Mirabela says positives result from study

Mirabela Nickel Limited announces that a scoping study for a nickel sulphide smelter at its Santa Rita project has returned positive results with preliminary cost estimates as follows:
Capital expenditure – US$254m

Operating cost – US$111/t of concentrate

As a result of these encouraging results, the Company is proceeding with a full feasibility study to build a smelter at Santa Rita. A smelter would provide the following major benefits:

- Substantial increase in nickel payability

- Increase in payability for credits for Cu, Co, Au and PGEs.

- Savings on transport costs

- Optimization of mine, concentrator and smelter circuit

The scoping study indicates that a smelter at Santa Rita could be an important value proposition for the Company, said Managing Director Nick Poll. It’s all about making the most of the economies of scale that are available to us and Santa Rita now has the third largest open-cut, nickel sulphide mining reserve in the world. A smelter would allow the Company to capture the revenue and operating benefits of downstream processing, whilst reducing transport costs. We believe that the demand for nickel matte, the smelter product, is even stronger than the demand for nickel concentrate, so a smelter would also strengthen the Company’s strategic position in the nickel market, he said.

At this stage, we are working through the options and implications of a smelter in detail. We remain focused on producing nickel concentrate, starting in 2009, from the currently planned operation for at least the first few years, said Mr Poll.

The results of the smelter study coincide with today’s announcement of new drilling results that extend mineralization about 120m down dip of the recently announced open-cut mining reserve, with composite intersections up to 135m grading 0.83% nickel located in the Southern high grade zone of the Santa Rita deposit. The occurrence of such thick mineralization is very encouraging and is expected to increase the open-pit mining reserve.

The positive smelter study has come on the back of several announcements in the past month, including the first mining reserve at Santa Rita, an updated CAPEX for the planned increase in capacity of the concentrator to 4.6mtpa and the mandating of debt financing.

Study details

WorleyParsens, a leading specialist in pyrometallurgical processing, completed the scoping study using the following Mirabela assumptions:

• 230ktpa concentrate throughput rate

• 12% nickel concentrate grade

• 25,000t of nickel a year output

The above assumptions are consistent with an expected 6.0mtpa production rate from the Santa Rita mine.

Whilst the current planned capacity of Santa Rita is 4.6mtpa for 18,500t of nickel output, it is expected that this will be increased to 6mtpa for 25,000t of nickel within the first few years of operation due to continued growth of the resource.

The scoping study costs are estimated to within +/- 50% and used a Brazilian Real exchange rate of R$2.05 to the US dollar.

WorleyParsons has been commissioned to proceed with the feasibility study, a team has been appointed and work is underway. The project will be split into two stages. Stage one is expected to cover preliminary test work, thermodynamic modelling, conceptual engineering and estimation of capital cost to within +/- 30% for a cost of about A$2m. Stage two will cover more detailed engineering and estimation of capital cost to within +/- 15%. It is expected Stage one will be completed in Q3 2008 and Stage two in Q3 2009. It is expected that a smelter would take about 2 years to construct.