The Company is currently seeking new project opportunities, mainly in resources but also in other sectors.
This has resulted from the Company losing access to its core project, the Abu Dabbab Tantalum-Tin-Feldspar Project (the Project), located in Egypt in early 2015. Notwithstanding its best efforts it became evident to the Board of Arrowhead Resources (Arrowhead), that it was unlikely to regain access to its 50% interest in the Project after an apparent expropriation event by the Egyptian Government. This was outlined to ASX on 17 August, 2015 and was a devastating realisation for all stakeholders particularly as the Company had just completed a feasibility study on a robust, lower-cost and lower-risk development strategy which was supported by a financing offer from a private investor. Indeed, given that this was the closest that the Project had ever come to being developed and that first production would have been within 12 months from commencement, this outcome is even tougher to accept by management, directors, shareholders, employees and no doubt the people of Egypt.
Whilst the Company has not given up on possibly reaching a solution to the dispute with the Egyptian Company for Mineral Resources (ECMR) (its 50% equity partner), it must be realistic, refocus and create new opportunities for shareholders.
The Company has a strong legal claim for compensation against the Government of Egypt if a sensible resolution to the dispute cannot be reached. However, legal proceedings in an offshore jurisdiction cannot be the Company’s core focus and the Board has previously outlined its strategy of identifying, assessing and securing a new exploration or mining project in order to rebuild value for the shareholders of Arrowhead.
Abu Dabbab Tantalum-Tin-Feldspar Project
(50% Interest via shareholding in Tantalum Egypt JSC)
The Company has been focussed on the Abu Dabbab Project since 2004 completing feasibility studies and seeking project financing for a large scale 2 to 3 million tpa operation producing in excess of 800k lbs of tantalum in concentrate as well as tin metal. In early 2014 a break through was achieved with an innovative change to the development strategy which resulted in financing proposal and brought the project to the closest point it has ever been to being developed – within 12 months of signing the financing agreement outlined below.
On 24 February, 2015 the Company signed a conditional financing agreement with a Taiwan based Company, Foxxtel Inc., (Foxxtel). The financing, would have enabled an almost immediate start to a two staged development (referred to as the “400K Plan”), which was planned to achieve first production in 2016. The US$7 million financing agreement was conditional on completion of satisfactory due diligence and approval from the respective boards of each party, as well as other standard conditions precedent including letters of support from the Egyptian Company for Mineral Resources (ECMR) and the Ministry of Investment that it supported the development proposals for TE. The following section summarises the 400K Plan, the financing arrangement with Foxxtel and the events which occurred late in March, 2015 triggering a dispute with ECMR which has led the Company to suspend funding of TE, pending resolution of the dispute.
The 400K Development Plan
Since mid-2014, the Company on behalf of Tantalum Egypt JSC (TE) has been seeking investment from the Gulf region for the large scale 2Mtpa of ore production plan. Whilst several Parties continued to show a high level of interest in the opportunity, their assessment and investment time frames kept stretching out, consequently putting pressure on the Company’s ongoing funding requirements.
In response the Company devised a new staged development strategy (referred to as the 400K Plan) based on the completed feasibility study testwork and equipment selection data, focussed around the existing gravity concentrator plant, site infrastructure and services from the alluvial tin operation which was closed in September 2014. The 400K Plan involves a two stage development scenario with a total expenditure of US$35 million culminating in annualised production of 400,000 lbs of Ta2O5 (hence 400K Plan), 960 t of tin metal and 1 Mt of ceramic grade feldspar, before a third expansion phase to 2Mtpa is assessed based on market conditions.
- Stage 1: Capital expenditure estimate of US$7 million (including 20% contingency factor and two months working capital) to mine and process 360,000 t and on an annualised basis to achieve a production profile of approximately 92,000 lbs of Ta2O5 and 260 t of tin metal. The key items of new equipment required are a crushing and grinding circuit, thickener unit, power plant and a small concentrate upgrade and smelting unit as well as general upgrades to site services and facilities.
- Stage 2: Capital expenditure estimate of US$28 million (including 30% contingency factor) to increase production and processing to 1.4 Mtpa to produce approximately 400,000 lbs of Ta2O5, 960 t of tin metal and 1 Mt of ceramic grade feldspar per annum over a 25 year time frame. The capital expenditure would be on further crusher and grinding circuit upgrades as well as the installation of a flotation plant to remove silica and feldspar prior to the gravity concentrator, power supply and service upgrades as well as equipment to further clean and dry the feldspar to a ceramic grade saleable quality. The existing 50 tph gravity circuit does not require further increased capacity in Stage 2 as the removal of the feldspar and silica effectively scalp off 70 to 80 % of the feed mass with minimal loss of tin or tantalum, prior to the gravity plant.
- A 3rd stage to further increase ore production and processing to 2Mtpa and upgrade support services such as water and power would be assessed on the basis of technical performance to date and the market conditions for the tantalum and feldspar.This is regarded as a prudent, staged development case particularly from a commodity marketing perspective for TE, with only modest initial sales into the tantalum and feldspar markets planned, but sourced from a strategically significant large scale deposit to underpin further marketing and expansion opportunities. Even at 400,000 lbs pa of Ta2O5 Abu Dabbab would be the largest single tantalum mine in the world supplying approximately 10% of global demand, so clearly more attention needed to be focussed on the commodity marketing and offtake aspects of the operation which the 400K Plan does address well.As part of the update and technical due diligence process, Gippsland completed an updated Mineral Resource Estimate for the Abu Dabbab Tantalum-Tin-Feldspar Project (Table 1) and the Nuweibi Tantalum-Niobium Project (Table 2); reported in accordance with the guidelines of the 2012 JORC Code. Full details on the resource estimates are available in the report to ASX dated 17 March, 2015.
Stage 2 as presented is dependent on completion of verification and process design testwork in regard to the feldspar/silica flotation, continuing on from previous testwork undertaken by Gippsland. Additional engineering and cost analysis as part of a standard feasibility study process is also planned over a 12 month period. The samples for this testwork have already been collected and are ready for despatch. Stage 1 is based largely on feasibility study data, direct supplier quotes and operating experience from the alluvial tin operation. The Company plans to update the current mine plan in collaboration with an Egyptian mining contractor.
This was regarded as a prudent, staged development case particularly from a commodity marketing perspective for TE, with only modest initial sales into the tantalum and feldspar markets planned, but sourced from a strategically significant large scale deposit to underpin further marketing and expansion opportunities. Even at 400,000 lbs pa of Ta2O5 Abu Dabbab would have been one of the largest single tantalum mines in the world supplying approximately 10% of global demand. Therefore more attention needed to be focussed on the commodity marketing and offtake aspects of the operation which the 400K Plan addressed very well.
For more detail around the 400K Plan, please refer to the summary presentation lodged on ASX 26 February, 2015.
As part of the update and technical due diligence process, the Company completed an updated Mineral Resource Estimate for the Abu Dabbab Tantalum-Tin-Feldspar Project (Table 1) and the Nuweibi Tantalum-Niobium Project (Table 2); reported in accordance with the guidelines of the 2012 JORC Code. Full details on the resource estimates are available in the report to ASX dated 17 March, 2015.
Table 1: Abu Dabbab Mineral Resource (100g/t Ta2O5 cut-off)
Category Tonnes (Mt) Ta2O5 (ppm) Sn (%) Measured 15.2 290 0.143 Indicated 17 250 0.078 Inferred 10 200 0.03 TOTAL 45 250 0.090
Note 1: Numbers in table may not add correctly due to rounding
Table 2: Nuweibi Mineral Resource (100g/t Ta2O5 cut-off)
Category Tonnes (Mt) Ta2O5 (ppm) Nb2O5 (ppm) Indicated 48 150 95 Inferred 50 140 95 TOTAL 100 140 95
Note 1: Numbers in table may not add correctly due to rounding
The two projects are approximately 20 km apart. There are no material changes to either resource estimate from those released previously, such as in the Annual Report for 2014 financial year For Abu Dabbab this update re-affirms a large scale, moderate to high grade tantalum resource with significant tin and feldspar credits which underpins the Company’s development and investment plans.