Alien Metals Ltd (LON:UFO), a minerals exploration and development company, has announced the results of the Development Study of its’ 90% owned Hancock Iron Ore Project, in the Pilbara Region, Western Australia that has confirmed that the Project has excellent project economics and prospectivity with extensive untested mineralisation trends. The Study was coordinated by experts Mining Plus Pty Ltd, Burnt Shirt Pty Ltd and internal UFO personnel and is based on an updated Mineral Resource Estimate containing a JORC Mineral Resource of 8.4Mt @ 60% Fe.
Key financial highlights:
· MRE of 8.4Mt @ 60% Fe JORC Mineral Resource, including an upgraded Indicated Resource of 4.5Mt@ 60.2% Fe.
· Based on 8Mt of the Mineral Resource being converted to mining inventory, robust project financials of the base case produced the following:
o an average annualised EBITDA of A$39m
o a pre-tax NPV10 of A$146m and a pre-tax IRR of 133%
o All in sustaining cost of US$85/t
o Production rate of 1.25mtpa
o Initial development Capital Cost of A$28m
Other key highlights from the Development Study include the following:
· High confidence in the Capital and Operational Costs with pricing received through the Early Contractor involvement and Preferred Tenderer process resulting in up-to-date tendered pricing for more than 90% of the Capital Costs and Operational Costs.
· Initial production plan focussed on current 3.9Mt mining inventory with further upside to mine the entire Mineral Resource of 8.4Mt and beyond to be realised through ongoing exploration upside. Further work confirmed a 165% increase in Indicated Resources from 2.8mt to 4.5mt as part of an updated Mineral Resource Statement.
· Ore processing will utilise a mobile dry crushing and screening plant capable of producing 1.25Mt to 1.5Mt of 100% fines product per annum on a single shift basis. Sprint capacity of the plant working on a double shift basis is up to 3.0Mt per annum.
· Low start-up cost of A$28m capital including:
o A$18.0m for main roads intersection and access to Site,
o A$2.5m for site establishment and pre-production capital,
o A$6.5m of owners costs, working capital and contingency allowances.
· Reduction in costs achieved through the close proximity to the Mining Hub of Newman. The proximity allows the Company to avoid extensive construction capital costs associated with airstrip, mining camp and associated services.
· Provisional export capacity through the Port of Port Hedland has been secured and remains on track for final approvals during the first half of 2024.
· CSA Global conducted an independent review based on existing geological information and a site visit to express an opinion about the Exploration Potential of the Hancock Project. Their findings included:
o Tenement E47/3954: Significant exploration potential has been identified, in addition to the 8.4Mt Mineral Resource outside of the known Mineral Resource area;
o Tenement E47/3954: Walk up drill targets, with a potential to increase the existing Mineral Resource
o Hancock Project Tenements E47/3954 and E47/5001: Significant strike lengths of Weeli Wolli Formation BIF and Boolgeeda Iron Formations identified and yet to be adequately explored.
· Alien has also separately completed an additional internal review of Project Tenement E47/5001[1], identifying (interpreted from GSWA 250k mapping) significant underlying geological lithologies that are suitable hosts for iron ore mineralisation and exploration potential.
· Success through accelerating exploration activities could therefore significantly increase the existing 8.4Mt JORC Mineral Resources, resulting in potential for increases to planned production and mine life.
· Alien plans to conduct additional exploration during 2024 to target an increase in its Mineral Resource while preparing for the mining development and while the requisite approvals are obtained.
· Development Approvals currently remain on track to be in place by mid-2024, allowing for site development to commence in 2024 and first ore sales to be achieved in Q1 2025.
Alwyn Vorster, Non-Executive Chair, commented:
“The Development Study is a significant advancement and de-risking step for the Hancock Project. Attractive project economics highlight the robustness of the project with its low start-up cost, sustainable operational costs along with the significant upside from future exploration plans.
“The geological review recently undertaken reinforces that the Hancock Project has significant regional exploration potential to increase the resource base through further exploration activities, supporting the Company’s future growth and expansion aspirations.
“Alien is confident that the global iron ore industry has a bright future, underpinned by ongoing high demand for quality iron ore from stable jurisdictions like Australia, where high environmental, social and governance standards are set in the production of raw materials. Healthy iron ore prices as experienced over the last few years will support the Hancock Project delivering shareholder value in the medium term.”
Further Information
Development Study#
Iron Ore Company of Australia Pty Ltd (“IOCA“), a wholly owned subsidiary of AIM listed Alien Metals Ltd (LSE: UFO), is advancing development activities for its Hancock Iron Ore Project (the Project) located in the Pilbara region of Western Australia.
The project is approximately 18 kilometers north of the township of Newman in an area renowned for producing high grade direct ship ore and about 430 kilometers south of the deep-water shipping Port of Port Hedland.
Figure 1: Location of the Company’s Iron Ore Projects, Western Australia
Financial highlights of the Development Study include:
· Based on the available Mineral Resource of 8.0(+) million tonnes, and conservative mid-point assumptions, robust project financials are produced including an average annualised EBITDA of A$39m, a pre-tax NPV of A$146m and a pre-tax IRR of 133%.
· High confidence in the Capital and Operational Costs with pricing received through the Early Contractor involvement and Preferred Tenderer process resulting in up-to-date tendered pricing for 92% of the Capital Costs and 94% of the Operational Costs.
· C1 cash cost of A$92.3/dmt delivered an average operating margin of A$33.2/dmt.
· Initial production plan based on 3.9Mt of contingent reserve with further upside the JORC resource of 8.4Mt to be realised through ongoing works.
· Low-cost capital start up of ~A$28M.
# – The Development Study is comprised of limited study elements at typical Pre-Feasibility Study level (e.g. resource estimates and mining inventory), and the majority of elements at Feasibility Study level (e.g. cost estimates, approvals, offtake, financial modelling etc).
Table 1 – Development Study, Life of Mine Metrics
| Item | Unit | Base Case(Mining >90% of Mineral Resources) | Low Case(Mining only current Mining Inventory[2]) | High Case(Mining of Exploration Upside tonnes) |
| Total Mined Product | Mt | 8.0 | 3.9 | 10.0 |
| Production Rate | Mtpa | 1.25 | 1.25 | 2 |
| Project Life (Production) | Years | 6.4 | 3.2 | 5 |
| CAPEX | A$m | 28 | 28 | 28 |
| AISC OPEX | US$/dmt | 85 | 85 | 85 |
| Iron Ore Price | US$/dmt | 120 | 120 | 130 |
| Realised Iron Ore Price | US$/dmt | 108 | 110 | 117 |
| Exchange Rate | US$-A$ | 0.68 | 0.70 | 0.68 |
| Annual EBITDA | A$m | 39 | 25 | 102 |
| Pre-tax NPV10 | A$m | 146 | 40 | 343 |
| Pre-tax IRR | % | 133% | 141% | 338% |
| Payback | Years | 0.77 | 0.9 | 0.30 |
The basis (identified in Table 1 as the Low Case) of the Development Study assumed Ore Produced came only from current Mining Inventory (3.9Mt). Even at these low tonnage levels the Project still delivered healthy economic returns with an annualised EBITDA of A$25m, a pre-tax NPV of A$40m and a pre-tax IRR of 141%, total revenues of A$570m and a pre-tax net cashflow of A$51m.
The High Case includes the assumed (potential) realisation of additional tonnes through exploration and/or tenement boundary softening[3] allowing production and mine life to increase.
Updated Mineral Resource Statement (January 2024)
The Updated Mineral Resource Statement for the Hancock Iron Ore Project is shown in Table 2. A 165% increase in Indicated Resources of 2.8Mt to 4.5Mt total as part of an updated Mineral Resource Statement with a consequential reduction in Inferred Resources.
The statements have been classified by Competent Person, Howard Baker (FAusIMM(CP)) of Baker Geological Services (BGS). The Mineral Resource Estimate JORC Tables can be found as Appendix 1.
Table 2 – Hancock Project Updated Mineral Resource Statement (January 2024)
| Classification Category | Prospect | Mass (million tonnes) | Average Value | |||||
| Fe % | SiO2 % | Al2O3 % | P % | LOI % | Mn % | |||
| Indicated | Sirius Extension | 2.8 | 59.8 | 3.9 | 4.09 | 0.17 | 5.4 | 0.05 |
| Ridge C | 0.7 | 60.9 | 4.9 | 3.27 | 0.12 | 3.7 | 0.03 | |
| Ridge E | 1.0 | 61.0 | 5.2 | 3.30 | 0.12 | 3.4 | 0.02 | |
| Sub Total – Indicated | 4.5 | 60.2 | 4.3 | 3.79 | 0.15 | 3.7 | 0.04 | |
| Inferred | Sirius Extension | 3.1 | 59.6 | 4.6 | 3.99 | 0.17 | 5.2 | 0.05 |
| Ridge C | 0.4 | 60.8 | 4.6 | 3.07 | 0.14 | 4.4 | 0.03 | |
| Ridge E | 0.3 | 59.8 | 4.9 | 3.64 | 0.17 | 5.0 | 0.02 | |
| Sub Total – Inferred | 3.8 | 59.7 | 4.6 | 3.88 | 0.17 | 5.1 | 0.05 | |
| Total | 8.4 | 60.0 | 4.4 | 3.83 | 0.17 | 4.0 | 0.05 | |
For comparison, the former resource statement was a total of 9.1 Mt @ 60.3% Fe of which 1.7 Mt was in the Indicated category and 7.4Mt was in the Inferred category.
Project Cost Estimate
Capital cost estimates for the Project have been sourced from contractor quotations, services agreements and industry benchmarks. A summary of the Project capital cost estimate is highlighted in Table 3.
Table 3 – Capital Cost Summary
| Item | Total (A$M) |
| GNH Intersection | 6.4 |
| Mine Haul Road | 4.0 |
| Site Facilities | 7.6 |
| Engineering Design | 0.3 |
| Owners Team Costs | 0.9 |
| Mine Site Establishment | 0.8 |
| Services (comms, power, water etc) | 3.4 |
| Pre-production capital | 1.4 |
| Bonds/Guarantees | 1.5 |
| Sustaining, Cont and Closure | 1.9 |
| Total | 28.1 |
Operating cost estimates for the Project have been sourced from contractor quotations, services agreements and industry benchmarks. A summary of the Project operating cost estimate is highlighted in Table 4.
Table 4 – Operating Cost Summary, Base Case (Mining Inventory)
| Item | Total (A$M) | A$/t ore |
| Mining | 98.3 | 25.0 |
| Processing | 36.2 | 9.2 |
| G&A | 28.2 | 7.2 |
| Logistics | 199.5 | 50.8 |
| C1 Costs | 362.3 | 92.3 |
| Freight | 80.1 | 20.4 |
| Royalties | 41.2 | 10.5 |
| AISC | 483.5 | 123.1 |
A ranking of global iron ore producers based on their total cash cost per tonne of ore is shown in Figure 2. The chart also highlights where the Project will sit on the global cost curve.
Figure 2: 2023 Iron Ore Production ranked on Total Cash Cost (US$CFR)
Over the last five years, the average spot price is US$117/dmt having operated in a range as high as US$227/dmt and a low point of US$62/dmt. At the end of January the spot price of 62% Fe, CFR into China was $134.80 which provides potential further upside to the base cases.
Figure 3: 5-year historical iron ore price and average
Multiple sensitivities were performed on the results of the financial analysis. A matrix of the effect of a varying the benchmark 62%Fe commodity price against the Project Discount Rate is shown in Table 5.
Table 5 – Commodity Price Against Discount Rate Sensitivity
| Fe Price[4](US$/t) | Project NPV (A$M) | IRR | ||
| 8% | 10% | 12% | ||
| 110 | 2 | 1 | 1 | 15% |
| 120 | 42 | 40 | 39 | 141% |
| 130 | 83 | 80 | 76 | 254% |
The financial analysis conducted on the Financial Base Case, using Mineral Resources highlights the project’s sensitivity to key variables (see Figure 3).
The commodity price, foreign exchange, operating expenses, and other factors were thoroughly examined to assess their impact on cashflows. The tornado chart highlights the impact to the project under various downside scenarios whilst highlighting its strong upside potential.
Figure 4: Financial Sensitivity to Base Case NPV A$149m
Additional Mining Inventory
It is anticipated that prior to commencement of the Project further infill drilling will occur at each deposit to convert inferred material to the indicated category. The Company is seeking to put in place agreements with adjoining tenement owners to allow mining of the Company’s Sirius resource up to, and/or beyond the tenement boundary.
The potential additional mining inventory should all the current Inferred material be upgraded to the Indicated resource category and the tenement boundary constraints be removed from the Sirius deposit, and Maintaining the scheduled production rate, the estimated additional inventory would add upwards of four years mine life beyond the currently scheduled three years.
Tenure and Ownership
A summary of the Hancock Project tenure and ownership is set out in Table 6.
Table 6 – Hancock Project Tenements
| Tenement No. | Type | Status | Ownership |
| E 47/3954 | Exploration | Granted | 90% IOCA |
| E 47/5001 | Exploration | In application | 100% IOCA |
| L 47/1063 | Miscellaneous | Granted | 100% IOCA |
| M 47/1633 | Mining | In application | 90% IOCA |
Approvals
The key next focus of the Company is to secure the grant of the Mining Lease M 47/1633. Granting of this lease by DMIRS allows the Company to then submit the final regulatory documentation for key approvals that will include:
· Mining Proposal and Closure Plan,
· Environmental Approvals (Part IV and V), and
· Native Vegetation and Clearing Permits.
The Company is cooperating with DMIRS on investigations about historical (2021) breaches of regulations regarding heritage and ground disturbance on the Hancock Project tenements. The Company is confident that these breaches, which were self-reported by the Company in 2023, will be addressed without significant impacts on the project development planning.
Infrastructure
The Project will involve the construction of an intersection at the Great Northern Highway (GNH) followed by the construction of an access road from GNH to the site infrastructure.
The Project does not require a dedicated air strip or accommodation due to the close proximity of the established mining town of Newman.
Operations
Mining will employ a conventional drill and blast, truck and shovel methodology which is well proven for operations of similar geology and scale. Mining will commence at the Ridge C and Ridge E deposits with mining at the Sirius deposit in the proceeding years. The project will target an initial production rate of 1.25Mt of Direct Shipping Ore (DSO) product per annum. Ore will be hauled to multiple fingers on a Run of Mine (ROM) pad allowing blending to achieve desired iron grade and impurity levels.
Ore processing will utilise a mobile dry crushing and screening plant capable of producing 1.25Mt of 100% fines product per annum on a single shift basis. Sprint capacity of the plant working on a double shift basis is up to 3.0Mt per annum.
Stockpiled ore product will be loaded onto quad trailer road trains and hauled from the Project to Port Hedland via GNH. In Port Hedland the product will be stored either in a bunker at Utah Point or at an offsite overflow stockpile. Material from the overflow stockpile will be campaigned to the Utah Point bunker as required. From the bunker product will be managed by a Port Services contractor and loaded onto ships for transport to customers.
IOCA will provide the operation with management and technical services with remaining site activities carried out by contractors on services agreements.
Next Steps
The Development Study has confirmed the potential economic viability of the Hancock Iron Ore Project. Whilst this is not a Definite Feasibility Study (“DFS”) the costs and other inputs are broadly to a DFS level (excluding any assumptions relating to Inferred Resource). Once a project funding partner is identified and terms agreed, the Company and such partner will consider whether a formal DFS is required at that stage. IOCA is now progressing development works towards the requirements for a Final Investment Decision (FID). The following key activities have been planned as part of the next phase of Project development:
· Progress funding discussions, including self-development, possible joint venture options and other funding arrangements
· Progress dialog with tenement neighbours to enable viable extraction of Sirius resource
· Complete optimised design of Sirius haul road and pit entry which minimises cut and fill volumes whilst having minimal impact on environmentally and culturally sensitive areas
· Finalise work with its consultants to determine most economical GNH intersection design
· Finalise work with its consultants to optimise access road alignment for capital savings and cultural/environmental sensitivity. This will include geotechnical sampling along preferred alignment to identify scale of drill and blast requirements.
· Finalise Mine Operations Centre layout for cultural and environmental sensitivity
· Finalise discussion with potential offtake partners to confirm desired product specifications and market appeal.
· Continued focus on heritage surveys:
o access to bore fields to secure a water supply for initial infrastructure works
o access to ore reserves and adjacent infrastructure
o clearance of exploration potential zones
· Exploration activities in those areas identified as having exploration potential to target an increase in resources and reserves after the required studies are completed.
ADDITIONAL EXPLORATION POTENTIAL
Figure 4: Hancock Project Tenements
Figure 5: Exploration potential areas and Regional Potential
Mineral Resources
· The exploration potential areas complement the Mineral Resource shown in Table 7 (Baker, 2024).
· The resources for Ridge C and Ridge E are hosted in the Weeli Wolli Formation.
· Sirius Extension is hosted in Boolgeeda Iron Formation (see Figure 5).
· All three of the deposits are located in E47/3954.
Table 7 – Hancock Project Updated Mineral Resource Statement (January 2024)
| Classification Category | Prospect | Mass (million tonnes) | Average Value | |||||
| Fe % | SiO2 % | Al2O3 % | P % | LOI % | Mn % | |||
| Indicated | Sirius Extension | 2.8 | 59.8 | 3.9 | 4.09 | 0.17 | 5.4 | 0.05 |
| Ridge C | 0.7 | 60.9 | 4.9 | 3.27 | 0.12 | 3.7 | 0.03 | |
| Ridge E | 1.0 | 61.0 | 5.2 | 3.30 | 0.12 | 3.4 | 0.02 | |
| Sub Total – Indicated | 4.5 | 60.2 | 4.3 | 3.79 | 0.15 | 3.7 | 0.04 | |
| Inferred | Sirius Extension | 3.1 | 59.6 | 4.6 | 3.99 | 0.17 | 5.2 | 0.05 |
| Ridge C | 0.4 | 60.8 | 4.6 | 3.07 | 0.14 | 4.4 | 0.03 | |
| Ridge E | 0.3 | 59.8 | 4.9 | 3.64 | 0.17 | 5.0 | 0.02 | |
| Sub Total – Inferred | 3.8 | 59.7 | 4.6 | 3.88 | 0.17 | 5.1 | 0.05 | |
| Total | 8.4 | 60.0 | 4.4 | 3.83 | 0.17 | 4.0 | 0.05 | |
Figure 6: Regional Geology Mapping, E47/3954 and E47/5001
Exploration potential areas (E47/3954)
During November and December 2023, ERM Australia Consultants Pty ltd, trading as CSA Global, completed an independent assessment of the Hancock Project and generated areas of exploration potential. These exploration potential areas are based on drilling results, field reconnaissance and rock chip sampling which identified 10 polygons where there is supporting evidence of iron mineralisation. The exploration potential polygons (potential mineralisation) are shown in the Appendix.
The exploration potential zones focus on those areas that are within vicinity of the existing Mineral Resource, providing the company with near term, walk up targets to test and potentially expand the resource.
Figure 7: Focused targets on E47/3954 and E47/5001
Exploration of the regional targets is scheduled to commence during the first half of 2024. The initial exploration plans call for the high priority areas to be mapped and rock chipped to enable further ranking of these areas before possible drill testing later in 2024. Given the experience and geological knowledge of the known Mineral Resource areas, the Company is confident that these priority target areas of the Weeli Wolli Formation BIF can be assessed rapidly to enable an aggressive exploration program to yield positive results.
CSA Global did not visit Exploration License Application 47/5001; however, they have identified based on a review of available aerial imagery supported by GSWA 250k mapping, there is evidence supporting the presence of significant strike lengths of Weeli Wolli Formation BIF and Boolgeeda Iron Formation particularly in the southeastern corner of the tenement (Figure 7). The Sirius Extension deposit located in the northeast of E47/3954 is hosted in Boolgeeda Iron Formation and planned exploration in E47/5001 will attempt to investigate for geological and mineralisation similarities.
Figure 8: Focused targets on E47/5001
Figure 9: Focused targets on E47/3954 and E47/5001
E47/5001 has yet to be granted. This is the subject of the standard and regulatory process. Although the Company is confident that E47/5001 will be granted in the first half of 2024 there is no guarantee, and this represents a risk.
Forward Work Programme
The Company will now commence planning for:
1. a detailed mapping programme to be completed by experienced iron ore geologists over all Weeli Wolli Formation BIF ridges with a focus on delineating mineralisation boundaries supported by a technical mapping report, and
2. a focussed and targeted exploration drilling campaign.
Geological Risks
The main geological risk is the limited drilling data supporting the present geometry and continuity of the exploration potential polygons.
Hancock Project Reserves (AIM: 26 April 2023)
Table 16 – Hancock Project Ore Reserves
| Material | Tonnes (Mwmt) | Volume (Mbcm) | Fe % | SiO2 % | Al2O3 % | P % | LOI % | Mn % |
| Proved | ||||||||
| Probable | 1.9 | 0.7 | 60.2 | 5.69 | 3.54 | 0.12 | 3.85 | 0.02 |
| Total | 1.9 | 0.7 | 60.2 | 5.69 | 3.54 | 0.12 | 3.85 | 0.02 |
Table 17 – Hancock Mining Inventory
| Material | Tonnes (Mwmt) | Volume (Mbcm) | Fe % | SiO2 % | Al2O3 % | P % | LOI % | Mn % |
| Unclassified | 4.2 | 1.6 | 60.5 | 4.11 | 3.53 | 0.15 | 4.74 | 0.04 |
| Total | 4.2 | 1.6 | 60.5 | 4.11 | 3.53 | 0.15 | 4.74 | 0.04 |
Competent Person Statements
The information in this announcement relating to Ore Reserves is based on information compiled by Mr. Jeremy Peters, a Director of Burnt Shirt Pty Ltd, a Fellow of The Australian Institute of Mining and Metallurgy (AUSIMM) and Chartered Professional Geologist and Mining Engineer of that organisation who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Peters consents to the inclusion in the document of the information in the form and context in which it appears.
The information in this announcement that relates to the Hancock Mineral Resources is based on information compiled by Mr. Howard Baker, a Competent Person who is a Fellow of the Australasian Institute of Mining and Metallurgy and is an employee by Baker Geological Services Ltd. Mr. Baker has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 edition of the ‘Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code)’. Mr. Baker consents to the disclosure of information in this report in the form and context in which it appears.
The information in this report that relates to Exploration Results is based on information compiled by Mr Mark Pudovskis. Mr Pudovskis is a full-time employee of CSA Global Pty Ltd and is a Member of the Australasian Institute of Mining and Metallurgy. Mr Pudovskis has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). Mr Pudovskis consents to the disclosure of the information in this report in the form and context in which it appears.
The Base Case identified includes an assumption that Inferred Mineral Resources are mineable and a general technical and economic assessments has been applied. This assumption does not provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Development Study will be realised.
For further information please visit the Company’s website at www.alienmetals.uk or contact:
[1] E47/5001 has yet to be granted and is the subject of the typical and standard regulatory process. The Company is confident that E47/5001 will be granted in the first half of 2024
[2] The mining studies of the Development Study Report assumed only the 3.9Mt current mining inventory is mined, although the base case financial evaluation assumed >90% of the Resource will be mined over time.
[3] See additional Mining Inventory section.
[4] Reference Price for 62% Fe
