Skardon River Progress Report June 2002
MINERALS CORPORATION LIMITED 2002-06-14 ASX-SIGNAL-G
HOMEX - Sydney
+++++++++++++++++++++++++
Prior to Minerals Corporation negotiating the purchase of the Skardon
River Kaolin Project in June 2000, many market rumours were in
circulation regarding the causes of failure of the previous owners
Australian Kaolin Limited. Minerals Corporation is pleased that most
of these issues have been dealt with, however, for purposes of
keeping the market fully and properly informed, Minerals Corporation
is pleased to advise the following:
1. ORE RESERVES
By April 2001, Minerals Corporation had demonstrated that a
sufficient proven reserve (per JORC Code) existed at Skardon River
for 20 years production, and indicated resources were at 100 years
production (using 150,000 tpa plant production rate). In order to
provide for an authorative assessment, this work was undertaken with
advice from leading geologists experienced in kaolin in the USA, UK
and Australia. The stripping or waste removal ratio at Skardon River
is 3:1 versus 9-15:1 in USA/UK.
2. ORE CONTAMINANT LEVELS
Skardon River is fortunate that the contamination levels, mainly iron
and titania, are low by comparison with existing high grade kaolin
producers. It has been rumoured that Skardon River products have
excessive potassium levels.
Over our existing range of four products, the potassium levels range
from an absolute low of 0.1% to an absolute high of 1.0%. We also
have another product that ranges up to 1.5% K(2)0 and this product
application is not potassium critical.
Existing successful commercial products produced in USA/UK range (per
their quoted literature) from 0.05% to 2.5%. The Company does not
regard the potassium level issue to be an issue at all.
3. ORE GRIT LEVELS
As correctly defined in the report to the Receivers of Australian
Kaolin Limited, the grit level of the Claystone kaolin resource is
very low, with an excellent 94% kaolite yield from excavated ore. The
fluvial resource is an old river system and as expected contains grit
of 40-60% which is quite typical by world standards.
A degritting unit was originally planned to be installed after the
main plant had become successfully operational, and thus extending
the product range to fluvial feed products. This unit is currently
being readied for shipment from Cairns. There was no operational
reason to install it earlier and it is efficient from a cash usage
perspective to follow this plan.
4. THE PROCESSING PLANT
We believe it is appropriate to put on public record, (per opinion of
internal and external engineers), that contrary to rumours,
Australian Kaolin Limited successfully designed and constructed an
excellent kaolin processing plant, very appropriate to the
characterization of the ore feed. All advice is that the plant is
technically the most advanced and the most labour efficient kaolin
processing plant of its type worldwide.
Due to AKL's financial problems and lack of operating expertise,
numerous plant breakdowns occurred in the original commissioning
stage. With the assistance of specialist experts Minerals Corporation
has systematically stripped, checked, recalibrated and where
appropriate, modified / repaired equipment throughout the plants.
Since completion in April 2002, both the wet plant and the dry plant
successfully produced kaolin products as originally envisaged. The
main plant products are identical to those predicted by pilot plant
testing in 2000/ 2001.
5. PLANT COSTS
Independent expert reviews in 2000 concurred that the Skardon River
Project should be reasonably assessed as an A$150 million project.
Monies spent by the previous owners, plus ourselves, will total very
close to this figure.
6. KAOLIN MARKETS
The high grade kaolin markets approximate 10,000,000 tpa. About 50%
of kaolin production is consumed by the paper industry, Skardon River
production at full capacity is 150,000 tpa. Our target customer
segments are initially paint, ceramics, plastics and rubber markets,
with paper to follow at a later date. Our marketing rationale is that
the performance attributes of products from the ore body specifically
suit these higher value specialty segments. Also Asia has major
industries in these segments, which are growing strongly. Market
reaction todate from these target customers has been consistently
very favorable and the Company is now focused on its market
development programme.
7. FINANCIAL BREAK EVEN POINT
Depending on product mix, our cash flow break even is at about 30,000
tpa, representing about 20% of plant capacity. We acknowledge this is
an unusually good position but represents the extremely low cost
price to the Company and strong kaolin price increases over the last
two years.
C V Alexander
CHAIRMAN
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