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Tuesday, December 06, 2005

Allegiance firms Avebury numbers

MiningNews.net Allegiance firms Avebury numbers

BUDDING nickel miner Allegiance Mining has slapped a $A77 million price tag on the development a 10,000 tonne per annum nickel producing operation at Avebury in Tasmania.

On initial reserves, the project has a net present value of $A26 million and in internal rate of return of 17%, but the company's business plan envisages a NPV of $A94 million with an IRR of 29%.

The business plan involves the rapid expansion of resources and reserves at Avebury next year during the construction phase.

Mine output will initially be 600,000 tonnes per annum for 5700t of nickel in concentrate, before being ramped up to a 1 million tonnes pa for 10,000t of nickel in concentrate.

Allegiance managing director Tony Howland-Rose told MiningNews.net project financing was expected to be complete within 6-8 weeks, with first production potentially before the end of next year.

"We have been working with potential banking partners for the past year and they are well aware of what we're doing and how we're doing it, so we're not starting from the word go," Howland-Rose said.

He added project funding would likely be in the order of half debt and half equity, with the possibility of more equity than debt.

In terms of ramping up production to 1Mtpa, Howland-Rose said it could be within 18 months after the operation gets off the ground, but there were advantages if the ramp-up took longer than anticipated.

"We don't anticipate any metallurgical problems?but if you start on a lower scale, then you will have all those problems solved and you will know what the capacity of the mill really is," Howland-Rose said.

"You don't really know that until you run it, all the theoretical work in the world doesn't really help you in a lot of cases."

The project has a mine life of around eight years, but Allegiance doesn't consider it resource-constrained because the orebodies are known to extend contiguously along strike to the west and east.

Avebury has proven and probable reserves of 4.4Mt at 1.16% nickel for 51,000t at a 0.85% cut-off, and resources of 11Mt at 1.02% nickel for 118,000t at a 0.4% cut-off ? including 7.7Mt at 1.23% for 92,000t at a 0.8% cut-off.

Shares in Allegiance hit a 52-wek low of 0.5c in May before gaining ground to hit a 52-week high of 16.5c in August. The stock gained 1c (7.1%) during the day's trade to close at 15c.

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