Tiomin Resources Inc.

Tiomin Resources Inc.

October 17, 2005 11:56 ET

SRK Review Confirms Technical and Economic Viability of Tiomin's Kwale Titanium Project

TORONTO, ONTARIO--(CCNMatthews - Oct. 17, 2005) - Tiomin Resources Inc. (TSX:TIO) is pleased to report that SRK Consulting (UK) Ltd. ("SRK") has completed its Independent Review of the Kwale Titanium Mineral Sands Project in Kenya which has been commissioned by Barclays Capital for the benefit of potential lenders to the project.

The review was undertaken to confirm that the plans for the development and operation of the Kwale mine and processing facilities have been based on adequate data and sound principles to achieve forecast production and results. Since SRK's initial study in 1999 and subsequent update of 2004, Tiomin has implemented several significant improvements to the project's design, planning and estimating that have satisfactorily resolved most of the issues identified in earlier SRK reviews.

As a result, SRK has concluded that "Tiomin's personnel, consultants and contractors have done an excellent job of progressing the project and that, over the past seven years of development, the Kwale project has reached the stage where it is low risk technically and economically and that it sees no issue that cannot be reasonably readily resolved or that would impair the project's ability to service the proposed debt."

The following summarizes SRK's assessment of the project's significantly improved risk profile:

- Title, Rights & Obligations. The basic requirements of secure title and legal right to build and operate all of the facilities needed for the mining of rutile, zircon and ilmenite are fully provided for in the duly executed Special Mining Lease No. 23 and the laws of Kenya, while the Fiscal Agreement signed by Kenya's Minister of Finance commits the government to provide a favourable tax regime. The risk in these areas is considered to be low.

- Resources & Reserves. The orebodies to be mined have been thoroughly and professionally drilled, sampled as assayed and the results have been analysed by several respected experts in the field of heavy minerals. They all show an indicated and measured resource which is in line with a detailed, costed, and professionally designed mining plan that converts these resources in large and sufficient part into probable and proven reserves. There is thus negligible reserve risk and a fair amount of upside potential due to empirical undervaluation of the grade by the method of reverse circulation drilling used.

- Mining. A large, high capacity, low unit cost Bucket Wheel Excavator supported by conventional dry mining equipment is considered to be an appropriate mining method and necessary precautions are being taken to ensure that the unit works properly to render it a low risk method.

- Processing. The process plants have also been professionally designed and improved over the years and have been based on sufficient testwork using standard pilot plants and laboratory procedures, applying also to the tailings designs and slimes handling and disposal which have been tested and designed. These areas are considered to be of low risk, although slimes disposal has moderate risk and may require further development during operation. On the upside, the standard reverse circulation drilling and sampling techniques used have empirically undervalued the actual grade by 10% to 15% and this can be expected. SRK considers that there is moderate risk of the recoveries being lower than estimated in the South Dune area after year 6.

- Port and Infrastructure. The port and infrastructure of roads, power, accommodation and site facilities have been thoroughly and appropriately designed and costed. As such, they carry low risk in SRK's view.

- Water supply. The water supply and infrastructure are well-proven for normal rainfall years while further investigation is required and underway to show the sufficiency of supply in the expected drought period/s. Final water handling design and costing awaits the results of these investigations. Risk is considered moderate should the aquifer not be available and if a drought were to occur in the early years, however, the intended inclusion of a desalination plant will render this risk low. A rough cost for such a plant is included in the estimates.

- Capital. The capital expenditure estimate has again been examined by SRK's infrastructure construction and capital specialist. Work performed by Dalesford, an independent Australian specialist who has had direct access to all of the detail of the Ausenco estimating department in Perth, has been determined as professional and convincing. A contingency of 8% has been included; the capital estimate is considered to be accurate between -10% and +15%.

- Opex. Likewise, the manning and OPEX estimates have been examined and are sound. The individual estimates have been prudently derived and the overall contingency included in the estimate of 8% is considered appropriate. Including this contingency, the Opex estimate is considered to be accurate to within 10%.

- Environment. Environmental evaluation and management plans and provisions have been expertly and appropriately conducted in all required areas. Environmental risks are deemed to be low when properly managed as expected. Any impact on forested areas during drought years should not be insurmountable and some form of irrigation or recharge of the upper aquifer may be necessary during such periods. With the intended inclusion of a desalination plant at the coast as a back-up supply, these problems would clearly not occur.

- Social and labour. Social and community matters have been thoroughly dealt with and the process of continual consultation has resulted in excellent relationships and general local support for the project. Labour practices will be to international and Kenyan standards. SRK has no concerns in this area. SRK considers that the project is fully compliant with all of the Equator Principles and expects that it will remain so in its future activities.

- Permits. The majority of permitting has been completed including the approval of the port construction, the Environmental Impact Assessment, Environmental Management Plan, Resettlement Action Plan and others. As with all projects, many ongoing submissions and approvals for construction and the environment are required and SRK sees no problem arising, especially since the Government has contractual obligations to support them. Permitting risks are considered to be low.

- Management and Construction. Tiomin has a good team of people with specialized knowledge of various areas in Kenya. In addition, an appropriate array of consultants have been retained for specialist technical back up and give confidence that the project will be properly managed. The final stages of negotiation for the award of the construction contract are underway with companies who have several years of experience with this project and with several other mineral sands ventures as well as appropriate African (and Kenyan) experience. An important factor is that guarantees on construction, capital cost, throughputs and recoveries are being included.

- Economic Result Model. The Barclays model of October 5, 2005 has been checked and found to be arithmetically and logically accurate. The inputs to the Barclays Model conform to those of Tiomin's estimates including their latest capital and operating cost estimates of September 30, 2005 which have been reviewed and accepted.

In addition, certain other outstanding items that are normal requirements for a project of this nature are detailed in the report and relate largely as to who will carry the risk rather than to the project's technical or economic acceptability.

As a result of SRK's favourable report, Barclays Capital will proceed in advising Tiomin with the project financing to raise the debt portion of the approximate US$165 million capital cost (excluding capitalized financing costs). Based on the current capital scenario, the Kwale project has the potential to be one of the lowest cost titanium mining operations in the world, generating cash flow in excess of US $40 million annually for the first six years of operation. Thereafter, Tiomin's considerable heavy mineral coastal deposits are expected to see development, benefiting from the infrastructure in place and providing the potential for long term growth.

Certain of the information contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to those with respect to the prices of rutile, zircon and ilmenite, estimated future production, estimated costs of future production, the Company's sales policy and permitting time lines, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the actual prices of rutile, zircon and ilmenite, the factual results of current exploration, development and mining activities, changes in project parameters as plans continue to be evaluated, as well as those factors disclosed in the Company's documents filed from time to time with the Ontario Securities Commission.


Contact Information

  • Tiomin Resources Inc.
    Jean-Charles Potvin
    (416) 350-3776, ext. 227
    Tiomin Resources Inc.
    Bruce Ramsden
    Chief Financial Officer
    (416) 350-3776, ext. 232
    Tiomin Resources Inc.
    Donna Yoshimatsu
    Investor Relations
    (416) 350-3776, ext. 222
    Visit the Company's website at www.tiomin.com