Iluka Resources has been granted four exploration tenements and has agreed to acquire all the issued capital of PKD Resources, the holder of an additional exploration tenement, all of which are near the city of Puttalam in the North Western Province of Sri Lanka and cover an area of 146sqkm.
The tenements contain large, mineral sand resources of 689 million tonnes of material at an average Heavy Mineral (HM) grade of 8.2% for 56 million tonnes of HM, using a lower cut-off of 3% HM. The quoted resources include 37 million tonnes of ilmenite (predominantly sulphate), 2.0 million tonnes of rutile and 1.9 million tonnes of zircon.
This compares with Iluka’s total resource inventory at the end of 2012 of 1.9 billion tonnes of material at an average HM grade of 6.5% for 122 million tonnes of HM. The Sri Lanka resource estimates are based on a 100% ownership basis which applies to the exploration stage.
The Sri Lankan Exchange Control Act currently limits the percentage holding of a foreign entity in a Sri Lankan mining company to 40%, although approval for up to 100% may be granted. In addition, current Sri Lankan Government policy also requires some form of downstream processing before a mining licence will be granted. The nature of this requirement will be clarified with the Sri Lankan Government in due course.
Iluka intends to undertake feasibility work towards developing these resources. The resource will represent the single largest HM resource in Iluka’s inventory, and it is considered highly competitive in terms of scale and grade. This provides the opportunity for a long life, material production base with mining extensions and/or expansions possible.
While subject to feasibility study work and all necessary Sri Lankan regulatory and Iluka approvals, it is expected that the deposit located on this tenement may in due course deliver a capital-efficient, financially attractive investment opportunity for shareholders.
Exploration over the mineralization was carried out by Iluka and precursor companies (RGC and CRL) from 1997 to 2001. The exploration drilling was done by contract and company owned drill rigs using reverse circulation air core drilling techniques. Sub samples weighing 1 to 1.5kg were taken at two metre intervals from a rotary splitter mounted below a sample return cyclone. The drill samples were analysed using industry standard methods for HM determination at laboratories in Sri Lanka or Australia.