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ZYL Limited's Mbila Anthracite Resource Upgrade Has "Potential To Be Material"

ZYL Limited (ASX: ZYL) is just a month off delivering an updated anthracite Resource for its Mbila Project in South Africa which has the "potential to be material".

The near term anthracite producer has concluded a phase one in fill drilling program as well as working towards the completion of a Bankable Feasibility Study which could be completed in third quarter 2012.

Investors will be aware that anthracite offers end users significant cost savings in using anthracite rather than metallurgical coke as anthracite does not require a coke battery, saving them approximately US$140/tonne.

Mbila already hosts a 125 million tonne JORC Resource, 73% of which is in the higher confidence Measured and Indicated categories.

To add to this potential, infill drilling between the Mbila project's S-Block and the Msebe Mining Right Application area has identified a continuation of the coal seams between these two known deposits.

This discovery is anticipated to increase Mbila's Resource.

The Phase one 11-hole, 1,870 metre drilling program targeted the B3 seam of the Beaufort group. The first batch of results indicates a yield of 65 to 70% at 15% ash with an average seam thickness of 3.02 metres.

The second batch of results is imminent and the planning of phase two of the infill drilling programme will begin once all results are received.

Ian Benning, chief executive officer, commented on the upgrade potential: "We are seeking to clarify the exact quantum of the likely Mbila resource upgrade which has the potential to be material".

Meanwhile, the completion of structural and geotechnical drilling program have been completed providing improved definition of the geotechnical structures and increased confidence in the resource model.

The outcome of this is that it may allow for a more economical mine design.

Two structural definition drilling program consisting of 44 percussion drill holes totalling 2,999 metres were completed on the G and A Block during March.

The geotechnical drilling program at S Block was completed during April and comprised of 13 diamond drill holes totalling 1,409 metres.

This program was designed to investigate the possibility of mining the B1 seam, in addition to the B3 seam, of the Beaufort series.

If found to be a viable option this would allow for an increase in the run of mine tonnes available within the S Block.

The final results of the geotechnical test work will be integrated into the final mine design.

RSV Enco is conducting 3D modelling of the Mbila Resource and its structure, which is expected to be completed by the end of the month.

The program includes a review of historical data, with the new information to be included into the new Resource model.

The 3D model will provide more confidence in the interpretation of the geology and the Resource model which will allow for better accuracy in the mine design, and in turn will provide a better platform for mine planning and optimisation.

The Bankable Feasibility Study, which is now due for completion in the September quarter of 2012, is being reviewed to incorporate the results of the drilling programs and 3D modelling.

Importantly, first production is still on track for the June quarter of 2013.

"We are extremely pleased with the work being undertaken by RSV Enco and the detailed review and analysis of the resource model, together with the extension to the Prospecting permit," Benning said.

"In addition to Mbila's convenient location in relation to end users and rail infrastructure, the potential cost-saving benefits to end users has attracted EOIs some 400% in excess of Mbila's planned saleable production under the current BFS scope."

Road to anthracite production

ZYL is well placed to service increasing anthracite demand, with the estimated global shortfall expected to be around 21.7 million tonnes by 2015.

The company has strengthened its hand in becoming a leading anthracite coal producer, acquiring an additional 30% of its Mbila project and adding two more anthracite projects to its portfolio in South Africa.

A Feasibility Study completed earlier this year demonstrates the Mbila project is economically competitive with strong profit margins and a project internal rate of return of 41%.

Mbila has the potential to produce a forecast phase one production rate of 580,000 saleable tonnes annually, increasing to full production of 840,000 tonnes per annum run of mine in the June quarter 2014.

Significantly, ZYL has already received numerous non-binding expressions of interest (EOIs) for offtake in respect of production from both Mbila and Kangwane. The EOI offtake volumes now exceed the full saleable production of both Mbila and Kangwane.

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