As DRA and Minopex are sister companies, they provide Energizer with a seamless 'turn-key' solution for the development of the Molo project design, feasibility studies, detailed engineering, construction through to operation, with DRA and Minopex offering value throughout the supply chain.
Panalpina has a long established track record of providing logistical expertise for companies operating in Madagascar, including Sherritt International Corporation's multi-billion dollar Ambatovy nickel-cobalt project. This experience includes not only physical transportation, but Madagascar-based knowledge of cost savings on duties and taxes, as well as simplification of customs processes. This experience, coupled with Panalpina's global supply chain logistical solutions, provides Energizer with a complete pit-to-port-to-customer solution.
The processing costs calculated by DRA are based upon diesel power generation. The Feasibility Study will evaluate two other options, 1) the use of heavy fuel oil which is approximately half the cost of diesel fuel, and 2) the cost of buying power from the Sakoa Coal Field project which will utilize coal-fired power plants.
Robin Borley, a Director of Mining for DRA Minerals (former COO of Red Island Minerals of the Sakoa Coal field project) commented:
"Based on the latest available updates the Sakoa Coal Field projects are moving forward and are expected to be in production by 2017. Supporting this scale of operation will require significant upgrading and development of infrastructure. This would include transportation corridors to the port and development of the deep water sea Port of Soalara itself, and may include coal fired power generation. There is also the possibility of an electrified rail line further down the road. Future development of infrastructure for the coal fields will provide significant opportunity to reduce operating costs for the potential Molo Graphite Mine."
Preliminary Economic Assessment
The preparation of the viability financial model and high level financial evaluation of the Project was conducted independently by Cresco Project Finance ('Cresco') a project finance advisory boutique, based in Centurion, South Africa. DRA provided the mine and processing assumptions derived with the aid of the Whittle 4.4 Optimization Software Package and in-house calculations and databases.
Financial return calculations were derived by Cresco through inputting the capital and operating expenses into a financial return matrix based on the following inputs:
-- Ungeared - assumes all mine funding will be 100% equity-- Geared - assumes mine funding will be a mixture of equity (42% or $69,817,000) and debt (58% or $ 98,961,000) at an interest rate of 8.5% USD fixed rate over 10 years (2 years capital moratorium + 8 years operations)-- Pre-Tax - applies no tax rate-- Post-Tax - assumes a Madagascan specific corporate tax rate of 22%-- Real - assumes a constant 2013 dollar basis-- Nominal - assumes the following inflation factors -- 2.5% income inflation (conservative assumption in line with long term US CPI) -- 3.0% mining cost inflation -- 4.0% processing cost inflation -- 3.5% other overhead costs
The following table summarizes Cresco's financial return calculations for a mine of 1,169,749 tonnes per annum:
---------------------------------------------------------------------------- IRR Payback NPVKey Financial Returns (20 years) (years) (USD'000)----------------------------------------------------------------------------Ungeared Project IRR Pre-Tax Nominal 52% 3 $ 555,783 Real 48% 3 $ 421,464 Post-Tax Nominal 45% 3 $ 460,146 Real 41% 3 $ 341,803-----------------------------------------Geared Project IRR Post-Tax Nominal 71% 2 $ 428,607 Real 66% 2 $ 329,258----------------------------------------------------------------------------
Qualified Persons
The technical data, economic indicators and information relating to the PEA has been reviewed and approved by Mr. Robin Borley, DRA Mining Director (Mining QP) and Mr. Glenn Bezuidenhout, DRA Process Director (Process QP) and is deemed to be a true reflection of the design parameters and financial indicators derived from the PEA study The technical report this release is based upon will be filed on SEDAR within 45 days.
About Energizer
The Molo deposit is located in the Green Giant Graphite project area, and is part of the joint venture (JV) property with Malagasy Minerals Limited. Energizer has a 75% ownership interest and is the operator of the Project.
For more information, please visit our website at www.energizerresources.com.
Safe Harbour: This press release may contain forward-looking statements that may involve a number of risks and uncertainties. Actual events or results could differ materially from expectations and projections set out herein.
Cautionary Statement: The above resource estimates were calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. Among other things, the terms "measured", "indicated" and "inferred" mineral resources are required pursuant to National Instrument 43-101, the U.S. Securities and Exchange Commission does not recognize such terms. Canadian standards differ significantly from the requirements of the U.S. Securities and Exchange Commission, and mineral resource information contained herein is not comparable to similar information regarding mineral reserves disclosed in accordance with the requirements of the U.S. Securities and Exchange Commission.
Mineral resources are not mineral reserves and do not have demonstrated economic viability. This mineral resource estimate includes inferred resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that the inferred mineral resource will be converted to the measured and indicated mineral resource categories through further drilling, or into a mineral reserve once economic considerations are applied.
U.S. investors should understand that "inferred" mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, investors are cautioned not to assume that any part or all of the Company's mineral resources constitute or will be converted into reserves.
Contacts:
Energizer Resources Inc.
Brent Nykoliation
Senior Vice President, Corporate Development
Toll Free: 800.818.5442 or 416.364.4911
bnykoliation@energizerresources.com
Energizer Resources Inc.
Craig Scherba
President and COO
Energizer Resources Inc.
Richard Schler
Executive Vice President, Operations
www.energizerresources.com
