AQUILA RESOURCES INC. 
By ?Project Definitive Feasibility Study has confirmed the technical and economic feasibility of the Washpool Hard Coking Coal Project based on a 2.6Mtpa open cut operation producing hard coking coal over 16 year LOM.
?Capital expenditure is estimated at A$335m plus 10% contingency of A$33m.
?Operating Costs of approximately A$125 per tonne FOB (excluding royalties)
?The Study anticipates production ramping up to meet mechanical completion of Stage 1 of the Wiggins Island Coal Export Terminal (WICET). An application has been made for a further 1Mtpa for Stage 2 of the WICET.
?Washpool in association with seven other coal producers has reached a commercial agreement with QR Network to proceed with the construction of Stage One of the Wiggins Island Rail Project (WIRP).
?Increase in Measured JORC Resource from 108.8Mt (May 2010) to 124.9Mt.
?Independent marketing study indicates that the Washpool Hard Coking Coal Project could reasonably expect to attract a long-term price at, or only marginally below, the Standard Grade Hard Coking Coal benchmark.
?Mining Lease approval remains on schedule for March 2012.
Aquila Resources Limited (ASX:AQA ?the Company? or ?Aquila?) is pleased to announce that Washpool Coal Pty Ltd, a wholly owned subsidiary of Aquila Resources Limited, has completed the Definitive Feasibility Study (DFS) for the Washpool Hard Coking Coal Project (the Project). The Washpool Hard Coking Coal Project is a proposed open cut coal mine located north west of Blackwater in the Bowen Basin.
The DFS proposes an open cut operation mining 7Mtpa of ROM coal to produce 2.6Mtpa of high rank hard coking coal over a mine life of 16 years, inclusive of initial ramp-up in production, with the coal to be exported through the proposed Wiggins Island Coal Export Terminal in Gladstone. The DFS has addressed the Aquila Coal Definitive Feasibility Study Deliverables and presents a business case and Project Execution Plan which has confirmed the Project?s technical and financial viability.Perth: Level 2 Aquila Centre, 1 Preston Street, Como WA 6152 Telephone (61) 8 9423 0111 Facsimile (61) 8 9423 0133
Brisbane: Level 18, 10 Eagle Street, Brisbane QLD 4000 Telephone (61) 7 3229 5630 Facsimile (61) 7 3229 5631
Jakarta: Level 2 Zone B Wisma Raharja, JI. TB Simatupang Kav 1, Jakarta, Indonesia 12560 Telephone (62) 21 7884 7214 Facsimile (62) 21 7884 7215
Johannesburg: Block C, Ground Floor, 28 Sloane Street, Bryanston 2191, Gauteng, South Africa (27) 11 4631340 Facsimile (27) 11 4635083
Capital ExpenditureThe DFS indicates the project can be developed for a capital cost of A$368 million, which includes provision for a 10% contingency. The increase in capital expenditure from the Feasibility Study (A$320 million) can largely be attributed to an expansion in project scope from 1.6Mtpa to 2.6Mtpa in December 2010.
The Project has been divided into three well-defined areas of work. The work packages and consulting firms were:? Coal handling and processing: DRA Pacific
? Mine design and planning: Xenith Consulting
? Infrastructure and engineering: GHD
Capital Summary | Base Case (A$m) |
Coal Handling Preparation Plant | 116 |
Surface Infrastructure | 188 |
Power | 16 |
Pre-production | 15 |
Subtotal | 335 |
Contingency | 33 |
Total | 368 |
Mine, plant and rail spur layout
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Operating ExpenditureThe DFS indicates that the mine can produce coal at approximately A$124.9 per tonne (FOB operating cost, excluding royalties, over the first ten years) and the mine has a life of 16 years, although additional potential resource in the North-West and South-East areas of the mine, may allow for a mine life in excess of 16 years.
The Mining and Processing cost of A$93.5 per tonne compares to A$87 per tonne in the Feasibility Study with the increase largely driven by the scope expansion to 2.6Mtpa, which has brought forward higher strip ratio coal. The Rail and Port cost of A$31.4 per tonne is based on advanced discussions with above and below rail providers and WICET.Operating Costs | A$ Cost per Prod t |
Mining and Processing Costs | 93.5 |
Rail and Port Costs | 31.4 |
Total | 124.9 |
Aquila has identified a number of areas where additional benefits may be generated through further optimisation of the capital expenditure and operating costs estimates. Capital expenditure initiatives include optimisation of the dam and levee bank design and review of a ?fit for purpose? approach to CHPP design and fabrication. In addition, Aquila has engaged an external consultant to review and benchmark the operating cost parameters with preliminary review of mining costs indicating a potential A$3-5 per tonne improvement.
Resource and ReservesThe target mining seam in the Project area is the Scorpio seam, which forms part of the Burngrove Formation. The deposit is contained within a perched basin and the Scorpio seam has been found to be continuous within that basin, dipping at 3-5 degrees from the margins and flattening out towards the centre of the basin.
Schematic of the Burngrove and Rangal Coal Measures
The basin extends approximately 7km along its east-west axis and approximately 4km along its north- south axis. The coal seam is typically 6m in total thickness of which 4.0m is coal material with the remainder being stone partings and inter-burden. The seam is split into five plies (A to E) and, from the surface, is intersected at an approximate minimum depth of cover of 20m at the edges of the basin and a maximum depth of cover of 67m in the central portion of the perched basin. This will make Washpool one of the shallowest coal mining projects in Australia.
The JORC compliant Resource Statement has been upgraded and now totals 196.7Mt. It benefits from further knowledge gained in the 2010/2011 exploration drilling programme. A significant increase in Measured Resource from 108.8Mt (May 2010) to 124.9Mt was achieved through infill drilling and ongoing coal quality analysis.3
JORC Coal Resource
Measured Mt | Indicated Mt | Inferred Mt | Total Mt |
124.9 | 9.7 | 62.1 | 196.7 |
A total of 108Mt of run of mine (ROM) coal of Proved plus Probable Reserves has been calculated by Xenith Consulting Pty Ltd during the Feasibility Study. This Reserve Statement is presently being upgraded on the completion of the Definitive Feasibility Study and the Revised Resource Statement.
The Feasibility Study Reserves were identified based on:? Exclusion of 5 of the 13 plies within the Scopio Seam, due to their high insitu ash (this was a blanket exclusion; there are areas within the deposit where these seams are viable and will be mined).
? Key coal quality information from the 2009/2010 exploration program which has been included in the current geological model, supported by quality information from the 2007/2008 exploration program.
? Product coal recoveries, based on a laboratory yield for a 15% ash, high rank, hard coking coal product.
? JORC Resource calculations and category classifications, supplied by Aquila.
? A margin rank of the entire deposit, conducted using loss and dilution assumptions consistent with a thin seam mining operation.
? Positive cash margin was identified throughout the deposit. The outcomes of this work are:
? Proved and Probable Reserves have been identified for the full project to 108.3Mt and now cover more than 95% of the proposed life of mine plan.
? Equivalent Marketable Coal Reserves of 39Mt.
JORC Open Cut Reserves ? ROM and Marketable Coal
ROM Working Section | Proved ROM Coal (Kt) | Probable ROM Coal (Kt) | Total ROM Coal (Kt) | Proved Marketable Coal (Kt) | Probable Marketable Coal (Kt) | Total Marketable Coal (Kt) |
A2 | 14,151 | 1,924 | 16,075 | 4,080 | 588 | 4,668 |
A2B1B2B3C1 | 39 | 0 | 39 | 17 | 0 | 17 |
B1B2B3 | 11,069 | 401 | 11,470 | 5,675 | 210 | 5,885 |
B1B2B3C1 | 25,000 | 5,357 | 30,357 | 11,332 | 2,523 | 13,855 |
B2B3 | 7 | 0 | 7 | 3 | 0 | 3 |
B2B3C1 | 106 | 56 | 162 | 42 | 23 | 65 |
B3C1 | 31 | 5 | 36 | 11 | 2 | 13 |
C1 | 6,318 | 267 | 6,585 | 2,543 | 110 | 2,653 |
D1 | 23,175 | 3,242 | 26,417 | 5,994 | 807 | 6,801 |
E1 | 8 | 0 | 8 | 2 | 0 | 2 |
E1E2 | 14,836 | 2,265 | 17,101 | 4,378 | 737 | 5,115 |
E2 | 3 | 0 | 3 | 1 | 0 | 1 |
Total | 94,743 | 13,517 | 108,260 | 34,078 | 5,000 | 39,078 |
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The proposed Washpool product has been assessed as premium grade hard coking coal with a higher than specification ash content.
MiningThe DFS proposes a contractor-operated, open cut mine producing 2.6Mtpa of hard coking coal using a cast, doze and excavate (CDE) mining method. The mine will target the Scorpio seams of the Burngrove measures and will employ selective mining techniques to minimise mining dilution. The expected LOM is 16 years, inclusive of the initial ramp-up in production. There is an opportunity to extend the life by 2?3 years by developing the deposit to the east. The mine will employ up to 370 people.
The use of conventional CDE mining methodology will achieve an optimised operating cost without the excessive capital involved with large electric shovels or draglines. A Cost Rank of the deposit has been carried out and the final mining sequence was assumed to adhere to the optimal path wherever practical to maximise Net Present Value. It is proposed that a large excavator fleet will bulk mine the upper Tertiary material, with a smaller dedicated coal fleet selectively mining the coal plies.Coal BeneficiationThe proposed CHPP has been designed to produce a single product using a three stage process at a plant feed rate of 1,060tph. The fine tailings will be dewatered and combined with the coarse tailings to be disposed of in the mined overburden. This greatly reduces the amount of water required to operate the CHPP and does not require the rehabilitation of tailings dams at the end of the Project life.
Plant Layout
LogisticsWashpool Coal Pty Ltd in association with seven other coal producers has reached a commercial agreement with QR Network Pty Ltd to proceed with the construction of Stage One of the Wiggins Island Rail Project (?WIRP?). The WIRP represents a significant upgrade in the rail capacity that serves the coal port of Gladstone.
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WIRP represents the next piece of infrastructure to connect the Washpool Hard Coking Coal Project to its customers. Construction of the WIRP is due to commence in early 2012, with completion of initial works aligning with port capacity becoming available during the 2nd quarter of 2014. Negotiations for above rail services with the selected service provider are in the final stages of contract drafting.
In September 2010, Washpool signed a Capacity Commitment Deed for 1.6mtpa of port capacity at Stage 1 of the Wiggins Island Coal Export Terminal (?WICET?) in Gladstone. In addition, Washpool has also applied for an additional 1.0Mtpa of capacity from Stage 2 of WICET. WICET is working towards achieving Financial Close for Stage 1 within the next month.MarketingWashpool Hard Coking Coal (WCC) has excellent caking and plasticity (fusibility) properties ? equal to that of a low-volatile premium hard coking coal, a coke strength equivalent to that of a standard hard coking coal, mid-range sulphur and low range phosphorus levels, and a higher than specification ash content. To estimate the long-term price value for WCC, an independent marketing consultant considered the notional return that would be generated by WCC from a total of 43 blends. In accordance with this methodology, they concluded WCC could reasonably expect to attract a long- term price at or marginally below the projected long-term Standard Grade Hard Coking Coal Benchmark.
Approval StatusThe Company is presently seeking to gain a Mining Lease for the Project.
The Environmental Impact Statement (EIS) has been submitted and undergone public review. The public review period closed on 20 June 2011. A total of 22 submissions have been received from Department of Environment and Resource Management and are currently being addressed by the Washpool Project EIS consultant. Work is being undertaken to respond to the submissions. The Mining Lease approval remains on schedule for March 2012.Tony Poli
Executive Chairman
For further information regarding this announcement, please contact Tony Poli.
Telephone: (08) 9423 0111
Facsimile: (08) 9423 0133
Email address: mail@aquilaresources.com.au
Visit us at: www.aquilaresources.com.au
The information in this announcement that relates to the Resource Statement has been based on information compiled by Mr Rod Doyle, who is a full-time employee of Aquila Resources Limited. He is a qualified geologist (BSc Geology UOW 1978 and MappSc UNSW 1988) with some 30 years? experience in coal geology, coal mining and resource evaluation. He is a member of the Australasian Institute of Mining and Metallurgy and qualifies as a Competent Person under the JORC Code. Mr Doyle holds shares in Aquila Resources Limited.
The Reserves Statement was prepared by Mr Ross Haupt who is a director of Xenith Consulting Pty Ltd. He holds a Bachelor Degree in Mining Engineering from the University of Queensland with over 25 years? experience in the open cut coal mining industry and substantial experience in mining operations. Ross Haupt is a Member of the Australasian Institute of Mining and Metallurgy and as such qualifies as a Competent Person under the JORC Code.
Mr Doyle and Mr Haupt consent to the inclusion in the announcement of the matters based on their information in the form and context in which it appears.
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