Khnaiguiyah Zinc-Copper Project

The advanced Khnaiguiyah Zinc-Copper Project in Saudi Arabia is Alara's flagship Project.

The Khnaiguiyah Project is operated by Khnaiguiyah Mining Company LLC (KMC) a 50:50 joint venture between Alara and United Arabian Mining Company LLC (Manajem), a privately owned Saudi Arabian mining company.

The Project is the second most advanced base metals project in Saudi Arabia after the Jabal Sayid Copper-Gold Project, previously held by Citadel Resources Group Limited (ASX: CGG), which was taken over by Equinox Minerals Limited (TSX and ASX: EQN) in January 2011, which itself was taken over by Barrick Gold Corporation (TSX and NYSE: ABX) in July 2011.

The Project comprises the Khnaiguiyah Mining Licence, 2 Exploration Licences and 5 Exploration Licence applications pending grant, totalling approximately 380km2.

The Khnaiguiyah Project has excellent road, power and camp infrastructure and is located adjacent to a bitumen road, approximately 200km west of Riyadh, the capital of Saudi Arabia, near the major Riyadh to Jeddah highway. It is approximately 30km northwest of the town of Al Quwayiyah.

Definitive Feasibility Study

Alara Resources is pleased to announce the completion of its Definitive Feasibility Study (DFS) for the Khnaiguiyah Zinc-Copper Project in Saudi Arabia (Project). A positive DFS confirms the Khnaiguiyah Project as technically and financially robust.

With the successful completion of the DFS, the focus of Alara has shifted from that of an explorer to that of potential producer seeking completion of project financing and ultimately commencement of mine construction and operation through Khnaiguiyah Mining Company LLC, KMC.

Project Highlights

  • Life of Mine (LOM) of 13 years at 2 million tonnes per annum (Mtpa) throughput with production forecast to commence in Q4 2015 when zinc prices are expected to significantly strengthen.
  • Project direct capital expenditure of US$257 million (including owner's cost and contingency).
  • Production of 1 410 000 tonnes (t) of zinc concentrate (775 000t of zinc metal) and 210 000t of copper concentrate (52 000t of copper metal) for LOM.
  • First 7 years of full production show an average of 79 750t of zinc metal as concentrate and 5 750t of copper metal as concentrate with peak production at 99 000t of zinc metal and 8 250t of copper metal respectively as concentrates.

Financial Highlights

  • Project revenue A$2 074 million.
  • EBITDA A$873 million.
  • Project NPV of A$170 million at an IRR of 23%.
  • Payback of 2.8 years
  • LOM zinc operating costs including treatment and refining charges (TC/RC) of US$0.50/pound (lb) after copper credits and US$0.46/lb in the first 7 years with copper price assumed at an average of US$6 114/t.
  • First full year zinc production (2016) costs forecast (after copper credits) to be in the 2nd quartile of cash costs for the western world mines with copper costs forecast to be in the bottom quartile.

Development Highlights

  • Khnaiguiyah Mining Licence issued in December 2010 with 30 year exclusive term and no mineral royalties payable.
  • Grant of approvals in July 2012 from the Presidency of Meteorology and Environment in Saudi Arabia for construction and mining operations at the Khnaiguiyah Project.
  • Potential for up to 75% project finance from the Saudi Industrial Development Fund (SIDF) reduces expected equity requirement.

Future Growth and Opportunities

  • The DFS is based on currently known JORC Proved and Probable Reserves of 26.1 million tonnes at 3.3% Zinc and 0.24% Copper.
  • All ore bodies are open along strike and depth. Significant upside exists for further discoveries along the host shear zones which have been mapped for several additional kilometres within the Exploration Licence Applications. Many ancient workings remain unexplored.
  • Plant throughput rate is based on conservative assumptions. To access high grade ores in the first few years, the mining rate has been planned to be higher than the plant throughput rate of 2Mtpa. This means that in-pit mining will be completed in approximately nine years and the last four year's production will be derived entirely from lower grade stockpiles. It is expected that some or most of this stockpile production may be brought forward with minimum additional expenditure.

More detailed information on the completed DFS can be found in our latest ASX Announcements.

Zones 1-4 at the Khnaiguiyah Zinc-Copper Project:

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