SOUTHERNERA RESOURCES LIMITED
Canadian Quotes from Telenium
SUF. (TSE)
Attention Business Editors:
SouthernEra Completes Bankable Feasibility Study -
Closes Acquisition of 54% of Messina Limited
TORONTO, March 1 /CNW/ - SouthernEra Resources Limited (SUF-TSE) is
pleased to announce the completion of the acquisition by SouthernEra Resources
Limited, of 54% of Messina Limited (Messina), for approximately US$10.3
million, from Messina Holdings Limited, a wholly owned subsidiary of Impala
Platinum Holdings Limited (Implats). Messina is a public company listed on the
Johannesburg Stock Exchange. Messina's wholly owned subsidiary, Messina
Platinum Mines Limited, is the lessee of three mineral lease areas, making up
the Messina platinum mine, which is located 250 kilometres northeast of
Johannesburg, in the Northern Province of the Republic of South Africa.
"We are very excited about closing this acquisition," stated Chris
Jennings, President of SouthernEra. "The acquisition of a major platinum group
metals resource like the one found at the Messina platinum project will
provide a foundation for growth for the Company. We also look forward to
continued co-operation with Implats including having a senior representative
from Implats on the new Messina Board. Implats will be able to contribute
further PGM experience to the management of the project", concluded Jennings.
The closing of the share acquisition follows the fulfillment of all the
conditions precedent in the Sale of Shares Agreement with Messina, including
the completion of a bankable feasibility study. SouthernEra contracted SRK
Consulting, a leading international engineering consulting group, to conduct
and complete an independent bankable feasibility study, which was completed in
January, 2000. Another condition met by SouthernEra was the provision of a
guarantee to The Securities Regulation Panel in South Africa that it has the
funds available to satisfy its obligations to make a follow-up offer on
similar terms to the remaining shareholders of Messina.
ECONOMIC PARAMETERS
The bankable feasibility study, which does not consider previously spent
capital of approximately US$20 million, indicates that the Messina platinum
project will have an internal rate of return (IRR) of 36.3% with a net present
value (NPV) of US$121.7 million (R742.4 million) at a 10% discount rate. An
exchange rate of R6.10 equals US$1.00 was used throughout the feasibility
study and all figures in this news release are converted at this exchange
rate. Metal price projections used in the feasibility study were supplied by
the CPM Group in New York. The average metal prices used in the feasibility
study for the first five years of production were: platinum US$448 per ounce,
palladium US$498 per ounce, rhodium US$1,530 per ounce, iridium US$418 per
ounce, ruthenium US$35 per ounce, gold US$330 per ounce, copper US$2540 per
tonne, and nickel US$6072 per tonne.
THE PROJECT
The Messina platinum mine is located 25 kilometres southeast of
SouthernEra's Klipspringer Mine and lies on the northwestern portion of the
eastern limb of the Bushveld Complex, an area known worldwide for its
production of platinum group metals. This proximity to the SouthernEra
infrastructure at the Klipspringer mine is expected to result in substantial
cost savings from an optimized utilization of services and work force for the
two mines. The project area consists of two sections, Voorspoed and Doornvlei.
The project area used in the feasibility study is the Voorspoed section. The
UG2 and Merensky reefs, the ore horizons, will be mined simultaneously at a
combined rate of approximately 80,000 tonnes per month. Ore from the two reefs
will be processed in a Mill-Float-Mill-Float plant, where high and low grade
concentrates will be produced. The concentrates will be combined and sent in a
slurry form to the Implats Smelter near Rustenburg in the Northwest Province.
The comprehensive smelting and refining contract concluded with Impala
Refining Services Limited to utilize capacity at Impala will result in
substantial capital savings for SouthernEra.
The bankable feasibility study only takes into consideration the
Voorspoed section of the project area and mineral resources to a depth of 575
metres. The expected annual average production rate will be approximately
159,000 ounces of Platinum Group Metals and Gold (5PGM+Au: platinum 44%,
palladium 34%, rhodium 5%, ruthenium 11%, iridium 3% and gold 3%). The
expected mine life will be at least 17 years at an average operating cost of
US$150.47 (R918) per ounce of PGM+Au. Site operating costs are calculated to
be US$24.03 (R146.58) per tonne hoisted for a typical year at full production
of 84,408 tonnes per month. The expected average annual net cash flow, after
tax, based on the above production rates as indicated by the bankable
feasibility would average US$33.8 (R206.18) million per year. The corporate
income tax rate in South Africa is 30%.
The life-of mine capital estimate for the Messina platinum project is
US$86 (R524.4) million. The Company plans to commence development of the
Messina platinum mine in the first half of 2000. It is expected that the mine
will be in full production three years after development begins. The peak
additional capital requirement for the project is US$64.9 (R395.8) million and
the payback period is calculated as five (5) years.
RESOURCE ESTIMATE
The Mineral Resource used in the feasibility study has been verified by
Professor Krige, a leading geoscientist in ore reserve calculations, and is
classified as a global Measured Resource, largely on the basis of estimated
confidence intervals derived from his analysis and from the general high
degree of geological continuity expressed by both the Merensky and the UG2
reefs within the Bushveld Complex.
The global Measured Resource for the Voorspoed section has been estimated
to a depth of 575 metres and 1,000 metres below surface. The current 17-year
mine plan uses the resource estimate above the 575 metre level of 11.2 million
tonnes at a grade of 6.85 grams per tonne 5PGMs+Au, containing 2.47 million
ounces of 5PGMs+Au. The total resource estimate of the Voorspoed section to a
depth of 1,000 metres is 21.2 million tonnes at a grade of 6.85 grams per
tonne 5PGMs+Au, which contains 4.67 million ounces of 5PGMs+Au.
<<
MINERAL RESOURCES TABLE
Voorspoed Section to a Depth of 575m
-------------------------------------------------------------------------
Reef Tonnage 5PGMs+Au Nickel Copper Contained
(millions) Grade g/t ppm Ppm ounces of
5PGMs+Au
(millions)
-------------------------------------------------------------------------
Merensky 4.4 6.24 2,917 1,619 0.88
-------------------------------------------------------------------------
UG2 6.8 7.24 2,377 1,472 1.58
-------------------------------------------------------------------------
Total 11.2 6.85 2,588 1,530 2.46
-------------------------------------------------------------------------
Voorspoed Section to a Depth of 1,000m
-------------------------------------------------------------------------
Reef Tonnage 5PGMs+Au Nickel Copper Contained
(millions) Grade g/t ppm Ppm ounces of
5PGMs+Au
(millions)
-------------------------------------------------------------------------
Merensky 8.3 6.24 2,917 1,619 1.67
-------------------------------------------------------------------------
UG2 12.9 7.24 2,377 1,472 3.00
-------------------------------------------------------------------------
Total 21.2 6.85 2,588 1,530 4.67
-------------------------------------------------------------------------
>>
Exploration potential exists on possible downdip and strike extensions on
the property. As well, the Doornvlei section, to the east, contains a
substantial drilled resource to 1 000 m of an additional 26.79 million tonnes
at a grade of 6.05 grams per tonne 5PGMs+Au, containing 5.21 million ounces of
5PGMs+Au, but is not included in the bankable feasibility study. The Doornvlei
section is expected to be developed once the Voorspoed section is in
production.
The total drilled mineral resource for the Messina platinum project
contains in excess of 10 million ounces of PGM+Au.
SENSITIVITY ANALYSIS
The bankable feasibility calculated various sensitivities for the project
to changes in revenues, capex and operating expenses. The project is far more
sensitive to revenue than to capex or operating expenses, but nevertheless the
project still has an IRR of 26% for a negative 20% change in revenues.
<<
Change.
-------------------------------------------------------------------------
Effect on IRR -20% -10% 0% +10% +20%
-------------------------------------------------------------------------
Revenue 26.0% 31.2% 36.3% 40.9% 45.5%
-------------------------------------------------------------------------
Capex 43.6% 39.6% 36.3% 33.4% 30.8%
-------------------------------------------------------------------------
Opex 39.8% 38.1% 36.3% 34.4% 32.5%
-------------------------------------------------------------------------
>>
FINANCING
Financing for the acquisition was arranged by RMB Resources Limited, a
division of Rand Merchant Bank, a leading South African investment bank. A
short term facility of US$5 million is expected to be fully repaid within the
year, and an additional facility of US$5 million in exchangeable capital
units, (ECU's), was provided, with a three year term. The ECU's issued by
SouthernEra are convertible at any time at a strike price of C$2.07 per common
share. Interest on both loans is at LIBOR plus 3%, with the interest on the
ECU's permitted to be capitalized until conversion or maturity. At the option
of the holder, the capitalized interest may be converted into common shares at
the market price of the shares at that time.
Discussions are continuing with leading South African banks regarding the
project financing for Messina and a favourable outcome is anticipated. As
Messina has over US$10 million in cash on hand, considerable progress can be
made on the project during completion of loan arrangements.
The statements in this release that are not historical facts are
forward-looking statements. They involve risk and uncertainties that could
cause actual results to differ from targeted results. Forward looking
statements include, but are not limited to estimates of future production,
costs, currency fluctuations and market prices for the company's product and
other estimates or predictions of future activities.
SouthernEra Resources Limited is a Canadian based diamond mining and
exploration company, with an excellent portfolio of properties and projects in
South Africa, Angola, Australia, Brazil, Canada's Northwest Territories and
Uruguay. SouthernEra's strategic goal is to become one of the world's leading
diamond and platinum producing companies. More information can be obtained
from the Company's website, www.southernera.com. The common shares of
SouthernEra are traded under the symbol SUF on the Toronto Stock Exchange.
THERE WILL BE A CONFERENCE CALL FOR INVESTORS ON THURSDAY MARCH 2, 2000
AT 11:00 A.M. TORONTO TIME. INVESTORS SHOULD CALL 416 695-9757
THE REPLAY NUMBER IS 416 695-9767 THERE IS ALSO A LIVE ARCHIVED BROADCAST
OF THE CONFERENCE CALL AT www.q1234.com
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%SEDAR: 00004535E
-30-
For further information: Steven W. Banning, President; Kim Freeman, Vice
President Operations; Frank van de Water, Chief Financial Officer; Toronto
Office : (416) 359 9282; Toronto Fax: (416) 359 9141; Christopher M.H.
Jennings, Chairman, Cell Phone : (416) 616 9241 S.A. Cell :
011 27 82 600 5792, www.southernera.com, e-mail : inbox@southernera.com |
