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TAWANA RESOURCES NL - Excellent Scoping Study Result for Mofe Creek Project

Release Date: 03/07/2014 09:23:00      Code(s): TAW       PDF(s):  
Excellent Scoping Study Result for Mofe Creek Project

Tawana Resources NL
(Incorporated in Australia)
(Registration number ACN 085 166 721)
Share code on the JSE Limited: TAW
ISIN: AU000000TAW7
Share code on the Australian Stock Exchange Limited: TAW
ISIN: AU000000TAW7
(“Tawana” or “the Company”)

    Excellent Scoping Study Results for Mofe Creek Project

      Low Capex, Low Cost, High Margin Operation Delivers Strong NPV and IRR

Tawana Resources NL (ASX: TAW) (“Tawana” or “the Company”) is very pleased
to announce that the completed Scoping Study for its 100 percent owned Mofe Creek Iron
Ore Project (“Mofe Creek” or “the Project”), has delivered excellent technical and
financial results along with project design and development simplicity.

Highlights

Key results from the Scoping Study for the Stage 1 development of a 2.5 Mtpa
project are presented below:

      Initial Mine Life                              14 years

      Production Target Profile                      2.5 Mtpa

      Capital Cost to Initial Production (incl 20 percent
      Contingency)                                   US52.9M
      
      Revenue (atFOB price of US87/Dmt – Pre-
      Tax)                                           US2.5B
      
      Operating Costs (LOM avg. Cash Costs -
      FOB)                                           US40.60 per tonne
      
      Net Present Value (NPV at8% DCF, post
      Royalties at 4.5%)                              US435M
      
      Internal Rate of Return (IRR) – Pre-Tax        55.8%

      Total Project Capital cost (mine, logistics    US280M – Staged across 4 years of
      and port incl. 20% Contingency)                prod’n

      Timeline to initial production                 15 months from approval of Mining
                                                     Licence
                                                    
      Product Quality                                64 – 68% Fe “Mofe Creek Premium
                                                     Fines”
                                                     

-    Tawana will commence a Pre-Feasibility Study on the Mofe Creek Project immediately
-    The Company will now further advance discussions with potential strategic partners, 
     off-takers, debt providers and financiers, in order to fast-track the development 
     of the Project

CAUTIONARY STATEMENT

The Scoping Study referred to in this announcement is based on lower-level technical and economic
assessments, and are insufficient to support estimation of Ore Reserves or to provide assurance of
an economic development case at this stage, or to provide certainty that the conclusions of the
Scoping Study will be realised.

The Scoping Study is preliminary in nature as its conclusions are drawn on inferred (74%) and
indicated mineral resources (26%). The relative sequence of mining is the indicated mineral resource
is assumed in Years 1 to 4, then the inferred mineral resource is assumed to commence in Year 4.

There is a low level of geological confidence associated with inferred mineral resources and there is
no certainty that further exploration work will result in the determination of indicated mineral resources
or that the production target itself will be realised. The stated production target is based on the
Company’s current expectations of future results or events and should not be solely relied upon by
investors when making investment decisions. Further evaluation work and appropriate studies are
required to establish sufficient confidence that this target will be met.

Further, the Company cautions that there is no certainty that the forecast financial information derived
from production targets will be realised. All material assumptions underpinning the production targets
and forecast financial information derived from the production targets are set out in Section 2 of this
announcement.

The estimated mineral resources underpinning the Scoping Study production targets have been
prepared by competent persons in accordance with the current JORC Code 2012 Edition and the
current ASX Listing Rules.


1. Executive Chairman’s Comments

Executive Chairman Wayne Richards said, “This study validates the opinion of the
Executive Management team that Mofe Creek ticks all the boxes with low Capex,
low operating costs, significant operating margins, a premium plus 65percent iron product
and a lifespan of at least 14 years. We are positioned to become a globally
competitive, highly profitable producer with a long-term logistics plan that will
ensure the timely and economic development of the Mofe Creek Project.”

“It has strategically positioned the Project as a potential bottom quartile operating
cost producer, with long-term logistics solutions designed to be implemented
sequentially, from forecast cashflows and/or strategic funding”.

Mr Richards said “the Company would utilise the Scoping Study to further advance
discussions with potential strategic partners, off-takers, debt providers and
financiers, in order to fast track the development of the Project”.

2. Scoping Study Overview
In conjunction with the publication of a Maiden Mineral Resources Estimate for the
Mofe Creek Project (refer ASX Release – dated 31st March 2014), Tawana has completed the
required engineering, mining, metallurgical and environmental studies, along with the 
logistics design and costings, to finalise the Mofe Creek Project Scoping Study.

The Project Development Plan envisages a staged production ramp up commencing
at 1 Mtpa (Stage 1A) then increasing production to 2.5 Mtpa (Stage 1B).
The Project Development Plan and Scoping Study identified the opportunity to
fast-track the initial 1Mtpa to 2.5 Mtpa production scenario, utilising the existing
infrastructure within Liberia, including an all-weather sealed bitumen road from
the Gofolo mine to the port of Monrovia, along with the existing deep-water port
at Freeport-Monrovia. The initial production for the first three years acknowledges
these current infrastructure facilities, however in anticipation of expansive growth
beyond the capacity of Freeport, the study assumes an alternate transhipment
and/or direct ship-loading facility on the coast of Liberia will be required.

The Tawana Project management team focused on the opportunity to accelerate
initial production timelines whilst minimising initial capital expenditure.
Consequently, work focused on Stage 1A and Stage 1B of the Development Plan and
on final production based upon the near surface itabirite mineralisation.

The principal activities completed as part of the Scoping Study assessment of Stage
1A and 1B included:

-        Resource modelling by Coffey Mining Pty Ltd (“Coffey”);
-        Mine planning and water management study by Coffey;
-        Tailing storage study by Coffey;
-        Environmental and social impacts review by Earth Systems - Perth and
-        EarthCons, Monrovia;
-        Metallurgical testing by ALS Laboratories, Perth;
-        Conceptual flow sheet design by Tawana, Allegiant Minerals Engineering
         and Tenova Mining and Minerals Pty Ltd (“Tenova”);
-        Processing plant and infrastructure design by Tenova;
-        Road studies under the supervision of Tawana’s Project Manager: Mr Noel
         O’Brien and Tenova;
-        Port stockpiling and barge loading plan by Tenova; and
-        Barging, transhipment and port development/loading studies by PRDW.

All production, capital and operating cost estimates presented in this release
relate to the Tenova review for Stage 1A and 1B of the Scoping Study.

The Scoping Study report provided by Tenova on the Mofe Creek Project Stage 1
Development includes:

-        Preliminary optimisation, mining schedule and mining costs provided by Coffey;
-        Run of Mine (“ROM”) and product stockpiling;
-        Tailings storage management preliminary design and costs provided by
         Coffey;
-        Preferred beneficiation plant, equipment selection and conceptual flow
         sheet design;
-        Load out arrangements for road transport and port stockpiles;
-        Planned use of the existing road transport system and staged independent
         road haulage enhancement program;
-        Initial use of the deep-water iron ore export facilities at Freeport-
         Monrovia; and
-        Development plans for barge loading and transhipment of ore to awaiting
         anchored vessels, off the coast of Liberia, from a new port location near to
         the Project site or interim barging to port of Monrovia

-        The key considerations in the Scoping Study were a preliminary assessment
         of the preferred mining and processing design; the development and
         expandability of a staged development plan, reflective of the outstanding
         approvals and currently installed infrastructure; the simple transition from
         a smaller-scale to a larger-scale development, including streamlining safety
         designs, operational and transport efficiencies for shipping of the ore; and
         the diligent consideration to community and environmental impacts the
         Project may have on our stakeholders.

-        The 2.5 Mtpa Project Business Case is based on the Maiden Resource
         Estimate. Coffey has provided a provisional mining schedule and estimated
         mine operating costs with Tenova providing a Class 4 (-15%/+30%) capital
         cost estimate (excluding owners’ costs and inclusive of a 20% Contingency)
         and operating cost estimate, including process, road transport, port
         infrastructure, and general and administrative expenses (“G&A”).

-        The Company plans to produce a “Premium Fines” iron ore product grading
         64-68% Fe from the Project. Based on the Maiden Resource the operating
         life of mine is estimated at 14 years. The first 4 years of mining are based
         on the indicated mineral resource at the Gofolo Main deposit (representing
         16.5% of the total mineral resource inventory), with the remainder being
         9.7% indicated at Zaway, and 73.8% inferred mineralisation for Gofolo,
         Zaway and Koehnko. Operating cash costs are expected to average
         US$40.60 per tonne FOB ex-Liberia over the life of the mine.

-        The initial capital expenditure required for first production is estimated at
         US$52.9 million (inclusive of a 20% contingency on CAPEX). The total
         capital cost required to achieve and sustain 2.5 Mtpa (including an
         independent haul road and transhipment facility at the coast of Liberia) is
         estimated at US$280 million (inclusive of a 20% Contingency on CAPEX).
         The total capital cost could be reduced through leasing arrangements on
         trucks, plant and/or the new port facility, consideration to
         infrastructure/utilities (Build, Own, Operate and Transfer – “BOOT”)
         agreements, improvements in tailings management and storage facilities,
         and future capital financing via cashflow from operations or off-take
         financing methodologies.

-        Further details of the key assumptions underpinning the Scoping Study are
         set out in the tables below:

    Production Profile

    Stage 1A (Year 1&2)                          1 Mtpa
    Stage 1B (Year 3)                            2.0 Mtpa
    Stage 1B (Year 4-14 incl)                    2.5 Mtpa
    Life of Mine (LOM):                          14 years including 10 years of steady state operation at
                                                 2.5 Mtpa
    Strip Ratio:                                 0.52:1 (waste to ore) average LOM
    Final product grade:                         64-68% Fe - Premium Fines Product
-   Table 1 | Key Parameters for the complete Stage 1 development of the Mofe Creek Project


     Operating cash costs – FOB Liberia Coast - average over Life of Mine (US$)
     Mining                                      13.44/t
     Processing                                  13.19/t
     Road Transport                               3.82/t
     Port Logistics                               9.19/t
     G&A                                          0.96/t
     TOTAL OPEX                                  40.60¢/t
-    Table 2 | Operating Cost Summary - Life of Mine


The current operational life of the mine, based on the Maiden Resource Estimate,
is 14 years, with a total production schedule of 29 Mt of final product, at an
Average LOM operational cost of US$40.60/t.

     Capital Costs (US$)
     Mine & Associated Infrastructure               5 M (assumes contract mining)
     Processing Facilities (Stages 1A &1B)        76 M
     Dedicated Haul Road                          40 M
     Port Development                             73 M
     Support infrastructure                       44 M
     Total Direct Costs                          238 M ( including 14% EPCM)
     Contingency (20% of Direct Costs)            42 M
     TOTAL CAPEX                                 280 M
    Table 3 | Capital Cost Summary for Stage 1


The capital cost estimates have been prepared in US dollars with a base date of
June 2014, and have an accuracy range of plus30% /minus15%, including a Project
Contingency of 20% of the CAPEX.

3. Production Timeline

The optimised Scoping Study for Stage 1 consists of a two-stage (Stages 1A and 1B)
initial development plan based on the production of a high quality, premium fines
product and planned as follows:

-          Stage 1A: Initial production of 1.0 Mtpa for the first 24 months using the
           existing bitumen road and working port facilities at the port of Freeport-
           Monrovia; and
-          Stage 1B: Ramp up of production to 2.0 Mtpa in Year 3 (then 2.5 Mtpa in
           Year 4) following the completion of the plant expansion, along with the
           addition of a dedicated haul road from the mine to the new coastal port
           location, and a barging/transhipment facility at the new coastal port
           location site.

The ramp-up to 2.5 Mtpa can be achieved by installing additional key plant and
equipment within the original Gofolo Main beneficiation plant. It is assumed that
trucking and/or barging of up to 2.5 Mtpa to the port of Monrovia could be
sustained for a finite period; whilst the new haul road and port facility at the
coastal location is approved, developed and commissioned.

The Company has completed its Baseline Environmental review, and has
commenced the Environmental, Social Impact Assessment (“ESIA”) Application
process. Likewise, the process of defining the principles of a Mineral Development
Agreement (“MDA”) with the Key Stakeholders in the Liberian Government has
commenced. In the forthcoming period, the MDA, ESIA and Mining Licence will be
expeditiously advanced, along with relevant local and state legislative approvals,
including the confirmation of the new preferred port location on the Liberian
Coast.

As soon as practical, after the new port (barging/transhipment facility) has been
developed, the transport logistics processes will transition from road haulage to
Monrovia, to dedicated road-train movements from the mine to the new port
location. This process will be determined by the earliest completion of the port
facility and/or the road, and is not subject to a tonnage constraint (i.e. the
Company will migrate to this modus operandi – as soon as the preferred, longer-
term logistics solution(s) is/are in place).

The plant design has been achieved by a modular approach to the site construction
and the sequential development and installation of additional plant and equipment
to expand production throughput. The location of the initial beneficiation plant
will be at the Gofolo Main deposit, or so-called “Gofolo hub”.

 Area                                                Stage 1A (US M)   Stage 1B (US M)
 Mine & Associated Infrastructure                    2.2               2.2
 Processing Facilities Stage 1A                      32.2              34.6
 Haul Road                                           0.8               34.3
 Port Development                                    0.0               64.1
 Support Infrastructure                              4.3               34.0
 Total Direct Costs                                  39.5              169.2
 EPCM at 14% of Direct Costs                          5.5               23.7
 Contingency (20% of Direct Costs)                   7.9               33.9
 Total Indirect Costs                                13.4              57.6
 Total Estimated Cost                                52.9              226.8
 Table 5| CAPEX Summary for Stages 1A and 1B


 Operating costs – average over Life of Mine (US)    Stage 1A (US M)   Stage 1B (US M)
 Mining                                              5.4/t             14.0/t
 Processing                                          20.0/t            12.7/t
 Road Transport                                      10.2/t            3.4/t
 Port                                                4.8/t             9.5/t
 G&A                                                 1.9/t             0.9/t
 TOTAL OPEX                                          42.30/t           40.50/t

 Table 6| OPEX Summary for Stages 1A and 1B


4. Forward Plan/Path Forward
The Scoping Study has successfully defined Tawana’s Mofe Creek Project’s optimal
mining and processing/plant design parameters, initial throughput rate capacities
and project life, and infrastructure requirements to support and transition the
intended production and logistics profile of the Project. Tawana has likewise,
designed the construction and location of the first and potential future
beneficiation plants, logistics and port infrastructure solutions acknowledging the
local communities and environmental sensitivities associated with the proposed
areas of operation.

The positive results and findings of the Scoping Study have determined the
expected timeline, capital expenditure requirements and operating costs for Mofe
Creek at an initial Production rate of 2.5 Mtpa. The advantages of the Project’s
access to existing infrastructure and favourable mineralisation allow for the
potential for a long mine life project at significantly higher production rates (to be
defined in the Pre-Feasibility Study) along with lower-quartile competitive
operating costs based on very low capital investment.

Mofe Creek’s robust project fundamentals provide a platform for Tawana to
further advance discussions and negotiations with potential strategic partners,
financiers and/or off-take corporations.

Tawana continues to explore opportunities for collaboration and partnership with
significant mining houses currently operating or proposing to operate mines within
Liberia, as well as mining houses operating in other West-African countries.
Discussions with potential Project (either at a Corporate or Project level) funders
and/or product off-take/trading firms/end-user companies in Europe or China will
also be progressed, as part of the Pre-Feasibility Study.

Currently, no binding agreements have been concluded with any party nor has any
opportunity sufficiently progressed to be announced to the market. There is no
guarantee that any agreement or transaction will eventuate from the Company's
current discussions.

As previously outlined, Tawana has commenced the ESIA Application process, the
MDA process and will coordinate both these activities to advance the longer-term
requirement for the granting of a Mining License, for the entire (current and
forecast) Mofe Creek Project.

An engineering and design company to champion the Pre-Feasibility Study will be
appointed in the coming month, along with the principal sub-consultancy groups to
affect the relevant studies for the Project. The Pre-Feasibility and exploration
extension-drilling Program will commence in earnest later this month.

5. About Tawana (ASX & JSE: TAW)

Tawana Resources NL is an iron ore focused ASX and JSE-listed Company with its
principal project in Liberia, West Africa. Tawana’s 100% owned Mofe Creek Project
(“the Project”) is a new discovery in the heart of Liberia’s historic iron ore
district, located 20km from the coast and 80km from the country’s capital city and
major port, Monrovia.
Tawana is committed to becoming a mid-tier iron ore producer through the
development of the Mofe Creek Project, which covers 285km2 of highly prospective
tenements in Grand Cape Mount County. The Project hosts high-grade friable itabirite
mineralisation which can be easily upgraded to a superior quality iron ore product in
the 64-68% Fe grade range, for which there is consistent global demand, attracting
significant price premiums.

About Liberia

Liberia is a democratic West African country with a modern and transparent mining
code and a government proactively engaged with the mining industry to help
unlock the value of its potential mineral wealth. Her Excellency President Ellen
Johnson Sirleaf was Africa’s first elected female head of state in 2005 and was re-
elected in November 2011 for a second term. The country is hugely prospective for
minerals exploration and production, hosting several world-class iron ore deposits.
Liberia has historically been the largest exporter of iron ore in Africa and was the
5th largest iron ore producer globally during the 1960’s to 1980’s.

For further information please contact:

Wayne Richards
Executive Chairman
Tel +61 8 9287 4344
Detailed information on all aspects of Tawana’s projects can be found on the
Company’s website www.tawana.com.au.

03 July 2014

Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Cautionary Statements

The Scoping Study referred to in this announcement is based on lower-level technical and economic assessments, and are
insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or
to provide certainty that the conclusions of the Scoping Study will be realised.

The Scoping Study is preliminary in nature as its conclusions are drawn on inferred (74percent) and indicated mineral resources
(26percent). The relative sequence of mining is the indicated mineral resource is assumed in Years 1 to 4, then the inferred
mineral resource is assumed to commence in Year 4.

There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that
further exploration work will result in the determination of indicated mineral resources or that the production target itself
will be realised. The stated production target is based on the Company’s current expectations of future results or events and
should not be solely relied upon by investors when making investment decisions. Further evaluation work and appropriate
studies are required to establish sufficient confidence that this target will be met.
Further, the Company cautions that there is no certainty that the forecast financial information derived from production
targets will be realised. All material assumptions underpinning the production targets and forecast financial information
derived from the production targets are set out in Section 2 of this announcement.

Competent Persons Statement
The information in this report that relates to Mineral Resources or Ore Reserves is based on information compiled by Len
Kolff and Iain Macfarlane, who are members of the Australian Institute of Geoscientists. Len Kolff is a full-time employee of
the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of
the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Iain Macfarlane is a full-
time employee of Coffey Mining Pty Ltd and has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined
in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ Len
Kolff and Iain Macfarlane consent to the inclusion in the report of the matters based on his information in the form and
context in which it appears.

Forward Looking Statement
This announcement contains certain forward looking statements. These forward-looking statements are not historical facts
but rather are based on the Company’s current expectations, estimates and projections about the industry in which Tawana
Resources NL operates, and beliefs and assumptions regarding the Company’s future performance. Words such as
“anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates” “potential” and similar expressions are
intended to identify forward-looking statements. These statements are not guarantees of future performance and are
subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company,
are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-
looking statements. Tawana Resources NL cautions shareholders and prospective shareholders not to place undue reliance on
these forward-looking statements, which reflect the view of Tawana Resources NL only as of the date of this presentation.
The forward-looking statements made in this release relate only to events as of the date on which the statements are made.
Tawana Resources NL will not undertake any obligation to release publicly any revisions or updates to these forward-looking
statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation except as
required by law or by any appropriate regulatory authority.

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