20th Jan 2009 07:00
|
ALBIDON LIMITED |
Level 1 |
|
62 Colin St |
|
|
West Perth 6005 Western Australia ARBN 107 288 755 Tel:+6189211 4600 Fax: +6189211 4699 Email:[email protected] ASX Code: ALB AIM Code: ALD |
|
20 January 2009
BUSINESS UPDATE - JANUARY 2009
http://www.rns-pdf.londonstockexchange.com/rns/9145L_-2009-1-20.pdf
KEY ISSUES:
OVERVIEW:
As indicated in the Company's announcement of 11 December 2008, mining practices were to be reviewed. In light of recent performance, the Company extended this to a full operational review focusing on 2009 and 2010. The main conclusions from this review are as follows:
The following cross section shows the grade contour map together with the Northern and Southern declines and level development. Development of the Northern decline has been suspended at the 970 Level.
Refer Diagram 1 - Enterprise Longsection Grade Contours
The key physical outcomes of the revised mine plan are tabulated below.
|
Unit |
2009 |
2010 |
|
|
Mined Ore |
t |
675,000 |
950,000 |
|
Ore Grade - Ni |
% |
1.0 |
1.0 |
|
Nickel in Concentrate |
Ni t |
5,000 |
7,000 |
|
Concentrate Grade - Ni |
Ni % |
10.3 |
12.0 |
Further restructuring of the Munali Nickel Project operations targeting significant cost reductions will be undertaken in order to render the project a viable concern at current nickel prices. This includes assessing the option to cease stoping operations during 2009 and to only mine and process development ore on a campaign basis. This allows development to be accelerated while allowing the Company the ability to substantially reduce its mining, processing and site overheads.
Discussions have been held with key stakeholders including:
Suppliers - we have talked to a number of our major suppliers to determine how they can assist in reducing our costs.
Zambian Government - meetings have been held with the Zambian authorities aimed at providing assistance to the Project.
Local Community - local community leaders have been advised that certain community projects and obligations must be deferred or cancelled in view of current business circumstances.
Lenders - senior and subordinated lenders have been briefed. The result of the revised mine plan is that the Company will be in breach of its loan covenants and therefore waivers and concessions have been requested. Our lenders are in the process of assessing the impact of the revised mine plan and while expressing willingness to work with the Company, they are reserving their rights.
Customer - Jinchuan has been advised of the reduced nickel offtake, particularly in 2009, and will need to waive certain minimum delivery obligations by the Company.
Major Shareholders - the Company is also maintaining communication with its major shareholders.
In view of the above and as highlighted in the 11 December announcement, the Company is pursuing a further injection of working capital. There are a number of parties that have expressed an interest in investing in Albidon and while these negotiations are at an advanced stage, the outcomes are not yet certain.
As advised in the previous operational update, the Company's ability to continue operating through to steady state and beyond is dependent upon:
prices for nickel and by-products remaining at or exceeding current levels;
operating forecasts being met or exceeded;
significant cost reduction targets being met when expected;
raising the additional working capital; and
the ongoing support of key stakeholders.
OPERATIONS:
Safety
Pleasingly, the Project recently achieved a major milestone with 1 million hours worked without a lost time injury.
Mining
Ore production for the December 2008 quarter was disappointing with 85,562 tonnes @ 0.72% compared to the forecast of 115,000 tonnes @ 0.7%. This was due mainly to breakdowns in underground equipment and lack of critical spares on a timely basis. This also impacted development and required lower grade/high MgO stopes to be accessed rather than planned higher grade/lower MgO stopes. These issues will also impact January 2009 ore production, grade and development.
Details of actual and forecast ore tonnes and grade are shown in the following graphs:
Refer Diagram 2 - Quarterly Production - Ore
Refer Diagram 3 - Quarterly Production - Ni Grade
Processing
The processing plant has been impacted by lower than expected ore feed tonnages/grade with higher than expected MgO content for reasons indicated above. This has affected the quality of concentrate produced and overall recoveries. By-product credits have contributed to revenue at higher than expected levels.
Details of actual and forecast recoveries, nickel tonnes in concentrate and concentrate grade are shown in the following graphs:
Refer Diagram 4 - Quarterly Ni Recovery
Refer Diagram 5 - Quarterly Ni Metal in Concentrate
concentrate sales
Dispatches of approximately 2,000t of lower grade out of specification concentrate commenced on the 15 of December 2008 and will be completed by the end of January 2009. Dispatches by Jinchuan of higher grade concentrate commenced on 24 December 2008 and are continuing.
Refer Diagram 6 - Quarterly Concentrate Quality
Operating costs
Further restructuring of the Munali Nickel Project operations targeting significant cost reductions must be undertaken in order to render the project a viable concern at current nickel prices. The Company is targeting immediate cash costs of ~US$7.00/lb of equivalent payable Ni reducing to ~US$4.00/lb in the final quarter of 2009. The higher costs in the early part of 2009 reflect the need to rapidly develop the Southern section and open the mine to achieve a production rate of >900ktpa.
Infrastructure
Infrastructure onsite has largely been completed with the exception of the warehouse and some site drainage, all of which are now well progressed and nearing completion. It is currently the wet season in Zambia and site infrastructure is coping well during its first year of production. Water supply is currently sufficient and a hydrological study will be initiated in February 2009 to ensure adequate back up water supplies provide continuity of supply through the dry season.
Exploration
Minimum exploration activities were undertaken during the December 2008 quarter.
CONTACTS:
If you have any queries please contact Alasdair Cooke and Paul Chapman on +61 8 9211 4600 or email [email protected]
Albidon's nominated adviser is RFC Corporate Finance Ltd, contact Stephen Allen +61 8 9480 2500.
Additional information may also be viewed on Albidon's website at www.albidon.com.
Related Shares:
ALD.L