Posted Thu, 09 Dec 2004
ABN 45 078 548 562
6 Kings Park Road, West Perth, WA 6005
Telephone 61 8 9420 1700 Facsimile 61 8 9420 1777
Australian Stock Exchange Code: AZR
ASX Release 9 December 2004
Société Generale backs Aztec to complete Koolan Iron Ore Project Bankable Feasibility Study
SG Australia (“SG”) a member of the Société Generale Group, has today agreed to fund a Bankable Feasibility Study (BFS) for Aztec Resources Limited’s 100% owned Koolan Iron Ore Project, which will help speed the development of the resource. SG will provide Aztec with funding of A$3,000,000 to complete the feasibility study that is already under way and to provide working capital. The feasibility study loan indicates SG’s intention, subject to credit approval, to support Aztec with project finance. The first loan will allow Aztec to fast-track to the project financing stage, saving time with due diligence and documentation. Aztec considers the terms of the SG funding to be attractive. It includes options issued to SG at an exercise price of 23 cents, a premium of 58% to the market price of Aztec shares at the time of approval. SG Australia currently holds 4.7% of shares in Aztec. Commenting on the agreement today Chairman of Aztec, Ian Burston, said “We are delighted with SG’s support, which affirms our belief that the Koolan Iron Ore Project will be a robust long life project. We expect the study to confirm the feasibility of an initial production rate of 2 million tonnes per annum of iron ore over a mine life of 15 years.”
Details of the Project
In October 2004 the Company announced the details of a successful drilling program at Koolan Iron Ore deposit, Western Australia that resulted in a 60% upgrade in the resource. Preliminary modelling work then confirmed the robust nature of the project. At Aztec’s AGM, the company set out preliminary feasibility study parameters which showed that the project would generate free cashflow before tax and depreciation of $240 million.
The preliminary study parameters are set out below:
Mine Output 2mtpa
Life of Mine 15 years
Mineable Ore 30mt
Iron Ore Revenue A$30/t
EBITDA Margin A$10/t
Total Project Revenue $900m
Total Costs $600m
Total Income $300m
Net Cashflow* $240m
* Before Tax and Depreciation, undiscounted
The above figures assume a 100% fines product and iron ore prices based on 2004 benchmark prices of around $30 per tonne for fines.
Iron ore prices for 2005 are predicted to rise by 25% to $37/tonne for fines and around $47/tonne for lump. Any increase in iron ore prices, together with the potential for some lump product at Koolan, would have a significant positive effect on the project’s profitability. Funding Package SG has offered funding on competitive terms that will enable Aztec to fast track completion of the BFS and to move rapidly towards the realisation of value of the Koolan Iron Ore Project for shareholders.
SG will provide Aztec with loan funds as follows:
Loan Amount: A$3,000,000
Purpose: To fund the costs of completion of the BFS
Term: To June 2007
Lender Options: On signing SG will be issued 15 million options at an exercise price of 23 cents or 58% above the trading price on the date the terms of facility were agreed. The exercise of the options would inject up to $3.45m into Aztec. Moving Towards Development
Aztec is continuing exploration and development activities at Koolan with BFS work progressing rapidly.
Current drilling at Koolan has been focused on confirming and increasing the resource base at Mullet-Acacia and Eastern-Barramundi, identifying potential new resources at Acacia, and deep drilling at Main Pit to confirm continuity and grade of the existing resource for ore reserve estimation. Results of the drilling program are expected shortly.
For further information contact:
Ian Burston, Aztec Executive Chairman +61 (08) 9420 1700
Rozanne Ichikowitz, Grant Thornton +61 (02) 8297 2522
Laurence Read/Leesa Peters, Conduit PR +44 (0) 20 7936 9095/+44 (0) 7979 955 923
Jonathan Guy, Seymour Pierce +44 (0) 20 7107 8009
Fiona Reid, Grant Thornton +44 (0) 870 991 2318