Haranga Resources - Metallurgical results confirm the ability to produce a premium product with drilling recommenced at Selenge
July 2 (Ocean Equities) -- Favourable metallurgy the key to unlocking the resource, and near term cash flow, potential of Selenge
Haranga Resources Ltd ('Haranga' or 'the Company') (ASX:HAR) has announced the results of initial detailed metallurgical testing of its flagship Selenge project (80% interest). Davis Tube Recovery ('DTR') analysis of every single metre of mineralised core drilled confirmed the expectation that the three drill tested targets to date at Selenge have the ability to each produce a premium magnetite concentratewith an average grade of +65% Fe, with favourable impurities (ex sulphur at the Bayantsogt deposit – discussed below) at a coarse grind size and with scope for further optimisation (initial analysis undertaken at 75μm in order to generate a conservative and consistent baseline study) and for higher grade mineralised zones to be treated by dry magnetic separation.
The favourable met analysis will be a key focus area due to the relatively low grade of the maiden resource (with a higher cutoff grade significantly reducing tonnage) and in our view is the key to unlocking the resource scale upside, and near term cash flow potential, of Selenge. These results will be fed into a scoping study to be announced in the next month that we expect will support a low opex, relatively low capex beneficiation process to produce a lump and/or concentrate product.
Current mining operations at the neighbouring Eruu Gol mine (Mongolia's largest iron ore mine) have proven magnetite skarn deposits such as Bayantsogt and Dund Bulag at Selenge are amenable to low strip ratio mining and simple beneficiation, generating extremely attractive margins given the inherent transport cost advantage to northern China – indeed the largest individual cost component remains freight costs (not mining or processing).
. . . with an aggressive drilling programme commenced and expected to support a 4-5Mtpa operation
The primary task for Haranga is to now quickly build its resource inventory, currently 32.8Mt @ 24.4% Fe at Bayantsogt (following 10,308 metres completed last year) with an exploration target of 120-250Mt for its Dund Bulag prospect, with the Company's planned 32,000 metre drilling programme now commenced. We expect this programme to last ~6 months and support a total resource in the order of 250-300Mt and an operation of +4-5Mtpa (on par with Eruu Gol).
Selenge is expected to produce a premium product
While DTR results indicate that sulphur at Bayantsogt is relatively high at 1%, such levels currently only attract a ~4.75% discount to the spot price in the northern Chinese market. We expect the likely development scenario of multiple sources of ore (ie mining from the Bayantsogt, Dund Bulag and/or Huiten Gol deposit/prospects) feeding a central plant at Selenge will result in blending to achieve optimal product characteristics (premium Fe levels and favourable impurities) and mining/processing costs.
Well funded and following a proven value creation roadmap
The Company remains comfortably funded (A$17.4m in cash at Mar'12), with an EV of only A$44m and the Lippo Group (a major Asian conglomerate with +A$50b of assets under management) has recently gained board representation (the Company's largest shareholder with a 15.3% interest). The business model Haranga is employing is very similar to its big brother coal company, Hunnu Coal(the target of a successful A$477m cash offer by Banpu Minerals) albeit ~12-18 months behind in terms of exploration/development of its flagship asset. In our view, the upside from an equity investment in Haranga is de-risked by its new big brother cornerstone financial investor (the Lippo Group) and the neighboring Eruu Gol mine, which provides proof of concept, a value creation roadmap and potential for corporate synergies. CIC invested US$700m to take a 35% stake in Eruu Gol in Oct'09 (implied US$2b valuation) at which time it was still a development project with a ~300Mt resource. Other near-term de-risking milestones for Haranga are expected to be a scoping study (due in a month), visibility for the Company's rail solution and submission of a mining right application (the later two expected by year end).
Haranga Resources Ltd ('Haranga' or 'the Company') (ASX:HAR) has announced the results of initial detailed metallurgical testing of its flagship Selenge project (80% interest). Davis Tube Recovery ('DTR') analysis of every single metre of mineralised core drilled confirmed the expectation that the three drill tested targets to date at Selenge have the ability to each produce a premium magnetite concentratewith an average grade of +65% Fe, with favourable impurities (ex sulphur at the Bayantsogt deposit – discussed below) at a coarse grind size and with scope for further optimisation (initial analysis undertaken at 75μm in order to generate a conservative and consistent baseline study) and for higher grade mineralised zones to be treated by dry magnetic separation.
The favourable met analysis will be a key focus area due to the relatively low grade of the maiden resource (with a higher cutoff grade significantly reducing tonnage) and in our view is the key to unlocking the resource scale upside, and near term cash flow potential, of Selenge. These results will be fed into a scoping study to be announced in the next month that we expect will support a low opex, relatively low capex beneficiation process to produce a lump and/or concentrate product.
Current mining operations at the neighbouring Eruu Gol mine (Mongolia's largest iron ore mine) have proven magnetite skarn deposits such as Bayantsogt and Dund Bulag at Selenge are amenable to low strip ratio mining and simple beneficiation, generating extremely attractive margins given the inherent transport cost advantage to northern China – indeed the largest individual cost component remains freight costs (not mining or processing).
. . . with an aggressive drilling programme commenced and expected to support a 4-5Mtpa operation
The primary task for Haranga is to now quickly build its resource inventory, currently 32.8Mt @ 24.4% Fe at Bayantsogt (following 10,308 metres completed last year) with an exploration target of 120-250Mt for its Dund Bulag prospect, with the Company's planned 32,000 metre drilling programme now commenced. We expect this programme to last ~6 months and support a total resource in the order of 250-300Mt and an operation of +4-5Mtpa (on par with Eruu Gol).
Selenge is expected to produce a premium product
While DTR results indicate that sulphur at Bayantsogt is relatively high at 1%, such levels currently only attract a ~4.75% discount to the spot price in the northern Chinese market. We expect the likely development scenario of multiple sources of ore (ie mining from the Bayantsogt, Dund Bulag and/or Huiten Gol deposit/prospects) feeding a central plant at Selenge will result in blending to achieve optimal product characteristics (premium Fe levels and favourable impurities) and mining/processing costs.
Well funded and following a proven value creation roadmap
The Company remains comfortably funded (A$17.4m in cash at Mar'12), with an EV of only A$44m and the Lippo Group (a major Asian conglomerate with +A$50b of assets under management) has recently gained board representation (the Company's largest shareholder with a 15.3% interest). The business model Haranga is employing is very similar to its big brother coal company, Hunnu Coal(the target of a successful A$477m cash offer by Banpu Minerals) albeit ~12-18 months behind in terms of exploration/development of its flagship asset. In our view, the upside from an equity investment in Haranga is de-risked by its new big brother cornerstone financial investor (the Lippo Group) and the neighboring Eruu Gol mine, which provides proof of concept, a value creation roadmap and potential for corporate synergies. CIC invested US$700m to take a 35% stake in Eruu Gol in Oct'09 (implied US$2b valuation) at which time it was still a development project with a ~300Mt resource. Other near-term de-risking milestones for Haranga are expected to be a scoping study (due in a month), visibility for the Company's rail solution and submission of a mining right application (the later two expected by year end).
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