Emily Ann delivers first nickel-in-concentrate

LionOre Mining International‘s (LIM-T) 79%-owned Aussie subsidiary LionOre Nickel has announced that the first nickel-in-concentrate was produced at the Emil Ann underground nickel-copper project in Western Australia, last week.

Processing of Emily Ann’s nickel sulphide ore began on Nov. 12, after the orebody was intersected on the first stoping level. During the next few weeks, LionOre intends to access ore levels on three horizons.

At full steam, Emily Ann’s conventional, on-site nickel-sulphide concentrate plant is expected to process 250,000 tonnes of ore annually, containing an average of 6,700 tonnes of payable nickel. Average operating costs are projected at about US$1.60 per lb. (including smelting, transport and refining costs and by-product credits). The operation is expected to hit full steam during the first quarter of 2002.

Concentrate from Emil Ann will be shipped to Inco’s Canadian smelters under a life-of-mine, off-take agreement signed in December 2000.

Situated 540 km east of Perth in the Lake Johnston greenstone belt, the Emily Ann deposit contains a probable reserve of 1.2 million tonnes grading 3.4% nickel plus indicated and inferred resources of 2.1 million tonnes grading 3.98% nickel. LionOre plans on reassessing the reserve calculation’s conservative recovery and dilution factors over the next few months now that access to the ore body has been gained.

Total pre-production capital expenditure at Emily Ann has remained on budget at A$42 million funded via project loans from NM Rothschild & Sons (A$17 million) and Inco (N-T) (A$25 million).

For the three months ended Sept. 30, LionOre Mining International suffered a net loss of US$1.6 million (or 1 per share), compared with a year-ago loss of $51,018 (nil per share). The loss is thanks, in large part to LionOre’s 41.65% stake in the Tati Nickel operations, in Botswana. The quarter’s nil revenue compares with revenue of US$3.1 million during the year-ago period. Cash consumed by operations soared to US$1.3 million from just US$108,455 the previous year.

For the first nine months of 2001, LionOre’s net earnings amounted to US$598,513 (nil per share) on revenue of US$3.6 million, compared with net earnings of US$4.4 million (4 per share) on US$7.6 million. Operations ate up US$2.5 million in cash, up from US$575,060 the previous year.

LionOre’s Tati stake netted it a US$607,673 loss during the recent quarter; for the first nine months of the year the operation chipped in profits of US$3.6 million. A year earlier, the figures were both on the positive side to the tune of US$2.8 million and US$7.6 million, respectively. Cash operating costs averaged US$1.72 per lb. for the nine-month period, up from US$1.68 in the corresponding period of 2000.

Tati’s poor performance is attributed primarily to a lower nickel price, which averaged US$2.83 per lb. during the first nine months of 2001, down significantly from the US$4.10 per lb. in the same period in 2000. Also eating away at the operation’s bottom line and pushing cash costs higher during the recent nine-month period were lower by-product metal prices (mainly palladium, platinum and copper)

The Phoenix expansion project at Tati remains on target and within budget for commissioning of the wet concentrator during the first quarter of 2002. The expansion aims at virtually doubling Tati Nickel’s production to 12,500 tonnes of payable nickel metal per year on throughput of 3.6 million tones per year. Anglo American (AAUK-Q) holds a 43.35% stake in Tati; the remainder is held by the government of Botswana.

Back in Australia, at the Thunderbox gold deposit owned by LionOre (60%) and Australian junior Dalrymple Resources (40%), government approvals are being sought and project financing is being negotiated.

Exploration also continued at various joint-venture projects in the Wildara region.

At the end of September, the company had cash and equivalents of US$17.6 million and total debt of US$31.1 million, including US$18.6 million of project debt at Emily Ann.

Subsequent to the end of the latest quarter, LionOre closed out certain forward sale contracts from its hedge book in response to falling nickel prices. The move generated a profit of about US$4 million, which will be realized over the original hedge period. LionOre’s hedge book now covers 7,098 tonnes of nickel sold forward over a 30-month period beginning April 2002, at an average price of US$6,600 per tonne, including the recent hedge profit.