6 October 2008                                       LSE:AYM  

Chairman’s statement at 2008 Annual General Meeting

At the Annual Meeting of Anglesey Mining plc, held in London on 3 October, Chairman John Kearney reported to shareholders that “the period since our last AGM has been one of very significant developments for Anglesey Mining plc. Our iron ore project in Labrador, Canada was successfully floated on the Toronto Stock Exchange and is moving towards first production in 2009.”

“At the Parys Mountain copper/zinc/lead project in Wales, negotiations continue with Western Metals of Australia which we hope will result in agreement being reached to move that project forward.”

“Meanwhile iron ore prices remain very positive and while base metals, especially zinc, have weakened recently, Anglesey believes that the outlook for iron ore prices, and indeed zinc, copper and lead, is encouraging, all driven by Chinese demand which shows no sign of abating”, said Mr Kearney. 

Labrador Iron Mines Holdings (TSX-LIR)

Anglesey Mining holds 50% of Labrador Iron Mines Holdings Limited (“LIMH”) which was floated on the Toronto Stock Exchange in December 2007 raising $C53 million before expenses. At 31 August 2008 LIMH had cash of approximately $C45 million, which is held in short term deposits with Schedule 1 Canadian Chartered Banks.

LIMH is pursuing a direct shipping iron ore project in north-western Labrador where it is engaged in the redevelopment of the Schefferville iron ore mines, previously operated by the Iron Ore Company of Canada from 1954 to 1982.  During 2008 LIMH has been actively advancing the project with the objective of achieving initial production of iron ore in 2009.   

Resource Definition Drilling

A programme of definition drilling is being undertaken on the four deposits which comprise the first development phase of the project. Over 50 reverse circulation holes have been drilled. In addition a programme of diamond drilling is being carried out on the outlying Sawyer Lake Property where seven holes have been drilled.

The results of the drilling will be utilized in the preparation of updated compliant resource estimates, which will be incorporated in a new 43-101 technical report expected to be completed by year end. The historical resources in LIMH’s eight deposits were previously estimated at 93 million tons, with in-situ grades of 56%-58% Fe, based on previous work undertaken by the Iron Ore Company of Canada prior to 1983. These historical resource estimates are not r NI 43-101 compliant.

Test Mining and Bulk Sampling

To provide representative samples for metallurgical testing, process design and product marketing, bulk samples totalling 6,500 tonnes were mined from each of the James, Redmond, Knob and Houston deposits by local contractors. The samples were crushed and screened to produce stockpiles of representative lump and sinter fine ores. It is estimated that approximately 25% of the stockpiles is lump ore with 75% sinter fine ore. The samples will be transported by rail to the Port of Sept Iles, where they will be onward shipped to various steel plants and potential customers, with a portion utilized for metallurgical testing.

Transportation

Detailed studies were carried out on the ore transportation plans. Further technical assessment reports were completed on the railroad. Negotiations have been carried out with the rail companies and freight rates for 2008 have been negotiated. Ten railcars, each with 100 tons capacity, have been leased to transport the bulk samples to port. Stevedoring rates have also been negotiated with the port and stevedoring companies for storage and ship-loading.

Permitting and Environment

The Project Registration Document for the first phase development of the James and Redmond properties was submitted to the Government of Newfoundland and Labrador at the end of April. The phase one development incorporates the mining plan for the first four years of mining operations. The Ministry of Environment and Conservation completed its review in August and the Minister directed the preparation of an Environmental Impact Statement (EIS). An EIS Technical Committee has been established by the Minister and the draft terms of reference are being finalised. It is anticipated that the submission of the Environmental Impact Statement will be made prior to the end of 2008. Authorization and release of the project by the Government of Newfoundland and Labrador is anticipated during the first quarter of 2009.

Community Consultations

In July 2008 an Impact Benefit Agreement was signed with the Innu Nation of Labrador. The IBA is a life of mine agreement that establishes the processes and sharing of benefits that will ensure an ongoing positive relationship between LIM and the Innu Nation.

Consultations and negotiations are also continuing with other First Nations in the Schefferville and Sept Iles areas. LIM has signed a Memorandum of Understanding with each of the First Nations in the Schefferville area reflecting the agreement of the parties with respect to community support for the development of the project and the commitment to negotiate more detailed co-operation agreements.

Plans for Remainder of 2008 and 2009

The ongoing definition drilling program will continue until November. It is planned to drill up to a total of 10,000 meters in the entire 2008 program. The iron ore bulk samples will be transported by rail to the Port of Sept Iles utilizing LIMH’s ten rail cars and shipped to potential customers for testing. A Resource and Engineering Study is being undertaken with SNC Lavalin, supported by Geostat and Lakefield Research which will incorporate the updated resources estimates. This is expected to be completed in early 2009.

Subject to the receipt of permits, first production of direct shipping iron ore is targeted for the second half of 2009. It is planned to mine 500,000 tonnes of iron ore in 2009, and this will increase to 1.5 million tonnes in 2010 and to 3.0 million tonnes in 2011/12 as production ramps up. The start-up date is dependent on the timely release of the project by the Government of Newfoundland and Labrador and the issue of appropriate permits.

The iron ore market is robust and is forecast to remain strong. The group believes that it is well placed to take advantage of this strength as it brings the Labrador iron project into production in 2009.

Parys Mountain   (Zinc - Copper - Lead Project)

At the Parys Mountain zinc/copper/lead property in Wales, the second phase White Rock diamond drilling programme was carried out in early 2008. The first hole was a short, large diameter hole for metallurgical testing purpose and three deeper holes were drilled into the White Rock Zone to transfer some of the inferred resource to the indicated category and to provide additional information on the extent and tenor of the resource.

The results of the 2008 White Rock drilling programme, which were very encouraging, were previously reported as follows:

Hole #

From

To

Width m

Cu%

Pb%

Zn%

Ag ppm

Au ppm

WD 10

21.2

53.8

32.6

0.91

5.44

9.67

77.0

1.04

Includes

21.2

30.2

9.0

1.27

8.14

15.29

130.0

2.68

 

 

 

 

 

 

 

 

 

WD 11

119

145.7

26.7

0.50

2.59

5.02

36.6

0.92

Includes

119

132.7

13.7

0.78

3.98

7.49

44.3

1.00

Includes

127.3

132.7

5.4

0.66

5.51

10.46

68.5

1.97

 

 

 

 

 

 

 

 

 

WD12

50.9

55.0

4.1

0.76

1.76

3.87

99

0.26

 

 

 

 

 

 

 

 

 

and

58.2

183.7

125.5

0.10

0.74

1.52

16

0.25

Includes

126.2

153.7

27.5

0.18

1.64

2.81

21

0.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WD13

157.3

188.4

31.2

0.20

1.42

2.32

12

0.19

Includes

169.5

185.0

15.5

0.33

2.26

3.45

15

0.20

 

These results should be read with caution as the drill-hole intersections were not normal to the dip of the White Rock Zone and the indicated widths in the table above will be larger than the true zone width. This is particularly true for WD 10 which was drilled vertically down the zone and was intended to collect samples for metallurgical testing purposes.

 

Total Parys Mountain Mineral Resources

White Rock resources - JORC compliant

Category

Zone

Mt

Cu%

Pb%

Zn%

Ag g/t

Au g/t

Indicated

White Rock

1.75

0.36

2.22

4.27

39.00

0.43

Inferred

White Rock

0.40

0.32

1.63

3.54

45.00

0.38

 

'Historic resources' - not JORC compliant                     

Category

Zone

Mt

Cu%

Pb%

Zn%

Ag g/t

Au g/t

Indicated

Engine

1.41

1.99

3.42

6.65

99.00

0.79

Inferred

Engine

2.83

3.20

1.93

4.54

22.00

0.12

 

Carreg y Doll

1.37

2.07

2.64

4.79

12.00

0.15

 

Site Activities

Site activities at Parys Mountain during the past year included the construction of a fenced enclosure large enough to contain the new decline site, plant site, administration buildings and maintenance area.

Approval of the detailed plans for the decline box cut excavation and related works, as required by the conditions of the company’s existing and valid planning permission granted in 1988, was received from the Isle of Anglesey County Council, the relevant mineral planning authority

The new decline is intended to provide access between the proposed processing plant and the existing 300 metre deep production-sized shaft.  From the shaft the decline will spiral down allowing access first to the newly discovered White Rock area and later to the deeper higher grade Engine Zone and other resource zones. 

The freehold of several acres of land adjacent to the Morris Shaft was purchased to facilitate White Rock mining operations; the company already held mining rights over the area. In July 2008 the company was granted a consent to discharge water from its Morris Shaft, an essential step in the re-starting of mining operations.

The planned commencement of decline construction has not occurred as had been anticipated. The price of zinc, which would provide the majority of revenue from the White Rock area, dropped from $4,400 per tonne during the last quarter of 2006 and 170 cents in the summer of 2007 to its current level of $1,650   per tonne. This reduction in the zinc price has had a significant affect on the projected revenues from the White Rock area. The effect on the projected returns from the property as a whole is much less, as other metals, principally copper and lead, are more important contributors to revenue outside the White Rock.  The property as a whole, including the deeper Engine Zone, has approximately double the metal grade and four times the tonnage of the White Rock area.

Metal Prices

The outlook for base metals is changeable, the price of zinc having fallen significantly since its 2007 peak thereby affecting the group’s own plans for the next stage of Parys Mountain.

Anglesey remains optimistic on the medium to long term outlook for zinc.  There are no new large zinc mines waiting to come into production anywhere in the world.  Some existing mines are coming towards the end of their lives and recently a number of zinc mines have announced closures or layoffs. 

On the demand side, China’s zinc consumption growth continues in double digits.  The recent weakness in zinc prices was partly caused by heavy selling by hedge funds seeking liquidity pushing metal prices down on the London Metal Exchange.  The London Metal Exchange is a liquid market where one can always sell.

We believe the price decline has been over done. The average cost of zinc production worldwide is estimated in the range of $1,500 - $1,800 per tonne, below which all mines will lose money, a situation which cannot continue for long. Smelter treatment charges and ocean freight charges have both come down recently to about half their peak, which is a sign of a shortage of supply. 

In contrast, copper prices have performed better than zinc over the past year, and more than half of the value of the Parys Mountain deposits is in copper, generally at deeper levels than the zinc.

Anglesey believes that the outlook for zinc prices, and indeed copper and lead is optimistic, both driven by Chinese demand which shows no sign of abating. 

Update on Western Metals discussions

An offer to purchase and develop the Parys Mountain properties was received from Western Metals Limited of Perth Western Australia in April 2008. Since that time Western has been carrying out due diligence and negotiations on a definitive agreement between the companies have continued.

Anglesey has been advised that Western Metals does not wish to proceed on the basis of the April Term Sheet. Both parties have expressed an interest to reach alternative arrangements and discussions on this matter are continuing. Anglesey has agreed to extend the due diligence period but as at the date of this meeting no formal agreement has been signed. Shareholder approval will be required for this transaction.

 

 

About Anglesey Mining

Anglesey Mining plc is a UK based company listed on the London Stock Exchange (LSE:AYM) with 100% ownership of the Parys Mountain polymetallic base metal project in North Wales, and a 50% interest in Labrador Iron Mines Holdings Limited (TSX:LIR) which is developing the Schefferville direct shipping iron ore project in Labrador, Canada.  

 

For further information:  

John Kearney, Chairman

Bill Hooley, Chief Executive

+ (1) 647 728 4105

+(44) 1492 541981

Ian Cuthbertson, Finance Director

+(44) 1248 361333

 

mail@angleseymining.co.uk                                          www.angleseymining.co.uk