mr Julian Hanna described the Outokumpu and Tectonic agreements as "a major development for Western Areas and a milestone in the Company's plan to become Australia's next nickel producer. We aim to be in a position to commence production in 2003, at a time when the industry is predicting strong demand for nickel". "The opportunity to acquire the rights to a joint venture over a nickel province which includes substantial resources, existing high quality targets and potential for new discoveries on granted mining leases, is rare". WSA is also fortunate that the Ravensthorpe nickel plant has become available at this time. "The Ravensthorpe plant and the established infrastructure at Forrestania may provide the means to get into production at the earliest possible date and at minimum capital cost", said Mr Hanna. Western Areas has appointed Hartleys Limited to provide corporate advisory services in relation to funding the development of the Forrestania Nickel Project. J Hanna MANAGING DIRECTOR The information within this report as it relates to geology and mineralisation was compiled by Mr Julian Hanna who is a member of the Australian Institute of Mining and Metallurgy and is competent in the field of activity being reported on. The information within this report as it relates to resources was compiled by Mr Adrian Black from geological consultants Newexco. Mr Black is a Competent Person as defined by the terms of the JORC code (1999) and consents to the inclusion of this information in the form and context in which it appears. For further information: Julian Hanna, Western Areas Ph: (08) 9486 7855 Tony Dawe, Ward Holt Corporate Communication Ph: (08) 9221 8722