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Overview
Current programme and targets
Infrastructure
The Nkout prospect is strategically well-situated, close to existing infrastructure, in a significant iron ore province which includes Sundance Resources' Mbalam iron deposit located 180km to the south east. The whole province lies within reach of the site of the proposed deep water port at Kribi on the Atlantic coast. The Preliminary Economic Assessment (PEA), expected to be delivered by the end of Q1 2012, should give greater detail on the infrastructure requirements at Nkout, exploring both cooperation with Sundance and other iron ore producers and a stand-alone project.
The town of Djoum is located 280 km SE of Yaoundé, of which 170km is macadam road and 110 km is laterite road. From Yaoundé it takes five to six hours to reach Djoum, via Sangmelina. Resource EstimateThe Company announced its maiden inferred mineral resource at Nkout on February 1, 2011. In total, SRK estimated an inferred mineral resource of some 1.04Bt grading 34.2% iron. On June 16 2011, the Company reported a 36% increase in the resource to 1.42Bt at 33.6% iron. 700Mt of the magnetite BIF, representing 50% of the resource, has been promoted to indicated category at Nkout Centre. The resource estimate now covers approximately 6 km of the 20 km long magnetic anomaly. A further resource update to include oxidised zone drilling is expected at the end of September 2011. Table 1: Nkout Centre, Mineral Resource Estimate
Notes: (1) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability (2) The effective date of the Mineral Resource Statement is 11 November 2011 (3) The Mineral Resource Estimate for the Nkout deposit was constrained within lithological and grade based solids and within a Lerchs-Grossman optimised pit shell defined by the following assumptions; metal price of USD1.40/dmtu; slope angles of 35º and 44º in the oxide and fresh material; a mining recovery of 97.5%; a mining dilution of 2.5%; a base case mining cost of USD1.40/t and an incremental mine operating costs of USD0.05/t/10 m below the 80 m reference RL and USD0.05/t/10 m above the 80 m reference RL; process operating costs of USD4.39/t crushed DSO, USD2.3/t crushed oxide and USD4.49/t crushed BIF ore; and G&A costs of USD 2.31/t crushed ore. Background The Nkout Iron prospect is located in the Company's Djoum licence in southern Cameroon. The project was identified from interpretation of airborne magnetic and remote sensing data in 2006 whilst investigating gold occurrences in the 150km long, Sangemalina-Djoum Archaean greenstone belt. Djoum, the closest town to the Nkout prospect, is located 280 km southeast of the Nsimalen International Airport in Yaoundé. The route from Yaoundé incorporates 170 km of macadam road and 110 km of laterite road. The Nkout project area is located approximately 7.5 km due south of the Djoum to Mbalam road. The terrain is typical of the southern tropical forest of Cameroon, characterised by dense jungle, rivers, swamps and areas of steep topography. The Nkout deposit is 100% owned by the Company. Exploration Programme The Company had drilled 12,000m to end May 2011, including 8,000m in 2011. A total of approximately 35,000m of drilling is targeted in the current year. Three rigs are currently on site, two of which are owned and operated by the Company. The number of rigs will increase to seven by September 2011, of which four will be in-house owned and operated. Nkout Centre Resource Potential The Nkout Centre model is open at depth and SRK recognises that there is potential to increase the Mineral Resource Estimate by targeting material that falls below the optimised pit shell but remains potentially economic. This material, based on a metal price of USD1.40/dmtu is considered by SRK to be potentially economic, should sufficient exploration data be collected that confirms the geometry and continuation of the mineralisation and that enables a classified resource to be estimated. SRK has estimated that an additional 300 to 600 Mt lies below the optimised pit shell used for constraining the Inferred Mineral Resources. The potential quantity of tonnes is conceptual in nature as there has been insufficient exploration or demonstration of economic viability to report these in the Inferred Mineral Resource category at the current time. It is uncertain if further exploration will result in these targets being defined and reported in a future Mineral Resource Estimate. These potential tonnages reflect a range of material within SRK's wireframe solid models outlining the interpreted down dip extent of mineralisation. Figure 2: Essong & Djoum Licence - Total Magnetic Intensity Map
Database Validation The QA/QC program for Company's Nkout project consists of alternating the insertion of a blank, standard and duplicate sample on a regular basis within the sample train. The Company uses standards with varying grades which are also alternated. All samples have been assayed at the accredited OMAC laboratory in Ireland. SRK found that the results of the above described QA/QC program indicate that the Company's Nkout assay databases were appropriate for Mineral Resource Estimation. Data Verification Howard Baker as qualified person completed the verification of data on which the Nkout Resource Estimate was based. This verification included an assessment of QA/QC data, sample preparation and assay methodologies, density data, data inputs and survey data used in the estimate. Data was validated by using field checks, statistical methods and evaluating the Company's protocols. Geological Modelling, Resource Estimation Assumptions, Parameters and Methods Nkout Centre and East, being a 5.9 km portion of a larger 20 km strike length magnetic anomaly, forms an east-west trending magnetite Banded Iron Formation ("BIF") with an oxidized cap of dominantly haematite mineralisation. SRK created a geological model based on the lithological logging and magnetic susceptibility data enabling the hanging wall and footwall contacts of the BIF unit to modelled and a three dimensional solid to be created. A statistical review of the validated drill hole data enabled grade based domains to be created within the oxidized cap. Internal metasedimentary waste domains created within the BIF and oxidized cap were based on lithology logging, magnetic susceptibility data and predominantly Al2O3 assay grades. A 5 m composite file was used in a geostatistical study (variography and Quantitative Kriging Neighbourhood Analysis, "QKNA") that enabled Ordinary Kriging ("OK") to be used as the main grade interpolation method. The interpolation used an elliptical search following the predominant dip and dip direction of the geological domains. The results of the variography and the QKNA were utilised to determine the most appropriate search and estimation parameters. The interpolated block model was validated through visual checks and a comparison of the mean input composite and output model grades. SRK is confident that the interpolated block grades are a reasonable reflection of the available sample data. Metallurgical Test Work Metallurgical test work is currently underway on a composite sample of saprolite ore (Zone 120 and 130 combined) from the Nkout Centre project. The test work is being undertaken by SGS Minerals in the UK. The sample is a composite sample with approximately equal proportions of material from three drill line sections drilled during the 2010 programme. Samples were taken from eight drill holes and the target Fe head grade of the sample was 44%, being in-line with the average grade of this domain. The gravity separation tests showed little potential for lump production; however, the results indicated that the production of a sinter fines product from the saprolite ore has potential. For each size fraction below 3 mm, a high specific gravity ("SG") fraction with an Fe content of the order of 65% Fe or greater was produced, with Fe recoveries in some size fractions exceeding 70%. While significant further test work is required, the early indications are that the Nkout saprolite presents the potential for the production of a sinter fines product through a flowsheet largely based on gravity separation. Based on the assay results obtained from the first two completed drillholes, SRK selected 94 representative samples for Davis Tube Testwork (DTT). The DTT results, based on a grind size of P90 less than 100µ, have been reviewed by SRK to evaluate the quality of the Fe concentrate that can be produced from the Nkout Centre project in relation to the feed grade. The DTT shows that a high grade concentrate averaging greater than 70% Fe can be attained with low levels of contaminants. The mass recovery shows an average of 42.2% and 87% of the Fe relates to a recoverable magnetite mineral phase. Mineral Resource Classification The Nkout project has been classified as containing Inferred Mineral Resource in the fresh BIF and oxidised domains. This is mostly due to the wide spaced drilling and the poor geological continuity of the internal metasediments and areas around the interpreted faults. Inferred Mineral Resources have been extrapolated no more than 200 m down dip of the deepest drillhole intersection. It is the opinion of SRK that the down dip extension of Inferred Mineral Resources is justified in areas of unsupported blocks due to the known down-dip extensions as observed through the deep drilling at Nkout that has intersected magnetite BIF up to 390 m from surface.
Archive airborne magnetic data indicates a 10km long, domain change dipole interpreted as an area of highly magnetic rocks likely to host Banded Iron Formation ("BIF") targets in an Archaean setting. The Company considers that the dimensions of Nkout and surrounding hills represent a potentially economic iron deposit.
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