Mkuju River

The Mkuju River Project (‘MRP’) is located in southern Tanzania, some 470km southwest of Dar es Salaam. It comprises twenty contiguous tenements (granted licences, renewals and applications) covering an area of approximately 3,250km². The area was identified as prospective for uranium during reconnaissance exploration undertaken between 1978 and 1982 by Uranerzbergbau GmbH ('UEB').

The MRP lies within the Karoo Supergroup sediments of Permian to Jurassic age (Figure 1). The host stratigraphy is a series of sub-horizontal, very coarse, feldspathic, arkosic sandstones with minor inter-bedded claystones and siltstones. The sediments are interpreted to have been deposited within a braided fluviatile system.

Figure 1: Mkuju River Project - Tenements and Geology

Drilling undertaken by Mantra has confirmed the presence of multiple stacked mineralised horizons of variable thickness at shallow depths. Higher grade mineralisation is also observed at surface in outcrop and trenches.

Mineral Resources

In January 2010 Mantra announced an updated Mineral Resource Estimate (‘MRE’) of 82.3 million tonnes averaging 464 ppm U₃O₈ for a contained 84.3 million pounds of U3O8 at a lower cut-off grade of 200 ppm U₃O₈. The updated MRE comprises 25.1 million tonnes averaging 515 ppm for 28.5 million pounds of U₃O₈ classified into the Indicated Resource category, plus Inferred Resources of 57.3 million tonnes averaging 442 ppm for 55.8 million pounds of U₃O₈.

The updated MRE includes the results from the 2009 exploration drilling program, including the significant area of mineralisation identified at Nyota NE, and the remainder of the infill drilling and trenching data that were pending when the last revision of the MRE was completed in December 2009.

Notes: The MRE was prepared by independent consultants CSA Global Pty Ltd (‘CSA’) and is reported in accordance with the JORC Code (2004) and NI 43-101.
The resource is estimated at a lower cut-off grade of 200 ppm U₃O₈.
All figures are rounded to reflect appropriate levels of confidence.

Highlights of the updated MRE include:

• The MRE has increased by 89% from the previous statement (44.6Mlbs);
• The average grade has increased by 2%;
• 28.5Mlbs U₃O₈ or 34% of the MRE is now classified as an Indicated Resource;
• The majority of the MRE is within 60 metres of the surface; 
• Aggressive and successful exploration drilling has lead to rapid growth in the MRE over the past year;
• The potential exists to continue to substantially increase the resource base with ongoing work;
• Further drilling programs at Nyota, aimed at expanding the MRE and upgrading the resource classification, have already commenced; and
• Drill testing of Satellite Targets within the Mkuju River Project, but outside the Nyota Prospect, also has the potential to deliver promising results after the positive results of an initial appraisal (announced 22 January 2010);

For an animated fly through of the Nyota Prospect please click here.

Pre-Feasibility Study

The Pre-Feasibility Study ('PFS'), completed in late February 2010 and managed by the highly respected firm MDM Engineering ('MDM') of South Africa, has confirmed the technical and economic viability of the Project and its capacity to operate with strong cash margins.

Using the current MRE, Nyota can support an average annual production of 3.7 million pounds U3O8 over a minimum twelve year mine life. This represents a 48% increase in annual production over the results of the Scoping Study reported in June 2009 and there is strong potential to increase this further with ongoing exploration work.

The PFS is based on a contractor mining scenario and the processing plant is based on simple acid leach and resin-in-pulp technology. The operating cost averages US$25.05 per pound over the life of mine, a decrease of 5% from the Scoping Study results.

The capital costs (determined to a nominal accuracy of +/- 20%) for the Project are estimated at US$298 million; US$140 million for the process plant and US$158 million for project infrastructure. Any future increase in production rates will require minimal infrastructural capital as this is essentially sunk in this first phase of the Project.

The Project has the capacity to generate pre-tax cash margins of approximately US$115 million per annum at an average uranium price of US$60 per pound over the life of mine.

Mining

The mining of both ore and waste is a simple process in shallow open pits requiring no drilling and blasting. As part of the PFS, a series of whittle pit optimisations were completed on six of the resource areas included in the MRE. Material classified in the Indicated and Inferred categories was used in the whittle pit optimisation process. Pit designs, waste dump designs and life of mine (‘LOM’) mining schedules were then completed to determine the optimal long term mine plan.

The stripping ratios for the Project are as low as 1:0.9 (ore/waste) with the LOM stripping ratio not exceeding 1:2.9. This has increased from the Scoping Study due to pit wall angles being decreased from 37 to 31 degrees based the results of a geotechnical evaluation.

The Company is currently contemplating the mining being undertaken on a contractor mining basis. The average mining cost is approximately US$2.58 per tonne mined (ore and waste) equating to a total mining cost of US$10.45 per pound U₃O₈ produced. Owner operator mining is also being evaluated as this does offer potential operating cost savings. This will be evaluated further in the DFS.

Processing

The process facility is based on simple acid leach, utilising resin-in-pulp (‘RIP’) technology (Figure 2). The current consideration is to locate the process plant, tailings storage facility (‘TSF’) and associated infrastructure as close as practically possible to the first areas proposed to be mined.

The current process flow sheet incorporates the concept of upgrading (beneficiating) the feed material ahead of its processing. This is achievable because the uranium mineralisation is interstitial, which means that it occurs as particles between the primary constituents of the host rock which are quartz and feldspar.

The beneficiation is achieved by processing the blended run of mine feed through a scrubber. The feed to the scrubber is up to 4.4 million tonnes of ore per annum. A scrubber unit simulates the activity of a low energy input mill. As the uranium mineralisation is interstitial and predominantly reports to the finer fraction, the coarse fraction can be rejected with a 10% loss of uranium at this point. The coarse fraction is rejected using a series of three cyclones.

Testwork has demonstrated that approximately half of the initial mass of scrubber feed is rejected. This process is termed herein as ‘scatting’. The scats are discarded to a stockpile after being washed over a screen with acid water to remove fines. The fine fraction of the scrubber feed (P80 -250 microns) containing 90% of the uranium is then processed in the near ambient temperature acid leach.

The beneficiation process has the capacity to almost double the grade of the feed material, hence reducing both capital and operating costs.

The fine fraction passes from the cyclones into a thickener and is then leached with sulphuric acid to dissolve the uranium. Testwork completed in the PFS has eliminated the need for iron oxide (Fe2O3) and manganese dioxide (MnO2), thus reducing process operating costs.

The Company currently favours the use of the RIP as part of the process route. This process involves the adsorption of uranium in solution onto resin beads. Once the resin is loaded with uranium, it is separated from the pulp by means of screening. The uranium is stripped from the resin, which is then re-used back in the leach. This has removed the need for a counter current decant (‘CCD’) circuit, reducing capital and operational risk. For further details, refer to the news release dated 1 December 2009.

Acid consumption in the leach is relatively low, consuming approximately 12 kg/t. Approximately 3 kg/t of acid is used to elute the uranium from the resin, giving an overall acid consumption of 15 kg/t of run of mine material. This is approximately 25% less acid than was envisaged in the Scoping Study.

Due to the high concentration of uranium in the eluate, the final product can be precipitated directly, removing the need for a solvent extraction unit in the circuit. This presents an obvious capital saving and moves to reduce operational risk.

An overall U₃O₈ recovery of 79% has been applied in the PFS. This is calculated by applying a 90% recovery from the scatting process and a minimum 88% recovery from the remainder of the metallurgical process.

Figure 2:  Process Flow Sheet

Infrastructure

The layout of the process plant and mine facilities have been planned to take advantage of the natural topography and minimise the impact on the environment.

The total power requirements for the Project are relatively low at an estimated 9.35MW of consumed power, of the 14MW installed. The consumed power is 22% less than that anticipated in the Scoping Study. Power will be generated on-site with heavy fuel oil (‘HFO’) generators at a cost of US$0.19 per kilowatt hour.

There is the potential over the medium term to reduce this power cost through the possible connection to the national grid. The nearest point of connection to the national grid is at Makambako, which is located approximately 380 kilometres northwest of the Project site Discussions are being held with the Tanzanian Government on the proposed national grid extension from Makambako to Songea and Mantra will continue supporting the Government’s efforts to expand the national grid to Songea with the aim of securing grid power supply to the Project in the medium term.

The initial 30 kilometres of the final 80 kilometres of access to the site is a public road with geometry suitable for average heavy vehicles. Minor maintenance is required on this section of road to re-instate the wearing course and improve drainage in certain sections. The remaining 50 kilometres of access from the local village of Likuyu to site is not suitable for heavy vehicles and requires upgrading prior to the start of construction. The estimated cost to upgrade the 80 kilometres of site access is in the order of US$28.3 million.

A process make-up water dam has been designed to supplement the plant make-up water requirements during the dry season. Site selection was conducted to meet the quantity requirements and to provide downstream pollution control for the mining areas and TSF.

As part of the infrastructure program, a 250 tonne per day sulphuric acid plant will be constructed on-site. Acid will be produced from the burning of elemental sulphur, which will be imported into Tanzania through the Dar es Salaam port facility. The acid plant will be a double absorption type plant and will be supplied as a turn-key package.

Capital and Operating Costs

The initial capital cost for the mine, process plant and associated infrastructure is estimated at US$298.1 million. This cost is inclusive of all infrastructures and indirect costs required for the Project, as well as a contingency of US$19.8 million. Working capital, amounting to US$45.2 million, is required in addition to the US$298.1 million to support nine months of operation after start-up. The engineering has been developed to support a capital and operating cost estimate to an accuracy of ±20%.

The average LOM (over the initial twelve years) operating cost is estimated at US$25.05 per pound of U₃O₈.These costs are based on the treatment of 4.4 million tonnes of ore per annum producing an average 3.7 million pounds of U₃O₈.

Operating costs were developed in conjunction with the project design criteria, process flow sheets, mass balance, mechanical and electrical equipment lists and in-country labour cost data provided by Mantra. The operating costs (C1 cash costs) are defined as the direct operating costs including contract mining, processing, tailings storage, water treatment, marketing and general and administration.

Permitting

The Company currently holds a Prospecting Licence covering an area of approximately 200 square kilometres, which includes the Nyota Prospect area. Environmental and Social baseline studies have been completed during the past two years and the Company has registered an Environmental and Social Impact Assessment (‘SEIA’) application. The SEIA is nearing completion and will be lodged with the relevant authorities in Tanzania shortly. These activities have commenced as a prelude to the application for a Special Mining Licence (‘SML’) to cover the Prospect area, which is expected to be lodged by the end of March 2010. A granted SML is valid for a period of up to 25 years and is renewable for a further 25 years.

Additional permitting to cover areas such as roads, power, water and aggregate, is currently progressing as part of the Company’s in-country execution plan. The Company has also engaged specialist consultants to assist with the drafting of a Mining Development Agreement (‘MDA’), which will be presented to the appropriate authorities in Tanzania shortly.

To view the Pre-Feasibility Study News Release dated 1 March 2010 please click here.

Definitive Feasibility Study

The Company commenced the Definitive Feasibility Study (‘DFS’) in early March and appointed DRA Mineral Projects (‘DRA’) of South Africa as the Engineering, Procurement, Construction and Management (‘EPCM’) Contractors. During the DFS phase, the Company will focus on evaluating further opportunities to reduce capital and maximise operating margins, including:

• Upgrading the resource classification of portions of the current MRE to the Indicated and Measured categories, and increasing the overall resource base to potentially enable further expansion in production rates and a longer mine life to be contemplated;
• Continued examination of the use of reagents, their transport and reclamation to reduce operating costs;
• Reviewing lower cost alternatives for power generation with a view to reduce operating costs;
• Reviewing contractor versus owner-operator mining scenarios; and
• Undertaking an evaluation of the various alternatives for funding the development of the Project and the sale of future uranium production (including uranium marketing and off-take arrangements).             

Permitting Update

The Company recently provided an update on the permitting process following the promulgation of the Mining Act 2010 (‘the Act’) by the Tanzanian Government on 23 April 2010.

The Environmental Impact Statement (‘EIS’) and an application for a SML have now been lodged with the relevant government departments.

The Mine Development Agreement (‘MDA’) is currently being finalised to incorporate the new provisions of the Act and will be lodged with the Ministry of Energy and Minerals (‘the Ministry’) during May 2010. Mantra expects that the EIS, SML and MDA will be approved during 2010.

The 2010 Mining Act retains key provisions of the 1998 Act, introduces a 5% royalty for uranium (the same level that has applied to, and continues to apply to, diamonds); and introduces provisions that will enable government participation in strategic projects. These new provisions will be incorporated into Mantra’s MDA, within the context of negotiating the specifics of the agreement, including fiscal incentives and development concessions, with the Ministry, prior to a project development decision.

The 2010 Act reflects the stated intent of the 2009 Mineral Policy which aims at “strengthening integration of the mineral sector with other sectors of the economy; improving economic environment for investment; maximizing benefits from mining; improving the legal environment; strengthening capacity for administration of the mineral sector; developing small scale miners; promoting and facilitating value addition to minerals; and strengthening environmental management.” This includes the stated objective of increasing the mining industry’s contribution to the country’s Gross Domestic Product from the current level of 2.5% to 10% by 2025.

The Mining (Radioactive Minerals) Regulations, in accordance with the requirements of the International Atomic Energy Agency, have been drafted by the Government and the Company anticipates that these will be gazetted shortly, following the promulgation of the 2010 Mining Act.

Nyota Resources Infill and Exploration Drilling

The 2010 exploration and resource infill drilling programs are currently ramping up. The Company has already completed approximately 315 holes for 21,500 metres of infill drilling (results pending).

The drilling programs will comprise diamond core, aircore and open-hole drilling and are being completed with the following objectives: 

• To substantially increase the overall resource base by extending ‘open’ resource areas and testing new priority targets, proximal to the existing resource areas;
• To upgrade the resource classification of portions of the current MRE to the Indicated and Measured categories;
• To complete additional sterilisation drilling to facilitate optimal site selection of waste dumps and site infrastructure; and
• To allow further assessment of the high grade surface mineralisation.
  

The resource infill drilling program will comprise approximately 2,000 metres of diamond core, 13,000 metres of aircore, and 50,000 metres of open-hole drilling. A diamond rig and a fourth air rig are currently being mobilised to site and will be in operation in early May. The program is anticipated to take approximately four months to complete and will facilitate the announcement of a revised MRE in the fourth quarter of 2010.

Surface mapping and geological model development undertaken during 2009 significantly enhanced the Company’s exploration targeting capability and lead to the generation and ranking of numerous priority target areas, proximal to the known areas of mineralisation at Nyota. The initial drill testing of a select number of these targets in late 2009 delivered outstanding results, including the discovery of the Nyota NE deposit which currently comprises 2.5 million tonnes averaging 503 ppm for 2.8 million pounds U3O8 of Indicated Resources and 15.4 million tonnes averaging 469 ppm for 15.9 million pounds U3O8 of Inferred Resources.

The 2010 exploration drilling program is a continuation of the evaluation of these priority target areas and will comprise approximately 1,000 metres of diamond core and 25,000 metres of aircore drilling on a nominal 100 metre by 100 metre spacing. These target areas are highlighted in Figure 3. This phase of the program is scheduled to be completed by December, and a further revision of the MRE is expected to be announced in early 2011.

Figure 3: Nyota Prospect - Exploration Targets

Satellite Targets - Reconnaissance Program

 A high resolution helicopter-borne radiometric survey completed over the entire Mkuju River Project area in mid 2007 resulted in the identification of 33 uranium anomalies requiring field evaluation (Figure 4). A helicopter supported exploration program designed to test the potential of six Satellite Targets to the east and south-east of Nyota (within a ~20km radius) was undertaken during the September quarter. Geological mapping, ground radiometrics and trenching was completed on the six Satellite Targets. Although preliminary in nature, the field observations were positive with visible uranium mineralisation being recorded in trenches at a number of the targets. The trench samples have been dispatched from site and assay results are pending.

The mapping identified sub-horizontal beds of medium to coarse grained sandstones, interbedded, multiple layers of claystone and a distinctive stratigraphic marker horizon consisting of petrified wood fragments and tree trunks. The mapping confirmed the radiometric anomalism to be associated with two linear structural corridors and associated, second order north-west orientated jointing and faulting. Secondary uranium mineralisation is associated with the claystone and wood bearing gritstone horizons, with enrichment along the preferred structural zones. Shallow, high grade uranium mineralisation is evident marginal to preferred structures. Disequilibrium between high radiometric values but low uranium assay results are evident in marginal zones where high radiometric values 200 - 17,000 counts per second, return uranium assays below 90 ppm U3O8. The location of the potential ‘remobilised’ uranium and testing of high grade zones will be the focus of future drilling.

Maximum assay grades in selective rock-chip grab samples ranged up to 15,380 ppm, 12,320 ppm, 3,510 ppm, 740 ppm, 650 ppm and 440 ppm U3O8 for six of the Satellite Targets examined in this program. Best results from the auger drilling and trenching are shown on Figure 4.

Figure 4: MRP Satellite Targets - Auger and Trenching Results (Auger results highlighted in red, trench results in blue and maximum rock chip values shown as white stars)

The SWC Prospect is a 4km long trend containing a number of prominent airborne radiometric anomalies, the largest of which is over 1.6km long and up to 800m wide, located in the south west corner of the MRP (Figure 4).

For further information, please see the latest Company Report.