14th Feb 2008 09:19
Berkeley Resources Limited14 February 2008 14 February 2008 STOCK EXCHANGE ANNOUNCEMENT SCOPING STUDY CONFIRMS POTENTIAL FOR MINING AT SALAMANCA I The Directors of Berkeley Resources Limited (AIM: BKY.L) are pleased to advisethat a Scoping Study on mining at the Salamanca I project, prepared by AMCConsultants, confirms the potential economic viability of the project. The Study, which is based only upon the project's previously announced JORCinferred and indicated resources of 16.9m lb of U3O8, includes the followingoutcomes: • Potential production of approximately 12.1m lb U3O8 over 10 years • Average cash operating costs of US$25 per lb of U3O8 • Initial capital costs totalling US$109m for a plant rated to process1.5mtpa. The plant design has been scaled to allow for potential futureadditional resources • At today's spot price (US$75 per lb U3O8), total capital is less than2 years operating cashflow • Legal review confirms no impediments to mining • Environmental review confirms no foreseeable major impediments tomining • Good potential to improve financial and operating parameters in anumber of areas, including utilising truck or radiometric sorting Further details are set out below. A full version of this announcement including images can be downloaded fromBerkeley's website at www.berkeleyresources.com.au. Enquiries - Managing Director:Matt Syme Telephone: +61 417 906 717 Email: info@berkeleyresources.com.au Nominated Adviser - RBC Capital Markets Martin Eales +44 20 7029 7881 Introduction Berkeley commissioned AMC Consultants to prepare a Scoping Study report (theStudy) on the potential for mining at the Company's Salamanca I project, inconjunction with a number of specialist sub-consultants. AMC Consultants is a leading mining consultancy, having completed over 3,500assignments around the world since 1982. The firm also has substantialexperience in Spain. The Director responsible for the Salamanca I Scoping Studywas Mr Martin Staples, a Principal Mining Engineer with over 28 years experiencein mine management and consulting around the world, including numerousfeasibility studies. The other consultants who contributed to the report are: • Metallurgical and processing Wisutec GMBH - a German stateengineering and consulting company responsible for the remediation of formeruranium mining sites in Saxony and Thuringia • Environmental and social URS Spain - the Spanish divisionof international engineering and consulting group URS, with considerableexperience in environmental studies for mining in Spain • Legal Clifford Chance (Madridoffice) - one of the world's leading law firms, with considerable experience inpublic practice in Spain Scoping Study Parameters Key considerations in the Study were scale, throughput rate, recoveries, maincapital and operating cost items, environmental and community issues andpermitting processes. The minimum project (production) life is 10 years, However, the plant was scaledat 1.5mtpa throughput with a view to adding further resources from ongoingexploration in the project area. The Study has not assumed the use of the Quercus plant, owned by ENUSA (theSpanish state uranium company) and currently on care and maintenance at Mina Fe,30 kilometres to the South West of the project. Berkeley has held a number ofdiscussions with ENUSA regarding the use of the Quercus plant and intendsholding further discussions shortly, now that initial operating parameters forthe Salamanca I project have been established. ENUSA has previously indicatedits support for use of the Quercus plant, if appropriate. AMC prepared two mining scenarios - with and without Zona 7 resources - giventhat the resource calculated for the Zona 7 deposit is not as advanced as forRetortillo and Santidad. This announcement refers to the scenario which includesthe Zona 7 resource given that the aerial radiometric and magnetic surveycompleted subsequent to the resource calculation highlights the considerableexploration potential in the Zona 7 area. The Study assumes a uranium price of US$60 per lb of U3O8. Resources and Exploration The Study was based only on the indicated and inferred mineral resourcetotalling 16.9m lb U3O8 calculated and announced in November 2007. Subsequentand ongoing exploration work at Salamanca I is intended to test the strongpotential to add further resources to the project's initial base. The Retortillo and Santidad deposits are only a few kilometres apart and hostedwithin the same stratigraphic horizon. Zona 7 is located 14 kilometres to thenorth. The Salamanca I project includes several other untested areas of uraniummineralisation and radiometric anomalies - as discussed in the stock exchangeannouncement of 5 Feb 2008. Total inferred and indicated resources at Salamanca I are: Ore Tonnes Grade (ppm U3O8) Mlb U3O8 at (Mt) 200ppm U3O8 cutoff Retortillo 9.6 615 13.0 Santidad 3.4 382 2.9 Zona 7 0.6 760 1.0 TOTAL 13.6 563 16.9 including the following indicated resources: Ore Tonnes Grade (ppm U3O8) Mlb U3O8 at (Mt) 200ppm U3O8 cutoffRetortillo 3.8 581 4.8 Assessment and interpretation of the historical and Berkeley drilling data wasundertaken by Company geologists; assessment of radiometrics and calculation ofradiometric equivalent assays were completed by Roger Murphy (former ChiefGeologist of the Rossing uranium mine); and resource modeling was assisted byMcDonald Speijers (a consulting group with 15 years experience in resourceestimations). The resource for the Retortillo and Santidad deposits wascalculated using block modeling methods, while the Zona 7 resource was estimatedusing a plan polygonal method. Resource classification has been carried out inaccordance with the JORC Code and resulted in 37% of the Retortillo depositbeing classified as indicated resources. The resource models were reviewed and approved by AMC and evaluated usingpreliminary processing costs and mining costs. In the absence of geotechnicalstudies, the core photographs were examined and judgements were made on theexcavatability of the rock and the parameters for slope designs. Pit optimisations were run using a Whittle FourD implantation of the LerchsGrossman algorithm and sets of nested pits were developed. The cost ofproduction, excluding capital but with allowance for rehabilitation costs, wasconsidered together with other parameters to select a basis for pit design. Thepoint at which the strip ratio and hence incremental production costs start torapidly increase was the main parameter for the chosen design. Mining For scheduling purposes the Retortillo pit was divided into 6 separate areas andthe Santidad pit into 3 areas and a mining schedule was developed to deliver1.5mtpa of ore to the process plant each year. The Scoping Study assumes thatat the end of the mine life, all waste and tailings are backfilled in the miningvoids. Based on drilling to date, it was assumed that the weathered top 20m of the pitsare free dig and below that would require drill and blast. As a result it wasassumed that, with appropriate perimeter blasting, relatively steep pit slopescould be achieved and in the top 20m the slopes were flattened back to 40degrees. Strip ratios are 4.2:1 at Retortillo and 1.3:1 at Santidad. Mining costs are based on all-inclusive quotes from suitable local earthmovingcontractors and have been benchmarked against recent mining costs for similaroperations in Spain. Processing Wisutec designed a preliminary process flowsheet for a 1.5 mtpa process plantbased on historical metallurgical work by ENUSA and leaching testwork performedby SGS Lakefield in 2007 (see ASX announcement dated 1 May 2007) Wisutec's interpretation of the ENUSA and SGS test work indicated the following: • Total uranium recovery of 88.8% • Maximum extraction achieved in 12 hours • Uranium liberated at coarse grind sizes with good recovery at grindsizes between P80 850(micro)m and P80 500(micro)m • Extraction of uranium occurs at 20(o)C and at an Fe3+ level over 2g/l • Acid consumption of around 20kg per ton of ore • 3.0kg of MnO2 per ton of ore • 2.3kg of Fe per ton of ore Alkaline leaching and the use of CARO acid will be considered in due course. The average life of mine head grade of material delivered to the plant is409ppm. Four stage crushing and screening and rod milling was selected to ensure acoarse grind for leaching and to produce tails that can be filter dried. As analternative, the possibility of SAG or HPGR comminution will be considered, withpotentially substantial cost reductions. While truck scanning is included in the process flowsheet, no benefit has beenincluded in the processing parameters due to the lack of test work. Neither hasradiometric sorting been included, for the same reason. Both options have thepotential to significantly improve processing economics. The balance of the plant is essentially a conventional mechanically agitatedleach tank farm with capacity of 150m3, belt filters for solution separation anda conventional ion exchange, precipitation and finishing circuit. Belt filtering allows for tailings impoundment in the mining void, optimisingthe environmental outcome. Operating Costs Based on the above circuit and mining schedule (including Zona 7), the SalamancaI project could produce a total of 12.1m lb of U3O8 over 10 years of production- representing approximately 72% of the total JORC resource. Wisutec and AMC calculated cash operating costs of US$25.02 per lb of productionas follows: Cost Centre US$ per lb Production Mining and Transport 7.21Processing 12.66Rehabilitation 2.68G&A 2.47TOTAL $25.02 AMC also applied selling costs of 3% of revenue and royalties payable of 3% ofgross revenue. Capital Costs Wisutec completed a preliminary costing of the above process plant as follows(including 10% contingency): Process Area Capital Cost US$m Crushing 29.4Grinding 17.4Leaching 20.4Ion Exchange and Recovery 13.4Waste Water Treatment 18.6Stockpiles 6.5Emergency Power 3.5TOTAL $109.2 AMC also estimated other capital costs totalling $5.2m, sustaining capital of$18.3m over the life of the project and pre-strip of $18.6m based on accessingthe deepest part of the Retortillo orebody first. This area has the highestgrade and also provides a void suitable for tailings storage. Environmental URS Spain undertook an initial environmental, heritage and social study toidentify potential areas for consideration and to clarify the environmentalpermitting process going forward. A number of special flora, fauna and heritage matters and areas of interest werenoted, with no unusual or insurmountable requirements apparent at this stage. An Environmental Impact Assessment will be required for mining. There is no specific requirement as to how mining rehabilitation should becarried out in the region. Berkeley and AMC have therefore assumed a very highstandard of rehabilitation - that is, all waste and tailings will be returned tothe mining void and resurfaced. Legal Clifford Chance in Madrid reviewed the status of Berkeley's mining (exploration)titles and analysed the legal procedures required to mine uranium ore and builda uranium processing plant. While a rigorous 3 stage approval process must be followed, with reports fromthe Nuclear Safety Council at each stage, there are no apparent prohibitions toBerkeley mining uranium at Salamanca I. Potential improvements Berkeley and AMC have identified a number of areas where the operating andfinancial parameters of the Salamanca I project could be materially improved andwhich will be addressed in future feasibility study work. These include: • As mentioned, the 1.5 mtpa plant is scaled to deal with a largerresource base than the project's current JORC resource and exploration to testthe immediate potential for additional resources is ongoing. • Truck and belt radiometric sorting may each have a substantialbeneficial impact on ore throughput and processing costs. There is growingevidence to support the benefits of both but as yet Berkeley has no basis toforecast the potential effects. • SAG or HPGR milling may benefit operating costs, particularly givenSpain has relatively high electricity costs. • As mentioned, Berkeley has had a number of discussions with ENUSAregarding use of the Quercus plant if appropriate. Berkeley expects toinvestigate further whether use of the plant may have a cost (capital andoperating) and/or time benefit for the project, possibly in conjunction withheap leaching of ore at site. • Tailings treatment and backfilling of pits are only preliminaryconcepts at this stage and other processes may be more appropriate. • There are a number of other capital and operating cost areas in theScoping Study which appear to have potential for savings. Berkeley is pleased to have completed an important step towards its goal ofregenerating the uranium mining industry in Spain. This initial positive,independent assessment of the potential at Salamanca I provides a strongendorsement of the Company's work to date and provides very useful guidance tothe further work required. The information in this report that relates to Exploration Results, MineralResources or Ore Reserves is based on information compiled by Mr Peter Ellis,who is a Member of The Australian Institute of Geoscientists and an employee ofBerkeley Resources Limited. Mr Ellis has sufficient experience which is relevantto the style of mineralisation and type of deposit under consideration and tothe activity which he is undertaking to qualify as a Competent Person as definedin the 2004 Edition of the 'Australasian Code for Reporting of ExplorationResults, Mineral Resources and Ore Reserves'. Mr Ellis consents to the inclusionin the report of the matters based on his information in the form and context inwhich it appears. 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