Broken Hill Prospecting (NYSE:BPL) has delivered a bullish scoping study for its Copi North HMS deposit in western New South Wales that would be profitable even at current low metal prices from production of Heavy Mineral Sand concentrates.
The study undertaken by Mineral Technologies Downer, evaluated the economics of mining, processing and sales of ilmenite, rutile, zircon, leucoxene and ilmenite concentrates.
The Copi North HMS project is located in the Murray Basin, home to one of the world's major sources of heavy mineral minerals.
The current defined portion of the Copi North strandline deposit extends for 12 kilometres and has a resource totalling 11.6 million tonnes grading 6.9% THM.
Operating costs would be low due to a low strip ratio and the use of innovative mining techniques to reduce costs.
The CAPEX estimate of $22 million is in line with expectations with a short payback period of 30 months based on producing 1.4 million tonnes per annum throughput with an initial 5 year mine life to generate operating cash $45.2 million on $163.6 million of revenue.
Mining an average grade of 9% HMS, innovative mining methods and use of a small mobile plant holds the key to the robust project economics for Copi North.
Mine life is likely to expand perhaps to 8-10 years as drilling will re-commence at Copi North next month aimed at expanding the resource base and extend mine life.
The quest to expand mine life is significant as each year of additional potential production adds approximately $12 million to the undiscounted net cash flow.
JV partner Relentless Resources Limited is funding Scoping and Feasibility studies and can earn up to 50%.
Modular, transportable plant
The small, moveable nature of the processing plant is also likely to be used not only on the shallow and high-grade Copi North mineralisation but could also be relocated to process additional resources extending from Copi North (Sunrise) or from other HMS deposits such as Magic, Copi South, or at any of the other HMS deposits which occur within the Broken Hill Prospecting tenements.
BPH's vision was always to capitalise on shallow high-grade HMS deposits which have historically been regarded as too small for traditional stand-alone development.
This study confirms our belief of the standalone attractiveness of Copi North and its commercialisation potential.
This has now been proven with strong project economics. That it would be profitable at current metal prices highlights the resource quality and the innovative approach to mining and processing to reduce OPEX and CAPEX costs.
Based on this, the probability the project will get developed is higher, even at current metal prices.
Step-out shallow air-core drilling preparation is underway to explore the western extension to the Copi North deposit.
The deposit is not fully explored with resource remaining open to the SE and NW. It may extend beyond the portion which has been drill tested.
With $12 million added to annual cash flow for each additional year of mine life, the drilling results will be keenly observed.
Drilling will commence in a few days and is expected to be completed by mid-March 2016.
In addition, a relatively small 10% increase in HM prices would add a tidy $15.7 million extra to project cash flow.
Commencement of a Pre-Feasibility Study is likely to follow completion of the drilling and take just 12 weeks to complete. However, Copi North is just the first cab off the rank.
Conceptually, after mining of Copi North resources, BPH could relocate the processing plant to any one of a number of high-grade HMS deposits like Magic and Copi South providing a segue to sequential cash flow generation. Significantly, BPH believes there could be as many as 20 similar projects to Copi North on its ground.
With JV partner RRL funding feasibility studies, releases BPH cash to continue to prove up additional resources.
BPH is very firmly on the road to become a heavy minerals developer despite challenging commodity prices.
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