Dr Sergey V Kurzin, Executive Chairman and CEO of Oriel Resources plc (the “Company”) AIM: ORI is pleased to announce the results of the Company’s Preliminary Feasibility Study (“PFS”) on its Shevchenko nickel project in Kazakhstan. Mintek, South Africa, as PFS managers and assisted by Bateman Metals Ltd South Africa with the design and cost estimating for the smelter, GBM Minerals Engineering Consultants UK with the infrastructural design and costs, and by Wardell Armstrong International (WAI), UK with the resource estimate, mine planning, and EIA prepared the study. Their main conclusions in the report were as follows:

• Financial analysis based on a nickel price of $4.50 per pound and a 10 per cent discount rate, gives a robust pre-tax internal rate of return of 26.6 per cent and a net present value to the project of $489 million
• Annual 140,000 tonnes ferronickel product grading over 22 per cent nickel from year five of production with 31,000 tonnes contained nickel
• Operating cash costs estimated at $1.53 per pound of nickel, over the life of the project, which would place the project as one of the lowest cost ferronickel producers in the world.
• Maximum pre-production capital exposure of $346 million

Oriel Work Programme

Oriel commenced due diligence work on site in March 2004 following its successful admission to AIM, which consisted of three main activities:

• Confirmation core drilling (completed in July)
• Infill core drilling (completed in August, core logging and analysis in progress)
• Bulk sampling from trial pits (completed early August)

WAI confirmed a JORC classified resource of some 46 million tonnes at 1.01 per cent nickel representing 58 per cent of the original Soviet C1+C2 resource of 79 million tonnes. Oriel continues to confirm the additional nickel deposits in the licence area and additional occurrences in the region and expects to add significantly to this resource base in the near future. As a result of these positive reports Oriel commissioned the Pre-feasibility Study published today (to see the Shevchenko Project Executive Report please click here or to save the document on your computer please right-click your mouse here and choose "Save Target As" from the menu).

 

The process route selected considers the initial construction of two 80MW DC-Arc furnaces followed by the construction of a third furnace in year three of operations. Pyrometallurgical recoveries are expected to be 92 per cent into a refined ferronickel product grading 22 per cent nickel. Annual refined ferronickel production from year five is expected to be about 140,000 tonnes per annum containing 31,000 tonnes of nickel.

In addition, Oriel has commissioned consultants Brook Hunt to provide information as to likely consumers of the ferronickel product. They estimate that stainless steel output will increase by 3.3 per cent per year over the next ten years and that both Europe and China may be ready markets for the Shevchenko ferronickel product.

Also as part of its programme towards a full bankable feasibility study, which it plans to complete next year, Oriel has shipped a 450 tonne bulk sample of Shevchenko ore for testwork at Mintek, South Africa in their 2MW DC Arc furnace which is programmed to commence in November. A further 35 tonne sample of nickel ore has been shipped for drying and calcining test work at Polysius, part of the ThyssenKrupp Group, Germany and testwork is currently in progress. Oriel is in negotiations with three major international technology and equipment suppliers for assistance in preparation of the feasibility study, project financing and possible future off-take agreements for the ferronickel products. Oriel will be appointing its chosen technology and engineering partners by November 2004.

On a recent visit to Kazakhstan by Oriel’s Directors and a number of analysts from the UK and Canada, meetings were held in Zhitigara, Kostanay and Astana with senior Government officials at the local and federal levels. These meetings demonstrated and confirmed full central government support for the Shevchenko Project and the company’s activities in Kazakhstan. Further to these meetings Oriel is currently negotiating potential tax concessions and privileges in line with current legislation of Republic of Kazakhstan which could substantially improve the post tax project economics. In addition, Oriel is in the process of negotiating with potential suppliers of electricity, gas and rail links to the project site for them to provide the capital infrastructure requirements in return for long term supply contracts which may substantially further reduce initial capital commitments.

Executive Chairman Dr Sergey V Kurzin said "Today's study fully justifies the enthusiasm of investors when we came to the market in March. We have the advantage at Shevchenko of an existing infrastructure with good transport links, low cost power, gas and labour and other readily available resources that means we should be able to complete and operate the Project very competitively. Now that the resource has been shown to be viable we plan to press ahead vigorously in order to deliver value to our shareholders."

For further information please contact:

Dr Sergey V Kurzin
Executive Chairman and CEO

or Stephen R Dattels
Managing Director
Tel: 020 7514 0590

 

To see the Shevchenko Project Executive Report please click here or to save the document on your computer please right-click your mouse here and choose "Save Target As" from the menu.