Cazaly Resources confirms robust project for Parker Range as shares jump 22%

Shares in Cazaly Resources (ASX:CAZ) shot up 22% after the company released the results of a Pre-Feasibility Study into the development of its Parker Range Iron Ore Project located in the Yilgarn region of Western Australia.

Investors reacted to news of the positive PFS results, with shares in the company jumping 6c, or 22%, to 33c around early afternoon.

The study indicates very robust economics for the project which greatly benefits from its close location to existing and accessible infrastructure including road, rail, port, power and township. This access allows for the relatively rapid development and ramp up to full production of 4 Mtpa within 1.5 years.

These results now allow for the commencement of a Definitive Feasibility Study into the project, the initial phase of which will incorporate a bridging programme of further metallurgical work.

Managing Directors Clive Jones and Nathan McMahon said study had shown the Company was on track to become the second major iron ore producer in the Yilgarn region of Western Australia, behind Koolyanobbing Operations who have successfully operated in the region for many years.

"The study evaluated several options for development including the production of 1 or 2 products at varying throughput rates and modelled both Contractor operated and Owner operated scenarios," the joint MDs said in a statement.

The result of these studies indicated that the optimal scenario involved the production of 4 Mtpa fines only product either on a contractor operated basis or owner operated basis (high capex, lower opex).

The study also highlighted Kwinana as the preferred export port over Esperance due to its closer proximity and lower capital costs requirements. Esperance however can still be considered as an alternate port option for the project.

The company forecasted an expected NPV of A$216m with IRR 78% for contract operations option, with revenue based on independent price forecasting and not spot iron ore prices.

Up front capital costs of A$78m plus A$26m deferred until year 3, while estimated operating costs are A$45/t of shipped product.

Mineable resources and mine schedules were generated using open pit designs for various mining throughputs and product options with a result for the preferred option (fines only product at 4 Mtpa) of 23.2 Mt @ 54.6% Fe (60.0% CaFe) with life of mine waste to ore stripping ratio of 1.34 based on an initial 5.5 year mine life.

Based on dry processing for years 1 and 2, and beneficiation from year 3, the mineable resources yield an expected target fines product of 22.0 Mt @ 56.6% Fe (62.2% CaFe) for life of mine.

The DFS is forecast to be completed in early Q3 this year and it is expected that approximately 12 months will be required to design, procure, construct and commission the processing plant and associated infrastructure and services for the project.

Following this, and subject to achieving the necessary statutory approvals and financing, operations can commence with a target date for production being Q3/2011.

Cazaly has commenced discussions with several potential strategic partners including both significant trading houses and customers regarding advancement of the project.