Here it is as expected; Zinc is currently trading just above 20 year lows at around US$800 a tonne. Production costs at Mt Garnet will range from US$300 - US$600 per tonne, commencing at the lower end.
Document date: Thu 02 May 2002 Published: Thu 02 May 2002 14:01:52 Document No: 215636 Document part: A Market Flag: Y Classification: Results of Meeting , Progress Report - Other KAGARA ZINC LIMITED 2002-05-02 ASX-SIGNAL-G
HOMEX - Perth
+++++++++++++++++++++++++ MT GARNET CONSTRUCTION TO COMMENCE 3RD WEEK OF MAY
Kagara Zinc Limited (ASX: KZL) will commence construction of its Mt Garnet Zinc Project in Queensland in just over two weeks after today (Thursday) receiving shareholder approval for the $30 million equity and convertible note component of its $54 million financing package.
The Perth-based Company also announced the start of a $2 million exploration program for the 2002 field season. This program, which kicks off in mid-May, is designed to increase the reserve/resource base of the Mt Garnet zinc complex in order to support a planned expansion of production to 150,000 tonnes per annum of zinc concentrates over the next 5 years.
Production from Mt Garnet is budgeted to commence at 80,000 tonnes per annum of zinc concentrates in February 2003.
At an Extraordinary General Meeting (EGM) in Perth today, Kagara shareholders approved a $15 million excluded offer placement of 50 million shares at 30 cents to Australian institutional and retail investors plus a $15 million Convertible Note issue. The equity and Convertible Note issue was managed by Southern Cross Equities.
The Convertible Note issue comprises 17.647 million unsecured 5-year convertible loan notes with a coupon rate of 9.75% per annum and a face value of 85 cents convertible into two ordinary shares per note. Shareholders also approved other changes to Kagara's capital structure in preparation for the Mt Garnet development including the cancellation of two existing convertible notes stemming from previous purchase agreements for components of the Mt Garnet Project.
The balance of the $54 million financing package has been raised through a $24 million senior debt facility negotiated with BankWest and the Bank of Scotland International (Aust) Ltd. Documentation for the debt facility is currently being finalised.
Kagara's Chairman, Mr Kim Robinson, said shareholder approval for the equity and convertible note issue represented the last regulatory hurdle before construction at Mt Garnet could commence.
"Our staff have been on site since the beginning of April undertaking co-ordination of site activities," Mr Robinson said. "Preliminary work will commence on May 6 and full-scale site activities in the third week of May."
"I would like to thank shareholders for their support as Kagara moves into the most significant period of growth and development in its recent history," he added. "The Company has achieved much in its relatively short history as a listed public company, moving from concept to project development at Mt Garnet in just over two years."
Construction of the Mt Garnet deposit will take 9 months, with a further 3-month ramp-up period to full production. This will position Kagara to achieve first zinc concentrate production in February 2003.
Pre-strip of waste at the Mt Garnet and Surveyor orebodies will commence while plant construction is underway, providing material for the construction of tailings and water sedimentation dams and associated plant infrastructure.
The Mt Garnet complex has a total reserve base currently of 3.6 million tonnes at 8.8% zinc, 0.6% copper, 1.7% lead, 48 g/t silver and 0.4 g/t gold in five major deposits Surveyor open pit and underground, Mt Garnet open pit and underground and Dry River South. However, there are substantial additional resources at King Vol (which was recently upgraded to 1.152 million tonnes at 18.5% zinc) and Balcooma.
The current production schedule envisages ore production commencing at the Mt Garnet open cut (until mid-2003) before transitioning sequentially to the Surveyor deposit (until 2006/2007), Mt Garnet open cut and underground and King Vol (until 2010) and Dry River South (until 2013).
The current mine life is 11 years with life-of-mine cash costs forecast at US25-30 cents/lb, positioning the project in the bottom quartile of international zinc producers. Cash costs during the first 15 months of production (Mt Garnet open cut) are forecast in the range of US15-20 cents/lb, enabling rapid capital payback.
Both the mine life and the annual production schedules are likely to be significantly increased on the strength of further exploration success. Mr Robinson said the objectives of the 2002 exploration program were to:
* bring the King Vol resource to feasibility status; * bring the recently announced high-grade component of the Dry River South resource (760,000 tonnes at 11.9% zinc, or 18% zinc equivalent) to reserve status; * quantify the size of the Balcooma high-grade zinc resource; * drill the Monte Video and Ivors exploration targets; * drill test the Muldiva polymetallic target; and * generate and drill test exploration targets at Balcooma and Walsh River.
The 2002 program will consist of 18,000 metres of diamond and RC drilling and will last until late October. It is expected that 1-2 drill rigs will be active from June to the end of the field season.
Released by: J Hope / N Read On behalf of: Mr K Robinson JAN HOPE & PARTNERS EXECUTIVE CHAIRMAN Telephone: (08) 9388-1474 Kagara Zinc Limited Telephone: (08) 9481-1211
