Jameson Resources Limited (ASX:JAL) Commits to Expanded Mine Case Feasibility Study
The outlook for thermal coal prices of similar quality to Basin has improved significantly with futures contract for delivery late 2010 trading at approximately US$85/tonne and over US$100/tonne for delivery in 2012 (ICE Europe).
Pulverised coal injection ("PCI") coals of similar quality to Basin's PCI product attract a premium of 10-20% above Newcastle thermal coal prices are also forecast to rise significantly.
The Company together with its consultants Norwest Corporation ("Norwest") has identified opportunities for revised operating cost assumptions in the expanded mine case scenario with a relatively minor impact on start up capital. As such, the Company has revised Norwest's brief to determine and complete the feasibility study at the optimal level for start up production for the project which is expected to be approximately 500,000 tonnes per annum. Subject to reserve definition and amendments to the existing mining permit, the Company is aiming towards ramping up from an initial rate of 500,000 tonnes per annum to a targeted rate of as high as 1 million tonnes per annum.
Preliminary estimates of the capital required to refurbish the existing wash plant suggest that the construction of a more efficient larger capacity plant will deliver enhanced project economics.
Norwest have identified that the refurbishment of the existing wash plant will require significant upgrading including the addition of new circuits in order to run efficiently and to produce a export quality product.
Initial engineering studies on a new wash plant facility designed to produce a thermal product at 12.5% ash or both a thermal coal and pulverised injection coal ("PCI") product have been completed. Financial modelling on both options is being undertaken as part of feasibility study.
The final wash plant design will be such that production capacity can be increased with only minor capital expenditure on delineation of additional reserves. Some components of the existing wash plant can be incorporated into the proposed new plant. Estimated capital required to construct a new wash plant facility is approximately US$8-12 million.
Additional capital for site infrastructure, logging road upgrades, and the proposed rail load-out facility will also be required. Pre-feasibility estimates indicate approximately US$20million will be required to bring the project into operation, which is approximately 1/3 of the typical Australian capital expenditure per tonne of production.
It is proposed to haul the coal from Basin using 42 tonne B-train trucks along the shortest route (110km) to the proposed rail load-out. The proposed route is a combination of forestry roads and major highway. Road upgrades include the re-establishment of a 6.7km logging trail to connect two well maintained roads. Advanced discussions are underway with the preferred transport companies.
The outlook for thermal coal prices of similar quality to Basin has improved significantly with futures contracts for delivery late 2010 at approximately US$85/tonne and over US$100/tonne for delivery in 2012 (ICE Europe), showing markets expect a rise in coal prices going forward.
Chinese domestic prices are approaching US$100/tonne, providing further incentive for imports and thereby placing upward momentum on world prices.
Based on late 2010 futures contract pricing of thermal coal, operating cash margins of approximately US$20 per tonne are anticipated. Discussions with potential domestic and international buyers of the coal that will likely be produced from Basin are continuing.
Jameson has recently completed a diamond drilling and trenching program at Basin. The drilling and coal quality program is under the supervision of Mr R.J. Morris, M.Sc., P. Geo from Moose Mountain Technical Services. The objective of the program was to further define the coal structure in the northern portion of the property and determine the coal quality, particularly levels of ash on both the Main and Lower coal seams. A reserve estimate to support the expanded mine case will be completed on receipt of the coal quality data.
Trenches were excavated to confirm the position of the modelled coal seams prior to drilling. A total of 7 trenches were excavated and sampled. Samples were collected for proximate analysis and bulk sample washability test work.
Drilling was undertaken by local drilling contractor Foraco Drilling Ltd using a skid mounted drill rig. A total of 6 HQ3 diamond core holes were drilled for an advance of 886m. Hole locations are shown on Figure 3. Average hole depth was 147m. Five holes were drilled on 300m spacings over the northern half of the resource. An additional hole was drilled in the southern portion of the property to confirm earlier drilling work and provide additional samples for coal quality characterization. All holes were geophysically logged within the drill stem by Century Wireline Services. Drilling statistics are summarised in Table 1.
------------------------------------ Hole ID Northing Easting Depth ------------------------------------ DH09-01 5485981 661571 150.1 DH09-02 5487268 661303 89.4 DH09-03 5487633 661467 128.5 DH09-04 5487884 661660 178.3 DH09-05 5487841 661934 169.8 DH09-06 5487696 662283 164.7 ------------------------------------ TOTAL 885.77 ------------------------------------ Table 1 - Diamond Drilling Program Summary TableCoal seams were intersected in all 6 holes. Coal seam thickness including partings correlated relatively well with the existing resource model, though ash levels increase significantly to the north. Samples were collected at varying intervals through both the Main and Lower seams as determined from the geological and geophysical logs. All samples have been sent to Birtley Coal and Minerals Testing Division of GWIL industries in Calgary for coal quality analysis.
It is anticipated that all coal quality analytical results are expected by the end of November and will compliment existing coal quality data. Drilling results will be used to calculate the initial reserve estimate as part of the expanded mine case feasibility study. This estimate will be focussed on the area of low strip ratio coal proximal to the existing mine.
About Jameson Resources Limited
Jameson Resources Limited is an Australia-based company engaged in mineral exploration. The projects of the Company include Ora Branda Project in Western Australia and Errabiddy Project in Gascoyne Province. The Ora Banda Project is located 65 kilometers north-west of Kalgoorlie in the historical gold mining district of Ora Banda. The Errabiddy Project comprises two Exploration licence applications covering an area of 400 square kilometers in the Gascoyne Province of Western Australia. The Project is considered prospective for palaeo-channel hosted uranium mineralisation.
Jameson Resources Limited