11 December 2008
Bass Metals Australia is announced today that it has signed a binding agreement to purchase from Intec Ltd the Hellyer processing plant, associated infrastructure and the Hellyer Mining lease for $4.0 million to be paid on settlement. Bass Metals will also pay Intec a Processing Royalty of $2.50/tonne processed, capped at $5.0 million.
Settlement is conditional on a number of factors, including; consent from Intec’s secured creditor, Macquarie Bank Limited and the Tasmanian Minister of Mines, possibly respective shareholder approvals as well as completion of formal documentation.
The assets to be acquired include:
• The 1.5mtpa crushing, grinding, flotation concentrator plant currently on care and maintenance, including a 2MW SAG and Ball milling circuit and a sizable spares inventory. The Hellyer plant was last operational from November 2006 to September 2008 re-treating Hellyer tailings to produce a low grade bulk zinc-lead concentrate and hence is in overall good operational condition.
• All associated supporting infrastructure including grid power, storage sheds, spares inventory, warehouses, water treatment facilities and railway line access.
• A 300kW, electric cutter suction dredge and spares recently utilised to reclaim tailings for the retreatment project.
• The remaining Hellyer tailings resource. In April 2008 Intec reported a “pre-mining” resource comprising Hellyer tailings of 11 million tonnes at 2.8% zinc, 3.0 % lead, 88 g/t silver and 2.6 g/t gold. Intec’s Hellyer zinc concentrate project processed approximately 2 million tonnes of this material through the Hellyer Mill, and Bass Metals will acquire the residual tailings.
• The Hellyer Mine Lease (CML103/1987), which Bass Metals already holds a sublease over giving it the mineral rights. Purchase of the Mining Lease transfers the environmental management responsibility to Bass Metals and it will be required to post a $0.99 million security deposit with Mineral Resources Tasmania.
Rationale for the acquisition
Bass Metals’ 100% owned Hellyer Mine Project (HMP) comprises 2 distinct resources; Hellyer and Fossey which total 1.6 million tonnes of moderate to high grade massive sulphide base metal resources, located within 1 km of the Hellyer processing plant as illustrated in Figure 2 (refer ASX Report 30 September 2008). The mine development concept for the HMP is to mine a “base load” ore for processing at the Hellyer Mill at approximately 200 ktpa from Fossey and supplement it with another 50 to 100ktpa of ore from other sources such as the Hellyer or Que River Mineral Resources to the extent that grade and metallurgical characteristics allow.
The Hellyer Mill is especially suited to treat the very fine grained Hellyer style ore, and therefore can treat most other “simpler” polymetallic ore types such as occur at Fossey or Que River. The Hellyer Mill has always been an important aspect of Bass Metal’s development strategy. The value in the assets being acquired comprises the plant and “hard machinery” as well as the “operational footprint” which includes a permitted tails dam and supply corridors for power, water and vehicles. The prime motivating factors for this transaction are:
1. High Replacement Cost
The replacement cost of the Hellyer plant is estimated by Bass Metals and its technical experts to be well in excess of $100 million. Whilst currently the HMP may not need such a large facility, the replacement cost of a processing plant sized to the current conceptual rate of 200 to 300ktpa is approximately $40 to $50 million based on recently completed comparable projects.
2. Unique Flexibility
Mining and treatment of the Fossey mineralisation is the current base case scenario which could increase to include; high grade Hellyer and Que River ore, low grade material from both Hellyer and Que River, copper rich Que River ore and perhaps even the gold-silver-barite material. The Hellyer Mill is purpose built for the Hellyer-Que ore types and gives Bass Metals flexibility to maximise the exploitation of its resources, which a smaller plant or an extension of existing ore sales arrangements would not allow.
3. Higher Payability
Preliminary metallurgical results from 14 Fossey Zone drill samples indicates that by utilising the Hellyer Mill it should be possible to produce separate zinc, lead and copper-silver-gold concentrates. Sales of metal concentrates will generate higher returns and margins than the sale of whole ore.