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Image Resources to commence Feasibility Study at North Perth Basin Heavy Mineral Project

Image Resources (ASX: IMA) has targeted 2014 for the commencement of production at the mostly 100%-owned North Perth Basin Heavy Mineral Project in Western Australia, based on the positive results of the August 2011 Scoping Study.

The company has committed to a Feasibility Study at the project which represents one of the largest undeveloped high-grade HM resources in Australia.

Highlights of the Scoping Study include a robust internal rate of return (NYSE:IRR) of 32.1%-42.9% and capital payback within the first 18-22 months of operation.

The project has a net present value (NYSE:NPV) of $59-$98 million for the first six resources located between Cooljarloo in the north to Gingin in the south.

Estimated capital costs are $83.8 million and a 3.6 million tonnes per annum (Mtpa) multi-pit operation is expected over an initial 12 year mine life.

Using A$0.90 and A$1.00 to the US dollar exchange rates, the study indicates the project can generate a net project cash flow of between $170 million and $259 million over a 12 year period.

George Sakalidis, Image’s managing director, said “the robust outcomes of the study are an extremely positive sign for the company given the conservative estimates of commodity pricing and metallurgical recoveries.”

“We have now achieved a critical mass for the resource base which, combined with solid grades and projected strong commodity prices, provides Image with the opportunity to become a substantial and highly profitable long term heavy mineral producer.”

Production over the life of the mine is expected to total about 1,393,000 tonnes of ilmenite (+50% SR grade), 85,000t of rutile, 193,000t of zircon and 93,000t of leucoxene using a conventional Wet Concentrator Plant and Mineral Separation Plant.

Preliminary non-optimised metallurgical test work performed on the Atlas deposit using conventional heavy mineral separation techniques yielded recoveries to product of 82.7% for ilmenite, 71.9% for rutile, 70.7% for zircon and 43.8% for leucoxene.

Similar recoveries have been applied to the remaining deposits where testwork is yet to be carried out. The company anticipates further test work will significantly improve on the initial Atlas deposit test work recoveries.

Feasibility Study

The Feasibility Study work schedule includes infill drilling, Resource upgrades, recruitment of key personnel, metallurgical testwork, geotechnical drilling/testwork, ethnographic and environmental studies, detailed engineering design, detailed capital and operating cost estimates.

The infill drilling during the Feasibility Study will target areas classified as Inferred Resources to upgrade them to Indicated or Measured Resources.

This drilling and the high likelihood of identifying extensions to resources have the potential to positively impact project economics.

Significant exploration upside exists at the project and Image remains committed to a focussed exploration program to increase the project resource base.

The grant of the tenement covering an interpreted 3.5km extension of the high grade Atlas deposit is imminent and drilling of this extension is anticipated to start in the next quarter.

The established zircon-rich Boonanarring resource is interpreted to extend for a further 7.7km. Drilling of this extension is anticipated to significantly expand and upgrade this resource and allow for its inclusion in the mining schedule.

At least another 100 kilometres of magnetic targets remain to be drill tested on a number of prospective shoreline positions, particularly in the Gingin area.

This exploration program will target shallow high-grade deposits, similar to Atlas, which have the capacity to increase the project life and/or throughput and to improve project economics.