Oriel Resources plc
TSX : ORL
AIM : ORI

Oriel Resources plc

June 06, 2006 02:00 ET

Oriel Resources plc-Expedited Development of Voskhod Chrome Project Continues on Schedule

LONDON, UNITED KINGDOM--(CCNMatthews - June 6, 2006) -

Voskhod Feasibility Study Confirms Sharply Increased Production and Dramatically Stronger Economics

Oriel Resources plc ('Oriel', or the 'Company') (TSX:ORL)(AIM:ORI) is delighted to announce the completion of the SRK Feasibility Study for its 100% owned Voskhod Chrome Project, Kazakhstan.

The results of the Feasibility Study confirm management's decision to fast-track development of the Voskhod Project and indicate significantly improved production output and economic metrics as compared to the Preliminary Assessment Study ('PAS') prepared by SRK Consulting (UK) Ltd ('SRK') in 2005 (see press release dated 8 September 2005).

SRK's Feasibility Study Highlights:

- Increased annual production will place Voskhod in top 3 global suppliers of high-grade chrome ore, a critical ingredient in the growing stainless steel market.

-- 80% increase in average annual saleable chrome ore to 900,000 tonnes.

-- Voskhod chrome ore is of very high grade; typically up to 48% Cr2O3 with up to 57% Cr2O3 grade concentrate anticipated to be readily produced.

-- Voskhod maintains a long mine life of 14 years, with potential to extend life to over 20 years.

- Increase in CIM and NI 43-101 compliant Indicated and Inferred mineral resources.

-- Indicated resource of 19.51 million tonnes at 48.47% Cr2O3, being a 9.5% increase of contained chrome content over the PAS.

-- Inferred resources of 1.57 million tonnes at 41.05% Cr2O3, being a six-fold increase of contained chrome content over the PAS.

- Capital expenditure estimated at US$131 million, including 10% contingency, VAT (recoverable) and import duties.



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(100% Equity) Pre-Tax Post-Tax
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NPV US$472 million US$320 million
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IRR 50% 41%
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--Endeavour Financial are advising on project finance options and is confident that the Voskhod Project will support a debt facility of more than US$100 million.

-- Life of mine operation cash flow estimated at US$1.2 billion with average annual cash flow of US$85 million.

- Extension to the Voskhod contract license area awarded, which includes the Karaagash deposit which has Russian C2 and P1 classified resources of some 7.8 million tonnes. These estimates have not yet been audited and do not comply with NI 43-101 standards.

- Off-take demands for Voskhod ore from both ferrochrome plants and metal traders in Russia, China and Western Europe have exceeded 1.7 million tonnes.

- Further development of on-site infrastructure ssuch as roads, rail and power supply allows for the security of independent, long-term production.

- Commencing Q2 2008, life of mine operating costs of US$20.80 per tonne of run of mine (ROM) ore.

- SRK used a conservative ore price of US$145 per tonne in the Feasibility Study financial model, whereas market expert, Heinz Pariser forecast a price between US$154-US$224 (average US$183) per tonne through to 2015.

Executive Chairman, Dr Sergey V Kurzin commented:

"Results from the SRK feasibility study are extremely encouraging with an almost 100% increase in the mine's output from our initial studies. Heinz Pariser's extremely positive market report shows growing ore demand especially in Asia which, in conjunction with our own advanced negotiations with potential off-takers, exceeded our initial expectations and this demand is significantly greater than Voskhod's production output. This has resulted in the Company decision to increase the output of saleable chrome ore product by 80%, therefore considerably enhancing the project's economics."

"We have made excellent progress in a short space of time and will have the mine in production in early 2008; only 3 years from acquisition. The development of the road, rail and power-supply infrastructure, whilst increasing the capital cost, will give us the security of independent and long-term production."

"Led by Endeavour Financial, we are in advanced negotiations with a number of leading international banks on debt financing options. Endeavour is confident that the project economics is sufficiently robust to support over US$100 million of debt which, in addition to over US$30 million of Oriel's cash reserves, provides the security the project financing requires."

Authors of the Feasibility Study

The Voskhod Feasibility Study was authored by lead consultants SRK, Dowding Reynard & Associates (International) (Pty) Ltd (DRA-I) and Mintek of South Africa.

Voskhod Chrome Project

Oriel commissioned SRK in October 2005 to prepare a feasibility study on Oriel's 100% owned Voskhod chrome project, Kazakhstan. SRK were assisted in the preparation of the study by DRA-I on process plant and infrastructure matters and Mintek, South Africa who performed all the beneficiation test-work on ore samples selected by SRK from the 2005 Oriel core drilling programme. The Voskhod study and the resource and reserve statements have been prepared by Dr Alwyn Annels and Mr Mike Beare of SRK, who are both competent persons in accordance with definitions set out in National Instrument 43-101.

Oriel acquired the Voskhod chrome project in February 2005 for the equivalent of US$15.0 million in cash and the allotment of 9,181,352 Oriel shares, at the time valuing Voskhod at US$25.0 million.

The Voskhod chrome project is located within the Khromtau District of the Aktobe Region of western Kazakhstan. A newly completed tarmac road links the town of Khromtau with Aktobe, the regional administration centre, 110 km to the west. The Voskhod deposit is itself 7km NNE of Khromtau and is surrounded by a group of existing and exploited mines.

The Voskhod deposit lies within a layered ultramafic complex, referred to as the Kempirsayskiy Massif, together with up to 80 other deposits discovered since 1936. This massif is 82km long in a NNE direction and covers an area of 920km2. The host rocks to the deposit have been subjected to hydrothermal alteration and now consist of serpentinites and serpentinised dunites.

The deposit consists of one large lens of massive to disseminated chromite with smaller fault controlled offsets on its eastern boundary. It is a "blind" deposit, lying at depths of 98m to 440m with a north-easterly dip of 28 degrees.

The results of a total of 14,921m of HQ diamond and some 57,960m pre Oriel ownership drilling have been incorporated into the resource estimation completed by SRK in May 2006.

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Indicated and Inferred NI 43-101 compliant mineral resources calculated on a 20% Cr2O3 cut off are summarised below;



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Resource Tonnes Cr2O3 % Fe2O3 % SiO2 % Estimation
Category (Million) Methodology
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Indicated 19.51 48.47 13.12 8.49 3D
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(a)Inferred 1.57 41.05 12.29 12.65 2D
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(a)Inferred Resources were only determined using 2D methodology


In addition, Oriel has recently been awarded an extension to the Voskhod contract licence area to include the Karaagash deposit which has Russian C2 and P1 classified resources of some 4.5 million tonnes and which has, assuming positive results of a confirmatory drilling program, the potential to provide additional resources for mining beyond a 20 year life.

Mine design

SRK has designed the mine based around a fully mechanised operation with an inclined 1,250m ramp access from the base of a box cut located to the south east of the orebody. The orebody will be stoped by a sub level caving method using a 20m level interval. Up hole drilling and subsequent blasting from the extraction levels will be followed by mucking with 5m3 scooptrams into 45 tonne capacity low profile haul trucks for transport to surface. Ventilation is provided by two shafts to the 220m level and heating of the air during winter months is provided by electrical heaters.

SRK has designed the mine operations utilising Earthworks Mine2-4D software which allows for all development driveage and ore production tonnages to be scheduled throughout the mine life. Estimated total lateral development for the life of mine is 36,000m. The Probable Reserve, based on the Indicated Resource, allowing for mining recovery losses of 10% and a dilution factor of 18% at zero grade is 18.3 million tonnes at 40.3% Cr2O3, giving a mine operational life of 14 years from this part of the deposit.

ROM production is planned at 1.3 million tonnes per annum with first chrome ore sales planned for Q2 2008.

Chrome recovery

Mintek carried out test work on core samples selected from four drill holes identified by SRK as being reasonably representative of the Voskhod deposit on the basis of preliminary studies. The tests included the crushing, screening, washability, characterisation and concentration of the chrome ore into products to generate the necessary data for the design of the process flow sheet for the commercial plant. The results showed that very high grade chrome ore of typically 48% Cr2O3 and a chrome concentrate of up to typically 57% Cr2O3 can be readily produced from Voskhod. The test work and process flow sheet information from Mintek was supplied to DRA-I to support the design and determination of the processing plant capital and operating costs.

The DRA-I plant design comprises a crusher and screen to reduce the 300mm ROM ore feed to less than 150mm, DMS (Dense Media Separation) drum and DMS cyclone stages for coarse and fine chrome ore fractions, respectively and a spiral concentration plant for the fine ore of less than 1mm. The tailings are thickened for disposal in the tailings dam.

Tailings will be stored in a lined facility with deposition planned over 14 years at an average rate of 148,000 tonnes per annum pumped slimes and 216,000 tonnes per annum of trucked coarse material. The height of the facility at closure will be 25m.

The plant has been designed with flexibility to handle the expected variations in ROM feed over the life of the mine and has scope for future optimisation. DRA-I estimated the capital and operating costs for the plant and in addition, certain costs related to the associated infrastructure.

The expected yield was projected to be 69.8% and split into products as 52.3% lumpy (typically + 10 - 150mm), 9.9% chip (typically + 1 - 10mm) and 7.6% fines (typically -1mm) concentrate expressed as a percentage of the ROM feed.

Infrastructure

Infrastructure for the mine include a road to the proposed new rail sidings and ore load out facilities at a location 14km to the north west of the site, provision of a 100kV power line from the HT supply at the Kempersai sub station 60km north of the mine, and potable and process water supplies. The facilities designed ensure the Voskhod operations are fully independent.

Market

Heinz H Pariser Alloy Metals & Steel Market Research (Pariser) carried out an updated study of the chrome ore market. Pariser provided a positive outlook for chrome ore demand and a ten year price forecast of between US$154-US$224 (average $183) per tonne (free at the Kazakhstan/Russian border) for a 48% Cr2O3 Kazakhstan ore.

Ahlers Logistics and Maritime Services of Antwerp, Belgium, carried out a detailed logistics study that concluded there are no major operational transport issues concerning the supply of Voskhod chrome ore to the markets that were addressed in the Pariser report.

Development

The Company has entered into discussions with an internationally recognised mining contractor who has formed a joint venture relationship with a local Kazakh contractor to provide rates for the decline and ventilation shaft development contract. It is intended that a process engineering company be appointed for the detailed design and construction for the plant and related infrastructure.

A full management team from Oriel will be in place to oversee all aspects of the project construction phase.

Endeavour Financial has been advising the Company on debt financing options available. To date it has received a number of offers of debt finance for the Project and with the feasibility study results is confident that the project economics are sufficiently robust to support a debt facility of more than US$100 million. Oriel will continue to work with Endeavour and a number of leading international banks, with whom negotiations are well advanced, to secure the required debt financing by Q4 2006.

Qualified Persons:

Dr Alwyn Annels, PhD, CEng, FIMMM, Principal Mining Geologist at SRK Consulting (UK) Ltd, and was responsible for reporting of Mineral Resources in the Feasibility Study. He is a Qualified Person in accordance with definitions set out in National Instrument 43-101 and he has consented to this announcement and reference to his report herein. Mr Mike Beare, BEng, CEng, MIMMM, Senior Mining Engineer at SRK Consulting (UK) Ltd), had responsibility for reporting of the Mineral Reserves and overall preparation of the Feasibility Study. He is a Qualified Person in accordance with the definitions set out in National Instrument 43-101 and he has consented to this announcement and reference to his report herein.

Notes to Editors:

Oriel Resources was incorporated in July 2003 with Dr Sergey V. Kurzin as Executive Chairman and CEO, with a primary focus on the acquisition, exploration and development of advanced and high quality nickel and gold projects in the countries of the Former Soviet Union (FSU).

The company was admitted to trading on the Alternative Investment Market (AIM) of the London Stock Exchange in March 2004, raising GBP40.56 million. The Admission was at that time the largest funded mining IPO in the history of AIM and provided the company with a solid financial foundation.

Oriel subsequently listed on the Toronto Stock Exchange in February 2005, providing the company with access to the resource-oriented Canadian market and providing for greater liquidity for the Company's shares.



GLOSSARY OF TERMS

Crusher A machine for crushing rock.
Deposit An anomalous occurrence of a specific mineral or
minerals within the earth's crust.
Feasibility
Study A definitive engineering study addressing the
economic viability of bringing a deposit to the
production stage; taking into consideration all
associated costs, revenues and risks.
Infrastructure The supporting installations and services that
supply the needs of the project.
Mine
development The term employed to designate the operations
involved in preparing a mine for ore extraction.
These operations include tunnelling, sinking,
cross-cutting, drifting and raising.
Ore Accumulation of minerals containing a substance
which can be economically recovered.
Preliminary
Assessment
Study The initial stage of the feasibility study in which
the accuracy of the factors involved such as costs
and revenues is plus or minus 25%.
Tailings Material rejected from treatment plant after the
recoverable valuable minerals have been extracted.



Contact Information

  • Oriel Resources plc
    Dr Sergey V Kurzin
    Executive Chairman
    44 (0) 20 7514 0590
    or
    Oriel Resources plc
    Nick Clarke
    Managing Director
    +44 (0) 20 7514 0590
    or
    Oriel Resources plc
    Gavin Dallas
    Marketing and PR
    +44 (0) 20 7514 0590
    www.orielresources.com
    or
    Bankside Consultants
    Michael Padley
    44 (0) 20 7514 0590
    or
    Bankside Consultants
    Michael Spriggs
    +44 (0) 20 7367 8888
    or
    Vanguard Shareholder Solutions
    Keith Schaefer
    + 1-604-608-0824