Projects & Operations

BARNES HILL, TASMANIA - 100% OWNED - JV WITH METALS FINANCE CORPORATION – NICKEL LATERITE, COBALT AND IRON ORE

Barnes Hill - Proto Resource's flagship project - is the 100% owned former Allegiance Mining NL Barnes Hill Nickel Deposit in Tasmania ("Barnes Hill") which is projected to yield Proto annual net profits of more than AUD$15 million in addition to, following a potential ramp up in production more than AUD$30 million.

Independent Resource Statement 

On 18 October 2010 Proto Resources announced an independent resource statement compiled by Snowden Mining Industry Consultants (“Snowden”) on the Barnes Hill deposit.

A total resource for the Barnes Hill portion of the overall deposit (the Barnes Hill project contains three interconnected but separately defined laterite deposits that are defined at Barnes Hill, Mt Vulcan and Scott’s Hill) of 6.6Mt at 0.82% Ni and 0.06% Co at a 0.5% Ni cut-off has been estimated. Of this resource, more than 5.6Mt now falls within the Indicated category of the JORC Code. At a proposed mining rate of 250,000t per annum the currently defined resource (as calculated only on the Barnes Hill portion of the deposit) represents a potential mine life of 26 years. 

The resource includes 2.8Mt at 1.01% Ni and 0.06% Co using a 0.8% nickel cut off grade. This higher grade portion of the resource will be targeted during the first ten years of mining and will be the area in which metallurgical testwork and the feasibility study will be initially focussed.

The Barnes Hill resource has been estimated using data from the recently completed 50m by 50m spaced drilling program (641 drill holes), in addition to pre-existing historic drill hole data (73 drill holes). Drilling was completed predominantly by RC drilling techniques, however 16 additional diamond drill holes were completed for density testwork and QA/QC purposes.

The Barnes Hill Mining Licence (application 1872P/M) is expected to be granted prior to the end of 2010. Proto is in the process of finalising the documentation and bond arrangements to allow grant of this Mining Licence. The lodgement of the Development Proposal and Environmental Management Plan is scheduled for mid December 2010.

Project Location

The project is located 10km northwest of Launceston in northern Tasmania, close to port and other infrastructure in the established Tamar Development Corridor. The TEMCO ferroalloy smelter at the deepwater port of Bell Bay is only just 30km by road. 

The Barnes Hill exploration licence (EL 17/2006) covers 76km2 and is registered 100% to Proto. Proto has also applied for a Mining Lease (1872P/M) over the central portion of EL17/2006.

  Barnes Hill Deposit, Beaconsfield. Tasmania – Location Map

Geology

The magnetic data of the licence areas is dominated by the response of the Anderson’s Creek Ultramafic Complex ("ACUC"), being a NNW trending body approximately 20km long and up to 3km wide. Gravity is also dominated by the considerable differences in density between the Precambrian, Cambrian and later Devonian and Permian units.

The ACUC is a layered wedge of Cambrian mafic and ultramafic stratigraphy consisting of mainly serpentinite, pyroxenite and gabbro. Variable weathering profiles with differing mineral assemblages and metal concentrations have been developed on different areas of the ultramafic complex.

In the Barnes Hill area, the weathering profile consists of an upper zone of secondary iron oxides (goethite, hematite, limonite) overlying a clay rich zone dominated by smectite, weathered serpentinite and chlorite, which in turn overlies fresh serpentinite. This geology supports the interest in secondary lateritic nickel, primary nickel sulphides and iron ore.
 

Magnetic Image of the Andersons Creek Ultramafic Complex and EL17/2006 with Historical Drill-Holes and Resource Blocks from the JORC Indicated Resource shown
 

Metals Finance Joint Venture

The Company has a financing and technology agreement with its joint venture partner Metals Finance Limited ("Metals Finance") at Barnes Hill, whereby Metals Finance will finance the project into production in return for 50% of future profits. Metals Finance will also provide the technology necessary to beneficiate the ore for sale.

Proto Resources meanwhile carries the responsibility to fund and complete the definition of the resource and to procure the permitting required to develop the project.

Proto Resources and Metals Finance are currently in Phase Two or the Final Evaluation Period of the formal joint venture arrangement between the parties, being the full evaluation period that will lead to a decision to enter into an Operational Phase at Barnes Hill. The purpose of the Final Evaluation Period is to carry out a pilot programme based on the leaching of a bulk sample from the Barnes Hill deposit, to raise the resource definition to a level sufficient to support a detailed feasibility, and to complete the detailed feasibility on the proposed project.

As at November 2010 Proto Resources is the single largest shareholder in Metals Finance with approximately 8% of Metals Finance’s issued capital.

Recent Work

In November 2009 Proto Resources commenced the drill-out of the Barnes Hill nickel-cobalt deposit. Drilling was conducted on a nominal 50m x 50m grid pattern across the Barnes Hill nickel resource. By the end of the FY09-10 year, a total of 625 aircore drill holes had been completed as part of this programme, allowing Snowden to calibrate their resource above. The completion of the drill-out represents a major achievement with by far the most onerous of Proto Resources’ responsibilities under the Metals Finance joint venture now completed.

During the FY09-10 year, Metals Finance completed a review and remodelling of the June 2008 Scoping Study and, based on key conceptual assumptions, the project appears to remain financially robust. The base case conceptual model presented in the Company's announcement of 14 October 2009 provides for a project surplus of $854 million over the life of the project or an NPV of $165 million.

The assays released on 8 February, 23 February, 9 March, 30 March and 19 May 2010 included an additional programme of 151 aircore drill holes to provide step-out coverage of extensions and close-space to confirm grade and width distributions within the deposit. Results across the whole database identified strong nickel and cobalt intercepts confirming several relatively richer pods of mineralisation.

Sixteen diamond core drill holes (BHA001 – BHA016) were also drilled in the period for a total of 461.3m. This diamond core drilling programme had the dual purpose of providing drill core material for bulk density confirmation purposes and to twin existing aircore drill holes as a check for quality assurance/quality control ("QA/QC") purposes.

By the end of March 2010 bulk density measurements had been completed on all 16 of the diamond core drill hole. Data successfully mirrored the earlier aircore drill holes with pleasing results including:

•   Drill hole BHD001             11m @ 0.95% Ni
  & 0.034% Co from 11m
   
• Drill hole BHD002              13.6m @ 0.93%
  Ni & 0.06% Co from 11m
   
• Drill hole BHD005               7.4m @ 1.06% Ni
  & 0.044% Co from 4.6m
   
• Drill hole BHD009               5m @ 0.84% Ni &
  0.37% Co from 2m
   
• Drill hole BHD015               9m @ 0.85% Ni &
  0.011% Co from 15m
   
• Drill hole BHD016               8.6m @ 1.22% Ni
  & 0.064% Co from 2m

Intersections with strong nickel and cobalt intercepts were returned (based on a cut-off of > 0.5% Ni with a minimum 2m intercept and maximum 3m of internal dilution). This cut-off grade was used to test assumptions on the potential mine life at Barnes Hill included in the updated scoping study announced on October 2009. The position of drill holes and material intercepts are shown in Figure 3 below.

  Aircore and Diamond Drill Hole Positions and Assay Results

Permitting

During the FY09-10 year, Proto Resources submitted its Notice of Intent (“NOI”) for the proposed development of the Barnes Hill project to the Tasmanian Environment Protection Authority Board (EPA Board). The NOI submittal outlined the fundamentals of the Barnes Hill project to the EPA Board.

The Tasmanian Environment Protection Authority (EPA) responded by releasing a draft Development Proposal and Environmental Management Plan (“DPEMP”) guidelines for public comment and has since confirmed the final set of guidelines. This led to the issuance of guidelines for the preparation of the project’s DPEMP on the 18th of February 2010 by the Board of the Environment Protection Authority in Tasmania.

These Guidelines for the preparation of a Development Proposal and Environmental Management Plan provide a comprehensive set of matters which will be addressed in order to ensure safe mining practices are applied at Barnes Hill and with minimal environmental impact. The DPEMP acts as a project development application to the Tasmanian West Tamar Council and will supply the detailed environmental information required by the EPA Board for environmental approval of the project.

Proto Resources has also held a number of beneficial meetings with community stakeholders. 

Iron Ore

Proto Resources is continuing testwork on the iron ore cap that lies immediately above parts of the nickel laterite ore body. Ongoing work involves logging, sampling, assaying and mineralogical testwork. Promising results flowing from work to date include intersections of iron ore (from surface) of 16 metres @ 43.1% Fe and 10 metres @ 42.1%. As previously announced, Proto Resources intends, if possible, on producing and selling iron ore from the overlying iron ore cap as well as developing separate saleable products of nickel and cobalt from the underlying limonite and saprolite ore bodies. Iron ore operations in the vicinity of Barnes Hill already supply overseas and local buyers.

Aircore Drilling at Barnes Hill in late 2009

Processing Technology

Proto Resources also continues to investigate improvements in processing technology with the aim of significantly reducing processing costs and maximising revenue for shareholders. Testwork to date, including on Barrier Bay Pty Ltd’s unique acid recycling technology, shows potential for significant cost savings at Barnes Hill. Ongoing testwork is continuing.

Proto Resources will now extract a series of bulk samples of representative limonite and saprolite material for metallurgical and density testwork. The results of this work program will provide additional information on the expected recoveries and density for each material type. It is expected that this testwork, in conjunction with a phase of infill drilling, will result in the assignment of a Measured classification for an area which represents at least the first 10 years of mining. The metallurgical testwork will commence in early 2011 following the collection of the bulk samples

Further Information

For a flyover of the Barnes Hill project please Click here.