Southern Hemisphere Mining Limited has announced the positive Pre feasibility study results of its 100% owned Los Pumas Manganese Project in Chile. The PFS was managed by SNC Lavalin Group Inc with participation and contribution from industry consultants.
The PFS has evaluated the development of an open pit mine at Los Pumas and on site processing facilities. The mine is expected to produce an average of 300,000 tonnes of manganese product per annum over a 7 year mine life, at an average cash cost (life of mine) of approximately USD 3.50 per dry metric tonne unit. The project economics are extremely robust with an after tax internal rate of return of over 40% on an initial capital investment of USD 74.3 million.
Final Project approvals and the results of a Feasibility Study are expected in the first quarter of 2011.
Highlights of the PFS include:
Long life mine: Increased JORC resource of 18.3 million tonnes @ 7.6% Mn will support average annual production of 300,000 tonnes over an initial 7 year mine life. Coffey Mining, who are the independent resource estimators, are reviewing the model and a reinterpreted resource estimate that includes further sample data will be completed within a month. This reinterpreted data will be incorporated by the Company into the FS.
Excellent logistics and near mine infrastructure: The Project is located 170 kilometers from Arica Port which has undercover stockpile facilities and bulk loading capabilities for Handymax ships. Manganese product will be trucked from Los Pumas to a stockpile 10 kilometers from Arica Port, with 140 kilometers on a sealed highway and the remainder a provincial gravel road.
High quality 38% Mn product: Metallurgical test work supports the production of a high quality manganese product with high manganese to iron ratio. The metal recovery yield of 60% used in the PFS is expected to be improved following further test work and incorporated into the FS by the Company.
Low operating costs: Average cash cost (life of mine) of approximately USD 3.50 per dry metric tonne unit forecast to generate strong operating margins.
Capital costs: Pre production capital costs of USD 74.3 million are expected to be paid back within two years of commencing production.
Robust Project economics: Estimated Project net present value of USD 90 million and an IRR of 43% using a long term manganese price of USD 7.40 per dry metric tonne unit (FOB Port of Arica).
Permitting: Final environmental approval is expected by January 2011.
Significant potential upside remains:
The company is conducting a supplementary study to the PFS focusing on the identified enhancements available to the economics and mine life of the Project. The FS will incorporate the reinterpretation of the resource by Coffey Mining, and further metallurgical test work being undertaken to confirm the Project's metal recovery assumptions.
The FS is expected to deliver:
Further metallurgical test work to enhance product yield assumptions that have the potential for increasing production and lowering operating costs
A review of the ore resource statement being conducted by Coffey Mining that includes further analysis data to increase the ore resource inventory
Reduction in product lost to waste through flow sheet optimization
Identification of optimal product mix for the Los Pumas ore
Regional exploration potential
The Company expects to deliver the FS by first quarter 2011
Mr Trevor Tennant MD & CEO of Southern Hemisphere said that "The first drill hole into the Los Pumas Project was sunk on December 16th 2008 and work has progressed on the Project to the current state where a pre feasibility has been completed that supports findings that the Project is viable and will be a producer of a quality of product that will be well accepted in the Chinese market. The Project site is in the north of Chile that is relatively undeveloped and the opportunity for employment and provision of services will be appreciated. The mine will have a Company work force of 66 and contractors will directly employ 150 persons."
