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DESCRIPTION OF THE MINING OPERATIONS

Please find a link to a document “Description of the Mining Operations” and appendices which provides more detail around the proposed Hillside Project.  This is based around the Extended Feasibility Study (EFS) released to the market by Rex Minerals in May 2015.  The linked document was provided to the Department of State Development (DSD) in South Australia and after an initial review has now been released publicly.  No changes to the Project of a physical or economic nature have been made to those details released last year, and this document provides further detail on design, layout and schedule for the proposed Hillside Project.  Reference should continue to be made to the existing Project approval documents, being:

 

  •          Mining Lease Proposal Response dated February 2014;
  •          DSD Assessment Report for the Hillside Project dated July 2014; and
  •          Mineral Lease Tenement document dated September 2014 containing the Mineral Lease conditions.

 

Appendices are listed below:

EFS Groundwater Modelling

EFS Noise Impact Assessment

EFS Dust Impact Assessment Study

EFS Odour Impact Assessment

TSF Feasibility Report

Please refer any questions to rex@rexminerals.com.au or by phone to 08 8299 7100

 

HILLSIDE PROJECT, YORKE PENINSULA, SOUTH AUSTRALIA

Rex’s flagship Hillside Project is situated 12 kilometres south of the township of Ardrossan on the Yorke Peninsula, South Australia. (Figure 1).  Copper-gold mineralisation was first discovered at the Hillside Copper Project by Rex Minerals Ltd in 2008.  Targeting of the Project was based on the presence of a small historical copper mine, a broad magnetic feature and subtle gravity anomalies in the area.  The Project was also the first test of a larger theory that iron-oxide-copper-gold (IOCG) style mineralisation could exist underneath the thin cover rocks on the Yorke Peninsula in South Australia.

 

 

 

Figure 1: Location diagram of the Hillside Project and Rex’s exploration licences on the Yorke Peninsula, South Australia.

The Hillside Project and the other copper targets on the Yorke Peninsula have a number of key advantages compared to many other new copper development opportunities around the world. These include:

  • Infrastructure – The Hillside Project is connected by a major highway (within a two hour drive) to the city of Adelaide (population 1.2 million).
  • People and Equipment – The Hillside Project has the potential to draw most of the required skilled labour and equipment from Adelaide and the surrounding country towns close to the Project.
  • Power – The area is connected to the State’s main power grid.
  • Port and Town – The Hillside Project is 12 kilometres from the Port and Town of Ardrossan. Ardrossan is a community familiar with mining given that the nearby open-cut dolomite mine ships its product through the Port.
  • Freehold Land – Rex has purchased freehold land which covers all of the known and potential copper mineralisation at Hillside.

Following the discovery of the Hillside deposit in 2008, the Company raised the funds required to drill out the Hillside deposit down to a depth of approximately 600m and this drilling and associated technical work is the basis for the current Mineral Resource and Ore Reserve for the Hillside Project.  Furthermore, the latest Mineral Resource at Hillside has been used as the starting point for the Hillside Extended Feasibility Study (EFS).

 

 

MINERAL RESOURCE AND ORE RESERVE

The Mineral Resource for the Hillside Copper Project remains one of Australia’s largest open pit copper Mineral Resources. The Mineral Resource estimate, reported in accordance with the 2012 JORC Code, consists of 337Mt @ 0.6% copper and 0.14g/t gold, equating to approximately 2.0Mt (4.3 billion pounds) of copper, 1.4Moz of gold. (Table 1).  Of the 2Mt of contained copper classified as a Mineral Resource, approximately 65% has been classified as Measured and Indicated Resources. The updated Mineral Resource – the seventh for the Hillside Project - includes information from 608 diamond holes and 245 RC holes for a total of 239,000m. The Mineral Resource remains open at depth and towards the north and south.

 

 

The Hillside Ore Reserve, announced 25 May 2015 and reported in accordance with the 2012 JORC Code, stands at 82Mt @ 0.62% copper and 0.16g/t gold, equating to approximately 0.51Mt (1.12 billion pounds) of copper and 0.43Moz of gold.  (Table 2).  The Hillside Ore Reserve was updated based on the mine design completed during the EFS1 to deliver, nominally, 6Mtpa of ore to the processing plant to produce a copper-gold concentrate. The Proved Ore Reserve of 42Mt represents 51% of the total Ore Reserve with the remaining 49% in the Probable category. Iron has been removed from the Ore Reserve due to prevailing iron ore market conditions, not with-standing that Rex may reconsider an iron ore processing stream in the future.

1 Released to the ASX on 25th May 2015  

Table 1:  Hillside Measured, Indicated and Inferred Mineral Resource Summary Table – May 2015

Copper Resources reported above 0.2% cut-off grade.

Measured and Indicated Resources are rounded to two significant figures and Inferred Resources are rounded to one significant figure.

Table 2:  Hillside Ore Reserve – May 2015

Figure 2: Schematic long section showing the location of the Measured, Indicated and Inferred Resources.  View looking to the west.

Hillside Project – Extended Feasibility Study (EFS)

In 2011, after extensive drill definition work, Rex Minerals completed a conceptual study which identified the potential for a 7.5Mt operation increasing up to 15Mt which could produce both a copper-gold and iron ore concentrate. This project was advanced further into a Pre-Feasibility Study, which was announced by Rex in late 2012, focusing on the larger scale 15Mt operation producing both a copper-gold and iron ore concentrate. The subsequent work leading into a Feasibility Study continued this focus until August 2014, where a dramatic drop in commodity prices, particularly for iron ore, prompted the Company to change its focus towards an initial copper-gold only project with lower capital investment and higher copper head grades. This work was termed the Extended Feasibility Study (EFS).

 

The results from the Hillside EFS were announced to the market on 25 May 2015 with the outcomes significantly improving the Project’s competitive fundamentals and materially reducing the upfront capital investment.

Key outcomes from the EFS included:

  • A stand-alone copper-gold project with an initial 13+ year mine life at a processing rate of 6 million tonnes per annum (Mtpa).
  • Annual average production over first 12 years of 129,000 tonnes of copper concentrate containing payable metal of:
    • 35,000t copper; and
    • 24,000ozs gold.
  • A processing head grade of 0.66% copper and 0.17g/t gold over the first 12 years of production.
  • Pre-production capital investment of A$480 (US$360) million and average operating costs (C1) of US$1.61/lb.
  • NPV(8%) of A$188 million (post tax) and an IRR of 14% under base case assumptions.
  • A construction workforce of close to 500-550, reverting to approximately 500 when in operation.

This simplified and streamlined plan delivers a wide range of operational benefits, including:

  • Smaller start-up footprint;
  • Significant reduction in operating fleet;
  • Simpler process flowsheet and material handling complexity;
  • Lower ramp-up rate plus a more manageable production rate that leads to reduced economic risk; and
  • Significantly higher equipment productivities.

The following tables summarise the key outcomes of the Hillside EFS.

 

 

COPPER MARKET AND EFS FINANCIALS

Market analysis has identified that future copper supply will become more reliant on the development of a new generation of copper mines.  The average incentive copper price required for the bulk of these new copper mines is reported by some analysts to be in excess of US$3.00 per pound and broad market consensus implies that the underinvestment in copper in the immediate future is likely to lead to a shortage in supply from 2017 onwards.

 

 

Figure 3: Graph of the projected copper supply gap for worldwide copper market.  Information courtesy of CRU International.

Rex considers that these fundamentals will lead to a new period of improved copper prices and that the Hillside EFS results have positioned the Company to take advantage of this impending period.  The results from the Hillside EFS have positioned the project as one of the more attractive new development projects globally.

Rex has completed the Hillside EFS at a time when commodity prices in general are depressed.  In this environment, the Hillside EFS has delivered a project that can still deliver strong cash flows.  However, the real value of the project lies in its potential to start producing at a time when copper prices could exceed US$3.50/lb.  It is therefore worth highlighting the results of the financial results from the EFS at both a US$3.00/lb price and also at US$3.50/lb price (Table 6).

 

YORKE PENINSULA – EXPLORATION POTENTIAL

The Hillside Project occupies an area of approximately 2km2 within a large Exploration Licence area of over 1,700km2.  The bulk of this area is highly prospective for copper mineralisation. Many of these targets are based on geophysical features such as a magnetic survey, which played an important role in the discovery of the Hillside Project (Figure 4).

 

 

Figure 4:  Hi –res aerial magnetic data over Eastern Yorke Peninsula tenure with key copper targets identified by Rex overlain.

Geochemical techniques similarly have subsequently shown to be an effective exploration tool at Hillside, and there are a number of features that are the basis for new targets in the region. In 2013, a review of historical calcrete sampling data was undertaken with the aim to provide an initial evaluation of several priority target areas, including the historical Yorke Valley copper mine and a series of newly identified targets. One stand-out target, predominantly based on geochemical work is called Westbrook which lies to the NW of Hillside. Westbrook exhibits a strong calcrete anomaly which when compared to the Hillside soil anomaly is larger in amplitude. (Figure 5).

 

Figure 5:  Westbrook Calcrete sampling results compared to Hillside soil results.

 

Notes

The Extended Feasibility Study (EFS) is based on the Ore Reserve (derived from Indicated and Measured Resources). There exists a small proportion of oxide resource within the pit shell that has the potential to be converted to an Ore Reserve. The expectation is that a proportion of this oxide copper will be converted to an Ore Reserve once further metallurgical test work is complete.

 

 

Forward-Looking Statements

This results contained within this announcement contains “forward-looking statements.” All statements other than those of historical facts included in this announcement are forward-looking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, copper and other metals price volatility, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, as well as political and operational risks and governmental regulation and judicial outcomes. The Company does not undertake any obligation to release publicly any revisions to any “forward-looking statement.”

Key Assumptions

Price and exchange rate assumptions for the life of the operation are shown in the table below. Quotes for the pre-production capital cost estimates in the EFS assumed an exchange rate of AUD:USD 0.75. A longer term exchange rate forecast of 0.70 was used for the life of the operation.

Table 7:  Commodity Price and Exchange Rate Assumptions for Hillside EFS

Commodity and Exchange Rate

Assumptions

Copper (US$ real)

US$3.00/lb

Gold (US$ real)

US$1,250/oz

Exchange Rate (AUD:USD)

0.70

 

Unless otherwise stated, all dollar amounts given are in Australian dollars and are not subject to inflation/escalation factors.

 

Competent Persons’ Report – Ore Reserves

The information in this report that relates to Ore Reserves is based on information compiled by Mr Charles McHugh who is a Member of the Australasian Institute of Mining and Metallurgy and is a consultant to Rex Minerals Ltd. Mr McHugh 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 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McHugh consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

Competent Persons’ Report– Mineral Resources

The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled by Mr Patrick Say who is a Member of the Australasian Institute of Mining and Metallurgy and is a full time employee of Rex Minerals Ltd. Mr Say 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 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Say consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

 

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Phone 08 8299 7100

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08 8299 7100

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