Anglesey Mining plc
8th September 2017 LSE:AYM
Parys Mountain Project Update
Planning for production in 2020
Anglesey Mining plc (“Anglesey” or the “Company”) is pleased to provide the following update on the Parys Mountain project in North Wales.
On 24th July 2017, Anglesey reported on the Scoping Study completed by Micon International Limited and Fairport Engineering Limited. The financial figures used in the Scoping Study were based on metal prices prevailing at that time. Since July all the metals to be produced at Parys Mountain have increased in price with copper at $3.10/lb compared to $2.50/lb in the Scoping Study, zinc has increased to $1.40/lb compared to $1.25/lb in the Study and lead has moved to $1.09/lb compared to $1.00. There has also been upward movement in both gold and silver. In contrast, the pound has strengthened somewhat against the US dollar and is now trading around $US1.30 to £1.00 compared to $US1.25 in the Study.
The overall impact of these changes would be very positive on the pre-tax NPV and IRR.
The fundamentals underlying the recent increases in these metal prices are well founded and are likely to continue to support upward growth through the next several years.
Anglesey believes that it is now opportune to progress a number of steps to move the Parys Mountain project forward with the expectation that financing can be obtained and the project developed to production as soon as practicable. The major steps to be taken in the short term will include:
• Commencement of an Environmental Impact Assessment
• Conversion of the Scoping Study to a Definitive Feasibility Study
• Recruitment of key corporate staff
• Discussions with potential providers of project finance, including investment funds, metal traders, smelters and banks
It is planned to immediately commence all of these steps with the hope that a Definitive Feasibility Study, including an Environmental Impact Assessment, can be completed in the first half of 2018 so that meaningful project financing discussions can take place immediately thereafter. It is the intention of the Company to bring in new personnel into key positions to drive these matters forward and move the project and the Company to a successful long-term future.
The Company has adequate funds to initiate these steps and continue its normal corporate and limited site operations but will need to raise some additional funding to complete these development targets. This will not likely involve significant dilution for current shareholders.
Providing this timetable can be met and discussions on project financing are well advanced by the middle of next year, it would be possible for project construction to commence before the end of 2018 with initial production targeted for the first half of 2020.
Parys Mountain Project
The Parys Mountain Scoping Study base case envisages a mining rate of 1,000 tonnes per day, to produce an average annual output of 12,500 tonnes of zinc concentrate at 57% Zn, 6,400 tonnes of lead concentrate at 52% Pb and 3,500 tonnes of copper concentrate at 25% Cu, annually, over an initial mine life of eight years.
The overall net smelter return (NSR) for the three concentrates, including the silver and gold precious metals contributions, is expected to total more than $270 million at the forecast metal prices used for the base case.
The base case yields a pre-tax net present value of $33.2 million, or £26.6 million, at a conservative 10 per cent discount rate, using metal prices of $1.25 per pound for zinc, $1.00 per pound for lead, $2.50 per pound for copper, $17.50 per ounce for silver and $1,275 per ounce for gold and at an exchange rate of £1.00 = $US1.25. With an estimated pre-production capital cost of $53 million, or £42 million, this results in an indicated internal rate of return (IRR) of 28.3%.
Using longer term metal price projections of $1.35 per pound for zinc and $3.00 per pound for copper the NPV10 would be $43.2 million, or £34.6 million. At an 8% discount rate, used to reflect the relatively low risks of the project given its advanced level of development and low political risk in the UK, the NPV8 would be enhanced to $41 million, or £32.8 million, for the base case metal price scenario and to $53 million, or £42 million, for the higher longer-term metal prices, with an IRR of 33%.
Importantly, the Scoping Study was based on only the 2.1 million tonnes of indicated resources reported by Micon in 2012. Micon had also reported a further 4.1 million tonnes of inferred resources which were not incorporated into the Scoping Study. It is expected that a high proportion of these inferred resources will be converted to indicated probable reserves once exploration drilling from underground takes place. These additional resources would be processed through the same concentrator plant and would significantly increase the projected life of the mine, to perhaps double the projected mine-life to 15 or 18 years, and enhance the NPV.
About Anglesey Mining plc
Anglesey is carrying out development and exploration work at its 100% owned Parys Mountain zinc-copper-lead deposit in North Wales, UK with a reported resource of 2.1 million tonnes at 6.9% combined base metals in the indicated category and 4.1 million tonnes at 5.0% combined base metals in the inferred category.
Anglesey also holds a 6% interest and management rights to the Grangesberg Iron project in Sweden, together with a right of first refusal to increase its interest by a further 51%. Anglesey also holds 11.8% of Labrador Iron Mines Holdings Limited which has direct shipping iron ore deposits in Labrador and Quebec.
For further information, please contact:
Bill Hooley, Chief Executive +44 (0)7785 572517
Danesh Varma, Finance Director +44 (0)207 653 9881
Elliot Hance, Beaufort Securities +44 (0)207 382 8300