Oriel Resources is pleased to announce that Bateman Minerals and Metals Ltd (Bateman) has completed the Shevchenko Nickel Project Feasibility Study and has issued a comprehensive Executive Summary report. The complete detailed report comprising all the relevant appendices is in preparation for release early in 2006. The study was carried out by Bateman as the lead contractor with consultancy support from Wardell Armstrong International (WAI) (UK), Mintek (South Africa) and Polysius (part of the ThyssenKrupp group of companies, Germany) for the resource modelling, mining plan and environmental studies, smelting technology and ore pre-treatment processing aspects respectively.

Highlights of the study, include:
• 47 year project operating life
• Nickel production in first 10 years peaks at an annual 23,765t nickel in 109,000t of ferronickel after an 18 month ramp up period.
• NI43-101 compliant Proven and Probable nickel laterite ore reserves of 104.4 million tonnes at 0.79% nickel.
• Capital direct field cost for process plant, infrastructure and mine of $448 million and $594 million including indirect field costs, EPCM, insurances and owner’s costs.
• Average operating costs of $1.91/lb Ni for initial 10 years and $2.12/lb Ni for the first 25 years. Industry average cash cost is $3.42/lb Ni.
• 25 year project NPV (at 8% discount rate) is $275 million and $328 million for full 47 year project life with IRR’s of 13.55% and 13.82% respectively, pre-tax at $4.25/lb nickel price (current price $6.50/lb).

The Shevchenko deposit is located within the Kostanai District of Kazakhstan, some 50km southwest of the town of Zhitiqara. The deposit is accessed by a part bitumen, part hardcore road across the steppe from Zhitiqara to the village of Shevchenko which lies a few kilometres to the west of the deposit. Oriel owns 90% of the project and has a Mining Contract with the Government of the Republic of Kazakhstan which allows for full exploitation of the deposit.

The resource infill drilling, geological modelling and mine optimisation plan has increased the overall project life considerably and it is projected to be 47 years based on mining the resource in 24 years. The AusIMM JORC (1999) and NI 43-101 compliant reserve is estimated as follows:
Proven – 21.392 million tons @ 0.85% Ni
Probable – 83.023 million tons @ 0.77% Ni.
The Shevchenko resource and this reserve statement have been prepared using Datamine® and NPV Scheduler® by Dr P Newall and Mr A Wheeler of WAI. Dr. Newall is a qualified competent person in accordance with definitions set out in National Instrument 43-101 and is a chartered engineer (CEng) and Fellow of the Institute of Materials, Minerals and Mining (FIMMM).

The mine production schedule will produce approximately 2.5Mtpa direct feed ore running at 1.04% Ni in the first ten years of operations with ferronickel production from the furnaces scheduled to start by the end of 2008. Mining of the orebodies is completed in 24 years and direct feed to the furnaces averages 0.95% Ni over this period. Mining produces substantial quantities of lower grade material which will be stockpiled for smelting beyond this 24 year mining period and an overall project life of 47 years is envisaged.

The process plant is based on flash drying and calcining of the ore and uses DC (direct current) arc furnace smelting technology to produce the ferronickel alloy. This technology offers the most economical solution for extracting the nickel, due to comparatively low capital costs, high thermal energy efficiency and high Ni recovery. DC furnace technology has also been shown by Mintek to be well suited to processing the fine Shevchenko ores over the range of compositions expected. Falconbridge has selected a very similar process flowsheet and DC arc technology for their Koniambo project in New Caledonia.

 

The process flow sheet described below was developed by Bateman, based on the results of comprehensive smelting and ore pre-treatment test work. It consists of ore milling, drying and upgrading in a single Polysius Aerofall™ mill, calcining in two Polysius Polcal™ suspension calcining systems, smelting in twin-electrode DC arc furnaces and a ladle refining station to remove impurities from the molten ferronickel. This is followed by a shotting station where the molten ferronickel alloy is granulated, dewatered and stored ready for shipment. Slag from the furnaces will be granulated and disposed on a dump at site, but can also be used as a construction aggregate.

The mined ore is upgraded by screening of the dried product in the drying plant by 6% for a mass loss of some 15% prior to calcining. Accordingly, the average grade of calcined feed to the furnaces in the initial 10 years is 1.2% nickel from which recoveries across the furnace and after refining is estimated at 92.3%. The low grade screened ore will be stockpiled for treatment later in the project life.

The smelting plant is based on two 80 MW DC arc furnaces designed by Bateman that are capable of smelting approximately 2.16Mtpa of upgraded, dried and calcined ore. The average annual production over the initial 10 years (after the 18 month ramp up) of ferronickel alloy is approximately 86,500 tons at a nickel grade of 24% for 20,600t of saleable nickel. The 25 year ferroalloy production will average 74,000t with saleable nickel of 18,125t per annum.

The ex-works operating cost for the first 10 years is projected as $1.91/lb Ni and $2.12/lb Ni for 25 years. The average cash operating cost for the life of the project is expected to be $2.36/lb Ni. The ferronickel industry average cash cost of production in 2005 was $3.42/lb of nickel.

Capital direct field costs for the plant, infrastructure and mine is $448 million and $504 million including indirect field costs. The total EPCM project capital including insurances and owner’s costs, excluding contingency is $594 million.

The NPV (@ 8%) is $275 million for the first 25 years with an un-geared IRR of 13.55% and the NPV over the life of the project is $328 million with an IRR of 13.82 % based on a nickel price of $4.25/lb, pre –tax.

The project economics at a nickel price of $4.25/lb, pre-tax, are shown in the table below.

 

Oriel has implemented a tax efficient corporate structure in which to operate the project. However, the project economics have been analysed on a pre-tax basis as Oriel is currently negotiating agreement to have amended taxation legislation applied to the project which may offer relief from corporate income tax for up to 10 years.

Oriel is at an advanced stage with the negotiations for an exclusive off take agreement with ThyssenKrupp Metallurgie that covers worldwide sales of the ferronickel. At this stage of the project development costs associated with the transportation to market have not been factored into the cash cost of production.

The project is extremely well served with main utilities such as power (500kV transmission lines), gas (pipeline linking Russia and Kazakhstan) and main rail line linked to the extensive rail system available throughout CIS, Russia and into China from the nearby town of Zhitiqara. The main infrastructure elements in the capital estimate, include:
• a new 110 kV power line and gas pipeline from Zhitiqara,
• a new rail siding and handling facilities at Zhitiqara,
• a new access road linking the site with existing national road and some limited upgrading of the existing national is also provided in the capital cost, and
• repairs to an existing water reservoir and the construction of a water supply line.
This infrastructure has been designed to be suitable for three 80 MW DC arc furnaces, should an additional furnace be constructed at a later date.

When constructed and in full production the operation will directly employ 752 personnel in a region that suffers from low industrial activity. Socio-economic studies show that the project will bring much needed employment to the region and will be welcomed by the local population.

Dr Sergey V. Kurzin, Executive Chairman, said “I am pleased that this major milestone has been successfully reached on the Shevchenko Project. Oriel is now working with Endeavour Financial, its financial advisers, to look at the best way to advance the project in order to unlock the maximum value for the shareholders. We are therefore considering various options as to how to progress the project including financing and strategic partnerships. The long term sustainable supply of nickel to the growing markets in Asia, Russia and Europe is the main objective of the Shevchenko nickel project and we have reached the stage where it is much closer to becoming a reality."

Ends

For further information, please contact:
Dr Sergey V Kurzin, Executive Chairman, Oriel Resources plc
Tel: +44 (0) 20 7514 0590

Nick Clarke, Director of Mining, Oriel Resources plc
Tel: +44 (0) 20 7514 0590

Jonathon Brill/Billy Clegg, Financial Dynamics
Tel: + 44 (0) 20 7831 3113

Vanguard Shareholder Solutions
Tel: 1-800 866-788-9288