Southern Cross Resources (SXR-T) has agreed to explore for Tertiary-hosted uranium mineralization on recently listed Equinox Minerals‘ (EQN-T) 916-sq.-km Ethiudna exploration licence in South Australia.
Under the deal, Southern Cross must spend at least A$100,000 on exploration, and pay Equinox a royalty of 1.5% on any uranium it produces from the tenement. Equinox also retains the rights to basement-hosted mineralization at Ethiudna.
The tenement adjoins Southern Cross’ Goulds Dam and Katchiwilleroo licenses, and is believed to contain the headwaters of the Billeroo and Curnamona palaeochannels. Previous drilling on Ethiudna indicates that the Billeroo palaeochannel, which hosts the Goulds Dam resource, extends southward on to Equinox’s licence.
Southern Cross says about a third of Ethiudna has the potential to host Tertiary uranium mineralization; the property is also home to several outcroppings. The company plans to begin drilling and exploration later this year.
In the meantime, the company is readying its drills at Brooks Dam prospect, a belt of uranium mineralization northwest (and downstream) of its Honeymoon deposit.
The prospect has a strike length of at least 1 km and grade thickness values ranging from 0.23 metre per cent to 0.83 metre per cent. It has been delineated by grades greater than 0.03% U3O8, based on an internal dilution of less than 20 cm, and across a mining width of at least 20 cm. Two thirds of this resource lies within the mining lease; the remainder is north, on exploration licence 3017 (T.N.M., June 7-13/04).
The company will then focus its drills on Goulds Dam, home to a low-grade resource totalling 13.4 million lbs. U3O8. Southern Cross figures previous gamma-logging may have underestimated the uranium content of the deposit.
In the boardroom, Southern Cross chief executive Mark Wheatley has replaced Oliver Lennox-King who left his post as chairman to pursue other business activities.
In other news, Equinox Minerals recently completed its listing on the Toronto Stock Exchange, and concurrently raised $15.6 million via an initial public offering of 22 million shares at 71 apiece.
Proceeds will go toward acquiring the 49% interest it doesn’t already hold in the Lumwana copper-cobalt project in Zambia. The company has inked a letter of intent to acquire Phelps’ stake for US$5 million. Phelps Dodge will retain a 1% net smelter return royalty, which can be eliminated by paying US$10.6 million on a development decision, or US$12.8 million once commercial production begins.
A bankable feasibility study completed in October indicates that Lumwana has the potential to produce an annual average of 112,000 tonnes of copper from the Malundwe and Chimiwungo orebodies over 20 years.
During the first five years of operation, open-pit mining will target Malundwe to produce a concentrate running 44% copper. Offsite smelting and refining will produce an average of 140,000 tonnes of copper per year.
In subsequent years, an on-site roast-leach-electrowinning plant would process concentrates produced from Chimiwungo containing 25% copper. Average annual production is pegged at 100,000 tonnes of LME Grade A copper cathode (plus by-product cobalt and sulphuric acid).
The two-stage approach takes into account Chimiwungo’s higher cobalt content. Mineralization at Lumwana is predominantly sulphide, with about 5% classified as oxide or transition. There are also significant cobalt and gold credits.
Malundwe is home to in-pit proven and probable reserves totalling 87.3 million tonnes grading 0.94% copper, 0.03 gram gold per tonne, and 128 parts per million (ppm) cobalt. Another 8.3 million tonnes of 0.64% copper, 0.02 gram gold, and 80 ppm cobalt are classified as inferred resources.
At Chimiwungo, in-pit reserves come to 205.3 million tonnes averaging 0.79% copper, 0.02 gram gold, and 207 ppm cobalt; inferred resources amount to 134.6 million tonnes of 0.6% copper, plus minor gold and cobalt.
The estimates are based on an average copper cutoff grade of around 0.3%. Both ore bodies remain open laterally and at depth; several exploration targets have been identified nearby.
The study pegged average cash costs at US42 per lb. (including byproduct credits), the after-tax internal rate of return at 21%, and after-tax net present value (at an 8% discount) at US$399 million. The estimates are based on a copper price of US95 per lb.
Pre-production capital costs for the initial stage are estimated at US$296 million, excluding the mining fleet, contingency and pre-stripping. The second stage carries a price tag of US$288 million.
Equinox is currently looking to arrange project financing, which may include taking on a new joint venture partner. Commercial production is planned for the second half of 2006, pending financing and a 24-month development period, including 18 months of construction.