Kipoi Central

Tiger commenced RC and diamond drilling programs at the Kipoi Central deposit in 2007. Significant copper and cobalt mineralisation was found in most holes with a number of intersections recording exceptionally high grade (104.5m @ 8.7% Cu, 109m @ 7.6% Cu, 102.5m at 7.3% Cu, 118.6m @ 7.0% Cu).

On the basis of the significant results received and the extent of the mineralisation defined, Tiger committed to a resource drilling and feasibility programme to determine the viability of establishing a mining operation.

An initial inferred resource estimate for Kipoi Central of 13.4Mt at 3.3% Cu for 439,000 tonnes of contained copper, 20,000 tonnes of cobalt and 1,416,000 ounces of silver was completed in March 2008 by Cube Consulting Pty Ltd. This includes a high grade component, upgraded to a Measured and Indicated Resource, of 2.8Mt at 8.1% Cu containing 230,000 tonnes of copper, 5,200 tonnes of cobalt and 441,000 ounces of silver.

The high grade component of the resource and the metallurgical properties of the ore allowed Tiger to develop a staged development plan that fast tracks production and minimizes initial capital expenditures.

Click here to view ASX announcements relating to Kipoi Central.

Revised Definitive Feasibility Study

Following the completion in September 2008 of the Definitive Feasibility Study (“DFS”) prepared by Lycopodium Engineering Pty Ltd for the proposed Stage 1 development of the Kipoi Project, and in response to the tightening in global debt markets, an internally managed Optimisation Study (“OS”) was completed. The key objectives of the OS were to revise the DFS so as to be able to minimise pre-production capital expenditure and debt payback period, to maximise the return on capital, and to bring the Kipoi Project into early production.  

The principle modification made in the OS was to simplify the Stage 1 operation by removing the two blast furnaces recommended in the Lycopodium study.  Stage 1 has been reduced to a HMS and spiral operation processing 900,000tpa of high grade oxide ore in order to produce a +25% copper concentrate (at a rate of approximately 150,000 tonnes of copper concentrate per annum). The HMS plant would operate for approximately 3 years before being replaced by the proposed Stage 2 SXEW processing plant. Over this period of time a total of approximately 116,000t of contained copper in concentrate would be produced.

During the life of the HMS plant operation it is expected that a total of 4.8Mt @ 2.97% Cu ore and unrecovered material from Stage 1 processing will be stockpiled and then used as feed in the planned Stage 2 SXEW processing plant.

Arccon completed an independent review of the OS in June 2009. The Arccon review confirmed the validity of the OS and estimated the capital expenditure of the revised Stage 1 development plan to be US$30 million, being an approximate 50% reduction in capital expenditure compared to estimate shown in the DFS. Arccon estimated operating cash costs to be in the order of US$0.34/lb. The Company considers that the revised definitive feasibility study (“RDFS”) by Arccon provides a sound development position allowing the Company to get into early production and generate significant cash flow that will allow for acceleration of the development of the long mine life Stage 2 SXEW operation and continuation of development drilling targeted at expanding the current resources and reserves at the Kipoi Project.
 

Key Project Economics

The key financial outcomes of the RFDS based on a range of copper prices are set out in Table below. The results demonstrate significant increases in project profitability at increased copper prices, whilst also showing the project remains profitable at a copper price of US$1.50/lb.

Table: Key financial outcomes based on a range of copper prices

Kipoi Cobalt Investigation Work – Stage 1

The Company is continuing to investigate opportunities to further enhance the Stage 1 project economics by looking into ways by which cobalt rich ore being mined within the Stage 1 pit could be upgraded to produce a saleable concentrate. Samples of this material have been dispatched to Australia where metallurgical testwork is underway. Testwork results are expected in October 2009.

 Project Tenure

Kipoi Project Acquisition Agreement

In November 2006 Tiger Congo sprl, an 85% owned subsidiary of the Company, entered into an agreement (“November 2006 Agreement”) with various parties (“Vendors”) to acquire 100% of Congo Minerals sprl (“Comin”) in stages. Comin owns 60% of SEK sprl (“SEK”), which is the holder of licences covering the Kipoi project. The remaining 40% of SEK is owned by Gecamines.

In accordance with the November 2006 Agreement (as amended) Gecamines was paid US$3 million in April 2009 (refer below) and the Vendors were paid US$5.59 million in July 2009 such that in July 2009 Tiger Congo increased its interest in Comin to 50%.

Tiger Congo is required to pay the Vendors a further US$12 million on or before 29 May 2010 in order to acquire the remaining 50% interest in Comin.

In September 2009 Tiger Congo and the Vendors agreed to settle a potential contract dispute on the following terms:

• Tiger Congo paid the Vendors US$2.55 million on 15 September 2009.
• The Vendors acknowledged Tiger Congo has met all contractual obligations to date and is entitled to its 50% shareholding in Comin.
• Tiger Congo assumes board control and management control of Comin.
• Upon payment by Tiger Congo of the amount due on or before 29 May 2010 into the trust account of an escrow agent, Tiger Congo is authorised (without further recourse to the Vendors) to transfer the remaining 50% shareholding in Comin to Tiger Congo (so that Tiger Congo holds 100% of Comin).
   

DRC Mining Review

The DRC government review of the Kipoi Mining Contract was completed in January 2009 after a revised agreement was signed with Gécamines in respect of the contractual arrangements governing the Kipoi Project. This brought to a conclusion the review by the Government of the DRC of the contractual arrangements governing the Kipoi Project.

Principal amendments to the original contractual arrangements governing the Kipoi Project are as follows: 

• Royalty - Gécamines shall be entitled to a 2.5% royalty on gross sales (previously Gécamines was entitled to a 4.5% royalty on gross sales).  
• Cash Payments - Payments are to be made by Comin to Gécamines as follows (previously no such cash payments were payable to Gécamines): 
• US$3 million upon the revised agreement coming into effect (paid in April 2009).
• US$2 million on commencement of production.
• US$2 million on the first anniversary of commencement of production.
• A further US$35/tonne of copper for proven reserves above 200,000 tonnes of copper. 
• Project Development Funding - Comin to provide 30% of development funding by way of non-interest bearing loans. Interest payable by SEK on the remaining 70% of development funding to be capped at LIBOR plus 3.5%.

Development Funding and Timing

The Company is planning for the Stage 1 Development at Kipoi to be primarily funded by a package of principal and subordinated debt given the short payback period (refer Table above).

Principal Debt Component 

In September 2009 the Company mandated Nedbank to act as exclusive arranger of an ECIC supported debt facility, for use in the Stage 1 development at the Kipoi project. Nedbank is one of the four largest banking groups in South Africa. The ECIC scheme facilitates and encourages South African export trade by underwriting bank loans and investments outside South Africa.

Key indicative terms of the proposed debt facility include: 

• Facility amount of US$16 million. 
• Floating interest rate of LIBOR plus 2.5%. 
• Facility includes comprehensive commercial and political risk insurance policies (terms and fees to be agreed with ECIC). 
• Facility will include hedging requirement. Quantity of copper to be hedged dependent on hedge price. At a hedge price of US$1.80/lb approximately 10% of total production is required to be hedged (quantity reduces as hedge price increases).
• Facility subject to standard conditions including due diligence (technical and legal), documentation, security / first ranking charges and ECIC and South African Exchange Control approval.
• The Company anticipates the due diligence and documentation process will take approximately 4 – 5 months and is targeting funding drawdown for the first quarter of 2010.

Subordinated Debt Component

The Company has also received indicative debt and offtake proposals from metal trading groups seeking to secure rights to acquire the copper concentrate to be produced. These include proposals for subordinated debt facilities of up to US$15 million.The Company anticipates the due diligence and documentation process to finalise these arrangements will be significantly shorter than the timeframe in respect of the principal debt. The Company plans on selecting and entering into exclusive negotiations and due diligence with a metal trading group in the near future.

Development Timing

The Company remains confident that funding for the Stage 1 development at Kipoi will be secured by early 2010, and that the significant component of this funding will be debt. Based on the short construction and pre-strip period and the relatively simple nature of the proposed development and operation, the Company continues to target commencement of production for mid 2010.

 
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