Koongie Park Project WA
Anglo Australian Resources NL 100%
Introduction
The Koongie Copper Zinc Project is located approximately 25km south west of the regional Centre of Halls Creek in the Southern Eastern Kimberley Region of Western Australia. The Great Northern Highway transects the project area.
Geologically the project is located within the highly mineralised Halls Creek Mobile Belt which also hosts The Savannah and Copernicus Nickel Deposits, the Argyle Diamond Mine, platinum / palladium mineralisation and numerous alluvial gold occurrences. 100 -200km to the west in the Lennard Shelf MVT Province, lead and zinc have been mined at Cadjabut and Pillara. At Koongie the copper zinc mineralisation of the VHMS (volcanic hosted massive sulphide) style is hosted by Koongie Park Formation a sequence of volcanic rocks and volcanic derived sediments.
Two significant copper zinc resources have been defined at Sandiego and Onedin. Anglo Australian Resources NL has focused its feasibility activity on the Sandiego deposit which has better grade, metallurgical and geometric characteristics.
History
In 1886 alluvial gold was first discovered in Western Australia near Halls Creek. The gold rush was, however, short term with no major discoveries made. In the Halls Creek area two small gold deposits, Nicolson’s Find and Palm Springs, were mined in the 1990’s by open cut.
Base metal exploration commenced in the area 85 years after the first gold discovery. In 1972 Kennecott discovered 6 base metal rich gossans, two of which are now known as Onedin and Sandiego. Initial drilling proved to be difficult at Onedin (due to structural complexity and depletion due to weathering) with only two diamond holes out of eighteen intersecting mineralisation, but more successful at Sandiego with eight holes out of eleven intersecting significant zinc mineralisation.
Anglo Australian Resources NL purchased the Koongie Project in 1989 from RTZ (Kennecott’s owner). Subsequently the project was subject to joint ventures with firstly Billiton then Lachlan Resources where AAR was the minority partner.
Exploration activity intensity has varied over the years often in line with zinc prices. This has included 245 RC and Diamond holes, numerous shallow RAB holes, surface geochemistry, various electrical geophysical techniques and airborne magnetics.
In 2003 Anglo Australian Resources obtained 100% ownership of the project when Lachlan Resources withdrew from the joint venture. In 2006, following a substantial improvement in base metal commodity prices, AAR commenced its first drilling program in it own right and established the first JORC code resource for the Sandiego and Onedin deposits. In October 2008 AAR completed a Preliminary Feasibility Study on underground mining of the Sandiego Deposit just as commodity prices crashed and the Global Financial Crisis began. In 2010 AAR began a more copper focussed program, recognising the potential of high grade near surface copper to drive the economics of the project.
Sandiego JORC Compliant Resource Estimate
A new resource estimate to JORC guidelines was announced in November 2010 following two earlier estimates in 2007 and 2009. The resource quoted separately for the copper and zinc lodes stands at a indicated and inferred resource for the copper lode of 2mt @ 2.8% Cu, 1.8% Zn, 0.39g/t Au and 18g/t Ag (which includes a maiden high grade copper supergene resource of 0.37mt @ 4% Cu, 2.7% Zn, 0.29g/t Au and 48g/t Ag) and a zinc lode indicated and inferred resource of 1.57mt @ 6.8% Zn, 0.2% Cu, 0.16g/t Au, 22g/t Ag.
Exploration by AAR has substantially improved zinc and copper metal content of the resource as well as providing substantial material for metallurgical testwork. The new resource has provided the basis for a mining scoping study which has included an open pit optimisation study. Previous feasibility activity focused entirely on an underground option.
The Scoping Study determined that development of the Sandiego Deposit by open pit and underground mining methods using an onsite concentrator and off-site smelting is potentially viable. It has the potential to generate 2Mt of mill feed from which 33,100t of copper, 42,900t of zinc, 6,800oz of gold and 296,000oz of silver could be recovered.Based on metal prices and foreign Exchange rates current in December 2010 (Cu US$9400/t and Zn US$2400/t; $US 1: $A1) the project generates an Operating Surplus of $60m, which equates to a net present value (NPV) of $36M at a discount rate of 8% from net revenue of $413M. The cashflow has an internal rate of return (IRR) of 31%.
Key Criteria of the Sandiego Deposit
Depth of Ore: The partially oxidised Sandiego sulphide mineralisation commences 50m below surface on the north end and 120m below surface on the south end. Above this level silver and gold mineralisation and low grade copper oxide may add to the inventory requires to be confirmed by additional drilling.
Shallow High Grade Chalcocite Mineralisation: A sub horizontal zone of high grade copper mineralisation in the form of chalcocite is draped over the copper and zinc lodes. (0.37mt @ 4% Cu, 2.7% Zn, 0.29g/t Au and 48g/t Ag). Mining this zone via an open pit could provide a low cost path to production, a maximisation of the value of this resource and an early cash flow.
Ore Body Geometry: Economic grades and widths have been intersected over a strike length of 200m and down to 600m below surface. The ore body consists of at least two and up to four separate copper or zinc lodes which dip steeply to the east. Mineralisation thickness varies from 2m at the extremities to 50m within the central portion of the deposit.
Resource Upside: The Sandiego is open at depth. A potential southerly plunge to the deposit also remains to be tested.
Drilling in 2010 intersected potentially a new copper lode 50-100m north east of the main Sandiego mineralisation, 500m below surface. Follow up drilling is planned for the next dry season.
Other Payable Products: All the deposits at the Koongie Project contain high levels of silver, gold and cobalt. Sandiego contains more than 2million ounces of silver and 30,000oz of gold. Tests to date suggest that silver and gold will report to both the copper and zinc concentrates. Only recent holes have been assayed for Cobalt which is insufficient to include in a resource estimate. Mineralised intervals range 0.05 to 0.2% Cobalt.
Common smelter terms are not favourable to maximise returns for these commodities if contained in the concentrate. The potential to extract these commodities separately to add value to the project is still to be evaluated.
Metallurgy: Test work on both the copper and zinc lodes in the sulphide and partially weathered zone utilising traditional flotation technology indicate metal recoveries will be high for these types of ore (75-92% for Zinc ores and 92-97% for Copper ores). Concentrates produced from this testwork resulted in grades of 24-26% Cu and 50-56% Zn which are well within most smelter specifications. There are no significant deleterious elements associated with Koongie concentrates.
Recent leaching testwork of Sandiego concentrates has successfully shown that the Galvanox methodology could be an effective tool to either directly produce copper and zinc metal or produce value added products such as zinc sulphate or copper sulphate. A by-product of this process is acid which could be used for leaching oxide ores from Onedin.
Mining: The 2008 Pre-feasibility Study envisaged mining the Sandiego Deposit by underground methods utilising a decline. A potentially cheaper start-up option of an open pit followed by a decline of the base of the pit is currently under evaluation.
Processing: Based on mining Sandiego alone, a conventional 300,000tpa processing plant using flotation is envisaged, producing annually 24,000 t of copper concentrate containing 6,000t of copper metal and 30,000t of zinc concentrate containing 15,000t of zinc metal. A 500,000tpa plant as planned in the 2008 Pre- Feasibility study cannot be sustained by underground mining rates.
Transport: The sealed Great Northern Highway transects the Koongie project. Development of Sandiego by open cut will require relocation of the highway.
Halls Creek has an all weather sealed airport which has a regular passenger service to Broome. The airport has previously been used to transport fly-in fly-out workers for the Savannah Nickel Mine.
Other Infrastructure: The proximity of the project to Halls Creek, a major regional centre will reduce the need to build a project specific accommodation camp. Employment and training of locally resident staff will be encouraged.
Power: Halls Creek township operates a gas powered power station to feed local demand, however the current capacity of the plant is too low for a potential Koongie operation and a separate power plant will be required.
Market Access: It is envisaged that concentrates would be transported by road train 400km to the port of Wyndham. Concentrates would be sent to customers via cape sized vessels. Wyndham currently exports nickel concentrate from the Savannah Mine and has also previously shipped zinc and lead concentrates from the Cadjubut Mine.
Native Title and Heritage: Heritage and archaeological surveys have been completed with no significant issues identified.
Environmental Surveys: Environmental surveys required for our Environmental Impact Statement (EIS) and for approval for a mining plan are partly complete.
Mining Leases: Mining leases covering the Onedin and Sandiego deposits are current. Approval to mine is subject to submission of a mining proposal to the DMP which will include a mining environmental management plan.
Other Tenure: In addition to the two mining leases AAR has adjoining tenure of 5 exploration licences and 15 prospecting licences covering ove r40km of strike of the Koongie Park Formation.
Geotechnical Assessment: Geotechnical assessment of the Sandiego Deposit by Dempers and Seymour is in progress.
Other Potential Ore Sources: Atlantis contains an exploration target of 100,000t @ 12% Zn at shallow open pitable depths. A JORC compliant indicated resource is defined at Onedin, 7km to the north of Sandiego. AAR is also aware of two other resources outside of current tenure which could potentially provide feed for a central mill.
Onedin Deposit
JORC Compliant Resource Estimate: The indicated resource estimated in 2009 stands at 2.5mt @ 1.1%Cu, 21g/t Ag, 0.3g/t Au from the Onedin copper zone; 1.3mt @ 5.4% Zn, 25g/t Ag, 0.25g/t Au from the Onedin zinc zone and 0.65mt @ 8% Zn, 1.1% Cu, 1.4% Pb, 47g/t Ag, 0.37g/t Au for the Copper Zinc zone.
Ore Body Geometry: Economic mineralisation has been defined over 200m of strike. The mineralised lodes are folded and plunge to the south west at 45 - 60°. Weathering occurs down to 200m below surface.
Metallurgy: The metallurgical characteristics of the Onedin deposit are different to the Sandiego deposit. The Onedin sulphide ore has excellent flotation characteristics (good recoveries); however the bulk of the resource occurs in the transition zone which has responded only to leaching techniques.
Mining: Scoping and optimisation studies at Onedin suggest that, subject to suitable metal recovery open pit mining to 160m below the current surface could be feasible. However a leaching circuit in addition to the planned flotation circuit would be required to maximise the value of the oxide and partially weathered Onedin ore types. There are currently insufficient Onedin sulphide resources to justify underground development of the sulphide ore alone.
Exploration
Over 245 RC and diamond drill holes consisting of 50,0417m have been drilled on the project. Most of the previous exploration drilling has focused on the Sandiego and Onedin deposits. AAR has focused on resource, metallurgical and geotech drilling at Onedin and Sandiego with minor exploration drilling at the Atlantis prospect.
Anglo Australian Resources tenements cover over 40kms of the base metal prospective Koongie Park Formation.
Exploration targets correspond to a specific mappable horizon within the Koongie Park Formation. Previously collected geochemistry, EM and magnetic data will be used to target our activity. In particular the relationship between magnetite alteration and the associated magnetic anomaly will be used as a targeting tool. Deep weathering and associated depletion, structural complexity and some areas of cover has provided challenges to exploration.
Exploration drilling in 2011 will target:
· Extensions of the newly discovered Eastern Sandiego Copper Lode
· Oxide copper, gold and silver mineralisation at Sandiego
· A combined magnetic / EM anomaly at the Highway Prospect
· A ground EM anomaly and off hole conductor at Onedin South
· An extensive magnetic anomaly under cover south west of Onedin corresponding to the interpreted host horizon.
· The Black Rock Gossan
· Copper anomalous gossans at Hanging Tree and Hanging Tree South
Potential Time Line
Time lines to development of the Koongie Copper Zinc Project are dependant on ongoing positive results from Scoping and Feasibility Studies, board approval, access to adequate financing, DMP approval and a favourable commodity prices. Potential time line scenario:
February 2011: Completion of Scoping Study and Sandiego Pit Optimisation
April/May 2011: Commencement of Exploration drilling program on targets outside of Sandiego.
August 2011: Financing of Feasibility Study
September 2011: Commencement of Feasibility Study. This will include completion of Flora and Fauna Survey, water study, detailed examination of processing options, and commencement of documentation required for mining approval etc.
March 2012: Commencement of Open Pit Resource RC and diamond drilling program. This will include large diameter Core drilling to obtain bulk samples for metallurgical testwork.
July 2012: Submission of a mining proposal to the DMP.
2013: Commencement of Plant construction and pre-strip of Sandiego Open Pit