ZAMBEZI RESOURCES LIMITED
ZRL - Africa Downunder Conference Presentation - Mr Julian Ford, Managing Director
Fri, 5 Sep 2008 05:15AM
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ZAMBEZI RESOURCES LIMITED (ZRL)
Ticker code: ZRL,ZRL
Website: http://www.zambeziresources.com
Industry: Materials,General Mining
Principal Activities:
Exploration for copper, gold and uranium.
Address:
17 Ord Street, Ground Floor
WEST PERTH
WA
Phone: (08) 9216 9000
Fax: (08) 9216 9090
Executives & Directors
Mr Brian Rear , Non Exec. Chairman
Mr Julian Ford , Managing Director
Dr Geoffrey Johnson , Non Exec. Director
Mr Lloyd Flint , CFO
Ms Allison Forte , Company Secretary
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Company ASX Announcements
Company ASX announcements can be viewed on the ASX website.
Announcements from the preceding six months are shown below.
Please refer to the relevant stock exchange if any of the above information is incorrect
ZAMBEZI RESOURCES LIMITED (ZRL) Events
Europe/London
ZAMBEZI RESOURCES LIMITED (ZRL)
| Updated shareholder information | Fri, 4 Jul 2008 |
| Company Secretary Appointment/Resignation | Fri, 4 Jul 2008 |
| Uranium Joint Venture Update | Wed, 2 Jul 2008 |
| Copper Gold Projects Update | Wed, 18 Jun 2008 |
| Copper Gold Projects Update | Tue, 20 May 2008 |
| Withdrawal of Becoming a substant. holder dated 6 July 2007 | Wed, 14 May 2008 |
| Large VTEM Anomaly Defined at Kangaluwi Copper Project | Fri, 9 May 2008 |
| Quarterly Activities and Cashflow Report | Wed, 30 Apr 2008 |
| Substantial Mineralisation intersected at Kangaluwi Project | Tue, 29 Apr 2008 |
| Cheowa Copper-Gold Project Drilling Results | Tue, 15 Apr 2008 |
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PRESENTATION BY JULIAN FORD, MANAGING DIRECTOR OF ZAMBEZI RESOURCES LIMITED (ZRL)
“Africa Downunder Conference Presentation”
http://www.brr.com.au/event/51082
FRIDAY, SEPTEMBER 5, 2008, 3:15 PM.
ZRL Thank you. Good afternoon, ladies and gentlemen. It’s a hard act to follow after Mark. Hopefully, I can convince you to buy some stock, Mark, and I think
10 you’ve convinced me. A local press broker rated Zambezi the best 10 bag-in in 2008, recently. The theme of our conference states Managing Risk, you can’t have reward without risk. What I aim to do is tell the Zambezi story and as I go through to explain to you how we’ve managed risk. Like a lot of people out there, we’ve been…had a lot of trouble this year. In my opinion, there are
15 four things in exploration investment in Africa and those four are your project, your people, your political risk, and obviously funding, and that theme I’ll take through as I go through my presentation.
A lot of you are familiar with Zambezi, and I won’t go through this in detail.
20 What I’d like to focus you on are three things. First, we were in copper and gold; second, we have a number of joint ventures and in a volatile environment and with the project portfolio have that important, we’ve demonstrated the capacity and the ability to do good JVs with good partners, Rio Tinto and Glencore, these are multi-billion dollar companies. The third
25 issue there is Zambia, we’ve chosen to manage our risk rather than diversify that risk. Time will tell whether that has been a successful strategy or not, but I’ll deal with some of the specific issues, so shall examine risk as I go through my presentation.
30 The first issue of product, I guess is, what (inaudible) (00:01:35). This is a hundred and ten years of the copper price and I think it’s important in these tough times when certainly fear has overtaken greed, is to look at the fundamentals. What this shows us in US dollars per pound copper is that we’re all familiar with the Supercycle by now….is that we would expect
35 copper to trade at $4.50 a pound for the next 10 years foreseeable future. We will make very good money at those prices and I think it’s important that we remember that.
The other issue about our project is, I guess, diversification. We are…..what
40 is, 100% of entire mineral problems, we’ve got 17,000 square kilometres. We started pegging this ground in 1997. We have four years of in-country experience. We’ve built up a really good team of people and I’ll talk a little about people as I go through.
45 Presenting for the first four years, a ramp up in the logistics and the issues are dealing with a country such as Zambia where there have been a lot of interest has been very important. We’ve managed that well. We drilled 100,000 meters last year and we’ve generated multiple projects. I think it’s also good to remember the fundamentals of Zambia, this is a good place to do investment. Sure, there are issues right now and this specifically revolve around two issues. One is political uncertainty. The current President who was laid to rest yesterday was very, very good for Zambia and certainly there are some risks associated with who will be the next President. We will know
5 that by the end of the year.
The second issue is royalty rates, more specifically, windfall tax, as that legislation is currently…. legislator, I think, you won’t see any new mines in Zambia. We’re confident that those issues will be resolved. We managed that
10 risk very carefully and we’re certainly of the view that it’s not the same as intention for no more new mines in the copper industry. This is a good infrastructure and I’ll talk a little bit about some of these later.
On theme of what we have in the entire province, these are four IOCG(U)
15 provinces, two in Australia, Gawler Craton in Cloncurry District, Zambia, and Garages in Brazil. We have CVID or Nobel have just brought on two new projects about the same grade of copper and gold as we have. They’ll produce 290,000 tonnes of copper in concentrate this year.
20 We’ve proved up a hypothesis with Cheowa, it’s a small project, it’s copper and gold about the same grade as Garages, about the same grade as Prominent Hill in Gawler Craton and not too different from Ernest Henry. Kangaluwi, we think, is a company maker .There has been a lot of money so a lot more time on that.
25
With multiple other projects, we did find a lot of uranium. This time last year a lot of people are encouraging us to become a uranium company. We’ve started sector knitting and we’ve joined venture those.
30 Given the idea of our project portfolio, this is, I think about 16,000 square kilometres, multiple projects, good infrastructure, relative to Lusaka. I’ll overlay now that tenement profile over the Cloncurry District. The tenements you see there in blue is what belongs to Ivanhoe, Australia who raised $125 million in cash for a then consideration of half a billion in July this year. To me
35 what this demonstrates is the perception of risk in Australia towards Australia say versus Zambia. We have a market cap of $20 million. I think the issue is perception more than reality and hopefully, I’ll talk about some of those issues as I go through.
40 Again, our project portfolio, the areas you see in red have been joint ventured. The uranium rights have been joint ventured to Lithic Metals and Energy, they are currently drilling two uranium projects that look very, very sexy. The area in red is a joint venture with Rio Tinto, it’s the only uranium joint venture they have anywhere in the world. The issue of bringing in joint
45 venture partners and sticking to knitting I think is important.
Given our idea of scale, this is 30 kilometres, left-to-right. What you see there in the brightly coloured is a VTEM only. It’s a graphic exist. The circles there you see are very granite domes which carry copper, gold, and uranium and the hypothesis here is that uranium has more grade in north. We flew this in May this year, VTEM results came back in June. When you overlay that over the Helimag signature which we flew in 2005, you can see a very strong coincident of uranium with ((inaudible) (00:.06:11). We have just finished the
5 mapping on the ground there. The samples will go off next week. We hope to drill this before next year, if indeed this has a mineral tenor to warrant a mine, it’s going to be a rare sized project and we have the right to retain 49%. So that’s been a really good deal for us. We didn’t really know what Rio were looking for when they came knocked in our door and approached us for this
10 JV. They had been on the ground and it took us some two years to negotiate that JV, but hopefully, it will be a some good blue sky for us.
If we move onto our core business, Cheowa, this is the cross-section of Cheowa, what you see there in brown is a small resource of indicated
15 resource, the green is Inferred resource, and the light green, we’ll still have two results coming back. We don’t have the drill density there to take that into a resource but based on the life of mine, roughly 1.1% copper in about 0.3 grams.
20 What you see….a photograph there on the right, we’ve really just drilled about 3 kilometres of what is a 13-kilometre strike length. The important thing I think there, in terms of this risk management is to look at the commercial factors that cost us $2 million in discovery costs. We joint ventured this in 2006. Glencore spent just over $50 million now, and then 51% interest and
25 paid us nearly $3 million in management fees. So we’re ahead as it is and we retained 49%. Our view, however, is that this project is to be……is likely to be too small for Glencore. Both the cash forecast cost and capital cost are much worse in Kangaluwi,. Well, not as good I should say, and so our intention is to make a decision on a joint venture development of this project or sale. We’ve
30 had two approaches and we’ll make that decision next year once we’ve got a new resource out and the pre-feasibility study in the next four months
Kangaluwi then sits down there to the right, this is the geological outline. We did a lot of extra work here. This is pretty much an entire Greenfield belt when
35 we went in here. Anglo had drilled few holes over the 17,000 square kilometres in the 60’s. The dark lines there are good structures, we’ve done a lot of work here at geochem, VTEM, Helimag so we’ve got a really good database. If we zoom in there now, what you see here is a geochem outline, that’s a pretty hard geochem outline. It’s 500 parts per million.
40
The two projects we drilled initially, before we even had the geochem data because we had all the malachites sticking out of its surface which is so in Kangaluwi. We’ve now completed just in the 55,000 meters there and obviously at Kalulu (inaudible) (00:09:04) at Imboo. We’ve just… we’ll finish
45 the end of next week a whole target drilling in Kalulu and Imboo and then we’ll demobilize. Our target here was initially 40 million tonnes at about 1% copper. We expect that they have to drill about 110,000 meters to achieve that. Our view is we’ve probably exceeded that already and when you go and then look what we’ve done….this is Kangaluwi…we’ve drilled about 30 diamond holes last year and the rest was assay. This is what we had planned to drill this year. If you look at the cross-section, what you’re seeing is 1% to 2% copper and about 10 to 30 meters wide. In some areas it’s up to 50 meters wide or 70 meters wide. We have had multiple holes parathetically
5 deep and so we think this makes it….basically outcrops its surface. But the geologists are kind of getting the iron, I should say. The VTEM results have been very successful as well and with the use of that VTEM, we’re now starting to get 2% to 3% coppers, up to 5% copper with 0.8 gram gold, but in essence, we think we’ve obviously drilled the entire strike length. The dotted
10 line there is the….on the VTEM. The red dotted line is really what we’re really targeting where we think the high grade is. Waiting for those results we then mobilize down to Chisawa, you can see this in the bottom right. Now you might not read those, but basically we’re getting 10 to 30 meters there at 1% to 2% copper. We think we might have 20 to 30 million tonnes just at Chisawa
15 alone. We only have results back so far for about 2 kilometres of that 3.5 kilometres strike length. It’s all mineralised and it continues at about 10 meters to 30 meters wide.
What we’ve done now, we’ve drilled it. We’ve got 28 kilometres strike length
20 here. We’ve drilled 8 kilometres so far. Of that 8 kilometres drilled, 6 kilometres has been mineralised and we think we’ve got 40 million tonnes already. This is down to depth of about 200 meters. We stuck a whole lot of holes in here at Kalulu and Imboo. When we get those results back early next year, we’ll have a feel if this project will go to 100 million, maybe 200 million
25 tonnes based on a 0 to 200 meters below surface, open pittable. So obviously, we think this is company maker. We should announce our first result early next year in terms of the JORC Resource, just shows you that the drilling we’re about to there.
30 So, in summary then, Kangaluwi has been pretty good. We’ve drilled to a sum of 60,000 meters. We’ve spent about US$10 million there. We reckon we’ve got 40 million tonnes based on the 8 kilometres strike length we’ve drilled, we’ve still got the 20 to go. Discovery cost at this stage, we expect to be about 1/1.5 cents by the time we’ve taken it or resource will improve and
35 probable expect might be approaching 2.5 cents per pound. These are good values in our scoping study numbers which are pretty good in terms of both capital intensity and operating cost. We’ll de-mob there in two weeks’ time, wait to get those results, and really the issue for us is to trying to get a head around what happens with the Presidential election and what happens with
40 the windfall taxes. Under the current regime has it’s promulgated, we don’t think it’s going to be worthwhile developing a mine in Zambia. Our view is, however, that that will change and we’re pretty confident that those windfall taxes will be modified and certainly the payments and the indications we have is that there would be some modifications to those.
45
I guess one of the important things is you’re going to be in the right region, and in Zambia there over the last four years have been three new smelters built. The Indian…Mepani built first the one, which is Glencore. The second one is just about to be completed by (inaudible) (00:13:03), an Indian company, and the Chinese consortium, non-Chinese, non-First metals in mining, and Union Copper will complete the other one, which is a nicer smelt and (inaudible) (00:13:16) flash smelter, and Mepani’s a nicer smelt. So there are some issues to do with the transport of concentrates from the DLC in
5 Zambia. We think that our forecast from CIU is that there’ll be about a 45% (inaudible) (00:13:35) capacity in Zambia next year and that’s in spite of (inaudible) (00:13:41) coming on stream. We think we’re in a great position. We probably have the best and certainly the biggest number of undeveloped copper mines or potential copper mines in the region. So far, all our mines
10 looked like being producing so far copper concentrate.
So in summary then, we’ve got a great team. We announced a strategic review at end of July. We basically demobilized 5 drill rigs. We have put the majority of our geologists with friends and family in the DLC and some of our
15 joint ventures. So, we’ve retained a team of about 20 geologists intact and geologists intact and the view is that when the political risk situation improves in Zambia, we’ll remobilize those back in Zambia and we intend to do that next year. We control a whole IOCG copper province. Time will tell whether we’ll find more than another one or two in Kangaluwi’s. (inaudible) (00:14:18)
20 is what drilled out. At this stage, our preference is not to take that into production but to sell it and focus on Kangaluwi. Our preference is to keep that 100%. As I mentioned to you, a pretty exciting joint venture with uranium with Rio. We think Zambia remains a favourable investment destination, good infrastructure, great people to work with, an educated work force, good
25 hydroelectric power. It was a tough decision having spent four years building up a team to then put those team on hold and redeploy that team into the DLC into uranium joint ventures that we have and we’ll probably deploy some into either Botswana or Namibia as well. It’ll gain us a good regional experience and we hope that 2009 will be a hell of a lot better than 2008 has
30 been. Thanks very much.
PRESENTATION CONCLUDED
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