December 2006 Half Yearly Report
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AXO000174_Half Year Financial Report.pdf (136 KB)Review and Results of Operations
Consolidated net loss after income tax for the half-year was $6,262,446 (2005: 2,331,643). The increase in the loss reflects the continued increase in the scale of activities of the Group since the corresponding period; with work progressing on the bankable feasibility study for the Balla Balla vanadium project and a pre-feasibility study of the Balla Balla iron ore project. The result for the period was also materially effected by the recognition of the fair value of options granted during the period and in earlier periods. This non-cash charge totalled $2,443,053.
Balla Balla Project
Aurox commenced work with engineering consultants, Lycopodium Limited on the bankable feasibility study (“BFS”) for the Balla Balla vanadium project in February 2006, initially focusing on the development of plant and infrastructure capable of producing 4,720 tonnes of vanadium (5,900 tonnes ferrovanadium – FeV80) annually. Following the signing of a Heads of Agreement with 2 major Chinese resource companies in September 2006, Aurox and Lycopodium commenced a pre-feasibility study work on a 2 million tonne per annum (“tpa”) titanomagnetite concentrate circuit to operate alongside the vanadium plant.
Financial evaluation of the BFS and PFS by Aurox and its advisors has determined that developing the Balla Balla project in 2 stages is the most effective and low-risk avenue to timely production and cash flow. All sections of the Balla Balla vanadium BFS and associated titano-magnetite concentrate PFS are complete, apart from the financial modelling section, which will be completed shortly following the recently announced Sales Agreement with Chengde Iron & Steel
Group Co Ltd of China.
The first stage of the project proposes the construction of the 2 million tpa concentration circuit. The capital cost of this stage is estimated to be A$155M and includes all plant and infrastructure required to function as a stand-alone operation. This would be followed by the second stage of the project, the construction and operation of the vanadium circuit, which will run alongside the titanomagnetite concentration plant. The capital expenditure for the vanadium plant is currently estimated to be a further A$290M; however, this figure may vary depending upon the prevailing capital cost environment at the time when the second stage is initiated. Lycopodium estimates that the time required to upgrade the titano-magnetite concentrate PFS to a BFS level document is approximately 4 months.
During the December 2006 quarter the Company completed its first drilling programme designed to better delineate the Balla Balla titanomagnetite mineralisation extending 11 kilometres beyond the project’s current 5 kilometre BFS area. The 42 reverse-circulation drill holes (3,800 metres) were targeted to supplement the 92 holes drilled by several past explorers across the Don Well and Caine Well areas prior to 1999. The new 2 metre composite drill samples were analysed for key economic elements including iron, vanadium and titanium. As anticipated, the assay results confirm the exceptional widths, tenor and continuity of the 16 kilometre Balla Balla titanomagnetite horizon.
In December 2006 mining consultants Orelogy Pty Ltd carried out a conceptual mining study focused on minimising the strip ratios associated with mining the ore required to produce 2 million tonnes of titanomagnetite concentrate per annum. The study concluded that a strip ratio of 1 tonne of ore to 0.25 tonnes of waste could be maintained for 12 years within the 5 kilometre BFS area. Incorporating the 11 kilometres of Balla Balla titanomagnetite extend-ing east and west beyond the BFS area, the study demonstrated that the same 1:0.25 ore-to-waste strip ratio could be maintained for 30 years.
Further support for the project was recently received when Western Australian Planning and Infrastructure Minister, Alannah MacTiernan announced that a preliminary study has identified the island, located 80 kilometres west of Port Hedland, as having the greatest potential to cater for the shipping of more than 300 million tonnes of iron ore and satisfying multiple user demand in the area. The port could be operational within 6 years. A deep-water port at Ronsard Island would bring shipping facilities to within 25 kilometres of the Balla Balla iron ore-vanadium project.
Full details of the project status are set out in the December 2006 Quarterly Report (www.aurox.com.au).
In February 2007 the Company announced a 92% increase in the Balla Balla Ore Reserve estimate comprising 103.8 million tonnes 45.7% Fe and 0.63%V2O5. The revised reserve estimate was undertaken by Golder & Associates Pty Ltd based on mineral resources in the Central and Western deposits and included additional hangingwall iron and vanadium mineralisation.
On 13 March 2007 Aurox announced the signing of a long term Sales Agreement to supply Chengde Iron and Steel Group Company Ltd with 3 million tonnes per annum of titanomagnetite iron ore concentrate from its Balla Balla project commencing 2009.
The agreement links the concentrate sales price directly to the ‘Hamersley Premium Fines price’ negotiated annually between the world’s major steel producers and Australian iron ore suppliers.
Yalgoo Exploration
Assay results have been received for a recent rock chip sampling programme at Aurox's Wadgingarra group of tenements near Yalgoo. The programme was designed to locate and test the occurrence and iron content of Banded Iron Formations identified from previous geological mapping and the interpretation of airborne geophysical data. Samples of magnetite-rich BIF returned values of up to 39.97% Fe and separate, parallel horizons of hematite-rich BIF returned values of up to 50.88% Fe. The magnetite-rich BIF is the same target currently being drilled by Ferro West P/L on the tenements immediately east of Wadgingarra, and approximately 500m of strike of this horizon occurs on Aurox ground. The hematite-rich BIF layers occur parallel and to the west of the magnetite horizon, and sampling has shown that they exist throughout a sequence at least 1.5 km thick which extends for approximately 8 km along strike within the Aurox tenements.
A programme of detailed outcrop sampling is due to start immediately to prove the true extent, tenor and thickness of individual hematitic units within the BIF sequence. Concurrent with this iron sampling programme is a detailed gold and copper soil sampling programme over Aurox’s Wadgingarra, Carlaminda and Noongal groups of tenements at Yalgoo. The purpose of this programme is to extend and infill geochemical grids completed previously which returned values
of up to 1,496 ppb Au and 822 ppm Cu. Previous rock chip samples from these tenements have yielded maximum values of 7,068 ppb Au (7.0 g/t) and 159,127 ppm Cu (15.9% Cu). The programme will test newly interpreted structures identified from airborne geophysical data which host extensive historical mine workings.
Other
The Company received proceeds from the exercise of options of $2,821,482 during the period and issued a total of 6,630,328 new fully paid ordinary shares on conversion.