(MENAFN- ProactiveInvestors - Australia) GBM Resources (ASX: GBM) has confirmed the strong commercial opportunity of its Milo Iron Oxide Copper Gold (IOCG) and Rare Earth Elements and Yttrium (REEY) Project in North West Queensland through an in-depth Scoping Study.
Importantly, the positive economics support a decision to progress to the Pre-Feasibility Stage, slated for 2013, and maintain ongoing exploration at Milo.
The study, completed by independent consultant Mining One, highlighted that Milo has the potential to become a mid-tier producer of rare earth oxide products with key credits for copper, phosphate and uranium.
Average annual production of key commodities is estimated to be 3,500 tonnes of TREEYO products, 5,300 tonnes of copper, 173,000 tonnes of phosphate (35%) and 927,000 pounds of uranium.
Long term base case indicates a net cash flow of $701 million over an 11 year mine life, and the upside case has a net cash flow of $1,160 million over the same mine life.
The Scoping Study indicates Milo will be a large scale, low cost conventional open cut mine with a low stripping ratio.
A mining schedule was developed based on a crushing rate of 10 million tonnes per annum.
This incorporates a heavy medium plant resulting in 6 million tonnes per annum passing through a treatment circuit producing rare earths, copper, phosphate rock and uranium.
The concentrate products will be railed to Townsville where the rare earths concentrates will be further processed to produce rare earth oxide products.
Start-up capital totals $792 million covering concentrator and rare earth oxide plant capital costs ($656 million), mining fleet ($99 million) and infrastructure ($37 million).
Peter Thompson, managing director, said this was a major milestone for GBM and the Milo Project.
"This is a very pleasing result for GBM Resources and its shareholders. This is a very robust Scoping Study based on many months of in-depth study and analysis by the GBM team supported by a group of highly qualified external consultants.
"Both the long term base case and the upside case confirm Milo as a potentially technically and financially viable project forecast to have very strong operating margins that should deliver significant cash flow over an initial 11 year mine life.
"The exciting thing is that we have achieved the significant milestones of unveiling the potential for a commercially strong, large tonnage project in just 18 months â€" and we still have so much exploration upside at Milo."
Significant credit
Uranium is a significant credit for the Milo Project, given the recent announcement by the Queensland Government that it is moving to allow the recommencement of uranium mining in the State.
The Milo inferred resource contains over 14 million pounds of uranium making it one of the largest undeveloped uranium deposits in Queensland.
Exploration upside
There remains significant upside at Milo as it is at an early point in its exploration cycle.
Milo currently hosts an Inferred resource of 88 million tonnes containing 97,000 tonnes of copper and 14 million pounds of uranium oxide.
The Milo Resource is over a kilometre long and remains open in all directions.
There are now three additional separate mineralised zones to be drilled within the Milo area, which is part of an extensive mineralising system.
The project has strong potential for further significant resource growth and also for delineation of higher grade zones with infill drilling.
Importantly, this shows strong opportunity to improve on economics through ongoing exploration and mineral recoveries.
High value rare earth elements identified as likely to be in critical undersupply comprise 24% of the TREEYO identified to date.
Next steps
GBM plans to begin a Pre-Feasibility Study in 2013 and is looking to secure funding through a joint venture partner or alternative means.
Key areas of development include metallurgical test work covering TREEYO products, larger scale testing and piloting to validate flowsheet and process design, as well as upgrading the Inferred resource to the higher confidence Indicated category.
Analysis
Given the early exploration stage of the Milo Project, the in-depth Scoping Study presents a strong indication of the commercial potential already evident from the project.
The definition of further resources and higher grade zones over time will only serve to build on the already strong economics.
The Milo Project is already attracting international investors with GBM recently introducing a Singapore based investment group led by Lion Resources Development as a new major shareholder under a A$3.1 million agreement.
The new consortium can potentially underwrite the company's future growth plans.
The move into Pre-Feasibility is an important and significant step for GBM and the Milo Project.
The completion and delivery of the Pre-Feasibility Study in 2013 is likely to be highly anticipated, and a potential catalyst for the re-rating of GBM as Milo's potential continues to be revealed.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.