The Kun-Manie nickel copper sulphide project is located within the Amur Oblast of the Russian Far East. The “Detailed Exploration and Production Licence” is 700 km northeast of the capital city of Blagoveshchensk located on the Chinese border. The licence and additional key rights to the project consist of and includes the following:
- A Certificate of Discovery issued in 2009 which grants the Company the first right of refusal for development of the project. This has been issued by the State Committee on Reserves (GKZ).
- 20 year period production rights ending 1 July 2035. Production rights can be extended on the discovery of additional economic mineralisation. The Company is entitled to recover 100% of the nickel, copper, cobalt, platinum, palladium, gold and silver over the 36 square kilometre “Detailed Exploration and Production Licence” area. Should additional mineralisation be located outside the licence area, the boundaries can be expanded through the State Licensing Agency.
- Prior to acquisition of the “Detailed Exploration and Production Licence”, the Company held a 940 square kilometer “Exploration Licence”. The area located outside of the “Detailed Exploration and Production Licence” area has been returned to the Russian Federation. The Company maintains no rights to the ceded area and there are no obligations incumbent upon AMC.
- The dominant geological feature in the area is the Kun-Manie Massif, a metagabbro-anorthosite intrusive of Early Archean age. The area hosts a series of mafic and ultramafic flat lying to steeply dipping sills and dykes, some of which host sulphide nickel, copper, cobalt, platinum, palladium, gold and silver.
- Within the Kun-Manie Massif, a two kilometre wide and 20 kilometre long structure called the Kurumkon Trend hosts economic grades of sulphide nickel and copper within multiple websterite sills. The primary mineralisation consists of nickel-bearing pentlandite, pyrrhotite and copper-bearing chalcopyrite occurring in both disseminated and veinlet form.
- The “Detailed Exploration and Production Licence” is located along the axis of the highly prospective Kurumkon Trend where five deposits have been discovered and drilled to date.
To date, the following exploration work has been completed within the “Detailed Exploration and Production Licence” area:
- Airborne and ground based geophysics including Magnetic and Induced Polarisation surveys.
- Geological reconnaissance, mapping and surface grab sampling.
- Soil grid geochemical sampling programme.
- Trenching of websterite outcrops which host the nickel and copper mineralisation.
- Diamond core drilling for resource identification.
As at 31 December 2016, the comprehensive exploration programme has resulted in the identification of the following five deposits:
- Maly Kurumkon / Flangovy
- Ikenskoe / Sobolevsky
Substantial areas of exploration potential remain untested and require drilling.
Additional drilling for metallurgical sample collection and testing of potential additional targets not located within known deposits has been completed. For metallurgical sample collection (7.5 tonnes), a total of 4,652.7 metres of drilling have been completed. The total drill meterage within the “Detailed Exploration and Production Licence” is 58,084.3 metres.
Substantial areas of undefined resource expansion exist within the licence area and include:
- The potential to link at the deposits of Maly Kurumkon with the low grade Gorny mineralised area. The target length is approximately 1,500 metres.
- The largest single target is the area between the Ikenskoe / Sobolevsky and Kubuk. Covering a target length totaling 2,800 metres, surface exploration and ground based geophysics indicated the potential of the area to host mineralisation. Successful drilling could result in establishing that the Ikenskoe / Sobolevsky and Kubuk deposits are a single deposit having a length of four to five kilometres.
- Immediately to the east of Kubuk, a target of 700 metres is present and economic grade mineralisation has been identified in trenches.
10 February 2017, Runge, Pincock and Minarco (RPM) compiled a Mineral Resource Estimates (MRE) for four of the five deposits. Completed to Joint Ore Reserve Committee (JORC) standards (December 2012), the Total MRE based on a 0.4% nickel cutoff grade contains:
- 101.3 million tonnes of mineralisation.
- Average of 1.03% nickel equivalent grade (Ni, Cu, Co, Pl +Pd) based on 1 February 2017 metal pricing.
- 1,045,000 nickel equivalent tonnes.
- The average nickel grade is 0.76%, copper is 0.20%, cobalt is 0.015%, platinum is 0.17 g/t and palladium is 0.18 g/t. Additional minor amounts of gold and silver will also be recovered but have not been estimated.
- More than 80% of the resource is identified as Measured and Indicated and is therefore suitable for inclusion in the definition of Mining Ore Reserves (MOR).
- By sulphide nickel equivalent tonnage, the present MRE places Amur within the 15 largest publically listed nickel sulphide resource companies in the world.
- Substantial resource expansion remains to be tested.
|Contained Metal (t)|
Total resource distribution available at http://amurminerals.com/project-details/resources-and-reserves/
Numbers may not be precise due to rounding.
Reserves (Mining Potential)
The Company has determined:
- The existing resource at Kun-Manie is projected to support an annual ore production rate of 6.0 million tonnes per year for a period of 15 years.
- Production will include both open pit and the underground long hole retreat method. The near surface mineralisation will be mined by open pit and deeper continuous high grade mineralisation will be subject to underground extraction.
- Production is planned to be derived from four deposits.
|Maly Kurumkon / Flangovy||X||X||Complete||X|
|Ikenskoe / Sobolevsky||X||X||Limited||X|
In December 2016, the “Mining Potential” for the Maly Kurumkon / Flangovy deposit was defined by Runge, Pincock, Minarco.
- Maly Kurumkon is the largest of the four deposits and is planned as the start up deposit for production.
- Production is planned to begin with open pit mining and then transition to underground recovery of ore.
- Nearly 45 million tonnes of ore averaging 0.75% nickel and 0.19% copper are identified.
- This is a first stage evaluation of the potential and will be updated to reflect the substantial increase in the resource based on the 2016 resource drill programme which was not available to the determination of the Mining Potential.
Maly Kurumkon / Flangovy Mining Potential
H1 2016 Resource Model
(Excludes 2016 Exploration Upgrade)
|Total mineable potential reserves||44.5 M tonnes|
|Total tonnes of mineable nickel||332,172 tonnes|
|Average nickel grade / ore tonne||0.75%|
|Total tonnes of mineable copper||83,467 tonnes|
|Average copper grade / ore tonne||0.19%|
|Underground production||31.7 M tonnes|
|Open pit ore production||12.8 M tonnes|
|Open pit waste production||43.7 M tonnes|
The December 2016 Mining Potential of Maly Kurumkon / Flangovy is considered to be substantially understated:
- Australian based underground mining costs were used. These are projected to be substantially higher than will be experienced using lower Russian based labour, fuel and explosives costs. Use of Russian based costs will reduce the cutoff grade increasing both the mined ore tonnes and profit per tonne of “mined” ore.
- Metallurgical recoveries were based on conservative bench scale metallurgical test work and averaged 70.4% for nickel and 78.3% for copper. Metallurgical recoveries derived from a larger scale representative half tonne bulk sample indicated production based recoveries will be in the order of 80.6% for nickel and 83.8% for copper. Nearly 15% more nickel could be recovered resulting in an increase to the profit per tonne. Simultaneously, the mining cutoff grade could be reduced, increasing the tonnage available to mine as ore.
- By-Product metals of cobalt, platinum and palladium were excluded for the evaluation. Inclusion of the by-product metal could increase the profit per mined tonne of ore and lower the cutoff grade.
- The evaluation is based on the H1 2016 resource model having a total length of 2,100 metres. The 2016 drill programme substantially increased the Mineral Resource Estimate by extending the mineralisation an additional 900 metres and existing Inferred resource have fully been converted to Indicated resource allowing for use in the determination of a Mining Ore Reserve. At a 0.4% cutoff grade, the new resource has been expanded by 83% to a total of 473,000 tonnes of nickel and by 80% to 131,000 tonnes of copper).
Reserve determination to JORC standards is underway. Using RPM’s newly compiled resource models of 10 February 2017, Mining Ore Reserves using Measured and Indicated resources for Maly Kurumkon / Flangovy (an update to include the 2016 drill results), Vodorazdelny and Ikenskoe / Sobolevsky can be compiled. Kubuk will be reported as Mining Potential due to the high proportion of Inferred resource.
|Tonnes of Nickel Equivalent|
|Maly Kurumkon / Flangovy||0||602,500||36,200|
|Ikenskoe / Sobolevsky||94,600||54,700||53,900|
The following graphic presents the relative locations of the deposits within the production licence boundary, the potential ore haulage roads between the deposits and the mill as well as the currently selected plant site facility.
Metallurgical test work completed by Sibsvetmetniproyect, SGS Minerals and Gipronickel Institute confirms substantial portions of all metals will be recovered into a sulphide concentrate. Results indicate:
- A single simple sulphide concentrate can be generated using historically proven flotation methods. The concentrate can be can be successfully smelted.
- Based on whole core analysis, Sibsvetmetniproyect confirms nickel recoveries at Ikenskoe / Sobolevsky and Vodorazdelny in the order of 80% can be obtained at a nickel cutoff grade of 0.5%.
- Based on a representative half tonne sample averaging 0.71% nickel and 0.17% copper processed by Gipronickel Institute, the metal recoveries for the Maly Kurumkon / Flangovy ores are 80.6% for nickel, 83.8% for copper, 61.4% for cobalt, 59.4% for platinum, 82.3% for Palladium, 70.5% for silver and 63.7% for gold.
- The Kubuk ores contain a higher nickel silicate content (unrecoverable nickel). SGS Minerals grade recovery curve indicate recoveries of 68.6% for nickel (at 0.8% grade), 71.7% for copper (at 0.20% grade), 52.9% for cobalt (at 0.015% grade), 55.8% for platinum (at 0.17 g/t grade) and 65.9% for palladium (at 0.18 g/t).
Gipronickel Institute’s evaluation for the ores of Maly Kurumkon / Flangovy (representing up to seven years of potential production based on the Mining Potential) indicates the concentrate will contain an average of 8.6% nickel, 2.1% copper, 0.15% cobalt, 1.9 g/t palladium, 1.3 g/t platinum, 0.6 g/t gold and 7.8 g/t silver. From the annual six million tonnes of ore planned for processing, it is projected that a total of 394,000 tonnes of concentrate will be generated.
A large scale (7.5 tonne representative sample) production run of the Maly Kurumkon / Flangovy deposit is planned allowing for the final design of the planned flowsheet and mill design. Additional drill hole metallurgical samples are planned for collection to fully define the metallurgical responses of the ore for deposits that will likely be mined during later stages of the mine life.
Six million tonnes of ore per annum (18,000 tonnes per day) are planned for processing. Initially designed by Sibsvetmetniproyect, verified by SGS Minerals and modified by Gipronickel Institute, the plant design will allow for the crushing ore the ore, two stage grinding followed by classic sulphide flotation. Approximately 394,000 tonnes of concentrate per year is projected. Tailings will be placed in an impoundment area which has been determined to hold approximately 90 million tonnes of waste covering a 15 year mine life.
Ancillary Site Requirements
At the mine site, additional facilities will require the following:
- A total of 40 megawatts of power will be generated using diesel fueled generators, typical of remote Russian operations. A fuel tank farm with a 60 day inventory is planned for the power plant and all mobile equipment fleets including mining, concentrate transport and resupply of consumables for the operation.
- Maintenance facilities for the mine, plant, tailing impoundment and all other site activities.
- Housing, cafeteria’s and ablution facilities for approximately 1,000 site personnel.
- Administration and engineering offices.
- Concentrate transport from the mine to the Ulak rail station.
A 320 kilometre long access road will be designed and constructed to handle two-way traffic on a year round basis.
The concentrate generated at the mine will be truck transported to the Baikal Amur rail line (“BAM”) where supplies and fuel will be delivered by rail for backhaul to the mine.
There are two options available to the Company for treatment of the sulphide concentrate:
- Toll smelting of the concentrate by an external company where substantial payments and deductions are included, decreasing the profit per tonne to the Company. Often, an off take agreement is required as a part of a construction loan repayment guarantee. The concentrate will be loaded into rail cars at the Ulak rail station on the Baikal Amur rail line for shipment to a smelter.
- Constructing a furnace allowing for the generation of a Low Grade Matte for sale on the international market. Recoveries at the furnace are typically 97.5% of the metal. The furnace is likely be located at the Ulak rail station for processing. This location has been selected as coal and limestone will be needed to process the concentrate. This option represents the better of the two alternatives allowing for the Company to recovery a much greater value for the metal delivered into the Low Grade Matte. External smelting specialists have confirmed this represents a technically viable option to the Company.
- A staged approach would encompass a combination of toll smelting and construction of furnace where the furnace is phased into production whilst toll smelting is undertaken for a limited period.
Projected Capital Costs
The projected initial capital cost for the operational design is based on public information, which has been calculated by staff and sourced by external organisations. Presently, the initial capital expenditure for a fully Toll Smelt operation and the Owner Operated furnace facility ranges from approximately $US 550 million to $US 700 million. A summary of the initial capital requirements follow:
|Capital Cost Category||Toll Smelt Only||LGM Option*|
|Total Capital Expenditure||$561.7||$688.2|
|Infrastructure & Permanent Facilities|
|Total Fixed Asset||$467.4||$593.9|
Note: LGM Option does not require converter smelter or refinery.
Further detailed information on projected capital costs can be found in the RNS announcements “Operational Blueprint Defined for Kun-Manie” dated 29 June 2015 and “Access Road Update” dated 14 November 2016.
Project Support – Russian Initiatives
Being located in the Russian Far East, the Company has been identified as a project of interest. The Far East Development Agenda is intended to draw foreign investment for the completion of key projects such as Kun-Manie. The eligible areas include:
- Net Profits Tax reduction of 0% for five years, 10% for the following five years.
- Metals Royalties Taxes of 8% are reduced to 0% for the first two years of production and then increase by 2% every two years.
- Low interest loans are available for infrastructure related components of a project. This could include the 320 kilometre long road from the Ulak rail station to the proposed mine site and the tie in to the national power grid at Ulak where it is anticipated that a Company owned concentrate treatment facility may be located.
- The Far East and Baikal Development Fund and the Far East Investment and Export Agency are assisting the Company in the identification of project funding in China, Russia and India.