METALS FINANCE CORP - ASX: MFC

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Description

Metals Finance Limited has been formed for the specific purpose of providing a unique combination of finance and technical skills for the development of small to medium scale metal recovery projects around the globe. The company's primary targets are those opportunities which, even during an upturn in world metal markets, may be too small, complex or unusual to easily attract the funding and high level technical input required to ensure their successful development.

Metals Finance does not assume the classical resource risks inherent to mineral exploration and mine development. It rather focuses its activities on metal-bearing resources and materials which have already been identified and fully outlined/measured. Metals Finance is not a mining or exploration company, rather it provides financial and production services to mining and metals companies.

PALABORA PROJECT, SOUTH AFRICA

The Company’s nickel extraction plant at Palabora in South Africa has been fully installed and commissioned and is now producing high grade nickel sulphate for sale in South Africa and overseas. The successful implementation of the Palabora project is a key milestone for Metals Finance, in that it:

1. Demonstrates the Company’s ability to implement against its business plan.
2. Will establish recurrent cash flow to Metals Finance.

The project is situated at a copper mine owned by Palabora Mining Company (PMC) in the north east of South Africa. It is South Africa's leading copper producer, and its majority shareholders are Rio Tinto plc and Anglo-American. PMC is South Africa’s only producer of refined copper, with an output capacity of 100,000 tonnes per annum of high quality copper cathode. The purpose of Metals Finances’ facility at the site is the recovery of nickel from waste streams from the copper refinery, as a high grade directly saleable product.

The project has been developed through the Company’s 50% owned company in South Africa, Metals Finance Africa Pty.Ltd. (MFA). MFA will receive all surplus cash flow from operations until capital expenditure, including interest at an agreed level, has been repaid. Thereafter the operating surplus will be divided 60% to MFA and 40% to PMC respectively. The agreed life of the operation is 5 years from the date that the plant reaches 80% of design capacity.

The successful implementation of the Palabora project has been a key milestone for Metals Finance, in that it demonstrates the ability of the Company to engineer, design and provide a complex hydrometallurgical facility of unique design.

The period since commissioning of the plant has seen severe limitation in nickel supply from the Palabora copper refinery and, although operating on a close to breakeven basis, has yet to achieve the expected financial result for the Company. A recent technical review of the nickel supply situation over the first 18 months of operation has highlighted a number of potential causes of the deficiency and the operators of the project, the Rio Tinto controlled Palabora Mining Company, had undertaken to address the issues raised.

However, more recently Metals Finance Africa has reached an agreement with the Palabora Mining Company, whereby the Palabora Mining Company purchased the Metals Finance Africa interest in the nickel sulphide plant for approximately A$5.4M. The sale enabled Metals Finance Limited to recover its initial investment in the plant and subsequent interest costs. The proceedings of the sale will provide additional capital for the development of the Metals Finance global business plan.

LUCKY BREAK PROJECT, AUSTRALIA

The Lucky Break project is being developed under a joint venture agreement between a subsidiary of the tenement owners, Metallica Minerals Limited, and the Company. Under the joint venture agreement, Metals Finance is responsible for funding, developing and managing the project, if it proceeds. A limited recourse loan will be created from Metals Finance to the Metallica subsidiary for 50% of the project costs. Upon implementation, 100% of cash flow surplus will be directed to replayment of the loan from Metals Finance until this loan is repaid. After this, the cash flow surplus will be shared 50:50. Under the original joint venture agreement, surplus after capital repayment was to be distributed 40% to Metals Finance and 60% to Metallica. This redistribution will have significant impact on the total projected revenue that Metals Finance may achieve from the project. This effect is a 25% increase in the sharing of total net revenue from the operation after capital repayment. In addition, the revised agreement removes an option previously held by Metallica to acquire Metals Finance interest in the project, one year after commissioning of a plant, for a price relative to the total capital expenditure on the project. The removal of this option again has the potential to significantly impact the potential return from the project for Metals Finance

Details of the resource defined within the Lucky Break mining leases have been previously provided to the market by both Metals Finance Limited and Metallica Minerals Limited. The Lucky Break project consists of two distinct nickel ore bodies (Dingo Dam and Circular Laterite). Both are surface outcroppings, with depth of the ore varying between 29m and 35m and being ideally suited to open pit mining methods.

The overall resource for the Lucky Break Project, at a 0.3% nickel cut-off, has been previously reported as 1,133,400 tonnes at average grade 0.75% nickel and 0.05% cobalt. The following table summarises the resource classification in accordance with the JORC code, derived from an independent resource evaluation of the Lucky Break project conducted by Computer Aided Geoscience Pty Ltd in 2006.

A recent mine planning study based on the original drill data has indicated that at 1.0% nickel cut-off the combined resource for the project will be 357,000 tonnes at 1.30% nickel and 0.09% cobalt. The following table provides a summary of the results of the recent study on the higher grade material.

CHAMBISHI COPPER-COBALT PROJECT, ZAMBIA

Metals Finance Africa Pty.Ltd. ( MFA ) has in place a joint venture agreement to examine the feasibility of establishing a treatment facility to recover cobalt and copper from a substantial stockpile of refinery waste at the Chambishi copper-cobalt mine in Zambia. The Chambishi Metals copper and cobalt refinery is located in the well known copper belt in Zambia. It is a primary producer of cathode copper and high grade cobalt cathode. The target material under this agreement is a substantial stockpile of refinery residue which contain high levels of residual copper and cobalt.

As part of the feasibility study process the Company completed a detailed drilling programme over the resource during the second half of 2009. The total area of the dump (approximately 30 ha) was drilled on surveyed 50 metre centres; with infill drilling being completed in two areas on 12.5 metre centres, for a total of 120 drill holes. The drilling was conducted by mechanical auger, with all holes being cased over their entire depth to prevent sample loss and/or dilution. Each hole was sampled at one metre intervals and samples submitted to the Alfred H Knight Analytical Laboratory in Kitwe for assay for copper and cobalt. For assay verification purposes, unidentified duplicates of 55 samples were submitted for comparative assay, and the laboratory carried out assay checks on every tenth sample submitted.

All of the material from each one metre drill hole interval was collected, weighed and dried to provide a determination of moisture content and dry bulk density of the tailings.

Detailed analysis of the results of this drilling programme has been carried out and Snowden Mining Consultants (Pty) Ltd were requested to provide independent supervision of the programme and an Independent Geologist Report on the results. The Snowden report has been based on the results of this drilling, and on supervisory visits to the site and the laboratory who conducted the assays. It has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral securities (The Valmin Code) and the Australasian code for Reporting of Exploration Results, Mineral Resources and Ores reserves (JORC).

It is Snowden's opinion that the target tailings dam has a Mineral Resource of approximately 1.6 million tonnes at 1.30% copper and 0.21% cobalt. The majority of the Mineral Resource can be classified as Measured (70%) with the balance regarded as Indicated (30%).

BARNES HILL NICKEL-LATERITE, TASMANIA

Metals Finance has an agreement with the Australian listed company, Proto Resources and Investments Limited (Proto), to participate in the development of the Barnes Hill nickel laterite deposit in Tasmania.

In accordance with reports issued to the Australian Stock Exchange by Proto and as disclosed in Metals Finance Prospectus dated 26 October 2007, the Barnes Hill project comprises a 12.1 million tonne Australasian Joint Ore Reserves Committee (“JORC”) compliant, indicated resource at 0.83% nickel and 0.07% cobalt, in three interconnected zones.

Mine For

nickel, cobalt, iron ore

Location of operation(s)

Queensland, Tasmania, South Africa, Namibia

Address

Unit 32, 28 Burnside Rd
YATALA, QLD, AUSTRALIA

Phone

(61 7) 3807 4166

Email

Website

http://www.metalsfinance.com/

Last Updated

7/3/2011