Mundo Minerals
Limited (ASX: MUN)
ASX RELEASE
8
SEPTEMBER 2008
Engenho Production
Update, Funding Facility and Project Resource Development
KEY POINTS
�
Short-term production schedules at Engenho revised following
reinterpretation of a small portion of the upper open pit wall resource
currently being mined.
�
Full production of 34,000oz pa now expected by end of 2008.
�
Integrity of main Engenho ore body reinforced, with underground
stoping to commence in November 2008.
�
A$4 million funding arranged to provide short term cash flow buffer
and facilitate ongoing exploration plus working capital.
�
Exploration Targets established for new Crista and Olhos anomalies at
Engenho, and for Jaqueira and Torrecillas Projects.
�
Current review of Mundo Minerals' assets underpins potential to
achieve targeted production of +200,000 oz pa within five years.
Mundo Minerals
Limited (ASX: MUN) today announced a revised short-term production
schedule for its 100%-owned Engenho Gold Mine in Brazil following a
review of the remnant resource currently being mined within the existing open
pit wall.
A previously
interpreted high-grade zone within the upper portion of the Bola ore body in
the open pit wall has been downgraded after development access was established.
This has resulted in a small reduction of 8,000
ounces from the previously announced 283,000
ounce resource, most of which lies underground beneath the
open pit that was mined by the previous owner of the Engenho Project.
While not
significant in the broader resource or the overall Engenho mine plan, this
reduction in ounces affects short-term production from the area currently being
mined. This will result in a lower than anticipated production from Engenho
until November 2008, when full-scale underground stoping is scheduled to
commence from the main Engenho underground ore body.
As a result,
the ramp-up to full annualised production of 34,000
ounces is now expected to be completed by the end of 2008.
Production for September and October is expected to be approximately 2,000
ounces and for November 2,400
ounces - compared with the average expected production of
approximately 2,800
ounces per month.
The overall
performance of the Engenho operation since commissioning has been excellent,
with metallurgical recoveries continuing to exceed 95% (averaging 95.3% since
production has commenced) and mine development including ground conditions
continuing to be excellent.
The major
focus of mine development is now on the ore bodies immediately below the open
pit. The ore developed is reconciling well with the previous ore resource model
from a structural, grade and integrity perspective. Two underground levels have
been developed providing access to the major ore sources and a third is
expected to be completed by mid-November 2008, allowing access to sufficient
stoping ore to support production at expected levels of around 20,000 tonnes
per month from the mine (equivalent to full annualised production of 34,000
ounces).
The ore within
the open pit wall was mined as an interim measure while the underground
development required to access the main ore body was completed. It is not
practical to fast track the development from the decline as this would affect
the longer term integrity of access to the stopes, which must be developed in
sequence.
In response to
this change to the short-term production schedule, the Company has taken
immediate steps to ensure that its cash flow position and financial integrity
is maintained through provision of a A$4 million debenture facility, to be
provided by the Company's major shareholder, AngloPacific Group.
While
disappointing from a timing perspective - given that the reinterpretation
affects accessible ore during the formative stages of mine production and,
therefore, initial cash flow - some adjustment to production schedules is not
uncommon in the start-up phase of gold mines. Understanding of the ore body
generally improves as it is progressively exposed and some fluctuation in
actual reconciliation against the original resource model is part of the normal
business process with gold operations.
From development
currently being undertaken within the main ore sources directly under the open
pit, the integrity of the ore body has been confirmed and it is not expected
that any significant reduction in resource will occur.
A$4M
Debenture Facility
Mundo Minerals
has secured a A$4 million convertible debenture facility from its major
shareholder, AngloPacific Group, to provide interim working capital for the
period during which production has been reduced. This will fund any working
capital shortfall, some exploration activities as well as providing an excess
working capital reserve for the company.
AngloPacific
Group has agreed to provide the facility subject to the following conditions:
�
Mundo Minerals has agreed to grant a net smelter royalty from ore
treated through the Engenho treatment plant of 2.5% of revenue from gold
derived from this treatment;
�
repayment of this facility is to be through payment of the royalty with
the loan principle to be reduced by the royalty payments;
�
a coupon rate of base plus 2.0% is payable on the reducing outstanding
principle each year after the royalties have been paid.
�
once the principle has been repaid, the royalty will be payable on gold
produced from the treatment facility;
�
security is to be provided by a charge over the treatment plant;
�
AngloPacific Group will be granted a right to convert any outstanding
principle to shares at 35 cents per share at the discretion of AngloPacific
Group;
�
if the principle is converted to shares, the royalty arrangement ceases;
�
the Convertible will be subject to due diligence being conducted by
AngloPacific Group, which will primarily consist of a site visit by
AngloPacific's Chief Operating Officer; and
�
the convertible arrangement will be subject to shareholder approval
where appropriate.
Updated
Exploration Targets
Following a
company-wide review of its resource development activities completed recently,
Mundo Minerals has enhanced its strong pipeline of Exploration Targets and
emerging production opportunities across its portfolio.
The Directors
anticipate that the conversion of these Exploration Targets into JORC Code
compliant resources will result in substantial value uplift for the Company
moving forward.
In addition to
the review of the Engenho ore body, including the Bola ore zone, additional
detailed assessments have been undertaken of the recently announced Crista and
Olhos anomalies, located immediately north of the Engenho Mine, and of the
Company's other advanced gold projects, Torrecillas in Peru and Jaqueira in
Brazil.
In accordance
with Clause 18 of the JORC Code, it is important to note that no JORC Mineral
Resources or Ore Reserves have been established on these tenements and any
current assessment remains subject to ongoing exploration work and drilling.
The current interpretation remains preliminary and is based on surface
indicators, assays from underground channel samples, geological modelling,
historical production records (in the case of Jaqueira and Torrecillas) and an
assessment of the strike and width assessed from surface expressions.
Nonetheless,
the Company's geologists have been able to establish conceptual Exploration
Targets* for both the newly identified Crista and Olhos anomalies at Engenho,
and for the Jaqueira and Torrecillas Projects, as set out below:
Exploration Target
|
Tonnage Range
|
Grade Range
(g/t Au)
|
Prospective Ounces\'000
|
Engenho
|
|
|
|
Engenho - to 270m
|
1.9-2.4M tonnes
|
4-5
|
244-385oz
|
Engenho - 270m to 500m
|
1.3-1.7M tonnes
|
4-5
|
167-273oz
|
Crista / Olhos
|
2.0-2.6M tonnes
|
5-6.5
|
321-543oz
|
Total - Engenho
|
|
|
732-1,201oz
|
|
|
|
|
Jaqueira
|
|
|
|
Jaqueira Tenement
|
1.2-1.5M tonnes
|
8-10
|
308-482oz
|
Other Tenements
|
0.8-1.0M tonnes
|
8-10
|
205-321oz
|
Total - Jaqueira
|
|
|
513-803oz
|
|
|
|
|
Torrecillas
|
|
|
|
Torrecillas Vein
|
270-300k tonnes
|
18-20
|
156-192oz
|
Ady/Oly Vein
|
0.9-1.0M tonnes
|
18-20
|
520-643oz
|
5 de Novembre Vein
|
700k-900k tonnes
|
12-15
|
270-434oz
|
Total - Torrecillas
|
|
|
946-1,269oz
|
|
|
|
|
TOTAL - Exploration Targets
|
|
|
2,191-3,273oz
|
Projects associated with the Tocantins
Joint Venture remain at a stage where it is inappropriate to establish an
exploration target. While these are highly prospective, exploration work is not
yet at a stage where appropriate estimates can be attributed to specific
targets and the Tocantins Project has therefore
been excluded from this table.
* Note: It is common practice for a company to comment
on and discuss its exploration in terms of target size and type. The
information above relating to the exploration target should not be
misunderstood or misconstrued as an estimate of Mineral Resources or Ore
Reserves. Hence the terms Resource(s) or Reserve(s) have not been used in this
context. The potential quantity and grade is conceptual in nature, since there
has been insufficient exploration to define a Mineral Resource. It is uncertain
if further exploration will result in the determination of a Mineral Resource.
Based on this
interpretation and subject to future exploration, it is anticipated that the
additional potential resources at Crista and Olhos, together with other
potential additional resources including the previously announced Mazoca area,
have the potential to support a future increase in production at Engenho.
The
development of these Exploration Targets, combined with a recent assessment of
the future production potential of the projects within its portfolio, supports
the Company's medium term targeted potential production profile of
approximately 200,000 ounces per annum.
This
assessment is based on current interpretations from the assets and the current
status of the projects. These are not based on JORC resources and further
exploration is required to confirm the resources before production profiles can
be based on JORC resource profiles.
Current
schedules anticipate these projects being developed within the next five years,
with new projects being brought into production on a regular basis.
Summary
Commenting on
the announcement, Mundo Minerals' CEO, Mr John Langford, said: "The
short-term revision to our production schedules with the Bola ore body is
frustrating, particularly as all of our assets, including Engenho, are
progressing extremely well. Underground development, mining and processing are
all on track and, importantly, we have every confidence in the integrity of the
main Engenho ore body and the overall robustness of the mine.
"Production
will be affected in the short term so we have put in place funding to cover all
of our operating expenses and to maintain exploration and development
activities at Torrecillas, Tocantins and
Jaqueira," he continued.
"Our view
is that it is important to maintain our momentum in this respect to ensure that
shareholder value is not compromised," Mr Langford said. "All of our
assets are showing great promise, and we expect to progressively convert these
Exploration Targets to JORC Code compliant resources over the next 12-18
months, providing a very attractive pipeline of new production opportunities
for the Company."
John
Langford
Chief
Executive Officer
Competent Person's Statement
The information in this report that relates to
Exploration Results and Mineral Resources is based on information compiled by
Mr Jean-Marc Lopez who is a Member of the Australasian Institute of Mining and
Metallurgy. Mr Lopez is employed by Mundo Minerals Limited and is the Company
Exploration Manager. Mr Lopez has sufficient experience which is relevant to
the style of mineralisation and the type of deposits under consideration and to
the activity which he is undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the "Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves. Mr Lopez consents to
the inclusion in the report of the matters based on his information in the form
and context in which it appears.
JORC Statement and Exploration Targets
It is common practice for a company to comment on and
discuss its exploration in terms of target size and type. The information
above relating to the exploration target should not be misunderstood or
misconstrued as an estimate of Mineral Resources or Ore
Reserves. Hence the terms Resource(s) or Reserve(s) have not been used in this
context. The potential quantity and grade is conceptual in nature, since there
has been insufficient exploration to define a Mineral Resource. It is uncertain
if further exploration will result in the determination of a Mineral Resource.
Forward-Looking Statements
This release may include forward-looking statements.
These forward-looking statements are based on management's expectations and
beliefs concerning future events. Forward-looking statements are necessarily
subject to risks, uncertainties and other factors, many of which are outside
the control Mundo Minerals Limited, which could cause actual results to differ
materially from such statements. Mundo Minerals Limited makes no undertaking to
subsequently update or revise the forward-looking statements made in this
release to reflect events or circumstances after the date of this release.
Background Information
Mundo Minerals
Limited is an Australian-domiciled international gold company focused on the
exploration and development of a portfolio of advanced, high-quality gold
assets in South America.
Mundo is aiming to
commence initial production at its flagship asset, the Engenho Gold Project
in Brazil, by April 2008,
laying the foundations for its growth strategy as a mid-tier
Australian-domiciled producer focused on small-to-medium sized high-grade ore
bodies in South America.
The A$13 million
Engenho Project, which is located in the State of Minas Gerais in Brazil, was
previously operated by AngloGold Ashanti Limited which closed it in 2004 after
treating some 171,257 tonnes of ore from an open pit through a conventional
Carbon-in-Pulp (CIP) treatment facility.
The Engenho Project
is forecast to produce at an initial annualised rate of 34,000 ounces at a
forecast cash operating cost of A$325/ounce. This will generate forecast
earnings before interest, tax, depreciation and amortisation (EBITDA) of A$17
million per annum, based on a US750/ounce gold price.
Mundo's other
assets in South America include the 100%-owned Torrecillas Gold Project
in Peru and the Tocantins
Gold Project in Brazil.
These projects have the potential to yield multiple resources to underpin the
Company's long-term growth.
The Torrecillas Project
comprises some 9,000ha of tenements with a history of high-grade gold
production in south-eastern Peru, a region which hosts a number of
small-to-medium sized gold mines, including the Area, Capitana, Arirahua,
Alcapay and Laytaruma operations - each of which have a production range of
25,000 - 80,000oz per annum. An exploration decline is currently being
developed to assess the high-grade, narrow vein gold mineralization at
Torrecillas.
The Tocantins
Project is a joint venture between Mundo (51% interest) and Gamaleira
Prospeccao E Geologia Ltda (a Brazilian joint venture between AngloGold Ashanti
and IAMGOLD Corporation) (49%). Mundo can increase this equity to 80% by taking
any gold resource to a bankable feasibility study. The Tocantins
tenements are located in a highly prospective region which includes three
greenstone belts with the potential to contain multiple mid-size gold deposits.
Exploration to date
has identified significant zones of gold mineralization at Concei��o, within
the Tocantins Joint Venture. Mundo
Minerals has also secured a strategic new gold exploration project at Nova
Prata as part of the Tocantins Joint Venture, and is assessing an advanced gold
production opportunity at the Jaqueira Project in Bahia
State, Brazil.
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