Forsys Metals Corp

Forsys Metals Corp

February 04, 2010 10:05 ET

Forsys Metals Corp Reports Results of Snowden's Update to June 2009 Valencia Project Technical Report

TORONTO, ONTARIO--(Marketwire - Feb. 4, 2010) - Forsys Metals Corp ("Forsys" or the "Company") (TSX:FSY)(FRANKFURT:F2T)(NSX:FSY) reports that on January 29, 2010, Snowden Mining Industry Consultants (Pty) Ltd. ("Snowden"), an independent Australian mining consultancy, has completed compiling an Addendum to the Valencia Technical Report dated June 23, 2009. The Addendum represents the outcome of the additional work undertaken in 2009 to capitalize on work completed in June 2009, including additional drilling completed since January 2009. The Company has completed a Prefeasibility study in 2007 and is completing a Feasibility study.

The November 2009 Valencia uranium deposit ("Valencia") resource model (as disclosed in the Company's Press Release dated December 14, 2009) was used as the basis for the mining study. The mining study undertaken by Snowden included the development of appropriate pit slope design parameters, which together with process recoveries, operating costs and revenue factors, were used to define an optimal pit outline at Valencia.

Based on the work completed, estimates were provided for Capex and Opex based on an initial steady state target production of a nominal 8.7Mtpa of ore derived from open pit operations to the crusher. This rate is planned to increase to 11.8Mtpa within four years of commencement of operation with the introduction of radiometric sorting. Based on these parameters, an average production level in excess of 3.5 Mlbs of uranium oxide per annum is projected to be achieved at Valencia for the first 7 years of operation.

Two processing options have been analyzed. The first is the "Base Case", representing the employment of three-stage crushing, rod milling and acid leach. The other option "Option 1" employs single stage crushing, SAG milling, uranium flotation and acid leach. The flotation option has been engineered and costed to a lesser degree of accuracy than the Base Case, but evidences a significantly improved economic outcome for the Valencia project.

For the options analyzed, the following capital costs are forecast:

                           Capital Items Base Case Option 1
  (US$ M) (US$ M)
 Process Plant 196.1 196.9
 Tailings Disposal 7.9 7.9
 Access Road 1.3 1.3
 Water pipeline 18.5 18.5
 Power supply 15.4 15.4
 Owners buildings & equip. 8.9 8.9
 Overheads 8.3 8.3
 Project Capital 256.4 257.2
 Mining Equipment 54.4 54.4
 Pre-Strip and Capitalized Opex 11.1 11.1
 Total Capital Cost 321.9 322.7

Most of the projected capital expenditures detailed in the table above will be spent during a two year period, towards the end of which mining will commence. Capex is considered to be estimated to an accuracy of +/-15% for the Base Case and +/-40% for Option 1. In terms of operating costs, these were determined from first principles and contractor estimates and are considered to have been estimated to an accuracy of +/-15% for the Base Case and -15% to +35% for Option 1. Opportunities to reduce costs are being pursued as part of the optimization and trade-off studies currently underway.

A breakdown of life-of-mine operating costs, competitive with leaders in the uranium sector is summarized below.

                         Areas Total Cost                        Total Cost
  (US$ M p.a.)                        ($/lb U3O8)
       Base Case        Option 1    Base Case    Option 1
 Mining 56.25 56.20 16.29 15.14
 Processing 58.45 55.93 19.10 17.58
 Overheads and Other 6.2 6.2 2.64 2.51
 Total Operating Costs 120.9 118.33 38.03 35.23

The IRR of the Valencia project for the Base Case and Option 1 based upon a long term uranium price of $70/lb has been calculated as follows:

  Base Case Option 1
           IRR 27% 30%

The November 2009 resource model (as disclosed in the Company's Press Release dated December 14, 2009) included an updated Valencia Resource estimate at a cut-off grade of 60 ppm U3O8, as summarized below:

Category U3O8 cut-off Tonnes U3O8 grade U3O8 metal
  (ppm) (Mt) (ppm) (Mlbs)
Measured 60 24.3 151 8.1
Indicated 60 245.9 124 67.4
Total Measured and Indicated 60 270.3 127 75.5
Inferred 60 32.0 126 8.4

An Expanded Base Case project valuation has been prepared by Forsys management using the Total Measured and Indicated Resource of 75.5 Mlbs of U3O8 producing the costs summarized in the table below.

Project Costs (Forsys Metals Est.)
(stated in US$ M)
                 Capital Cost Operating Cost
 Expanded Base Case $322 $34.73/lb U3O8
 Option 1, Froth Flotation $323 $32.33/lb U3O8
 Additional Capex in Year 41 $89  

1 - Represents the cost of radiometric sorting, a fourth mill and additional mining fleet

The IRR of the Valencia project for the Expanded Base Case and Option 1 based upon a long term uranium price of $70/lb has been calculated as follows:

  Expanded Base Case Option 1
           IRR 32% 36%

The Expanded Base Case valuation was prepared using the same input parameters as the Base

Case. Changes were an increase in Capex in year 4 to build a fourth mill, increase the mining fleet and expand selected infrastructure. Opex was based on a steady state target production of a nominal 14.2Mtpa of ore derived from open pit operations to the crusher after the upgrade. Based on these parameters, an expanded production level in excess of 4.4 Mlbs of uranium oxide per annum is projected to be achieved at Valencia for the 7 years of production after the upgrade.

Reductions in processing costs and mining costs to the Base Case and Option 1 have been estimated by Forsys management to be 6.9% and 2.9% respectively.

Exclusive Financial Advisor – Morgan Stanley & Co.

Morgan Stanley & Co. were hired by Forsys in October 2009 as exclusive financial advisor to undertake a strategic review of the opportunities available to the Company. Martin Rowley, Chairman of Forsys stated "Now that the updated technical reports and valuations have been completed, Morgan Stanley & Co. can progress the detailed assessment of the various alternatives available to Forsys. This will include bringing the Valencia uranium project into production through strategic alliances or joint venture opportunities or a sale of all or part of the business. Morgan Stanley & Co. are expected to report their findings and recommendations to the Forsys Board of Directors in mid February".

About Forsys Metals Corp

Forsys Metals Corp, having BEE sponsorship, is an emerging uranium producer with 100% ownership in the fully permitted Valencia Uranium Project. With an expanding reserve base, production is expected to commence in 2012 with a 17 year life of mine. Current NI 43-101 compliant reserves at Valencia are 60.5 Mlbs U308 and current Measured and Indicated resources are 75.5 Mlbs U308 with a further 8.4 Mlbs Inferred U308. Additional infill drilling is currently underway and is designed to bring the Inferred category resources into the Indicated category so they can be incorporated into a future reserve update. The Company also has an extensive portfolio of uranium exploration projects totaling over 252,000 ha located in Namibia, Africa, a politically stable and mining friendly jurisdiction.

Qualified Persons under National Instrument 43-101

The engineering aspects of the reserve determination were supervised by Mr. Jeremy Peters, who is a member of the Australasian Institute of Mining and Metallurgy ("AusIMM") and a full time employee of Snowden. Mr. Peters has sufficient experience relevant to the type of mining contemplated and to the activity he is undertaking to qualify as a Qualified Person ("QP") under National Instrument 43-101 ("NI 43-101"). Mr. Peters holds no interests in Forsys or its associated companies and has not visited the Valencia Uranium site. Mr. Peters recommends a Probable classification for the reserve. Economic and metallurgical data used in the preparation of the reserve were derived from the ongoing work on the Valencia Feasibility Study, conducted under the supervision of Mr. Kullmann. Mr. Peters has read and consents to the content of this news release.

Mr. Dag Kullmann, a Fellow of the Southern African Institute of Mining and Metallurgy (SAIMM), Engineering Manager for Forsys, is the designated QP responsible for the reporting of mineral reserves. Mr. Kullmann has sufficient experience in the assessment and application of modifying factors required for the determination of reserves for open pit operations to qualify as a QP under NI 43-101. Mr. Dag Kullmann retains responsibility for the validity of the study data.

On Behalf of the Board of Directors of Forsys Metals Corp

Martin Rowley

For further information visit our website at

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Forward-Looking Information

This news release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of the Company. The following are important factors that could cause Forsys actual results to differ materially from those expressed or implied by such forward looking statements: fluctuations in uranium prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology; continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs; recovery rates, production estimates and estimated economic return; general market conditions; the uncertainty of future profitability; and the uncertainty of access to additional capital. Full description of these risks can be found in Forsys various statutory reports including the Annual Information Form available on the SEDAR website at These risks and uncertainties could cause actual results and the Company's plans and objectives to differ materially from those expressed in the forward looking information. Actual results and future events could differ materially from anticipated in such information. These and all subsequent written and oral forward looking information are based on estimates and opinions of management on the dates they are made and expressed qualified in their entirety by this notice. The Company assumes no obligation to update forward looking information should circumstances or management's estimates or opinions change.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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