Kogi Iron (ASX: KFE) has highlighted the low strip ratios that will minimise future mining costs at its Agbaja Iron Ore Project in Nigeria after completing pit shell designs for the Stage 1 and Stage 2 mine areas under the Scoping Study.
Notably, the first three years of operation will enjoy an average strip ratio of 0.42 to 1 before it ramps up to a still attractive 20 year strip ratio of 0.72 to 1.
Another advantage granted by the design of the pit shells is that the company now has more than 20 years of ore feed scheduled, giving it a level of certainty going ahead.
Kogi has also identified a possible location for a processing plant in the northeast of the Resource Area between the two mining areas as part of its Scoping Study for a 5 million tonne per annum iron ore project at Agbaja.
Agbaja has a 488 million tonne at 42.7% iron Inferred Resource, which is high for African iron ore, and access to transport infrastructure including barging along the Niger River to the sea port.
The Resource covers just 20% of the prospective plateau area within EL12124 and considerable upside remains with an Exploration Target of between 1.8 billion tonnes and 3Bt at 32% to 48% iron.
"The two mining areas have an overall average strip ratio estimated at 0.72 to 1, which is an excellent result. Such a low forecast strip ratio will minimise mining costs for the first 20 years of operation and is proving to be a distinct advantage of this project," managing director Iggy Tan said.
"The average strip ratio for the first three years of operation is expected to be around a low 0.42 to 1. The next phase of the work is the estimation of mining costs using quotations that are currently being submitted by a number of leading mining contractors in response to requests for proposals.
"Overall, the Scoping Study is progressing well and is being completed at a high level of detail. The study is still on track to be completed by the end of Q1 2014."
The Scoping Study is expected to be completed by the end of first quarter 2014.
Global independent mining consulting group Coffey was contracted to undertake the mine designs and have identified, design the pits and developed material movement schedules for the Stage 1 and Stage 2 mining area.
The Stage 1 mining area is about 6 square kilometres and is located west of the proposed processing plant site.
This area is estimated to contain approximately 158 million tonnes of the 488Mt Inferred Resource.
Targeting the magnetic fraction of the mineral resource, the average grade of material identified for mining is estimated at about 46% iron, with a corresponding strip ratio of approximately 0.68 to 1.
As currently designed this area should provide processing plant feed for an initial 14 years.
Stage 2 covers about 2.2 square kilometres to the east of the proposed plant.
This area is estimated to contain about 63Mt of the Inferred Resource with the average grade identified for mining estimated at about 46%. Strip ratio is calculated at approximately 0.81 to 1.
As currently designed this area should provide feed for an additional 6 years, bringing the combined total plant feed from the two areas to 20 years.
The two mining areas were identified from the 686 holes of close spaced (200 metre by 100 metre) reverse circulation drilling and 41 PQ diamond drill holes completed between late 2011 and January 2013 within the Resource Area.
The areas were selected to minimise estimated strip ratio and maximise exposure to the thickest portions of the higher grade magnetic Oolite zones of mineralisation.
Agbaja Iron Ore Project Mineralisation
The Agbaja Iron Ore Project has an Inferred Resource of 488 million tonnes at 42.7% iron along with an Exploration Target of between 1.8 billion tonnes and 3Bt at 32% to 48% iron that offers potential for further growth.
It is a unique deposit with iron mineralisation hosted in Cretaceous channel iron deposit (NASDAQ:CID) on the Agbaja Plateau with drilling to date establishing that this is flat lying, relatively homogeneous and continuous within the mineralised channels.
The CID comprises iron-bearing nodules in an iron-rich matrix and has an average thickness of 12.5 metres. This is overlain by laterite with an average thickness of 6 metres.
Notably, the project geology is ideal for continuous surface mining.
Recently, magnetic susceptibility measurements from all 41 PQ diamond drill holes were incorporated into the resource model which has assisted in the identification of the proposed mining areas.
Primary crushing will be carried out by surface miners with secondary and tertiary crushing at the plant.
Beneficiation will be achieved using simple magnetic separation with common low intensity magnetics envisaged thanks to the relatively coarse particle size of about 250um.
This translates to lower capital and operating costs.
Agbaja benefits from established transport infrastructure.
Ore will be transported by slurry pipeline about 20 kilometres to the Banda Barge facility where it will be transported by 3,000 tonne river barges along the Niger River to a proposed transhipment facility at Port Warri for export.
Potential also exists for rail transport of ore as there is an established under-utilised railway to Port Warri that would require a 59 kilometre spur line to access though this is beyond the scope of the current Scoping Study.
The very low strip ratios established for the Stage 1 and Stage 2 mine areas at Kogi Iron's Agbaja Iron Ore Project, serves to minimise future mining costs, a real differentiator for the development of the project and for Kogi.
Besides lowering costs, the design also offers a 20 year mine schedule, giving the project a high level of mine life certainty.
Considerable scope also exists for the Resource to grow beyond its current 488Mt at 42.7% iron with an Exploration Target of between 1.8 billion tonnes and 3Bt at 32% to 48% iron in the prospective plateau area.
Processing further highlights the low cost of the project with just simple magnetic separation required to beneficiate the ore.
Helping things along, the Nigerian government is also known to have given Agbaja project a strong endorsement.
There is much to look forward to in terms of catalysts for valuation upside as the company progresses its Scoping Study, which is scheduled for completed in the first quarter of 2014. Kogi is methodically ticking the boxes at Agbaja.
Catalysts include the Scoping Study along with further exploration to both upgrade and extend the Resource. With this in mind the current market cap. of circa $17 million is very undemanding.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.