2013
Annual Report
ABN 27 122 892 719
Western Australia – Main Office
ALARA RESOURCES LIMITED
SHARE REGISTRY:
150 Stirling Hwy
Nedlands WA 6009
T | +61 8 9389 8033
F | +61 8 9389 7871
New South Wales – Branch
Suite 601, Level 6
225 Clarence Street
Sydney NSW 2000
T | +61 2 8096 3502
A.C.N. 122 892 719
ASX Code: AUQ
Principal & Registered Office:
Level 3, 35 Havelock Street,
West Perth, Western Australia 6005
Local
T | +61 8 6323 5900
F | +61 8 6323 5999
E | info@alararesources.com
W | www.alararesources.com
“Alara is transitioning from being a
mineral resource developer to a mine
builder and operator”
“Alara respect the Company’s key assets
are its Joint Venture Partners, resources
and people”
“Alara will achieve its goals through open,
collaborative and respectful working
relationships with its employees, partners,
shareholders and stakeholders”
Since its inception in 2007, Alara has been a
resource development company that has looked
throughout the world for suitable and attainable
projects and ore bodies that could be taken forward
by the Company into profitable production. As a result
of the success of this approach and work, Alara is
ready and poised to take its next step in its corporate
development and plans.
The past year (2013 Financial Year) saw Alara focus
on asset and resource development in the Middle
Eastern countries of Saudi Arabia and Oman. As a
result of this focus and effort, Alara completed its
resource drilling programs and study work in these
areas during the year and has advanced its flagship
Khnaiguiyah Zinc-Copper Project in Saudi Arabia
through a successful Definitive Feasibility Study
(DFS) and its early stage Daris/Washihi Copper-
Gold Project through a successful Scoping Study.
Both Projects are robust in their own right with
considerable upside potential.
Going forward, Alara will focus its efforts and
resources on taking the Khnaiguiyah Project though
the finance stage and into construction while
divesting some or all of the Oman Projects.
“Alara is transitioning from being a
mineral resource developer to a mine
builder and operator”
“Alara respect the Company’s key assets
are its Joint Venture Partners, resources
and people”
“Alara will achieve its goals through open,
collaborative and respectful working
relationships with its employees, partners,
shareholders and stakeholders”
Since its inception in 2007, Alara has been a
resource development company that has looked
throughout the world for suitable and attainable
projects and ore bodies that could be taken forward
by the Company into profitable production. As a result
of the success of this approach and work, Alara is
ready and poised to take its next step in its corporate
development and plans.
The past year (2013 Financial Year) saw Alara focus
on asset and resource development in the Middle
Eastern countries of Saudi Arabia and Oman. As a
result of this focus and effort, Alara completed its
resource drilling programs and study work in these
areas during the year and has advanced its flagship
Khnaiguiyah Zinc-Copper Project in Saudi Arabia
through a successful Definitive Feasibility Study
(DFS) and its early stage Daris/Washihi Copper-
Gold Project through a successful Scoping Study.
Both Projects are robust in their own right with
considerable upside potential.
Going forward, Alara will focus its efforts and
resources on taking the Khnaiguiyah Project though
the finance stage and into construction while
divesting some or all of the Oman Projects.
CONTENTS
About Us ________________________ 1
Chairman’s Letter _________________ 2
Managing Director’s Letter _________ 3
Board of Directors ________________ 4
Directors
Ian J Williams
Non-Executive Chairman
Philip H Hopkins Managing Director
John D Hopkins Non-Executive Director
His Royal Highness
Prince Abdullah bin Mosaad bin Abdulaziz Al Saud
Non-Executive Director
Secretary
Victor P H Ho
Registered Office and Business Address
Management Team ________________ 5
Level 3, 35 Havelock Street, West Perth, Western Australia 6005
Organisational Structure ___________ 6
Our People _______________________ 7
Our Joint Venture Partners _________ 8
Our Support Contractors ___________ 9
FY2013 A Year in Review __________ 10
FY2013 Milestones _______________ 11
Financial Summary _______________ 12
PO Box 1890, West Perth WA 6872
Telephone:
Facsimile:
E-mail:
+ 61 8 6323 5900
+ 61 8 9323 5999
info@alararesources.com
ABN: 27 122 892 719
Website
Alara Resources Limited maintains a website where all major announcements to
the ASX are available: www.alararesources.com
Share Registry
Advanced Share Registry Services
Company Projects Overview ______ 13
Suite 2, 150 Stirling Highway, Nedlands, Western Australia 6009
Company Mineral Resources ______ 16
Telephone:
Facsimile:
+61 8 9389 8033
+61 8 9389 7871
Company Mineral Reserves _______ 18
Level 6, 225 Clarence Street, Sydney, New South Wales 2000
Khnaiguiyah Project ______________ 19
Oman Projects __________________ 32
Telephone:
+61 2 8096 3502
E-mail:
Website:
admin@advancedshare.com.au
www.advancedshare.com.au
FY2014 Looking Forward __________ 40
Australian Securities Exchange
Closing Pages ___________________ 41
Directors’ Report ________________ 42
Auditor’s Independence Declaration 73
ASX Limited
Exchange Plaza, 2 The Esplanade, Perth, Western Australia 6000
ASX Code: AUQ
Auditors
Consolidated Financial Statements _ 75
Grant Thornton Audit Pty Ltd
Notes to the Consolidated Financial
Statements _____________________ 79
Directors’ Declaration ___________ 114
Independent Audit Report ________ 115
Corporate Governance ___________ 118
Mineral Licences _______________ 129
JORC Code Competent Person
Statements ____________________ 130
Additional ASX Information _______ 131
Level 1, 10 Kings Park Road, West Perth, Western Australia 6005
Telephone:
+61 8 9480 2000
Facsimile:
Website:
+61 8 9322 7787
www.grantthornton.com.au
Shareholders wishing to receive
copies of Alara Resources Limited
ASX market announcements by
email should register their inter-
est by contacting the Company at
info@alararesources.com.
Alara Resources
Annual Report 2013
1
CORPORATE DIRECTORYALARA RESOURCES LIMITED – ABN 27 122 892 719 CHAIRMAN’S LETTER
To Stakeholders and Shareholders
2013 was a year of progress
and transition.
In July 2012, the Alara received a draft
of the Definitive Feasibility Study (DFS)
for the Khnaiguiyah Zinc-Copper Project
in Saudi Arabia. Following an extensive
internal review and enhancement, the
study was completed and accepted
in April 2013. This confirmed that the
Project was commercially attractive and
would provide a solid foundation on
which to transition Alara from Explorer
to Operating Miner.
In Oman, Alara’s interests in three
copper-gold projects was advanced with
further drilling and in Q4 2012 a Scoping
Study confirmed the potential for a small
but profitable operation by combining
the resources of the three projects.
Early drilling in Alara’s projects in Chile
showed little chance of success and
in Q4, 2012 the decision was made
to withdraw from the projects and
cease activity in Chile and focus on
Saudi Arabia and Oman. Subsequently,
to preserve cash and maintain
management focus on the Khnaiguiyah
Project, the decision was also made
to dispose of the Oman assets if
a suitable sale could be arranged.
This process is still ongoing. Despite
this decision, the Company believes
Oman has good project potential and a
favourable environment for investment
and we will maintain a watching brief
for the future.
Following year end, Alara was
successful with a Research and
Development Tax Incentive Scheme
refund from the Australian government
in relation to the Khnaiguiyah DFS. The
$2.75m received so far, with some $0.5
to $0.9 more to come, has secured
Alara’s cash position to underpin
ongoing operations ahead of project
funding. The sale of the Oman assets
will provide an additional buffer.
Another aspect of the transition has
been in the change in leadership of
the Company. Shanker Madan, who
led as Managing Director from the
start, resigned in July 2013. Shanker
was instrumental in identifying and
developing through study phases, the
projects which now provide the basis
for a secure future. On behalf of all,
I thank Shanker for his contribution.
Similarly I also thank Non-Executive
Director Doug Stewart, who retired
in August 2013, for his substantial
commercial and technical input. It
is also opportune to thank William
Johnson for his contribution. William,
a Director in executive as well as non-
executive capacities since 2009 will
retire on 31 October.
To lead the Company into operation,
Alara has been fortunate in attracting
Philip Hopkins to the Managing Director
role. Philip has strong operational
and development experience and
is well suited to lead Alara in what
Directors believe will be an exciting and
rewarding period.
Finally I would like to thank fellow
Directors and all staff for their
contribution. Considerable progress
has been made but it hasn’t always
been easy. Nor has it been easy for
shareholders and other stakeholders
and I thank them for their patience
and continuing support. Directors and
staff are focused on ensuring that this
patience is rewarded.
Alara Resources
Annual Report 2013
2
ALARA RESOURCES LIMITED – ABN 27 122 892 719 MANAGING DIRECTOR’S LETTER
Managing Director and the transition
of the previous Managing Director
(S Madan) from the Company. There
were also anticipated Board changes
with the resignations of Doug Stewart
and William Johnson allowing them to
pursue their external commitments.
In addition on the Management Team
there was a change in the CFO role,
the appointment of a new Country
Manager for Oman (Justin Richard who
also manages Saudi Arabia for Alara),
the strengthening of the Perth office
management staff and an upgrade
of the corporate technical support
skills. These personnel changes were
concurrent with the Company’s move
to new and separate offices in West
Perth (formerly using shared offices
with the Queste/Bentley group of
companies in downtown Perth). In
alignment with the noted focus and
strategy the Oman staff levels were
reduced accordingly. Alongside these
changes administrative enhancements
were made relative to the upgrade of
management reporting, Board reporting
and presentation, management Team
communication etc.
In a year-on-year step and stage
approach the following notes the
stages the Company is currently
moving through relative to the KMC
Project and transition to becoming a
mine developer and operator:
FY2013 – Confirmation of
the Project’s viability (DFS
completion) and Company/Team
adjustments in order to be ready
to move forward
FY2014 – Project finance, EPC
contract completion, construction
Team secured and final
arrangements to commence
construction
FY2015 – Project construction
start up and final Project
optimisation
From a commercial, technical and
growth perspective the development
plan for Saudi Arabia has tremendous
upside for the Company and its
shareholders. Saudi Arabia is arguably
the best commercial and economic
region in which to start and grow a
mining company with a low interest
government funding vehicle, low tax
rates, no government royalties and
other benefits. Technically the location
is ideal as much of the Arabian Shield
has had preliminary exploration work
completed on it confirming its heavy
endowment of potentially economic
resources but few mines actually
having been built. And finally, from
a political standpoint there is a very
stable government overseen by the
King with his succession plan in place
and well accepted. Possibly most
important is the government support
and interest in developing a strong
mining industry as Saudi Arabia is
highly motivated to diversified its
industrial future as they are keen to
have a transition plan if and when the
oil & gas production lessens.
The Company is very well situation
from a future production perspective as
Zinc is the only base metal forecasted
to grow in real value over the period
of the planned mine construction and
commissioning. Based on a number of
international forecasts the zinc price is
predicted to hit 20 year real price highs
in 2016-19 when the mine is coming
on line.
It is a terrific advantage to be in the
correct region for company growth
and development and then to have a
robust project with strong financial
outcomes as defined by a successful
DFS. The key then becomes how you
will pull these factors together and
ensure the delivery of the planned and
communicated commercial results?
The answer to this is the true heart
and soul of Alara’s way forward and
planned success. The key is to have
the right people and Teams in place and
then to ensure everyone is able to work
in an open, collaborative, supportive
environment while sharing a set of
aligned mutual outcomes. This will be
the core to what Alara does and where
they focus in the years ahead.
Alara Resources
Annual Report 2013
3
Traditionally the Managing Director’s
letter in a typical public company Annual
Report will speak primarily to the year
past, the achievements, the challenges,
shortfalls and the overall view of the
year ahead as it relates to the prior year.
Having joined the Board of Directors
late last year (May) and then only
officially taking over as Alara’s Managing
Director on the 1st July this year I felt
it gave me the latitude to talk more
about how FY2013 ended up but then
focus my comments on what I feel is
critical for the Company and what I am
passionate about… the way forward.
Alara finished the year with great
clarity of purpose and direction and
with a number of changes in place or
taking place that are the enablers for
the planned activity in FY2014. As an
overview position at year’s end the
Company confirmed to the market and
all stakeholders that Alara’s future was
in the Middle East (Saudi Arabia and
Oman) with a defined and distinct short
to mid-term focus on the company’s
flagship Zn/Cu KMC Project in Saudi.
In turn a strategy was put in place to
partially or fully divest of the Oman
assets in support of the KMC focus.
It was also clear that the next steps
going forward for this Project was
the effective alignment with our Joint
Venture Partner United Arabian Mining
Company followed by Project finance
and preparation for construction.
At year’s end and into the new financial
year there were several internal
changes made (or being made) to help
ensure the success of the FY2014
plans. Some of the key changes in this
regard include my taking on the role of
ALARA RESOURCES LIMITED – ABN 27 122 892 719 BOARD OF DIRECTORS
BOARD OF DIRECTORS
Ian J Williams, AO
Non-Executive Chairman
BE(Elec), FAus IMM, FIE Aust
Mr Williams was awarded an Officer
of the Order of Australia (AO) in June
2010 for distinguished service to the
Indigenous community of Western
Australia and Queensland through the
establishment of training programmes
providing sustainable employment in
the mining industry, the promotion of
social responsibility and as a supporter of
business development initiatives.
As Managing Director of Century Zinc
Ltd, Ian was responsible for planning and
bringing on stream the Century lead/ zinc
mine in north western Queensland, one
of the largest zinc mines in the world.
Ian’s diverse experience includes executive
management of open cut and underground
mining operations, brownfield expansions
and new major mining projects.
Philip H Hopkins
Managing Director
BSc (Mining Engineering), MBA,
P.Eng, MAusIMM, MCIM
Mr Hopkins has +30 years’ international
experience in the mining industry in
leadership roles across operations,
projects, commercial and executive
matters.
His career has included work with
Cominco Limited, Falconbridge Limited,
Placer Dome Inc., BHP Billiton Limited
and St Barbara Limited and has included
international postings in Canada, Papua
New Guinea, South Africa, Brazil and
Australia. Mr Hopkins has mining
experience in base metals (copper and
nickel), gold and iron ore.
Alara Resources
Annual Report 2013
4
John D Hopkins
Non-Executive Director
LLB, FAICD
Mr Hopkins has 23+ years’ experience
on the board or as chairman of more
than 20 public listed companies (in
Australia, UK and Canada) and as such
has been involved in the financing and
development (and subsequent M&A
activities) of many gold, base metal,
energy (coal and oil and gas), mineral
sands and other resources projects
in Australia, Africa, Asia, Europe and
North America as well as industrial and
manufacturing companies.
More recently, John (as Chairman)
oversaw the transition of Adamus
Resources Limited (ASX : ADU) gold
operations in Ghana from explorer to
producer culminating in its merger
with Endeavour Mining Corporation
(TSX : EDV, ASX: EVR). He is currently
Chairman of developing tungsten and
tin producer Wolf Minerals Limited
(ASX : WLF) and South African based
coal producer Universal Coal Plc (ASX:
UNV) which companies have recently
secured major debt funding.
His Royal Highness
Prince Abdullah bin Mosaad bin
Abdulaziz Al Saud
Non-Executive Director
BEng. (Industrial) (Hons), MEng.
HRH Prince Abdullah is a prominent
self-made Saudi businessman and
industrialist and the Chairman of
The Saudi Paper Manufacturing
Company (SPM) which he established
in 1989 and floated on the Saudi
Stock Exchange in 2006 – SPM
has one of the largest waste paper
collection, recycling, manufacturing
and converting (consumer tissue paper
products) operations in the Middle
East.
HRH Prince Abdullah is keen to
be a part of and to assist in the
advancement of Alara’s flagship
Khnaiguiyah Project in Saudi Arabia.
HRH feels the development of this
Project is of strategic importance to
the country in terms of support of the
nation’s mining industry as well as for
local industry, expertise and workforce.
ALARA RESOURCES LIMITED – ABN 27 122 892 719 MANAGEMENT TEAM
MANAGEMENT TEAM
Exploration
Manager
20+ years’ exploration
and feasibility experience
in and Australia. Received
“Discoverer of the Year”
award, Rio Tinto 2010.
Atmavireshwar Sthapak
Justin Richard
Accountant
10+ years’ accounting
and finance experience
in construction, banking,
exploration and mining.
Chirag Patel
Tina Ahern
Country
Manager,
Saudi Arabia
& Oman
20+ years’ experience,
including Corporate Counsel
and head of legal for UGL
Limited’s resources division,
Senior Commercial Officer
/ Contracts Specialist with
Bateman Engineering
(Australia) and Managing
Director of Irrigate Australia
a private enterprise providing
water management solutions.
Office
Manager
12+ years’ administration,
finance and project
experience including
Brikmakers, Shell Australia,
WA Gas Networks and
BHP Billiton.
General
Manager,
Exploration
(Oman)
20+ years’ experience,
with 4 years in exploration
and development in
Oman, and 8 years with
Rio Tinto Iron in Australia
Company
Secretary
13+ years’ experience with
number of public listed
companies as a Director
and Company Secretary.
Ganesh Krishnamurthy
Victor Ho
Acting CFO 20+ years’ financial,
corporate and commercial
experience, CFO roles
at Strike Resources,
Crescent Gold, Central
Petroleum, DRDGOLD,
and held management
and accounting roles for
Hills Industries, Brown
& Root, Woodside and
Normandy Mining.
Julian Tambyrajah
Alara Resources
Annual Report 2013
5
ALARA RESOURCES LIMITED – ABN 27 122 892 719 ALARA ORGANISATIONAL STRUCTURE
(ASX code: AUQ)
Hume Mining
Pty Ltd
Australia
100%
Alara Operations
Pty Ltd
Australia
100%
Alara Peru Operations
Pty Ltd
Australia
100%
Alara Oman
Operations Pty Ltd
Australia
100%
Alara Saudi
Operations Pty Ltd
Australia
100%
Alara Saudi Marjan
Operations Pty Ltd
Australia
100%
Alara Kingdom
Operations Pty Ltd
Australia
100%
Khnaiguiyah Mining
Company LLC
Saudi Arabia
50% - JV with United
Arabian Mining
Company
Sita Mining Company
LLC
Saudi Arabia
Daris Resources LLC
Oman
50% - JV with AI
Tamman Trading
Establishment LLC
Alara Resources LLC
Oman
70% - JV with Sur
United International
Co. LLC
Al Hadeetha
Resources Oman
LLC
Oman
70% - JV with AI
Hadeetha Investment
Services LLC
Alara Resources
Annual Report 2013
6
ALARA RESOURCES LIMITED – ABN 27 122 892 719 OUR PEOPLE
Perth Management
His Royal Highness Prince Abdullah bin
Mosaad bin Abdulaziz Al Saud ___________ Non-Executive Director
Chirag Patel __________________________ Accountant
Deborah Skolnik _______________________ Office Administrator
Ian Williams __________________________ Non-Executive Chairman
John Hopkins _________________________ Non-Executive Director
Julian Tambyrajah ______________________ Acting Chief Financial Officer
Philip Hopkins _________________________ Chief Executive Officer;
Managing Director
Tina Ahern ____________________________ Office Manager
Victor Ho _____________________________ Company Secretary
Saudi Arabia
Atef Musfer Al Qahtani _________________ Site Security Guard
Fahad Al Baheli ________________________ Government Relations Officer
Fahad Saad Al-Qahtani _________________ Site Security Guard
Faisal Medwid Al Qahtani ______________ Office Assistant
Hamd Elshemi Al-Qahtani ______________ Site Security Guard
Justin Richard _________________________ Country Manager,
Saudi Arabia & Oman
Kamal Hassan _________________________ Office Assistant
Manahi Abdul Hadi ____________________ Site Security Guard
Mohammed Ansar Ahmed ______________ Corporate Services Manager
Mukhezem Faleh Wisam Al Qahtani _____ Site Security Guard
Mukhezem Fuhaid Al Qahtani ___________ Site Security Guard
Muthwed Falef Al Qahtani ______________ Site Supervisor
Suhaim Munir Al Qahtani _______________ Site Security Guard
Zahar Bin Majid Bin Mubarak Al Qahtani __ Site Security Guard
Oman
Atmavireshwar Sthapak ________________ Exploration Manager
Badar Marhoon Al Rahbi ________________ Public Relations Officer
Ganesh Krishnamurthy _________________ General Manager, Exploration
Rexin Kamilas _________________________ Accountant
Majid Al Minji _________________________ Government & Community
Relations Manager
Alara Resources
Annual Report 2013
7
ALARA RESOURCES LIMITED – ABN 27 122 892 719
OUR JOINT VENTURE PARTNERS
OUR JOINT VENTURE PARTNERS
Alara acknowledges and expresses appreciation to each of our joint
venture partners:
United Arabian Mining Company LLC – KHNAIGUIYAH ZINC-
COPPER PROJECT (Kingdom of Saudi Arabia);
Al Hadeetha Investment Services LLC – WASHIHI-MULLAQ-AL
AJAL COPPER-GOLD PROJECT (Sultanate of Oman); and
Al Tamman Trading Establishment LLC - DARIS COPPER-GOLD
PROJECT (Sultanate of Oman).
May we continue together to progress these and future projects
for the benefit of all stakeholders, including our respective
shareholders, employees and the communities where we operate,
In Sha’Allah.
Alara Resources
Annual Report 2013
8
ALARA RESOURCES LIMITED – ABN 27 122 892 719 OUR SUPPORT CONTRACTORS
OUR SUPPORT CONTRACTORS
Contractors
ALS Ammtec
Ausenco
Country
Australia
Australia
Bedrock Minerals Resources (BMRC)
United Arab Emirates
Burns Consulting
CSA Global
Dassalult Systemes (Gemcom)
Australia
Australia
Australia
GEOWISDOM
United Kingdom
Gulf Geotechnical Services
IndiGeo Consultants
Kamel Establishment
Megabest
Mining and Cost Engineering
Petra Capital
Shiva Analytical Labs
SMEC
South West Pinnacle
SRK Consulting
Warner Consulting Australia
Oman
India
Oman
Australia
Australia
Australia
India
Australia
India
Australia
Australia
Alara Resources
Annual Report 2013
9
ALARA RESOURCES LIMITED – ABN 27 122 892 719 2012/13 – A YEAR IN REVIEW
A BRIEF LOOK AT FINANCIAL YEAR 2013
If you had to summarise the past year for Alara and its shareholders in what is
often called “an elevator speech” you might describe the last twelve months
as a year of consolidation of the Company focus, completion of the field drilling
programs and following Project studies on both the Company’s main assets and
internal change and realignment for the next stage of the Company’s growth and
strategic plan. In short it was a year of overall successes that has set up the group
to move forward in becoming a mine operator and concentrate producer.
Now if your elevator got stuck for a few minutes longer you would be able to
explain some of the details of the past year. This extended discussion would note
that Alara defined its overall focus both regionally and on two specific asset bases
or Projects. Namely and respectively, the Middle East (Saudi Arabia and Oman) and
the Saudi Arabian KMC Zn/Cu Project and the Oman Daris/Washihi Cu Project’s.
In both countries and on both Projects the field drilling work was completed, the
JORC compliant Mineral Resource was completed and signed off and the relevant
mine development studies successfully finished. This work left the Company with
a robust DFS on the KMC Project that is now ready for finance and construction
while the earlier stage successful scoping study on Daris/Washihi has added
value to this asset and will support its full or partial divestment. Although the
Daris/Washihi Project is robust in its own right Alara will partially or fully divest
this asset to allow its full focus to go to the KMC Project in Saudi Arabia while
not inadvertently “slowing up” the Daris/Washihi project itself. In addition to this
technical work toward the end of the year the Company made internal changes to
its Board of Directors and Management Team in order to be ready to take on its
next stage of growth and the advancement of the KMC Project.
The key for Alara is that FY2013 has effectively and successfully set the Company
up to progress its strategy to move the Company into being a profitable mine
operator and concentrate producer in one of the world’s most commercially and
technically attractive and sustainable locations.
“If you had to summarise the
past year for Alara and its
shareholders in what is often
called ‘an elevator speech’”
Alara Resources
Annual Report 2013
10
ALARA RESOURCES LIMITED – ABN 27 122 892 719 FY2013 MILESTONES
FINANCIAL YEAR 2013 MILESTONES
Completed KMC drill program
November 2011
Completed Daris/Washihi JORC Mineral Resource
October 2012
Fund raising of $ 7.875m
October 2012
Closed overseas subsidiary EL Quillay
October 2012
Completed Daris Drill program
December 2012
Completed Daris/ Washihi Scoping Study
February 2013
Completed Washihi drill program
Completed KMC JORC Ore Reserve
Completed KMC DFS
March 2013
April 2013
April 2013
Transitioned previous Managing Director from the Company
June 2013
Appointed new Managing Director
Moved to new and separate offices (previously with the
Queste/Bentley Group of Companies)
June 2013
July 2013
Retirement of Shanker Madan from the Alara Board
July 2013
Updated Washihi JORC Mineral Resource
July 2013
Announcement of the Board retirements of Doug Stewart
and William Johnson
August 2013
Alara Resources
Annual Report 2013
11
ALARA RESOURCES LIMITED – ABN 27 122 892 719 FINANCIAL SUMMARY
FINANCIAL SUMMARY
Key Financial Numbers
Full year total comprehensive loss was A$7m compared to A$3.2m in 2012.
The increase in total comprehensive loss from 2012 is primarily the result of
the Consolidated Entity writing off the carrying value of the Awtad Copper-
Gold Project in Oman and the El Quillay Copper Project in Chile, which were
relinquished during the financial year (as described in Review of Operations
below). As a result, an impairment loss of A$3m was recognised in the 2013
results, compared to A$432k in 2012.
Interest income revenue was significantly reduced compared to 2012 as a
result of lower cash balances held during 2013.
Corporate, administration, personnel and occupancy costs have decreased
marginally in 2013 mainly due to no performance options being issued to
Directors or employees in 2013. Also a reduction in staff and consultants
following completion of the DFS.
During October 2012, the Consolidated Entity issued 31.5m shares @ $0.25c
to raise A$7.8m.
The Consolidated Entity had a closing cash balance as at 30 June 2013 of
A$4.5m.
Consolidated net cash outflows in 2013 (and 2012) were driven mainly by
significant exploration and evaluation work carried out on the Khnaiguiyah
Zinc-Copper Project in Saudi Arabia and across a number of copper-gold
exploration projects in Oman.
Consolidated Profit &
Loss Summary
Total revenue
Total expenses
Loss before tax
Income tax benefit
Other comprehensive
income
Total comprehensive
loss
Consolidated EPS
Basic loss per share
(cents)
Diluted loss per share
(cents)
2013
$’000
283
(7,186)
(6,903)
-
(125)
2012
$’000
1,726
(4,975)
(3,250)
-
(37)
(7,028)
(3,250)
2013
(2.84)
2012
(1.50)
(2.84)
(1.50)
Weighted average
231,392,432
210,507,500
ordinary shares
•
•
•
Cash flow Investing activities
includes A$10.3m spend on
exploration and evaluation activities.
Cash flow from Financing activities
includes A$7.8m proceeds from issue
ordinary shares.
Net cash outflows for the year were
A$6.5m.
Consolidated Balance
Sheet Summary
Total assets
Total liabilities
Net assets
Total equity
Consolidated Cash
Flow
Summary
2013
$’000
41,046
(3,595)
37,451
37,451
2013
$’000
2012
$’000
41,680
(4,159)
37,521
37,521
2012
$’000
Operating Activities
(3,577)
(1,497)
Investing Activities
(10,309)
(19,919)
Financing Activities
Opening Cash
Net Cash Movement
Closing Cash
7,481
10,950
(6,491)
4,459
-
32,241
(21,290)
10,950
Alara Resources
Annual Report 2013
12
ALARA RESOURCES LIMITED – ABN 27 122 892 719
COMPANY PROJECTS OVERVIEW
SAUDI ARABIA
Khnaiguiyah Zinc-Copper Project:
Alara’s 50% interest held via joint venture company, Khnaiguiyah Mining
Company (KMC);
Located adjacent to bitumen road ~200km west of Riyadh (capital city) near
major Riyadh to Jeddah highway;
Comprises Mining Licence (issued in December 2010 with exclusive 30 year
term and no mineral royalties), 3 Exploration Licences and 5 Exploration Li-
cence applications, totalling ~380km2 pending completion of transfer to KMC;
JORC Reserves (Proved and Probable) of 26.08MT at 3.3% Zn and 0.24% Cu;
2Mtpa DFS completed in Q2 2013 with projected US$257M capex, 2.8 year
pay-back, A$2.074B LOM revenues and A$0.873B LOM EBITDA (at base case
Zn/Cu prices);
Application for Saudi Industrial Development Fund (SIDF) project financing (up
to 75%) underway with target completion in Q2 2014.
Alara Resources
Annual Report 2013
13
ALARA RESOURCES LIMITED – ABN 27 122 892 719 COMPANY PROJECTS OVERVIEW
OMAN
Washihi Copper-Gold Project
Alara’s 70% (with right to 75%+) is held via joint venture company, Al Hadeetha
Resources LLC
Daris Copper Gold Project
Located ~80-160km east of Alara’s Daris Copper-Gold Project and comprises
3 exploration licences totalling ~ 105km2 applications for 3 mining licences
totalling 5.5km2
JORC Resource: Indicated 6.84Mt at 0.90% Cu and 0.17%g/t Au and 7.27Mt
Inferred at 0.71% Cu and 0.20g/t Au
Alara’s 50% (with right to 70%+) is held via joint venture company, Daris
Resources LLC, which holds the exclusive right to manage, operate and
commercially exploit the exploration licence
Located ~150km west of Muscat (capital city) and comprises a mineral
excavation licence of ~ 587km2 and applications for 2 mining licences totalling
4.5km2
JORC Resource (Measured and Indicated) of 240,024t sulphides at 2.37% Cu
and183,365t oxides at 0.72% Cu
Alara Resources
Annual Report 2013
14
ALARA RESOURCES LIMITED – ABN 27 122 892 719 COMPANY PROJECTS OVERVIEW
Alara has completed a 500,000tpa Scoping Study centering on the Washihi
prospect with inputs from the Daris, Mullaq and Al Ajal prospects.
After a strategic review, Alara is seeking to divest (partially or in full) its Oman
Projects to focus on its more advanced flagship Khnaiguiyah Zinc-Copper Project in
Saudi Arabia.
Alara Resources
Annual Report 2013
15
ALARA RESOURCES LIMITED – ABN 27 122 892 719 COMPANY MINERAL RESOURCES
SAUDI ARABIA
Khnaiguiyah Zinc-Copper Project
JORC Measured and Indicated Zinc (Domain 1) and Zinc/Copper (Domain 2) Resource
JORC Re-
source
Measured
Indicated
Domain
1 and 2
Mineralised
Zone
1, 2
3
1, 2
3
9.65
6.37
3.12
6.18
Measured and Indicated
1, 2 and 3
25.32
JORC Measured and Indicated Copper (Domain 3) Resource
Tonnes (Mt)
Zinc %
Copper %
Zn Cut-off (%)
3.37
5.28
4.45
3.55
4.03
0.16
0.25
0.30
0.05
0.17
1.50
1.50
1.50
1.50
1.50
JORC Resource
Domain
Mineralised Zone
Tonnes (Mt)
Copper %
Cu Cut-off (%)
3
Measured
Indicated
1, 2
3
1, 2
3
Measured and Indicated
1, 2 and 3
4.70
1.07
1.59
1.16
8.53
0.72
0.63
0.54
0.43
0.64
0.00
0.00
0.00
0.00
0.00
JORC Inferred Zinc (Domain 1) and Zinc/Copper (Domain 2) Resource
JORC Resource
Inferred
Domain
1 and 2
* Based on JORC Code, 2004 edition
Mineralised
Zone
4
Notes:
Tonnes (Mt)
4.32
Zinc %
2.90
Copper %
Zn Cut-off (%)
0.03
1.50
Khnaiguiyah contains four mineralised zones located within 1 to 2kms from a central area
and ~3kms from each other. Within the Mineralised Zones 1, 2 and 3 resource modeling has
established3 distinct ‘Domains’ as follows:
•
•
•
“Domain 1” - has Zinc but no Copper
“Domain 2” - has Zinc and Copper
“Domain 3” - has Copper but no Zinc
A total of 315 holes totalling ~36,961m have been drilled by Alara; historically, ~345 holes
have been drilled totalling 45,000+ metres by BRGM and Ma’aden
Mineralisation is open in Zones 1, 2 and 3 and remains to be tested fully in Zone 4
For the location of mineralised zones 1 to 4 (KZ1 to KZ 4), the resource outlines and
drill hole locations
Alara Resources
Annual Report 2013
16
ALARA RESOURCES LIMITED – ABN 27 122 892 719 COMPANY MINERAL RESOURCES
OMAN
Washihi Copper-Gold Project
Cu %
Cut off
0.00
0.25
0.50
0.75
1.00
Tonnes
(Million)
7.16
6.84
5.66
4.04
2.39
* Based on JORC Code, 2004 edition
Indicated Resource
Inferred Resource
Copper (Cu)
Gold (Au)
g/t
0.17
0.17
0.18
0.18
0.20
%
0.87
0.90
1.01
1.17
1.37
Notes:
Tonnes
(Million)
7.77
7.27
5.00
2.57
1.24
Copper (Cu)
Gold (Au)
%
0.67
0.71
0..85
1.07
1.31
g/t
0.20
0.20
0.21
0.23
0.27
Based on 69 holes totalling 10,668m (diamond core – 8,685m, RC - 898m and core-cum-RC –
1,085m) comprising 35 holes totalling 6,206m (diamond core – 4,223m, RC - 898m and core-
cum-RC – 1,085m) drilled by Alara and verified historic drilling data from 34 holes totalling
4,462m (diamond core).
For an outline the distribution of the Inferred and Indicated Resource at Washihi together with
key drill intersections utilised in the estimation of the JORC Resource.
Daris Copper-Gold Project
Ore type
Sulphides
Oxides
Cut-off
grade Cu%
0.5
0.5
Measured
Indicated
Measured and Indicated
Inferred
Tonnes
129,155
96,526
Cu%
2.48
0.77
Tonnes
110,870
86,839
Cu%
2.24
0.66
Tonnes
240,024
183,365
Cu%
2.37
0.72
Tonnes
30,566
1,712
Cu%
2.25
0.61
* Based on JORC Code, 2004 edition
Notes:
A total of 21 rotary (624m) and 41 diamond core (4,654m) holes totalling 5,278m have been
drilled by Alara to test shallow oxide mineralisation and to locate massive sulphide and
stringer zones beneath the oxide cap at the Daris-East prospect, and to test geophysical
targets in the vicinity.
In addition historic drilling data from 44 holes totalling 4,353m have been included in the
resource database.
Alara Resources
Annual Report 2013
17
ALARA RESOURCES LIMITED – ABN 27 122 892 719 COMPANY MINEABLE RESERVES
SAUDI ARABIA
Khnaiguiyah Zinc-Copper Project
JORC Ore Reserves
Mineralised
Zone
Mt
0.78
8.75
8.21
17.73
K1
K2
K3
Total (All
Pits)
Proved
Zn%
4.2
2.6
4.1
3.4
* Based on JORC Code, 2004 edition
Cu%
0.23
0.32
0.27
0.29
Notes:
Probable
Zn%
4.3
3.8
2.7
3.1
Proved + Probable
Cu%
0.25
0.44
0.05
0.13
Mt
1.85
9.95
14.28
26.08
Zn%
4.3
2.7
3.5
3.3
Cu%
0.24
0.34
0.17
0.24
Mt
1.07
1.20
6.08
8.35
Ore Reserve assessed using the Net Smelter Return (NSR) method to generate an economic
cut-off. This method was considered to provide the best representation of value contained
within the Mineral Resources. The NSR cut-off was estimated on a mine gate sale basis and
accounts for pricing assumptions, process plant recovery, transport costs, TC/RC and smelter
deductions.
Refer Alara’s ASX market announcement dated 18 April 2013: Maiden JORC Ore Reserves
– Khnaiguiyah Zinc-Copper Project for further information on the estimation and reporting
criteria under the JORC Code (2004 edition).
Alara Resources
Annual Report 2013
18
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
KHNAIGUIYAH PROJECT
Khnaiguiyah Zinc-Copper Project (Saudi Arabia)
(Alara - 50%, United Arabian Mining Company LLC (Manajem) – 50%, of
Khnaiguiyah for Mining Company LLC (KMC))
Khnaiguiyah Project – At a Glance
Alara has a 50% interest in its advanced flagship Khnaiguiyah Zinc-Copper
Project (Definitive Feasibility Study (DFS) completed) located in Saudi Arabia via
a 50:50 ownership with local partner, Manajem, in joint venture company, KMC
Mining Licence issued with 30 year (2040) exclusive term and no mineral
royalties payable
DFS confirms a technically and financially robust mining operation with a mine
life of 13 years at 2Mtpa throughput with production potentially to commence
in 2016 when zinc forecasted prices are expected to significantly higher:
• Project direct capital expenditure of US$257 million (including owner’s cost
and contingency)
• Production of 1,410,000t of zinc concentrate (775,000t of zinc (Zn) metal)
and 210,000t of copper (Cu) concentrate (52,000t of copper metal) for Life
of Mine
•
First 7 years of full production show an average of 79,750t of zinc metal
as concentrate and 5,750t of copper metal as concentrate with peak
production at 99,000t of zinc metal and 8,250t of copper metal respectively
as concentrates
• Project revenue A$2,074 million (LOM)
• EBITDA A$873 million (LOM)
• Project NPV of A$170 million at an IRR of 23%
• Payback of 2.8 years
•
•
Life of Mine inc operating costs including treatment and refining charges
(TC/RC) of US$0.50/lb after copper credits and US$0.46/lb in the first 7
years with copper price assumed at an average of US$6,114/t
First full year zinc production (2016) costs forecast (after copper credits)
to be in the 2nd quartile of cash costs for the western world mines with
copper costs forecast to be in the bottom quartile
Maiden JORC Ore Reserve Statement:
• Proved Ore Reserves of 17.7 Mt at 3.4% Zinc and 0.29% Copper
• Probable Ore Reserves 8.4 Mt at 3.1% Zn and 0.13% Copper
Upgraded JORC Mineral Resource Statement:
• Measured & Indicated Zinc and Zinc/Copper Resource of 25.32 Mt at
4.03% Zn and 0.17% Cu
• Measured & Indicated Copper Resource of 8.53Mt at 0.64% Copper
Alara has drilled 315 holes totalling 36,961 metres; historically, 345 holes have
been drilled totalling 45,000+
metres by BRGM and Ma’aden
Pursuing 75% project financing with
the Saudi Industrial Development
Fund (SIDF)
Construction is targeted to
commence in Q3 2014 and take 24
months
Alara Resources
Annual Report 2013
19
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Project Development Summary and Milestones
Alara secures 50% interest in advanced Khnaiguiyah Project in October 2010
- previous drilling (of in excess of 45,000 metres in ~345 RC and diamond drill
holes) by BRGM and Ma’aden (Saudi Arabian Mining Company) had outlined
a substantial zinc-copper mineralisation in Zone 2 and Zone 3 and significant
additional mineralisation in Zone 1 and Zone 4 (see figure below)
Khnaiguiyah Mining Licence issued in December 2010 with 30 year exclusive
term and no mineral royalties payable. Some mineral extraction fees do apply.
Maiden JORC Resource Statement announced in February 2012 and Resource
Upgrade announced in October 2012
Since the commencement of Alara’s Khnaiguiyah drilling programme in
February 2011, a total of 315 holes to ~36,961 metres has been completed
Grant of approvals in July 2012 from the Presidency of Meteorology and
Environment in Saudi Arabia for construction and mining operations at the
Khnaiguiyah Project
Initial draft DFS (July 2012) was based on a 1.5Mpta process throughput; this
was subsequently updated and enhanced to a 2Mtpa plant in light of upgraded
JORC Resource, optimisation studies and metallurgical test work
Maiden JORC Ore Reserve Statement announced in April 2013
Completion of positive DFS on 2Mtpa operation announced in April 2013
Submission of 75% project finance application to the Saudi Industrial
Development Fund (SIDF) possible in Q4 2013 (with 8 – 9 month turn around)
Commencement of negotiation of commodity off-take agreements
commencing in Q4 2013
Recruitment of project workforce in Saudi Arabia, including Project Director, to
commence in Q1/Q2 2014
Commencement of Project construction targeted for Q3 2014 (to take 24
months)
2014 timetable subject to review as the details of the EPC mine development
and joint venture partner and management matters are advanced
Definitive Feasibility Study (DFS) Summary
Completion of a positive DFS announced on 30 April 2013
Production highlights:
•
•
•
•
Life of Mine (LOM) of 13 years at 2Mtpa throughput with production
potentially to commence in Q3, 2016 when zinc prices are expected to
significantly strengthen
Project direct capital expenditure of US$257 million (including owner’s cost
and contingency)
Production of 1,410,000t of zinc concentrate (775,000t of zinc metal) and
210,000t of copper concentrate (52,000t of copper metal) for LOM
First 7 years of full production show an average of 79,750t of zinc metal
as concentrate and 5,750t of copper metal as concentrate with peak
production at 99,000t of zinc metal and 8,250t of copper metal respectively
as concentrates
Alara Resources
Annual Report 2013
20
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Financial highlights:
•
•
LOM Project revenue A$2,074 million
LOM EBITDA A$873 million
• Project NPV of A$170 million at an IRR of 23%
• Payback of 2.8 years
•
•
LOM zinc operating costs including treatment and refining charges (TC/
RC) of US$0.50/pound (lb) after copper credits and US$0.46/lb in the first 7
years with copper price assumed at an average of US$6,114/t
First full year zinc production (2017) costs forecast (after copper credits)
to be in the 2nd quartile of cash costs for the western world mines with
copper costs forecast to be in the bottom quartile
Future growth and opportunities:
• DFS is based on currently known JORC Proved and Probable Reserves of
26.1 million tonnes at 3.3% Zn and 0.24% Cu (refer table below)
• All ore bodies are open along strike and depth. Significant upside exists
for further discoveries along the host shear zones which have been
mapped for several additional kilometres within the Exploration Licence
Applications. Many ancient workings remain unexplored
• Plant throughput rate is based on conservative assumptions. To access
high grade ores in the first few years, the mining rate has been planned
to be higher than the plant throughput rate of 2Mtpa. This means that
in-pit mining will be completed in approximately 9 years and the last 4
year’s production will be derived entirely from lower grade stockpiles. It is
expected that some or most of this stockpile production may be brought
forward with minimum additional expenditure.
Khnaiguiyah DFS Financial Summary
Definitive Feasibility Study Financial Summary
Zinc Production LOM
Copper Production LOM
Tonnes
775,000
52,000
Average Annual Production
LOM
Zinc concentrate 108,000 dry metric tonnes
Copper concentrate 16,000 dry metric tonnes
Average first 7 Years of Full
Production
Zinc concentrate 145,000 dry metric tonnes (79,750t of zinc metal)
Copper concentrate 23,000 dry metric tonnes (5,750t of copper metal)
LOM Project Revenue Using
Base Case Zn/Cu Pricing
Forecast LOM EBITDA Using
Base Case Zn/Cu Pricing
A$2,074 million
A$873 million
Zn price
Cu price
TC/RC
NPV
IRR
Assumed A$ to US$ over
LOM
Base Case
US$2,315/t
US$6,114/t
US$180/t
High Case
Market Price*
US$2,373/t
US$2,335/t
US$7,070/t
US$7,070/t
US$180/t
US$203/t
A$170 million
A$255 million
A$120 million
23%
A$0.90 to
US$1.00
31%
A$0.90 to
US$1.00
18%
A$1.00 to
US$1.00
* Market Price based on Forecast LME Price for 2015
Alara Resources
Annual Report 2013
21
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Khnaiguiyah DFS Production Summary
Definitive Feasibility Study Production Summary
Ore Reserves
Proved Reserves
Probable Reserves
Total Proved and Probable
Tonnes
17,730,000
8,350,000
26,080,000
Zn
3.4%
3.1%
3.3%
Cu
0.29%
0.13%
0.24%
The average grade of the feed to the process plant for the first 7 years is
expected to be 4.36% Zinc and in the first 9.5 years approximately 3.95% Zinc
Mining Method
Mining operation
Open Cut - consisting of three pits (KZ1, KZ2 and KZ3)
Drill and Blast, Excavator and Dump Truck Haulage:
Pit Depths
Process
•
•
•
90t Excavator – Ore
160t Excavator – Waste & Ore
90t Off highway Dump Trucks – Ore, Waste and Tailings
KZ1 Pit: 95 metres
KZ2 Pit: 155 metres
KZ3 Pit: 220 metres
Conventional Differential Floatation including Crushing, Grinding, Floatation,
Thickening and Filter press
Civil and Engineering Works
Infrastructure:
•
Fencing and security. Accommodation Village, Run of Mine (ROM) pads and
Low Grade Stockpiles (LGS)
• Buildings include Workshops, Offices, Prayer rooms, Training crib rooms,
Security and Medical facilities
Process Plant:
•
2Mt per annum throughput Process Plant including crushers, grinding
circuit, floatation circuits, thickeners and filtration units for copper and zinc,
conveyors, modern integrated fibre optics based real time communication
system and control room, weighbridge, laboratory
Power Generation:
• Diesel Power Plant: 12 x 1.825 MW
Water production and delivery:
• Bores, pumping station, 15 km pipeline and water storages
Mining:
• Development of the KZ1, KZ2 and KZ3 Pits
•
Tailings and waste disposal will be a Co-disposal facility (CDF)
Employment
Construction workforce – Total = 325:
• Owners Team – 25
• Construction work force – 300 (Peak) supplied under EPC contracting terms
Permanent work force – Total = 475:
• Mining – 184 (Peak)
•
Process – 112
• Management and Admin and support staff – 114
Site Services:
•
•
•
Village catering and cleaning - 40
Village Maintenance – 12
Power and bore fields – 13
Alara Resources
Annual Report 2013
22
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Definitive Feasibility Study Production Summary
Volume Extracted
TOTAL: 160 Mt comprising (approx.):
•
•
•
20 Mtpa (for Years 1, 2, 3, 7)
14 Mt (Year 4)
17 to 18 Mtpa (for Years 5, 6, 8, 9), decreasing to 0.3 Mtpa (Year 10)
Total Ore Processed
Processing
Tailings
Waste Rock
Processing stockpiles occurs from Years 10 to 13
26.08 Mt
2mpta years 1 – 9 direct feed from ROM
2mpta years 10 – 13 direct feed from LGS
25 Mt / LOM
134 Mt / LOM
Volume in Co-Disposal
13 year waste rock and tailings totalling 159 Mt
Construction and Commissioning, Mine
Development
Construction – 24 months consisting of:
•
•
18 months – Engineering, Procurement and Construction
4 months – Commissioning including wet commissioning
Mine Development:
•
6 months – Mining Ramp up. Commencing 16 months into the construction
cycle
First production is forecast for Q4 2015
Life-of-Mine
Mining (Years 1 to 9)
Waste to Ore Ratio
Mining Equipment
Stockpile Processing (Years 10 to 14)
2 year rehabilitation:
• Rehabilitation to start at the end of mining:
– Pits – 18 months
– Co-Disposal Facility (CDF) – 6 months
5.2:1
•
•
•
•
•
2 x 160t excavators for waste
1 x 90t excavator for ore
1 x 50t excavator for batter scaling
23 x 90t dump trucks of which 2 are planned for haulage of dry tails
5 drill machines for drill and blast
Other equipment includes graders, dozers, wheel loaders, water carts and tyre
handlers
Mine operations - three open cut pits (KZ1, KZ2 and KZ3) within 3 km distance of each other
and a centrally located ROM pad and processing facility. It is envisaged that 100% drill and
blasting for ore and waste will occur with truck and shovel operation occurring on an owner
operator basis
Alara Resources
Annual Report 2013
23
ALARA RESOURCES LIMITED – ABN 27 122 892 719
KHNAIGUIYAH PROJECT
Khnaiguiyah Zinc–Copper Project
Surface Layout
Khnaiguiyah Zinc–Copper Project
from Pit to End User
Alara Resources
Annual Report 2013
24
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Capital Cost Estimate – based principally on a fixed price lump sum (Q3, 2013
base) tender submission under the internationally accepted FIDIC (International
Federation of Consulting Engineers) Silver Book (First Edition 1999) EPC/Turnkey
General Conditions contracting model which covers the engineering design,
procurement, construction and commissioning for a 2Mtpa process plant, 24MW
power station, mine village and water bore field:
Capital Cost Estimate
Cost Centre
Process Plant
Infrastructure
Services:
Bore field
Co-disposal facility
Fuel Farm
Mobilisation/Demobilisation
Owner’s Team / Contingency
Total
6
4
1
1
US$ Millions
158
66
12
21
257
Operating Cost Estimate – includes capital and mining equipment leasing costs
using conservative equipment availability and productivity estimates and treatment
and refining (TC/RC) charges (will likely vary over time and are partly correlated to
zinc prices quoted on the London Metals Exchange (LME)):
Operating Costs Estimate
Operating Cost Summary
Unit Operating Costs
US$/t ore
LOM Total US$/Million
Waste mining
Ore mining
Additional ore mining costs*
Processing cost (variable)
Processing cost (fixed)
Transport, TC / RC (variable)
Total operating cost (+/- 15%)
7.89
1.42
2.83
7.33
5.53
18.20
43.20
206
37
74
191
144
475
1,127
*Management, Grade Control, Rehandle, Tailings
Financial Analysis:
Based on report from CRU Strategies (an international marketing and market
forecasting firm) and other data on long term Zinc and Copper price forecasts
and associated TC/RC, the financial analysis has confirmed Khnaiguiyah as
providing a financially robust mining operation
Key assumptions used in the financial model include a Base Case and a
further 2 scenarios in which the Base Case assumptions are changed to reflect
different variables on Zinc and
Copper pricing and TC/RC:
•
Zinc consensus price based
on the CRU estimate and
estimates from BDO and
Morgan Stanley
• Copper consensus price
based on the CRU estimate
and estimates from BDO, JP
Morgan and Morgan Stanley
Alara Resources
Annual Report 2013
25
ALARA RESOURCES LIMITED – ABN 27 122 892 719
KHNAIGUIYAH PROJECT
The variable parameters used in each case reflecting Zinc and Copper prices and TC/RC are:
Pricing and Refining/Treatment Assumptions for Life of Mine
Pricing and Refining/Treatment Assumptions for Life of Mine
Case
Scenarios
Assumptions
Zn US$/t
Cu US$/t
Zn TC/RC per
US$t
Cu TC per
US$t
Cu RC per
US c/lb
High
Base
Use CRU Prices, for Zn;
Adjust Cu Prices and TC/RC
Use Consensus Prices for Zn and Cu;
Adjust TC/RC
Market
Price
LME 2015 Prices for Zn and Cu and TC/RC
as forecast by CRU
2,373
2,315
2,335
7,070
6,114
7,070
180
180
203
64
64
64
6.4
6.4
6.4
On these parameters, the Base Case under the financial model shows:
•
•
EBITDA of A$873 million which will generate sufficient cash flow to repay Capex in 2.8
years
NPV of A$170 million at weighted average cost of capital (WACC) of 9.10% (taking into
account the low cost of capital in Saudi Arabia)
Summary of Revenue, EBITDA, NPV, IRR and Payback Period
Pricing and Revenue Assumptions for Life of Mine
Case
Assumptions
High1
Base1
Market
Price2
Use CRU Prices, for Zn;
Adjust Cu Prices and TC/RC
Use Consensus Prices for Zn and
Cu; Adjust TC/RC
LME 2015 Prices for Zn and Cu
and TC/RC as forecast by CRU
Strategies
Revenue
Cost
A$
million
A$
million
EBITDA Yr 1
to 7 of Full
Production
EBITDA
NPV
A$
million
A$
million
IRR
Payback
years
2,205
1,201
2,074
1,201
1,899
1,107
831
696
609
1,004
255
31%
873
170
23%
791
120
18%
2.0
2.8
3.8
Notes:
1. Assuming an average US$ to A$ conversion of A$0.90 to US$1.00 over LOM
2. Assuming an average US$ to A$ conversion of A$1.00 to US$1.00 over LOM
Alara Resources
Annual Report 2013
26
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Base Case Cash Free Cash
Flow and Payback
Project Financing
The Saudi Industrial Development Fund (SIDF) has the mandate and capacity to
provide loans for local Saudi projects of up to 75% of the capital cost of mine
development at sub-LIBOR rates
SIDF has indicated to Alara that it would be interested in providing such
financing for development of the Khnaiguiyah Project
Riyadh office of KPMG is advising and assisting KMC on the SIDF loan application
process with planned lodgement in Q4 2013 and a 8 – 9 month turn-around
Also pursuing discussions with supplier and off-take partners to provide
additional levels of project financing, further reducing the amount of equity
which Alara will be required to raise itself to fund KMC
JORC Reserve Statement
JORC Ore Reserves
Mineralised
Zone
Proved
KZ1
KZ2
KZ3
Mt
0.78
8.75
8.21
Total (All Pits)
17.73
* Based on JORC Code, 2004 edition
Probable
Proved + Probable
Zn%
4.2
2.6
4.1
3.4
Cu%
0.23
0.32
0.27
0.29
Mt
1.07
1.20
6.08
8.35
Zn%
4.3
3.8
2.7
3.1
Cu%
0.25
0.44
0.05
0.13
Mt
1.85
9.95
14.28
26.08
Zn%
4.3
2.7
3.5
3.3
Cu%
0.24
0.34
0.17
0.24
Alara Resources
Annual Report 2013
27
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
Alara Resources
Annual Report 2013
28
Location of Mineralised Zones 1 to 4 (KZ1 to KZ 4), Resource Outlines and Drill Hole Locations
Notes:
Ore Reserve assessed using the Net Smelter Return (NSR) method to generate an economic
cut-off. This method was considered to provide the best representation of value contained
within the Mineral Resources. The NSR cut-off was estimated on a mine gate sale basis and
accounts for pricing assumptions, process plant recovery, transport costs, TC/RC and smelter
deductions.
Refer Alara’s ASX market announcement dated 18 April 2013: Maiden JORC Ore Reserves
– Khnaiguiyah Zinc-Copper Project for further information on the estimation and reporting
criteria under the JORC Code (2004 edition).
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
JORC Resource Statement
JORC Measured and Indicated Zinc (Domain 1) and Zinc/Copper (Domain 2) Resource
JORC Resource
Measured
Indicated
Domain
Mineralised
Zone
1 and 2
KZ1, KZ2
KZ3
KZ1, KZ2
KZ3
9.65
6.37
3.12
6.18
Measured and Indicated
KZ 1, 2 and 3
25.32
JORC Measured and Indicated Copper (Domain 3) Resource
Tonnes (Mt)
Zinc %
Copper %
Zn Cut-off (%)
3.37
5.28
4.45
3.55
4.03
0.16
0.25
0.30
0.05
0.17
1.50
1.50
1.50
1.50
1.50
JORC Resource
Domain
Mineralised Zone
Tonnes (Mt)
Copper %
Cu Cut-off (%)
Measured
Indicated
3
KZ1, KZ2
KZ3
KZ1, KZ2
KZ3
Measured and Indicated
KZ 1, 2 and 3
4.70
1.07
1.59
1.16
8.53
0.72
0.63
0.54
0.43
0.64
0.00
0.00
0.00
0.00
0.00
JORC Inferred Zinc (Domain 1) and Zinc/Copper (Domain 2) Resource
JORC Resource
Domain
Mineralised
Zone
Tonnes (Mt)
Inferred
1 and 2
KZ 4
4.32
* Based on JORC Code, 2004 edition
Notes:
Zinc %
2.90
Copper %
Zn Cut-off (%)
0.03
1.50
Maiden JORC Resources announced on 21 February 2012 and upgraded on 12 and 30
October 2012
Khnaiguiyah contains four mineralised zones located within 1 to 2kms from a central area
and ~3kms from each other. Within Mineralised Zones 1, 2 and 3, resource modeling has
established 3 distinct ‘Domains’ as follows:
•
•
•
“Domain 1” - has Zinc but no Copper
“Domain 2” - has Zinc and Copper
“Domain 3” - has Copper but no Zinc
A total of 315 holes totalling ~36,961m have been drilled by Alara; historically, 345 holes have
been drilled totalling 45,000+ metres by BRGM and Ma’aden
Mineralisation is open in Zones 1, 2 and 3 and remains to be tested fully in Zone 4
For the location of Mineralised Zones 1 to 4 (KZ1 to KZ4), the JORC Resource outlines and
drill hole locations
Additional Mineralisation Potential
KZ1 – Mineralisation drilled on 50x25m grid; shallow with low strip ratio; extends for 600m
long; generally 300m wide; average 8-10m thickness and significantly, open at both ends to
the north and south along strike
KZ2 – mineralisation extended a further 400m NE since maiden JORC Resource was
calculated
KZ3 – mineralisation open to the south
KZ4 – previously drilled by BRGM; to be
drilled to upgrade historical data
Alara Resources
Annual Report 2013
29
ALARA RESOURCES LIMITED – ABN 27 122 892 719 Joint Venture Management
and Transfer of Mining Licence
KHNAIGUIYAH PROJECT
Under the KMC joint venture shareholders agreement (SHA), Manajem will
transfer the Khnaiguiyah Mining Licence (and other exploration licences) to
KMC
After the formation of KMC, Alara and Manajem entered into a further Mining
Rights Agreement (MRA) in recognition that the transfer of the licences was
in progress and to provide that until such time as they have been transferred to
KMC, KMC shall be contractually entitled to develop the project consistent with
the joint venture contemplated under the SHA
The Mining Licence and related Exploration Licences are pending completion
of transfer to KMC and are currently before the Saudi Department of Mines and
Mineral Resources (DMMR)
SIDF project financing will be provided (upon approval) to the relevant mining
licence holder
Other relevant regulatory approvals and permits required for the development
of the project are also (generally) required to be filed in the name of the mining
licence holder. Alara announced on 21 May 2013 that it had formally given
notice to Manajem to request that they comply with their obligations under
the SHA and rectify the matter of transfer of the Mining Licence (insofar as it
relates to their involvement to facilitate the process). Alara has the option, inter
alia, to suspend its obligations under the SHA. Due to the discussions and
resulting outcomes from the parties there was no further action by either party.
Alara has reserved its rights to do so if the matter of the transfer of the Mining
Licence is not been resolved in due course
Alara and Manajem have since been productively engaged to resolve
outstanding issues in this regard and to address other KMC joint venture
management and operational matters interrelated to the development of the
Khnaiguiyah Project overall
Alara acknowledges the assistance of all internal and external contributors in
advancing the Khnaiguiyah Project to completion of a positive DFS in a relatively
short period of two and a half years since the formation of the joint venture.
Earlier in the year, Alara relocated Mr Justin Richard (Alara’s General Counsel
/ Legal & Commercial Manager) to Riyadh to assume the Managing Director
/ CEO role for the KMC joint venture specifically and to represent Alara’s
interests in the Middle East region generally.
Alara Resources
Annual Report 2013
30
ALARA RESOURCES LIMITED – ABN 27 122 892 719 KHNAIGUIYAH PROJECT
About Saudi Arabia
Saudi Arabia considered to be a favourable investment destination, ranked
22nd in 2012 by the World Bank out of 185 countries in terms of “ease of doing
business” and ranked 1st in the Middle East region (source: World Bank, Doing
Business Project)
Country benefits from developed infrastructure including roads and ports, low
cost energy and in-country construction expertise
SIDF supports local projects with financing (up to 75%) at sub-LIBOR rates and
long 10 year tenure
Tax – 20% corporate tax (nil personal tax rate)
Royalties – nil
Foreign ownership – 100% permitted
Profits and Capital – 100% repatriation
Nil import duties for Capex
Tenure certainty – from exploration to mining
Roads – bitumen highway and road to mine gate
Power – 33KVA power line to site
Water – 15km to aquifer (low salinity)
Fuel – 8,333
Total
1,423
709
2,132
1,643,348
240,364,152
242,007,500
0.153
0.325
0.696
6.685
92.141
100.00%
% of Total Issued
Capital
0.68%
99.32%
100.00%
An unmarketable parcel is considered, for the purposes of the above table, to be a shareholding
of 8,333 or less, being a value of $500 or less in total, based upon the Company’s closing share
price on 24 October 2013 of $0.06 per share.
Alara Resources
Annual Report 2013
132
ALARA RESOURCES LIMITED – ABN 27 122 892 719 ASX ADDITIONAL INFORMATION
Top 20 Listed Ordinary Fully Paid Shareholders
Rank
Shareholder
Shares
Held
Total
Shares
% Issued
Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
13,143,915
J P MORGAN NOMINEES AUSTRALIA LIMITED
44,134,814
NATIONAL NOMINEES LIMITED
Sub-total
57,278,729
42,739,198
23.668
17.660
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED -
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1,300,081
3,172,000
10,278,451
ABSOLUTE INVESTMENTS AUSTRALIA PTY LTD
GWYNVILL TRADING PTY LTD
CITICORP NOMINEES PTY LIMITED
MRS FELICITY CLAIRE KOEKOEK
MR PETER KELVIN RODWELL
MS MENG HENG
FLANNERY FOUNDATION PTY LTD
HGT INVESTMENTS PTY LTD
BNP PARIBAS NOMS PTY LTD
MR WARREN WILLIAM BROWN & MRS MARILYN HELENA BROWN
THORPE ROAD NOMINEES PTY LTD
MR ANDREW BRUCE RICHARDS
HOUVAN PTY LTD
MR WARREN WILLIAM BROWN & MRS MARILYN HELENA BROWN
SURFLODGE PTY LTD
MR IAN EDWARD TREGONING & MRS LISA ANTONIETTA TREGONING
MR BRIAN JOSEPH FLANNERY & MRS PEGGY ANN FLANNERY
Sub-total
14,750,532
10,100,000
7,671,468
5,246,784
4,000,000
4,000,000
3,931,024
3,588,083
3,000,000
2,995,434
6.095
4.173
3.170
2.168
1.653
1.653
1.624
1.483
1.240
1.238
2,500,000
1.0330
2,460,000
2,400,000
2,000,000
1,650,000
1,629,000
1,568,491
1,500,000
1.016
0.992
0.826
0.682
0.673
0.648
0.620
Total
175,008,743
72.315%
Alara Resources
Annual Report 2013
133
ALARA RESOURCES LIMITED – ABN 27 122 892 719 ASX ADDITIONAL INFORMATION
Substantial Shareholders
Registered Shareholder
Shares/Voting
Shares Held
Voting Power
Antares Capital Partners Limited
Acorn Capital Ltd
Northcape Capital Pty Ltd
Kinetic Investment Partners Limited
National Nominees Limited
9,819,296
JP Morgan Nominees Australia Limited
13,907,352
JP Morgan Nominees Australia Limited
10,313,319
HSBC Custody Nominees (Australia) Ltd
3,172,000
HSBC Custody Nominees (Australia) Ltd
5,882,200
National Nominees Limited
3,670,000
JP Morgan Nominees Australia Limited
15,174,701
HSBC Custody Nominees (Australia) Ltd
2,443,629
RBC Investor Services Australia Nominees Pty
Limited
National Nominees Limited
1,335,373
3,301,093
JP Morgan Nominees Australia Limited
1,892,445
National Nominees Limited
Citicorp Nominees Pty Ltd
11,436,650
1,839,814
BNP Paribas Nominees Pty Limited
1,195,434
9.80%
9.52%
9.20%
6.76%
Notes:
1.
These results are based on responses to beneficial tracing notices issued by the
Company as part of a quarterly analysis of its major registered shareholders as at
30 September 2013
2. Substantial shareholders disclosed above are investment managers – shares may be
held for clients who are the beneficial owners
Alara Resources
Annual Report 2013
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Alara Resources
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Alara Resources
Annual Report 2013
136
ALARA RESOURCES LIMITED – ABN 27 122 892 719 “Alara is transitioning from being a
mineral resource developer to a mine
builder and operator”
“Alara respect the Company’s key assets
are its Joint Venture Partners, resources
and people”
“Alara will achieve its goals through open,
collaborative and respectful working
relationships with its employees, partners,
shareholders and stakeholders”
Since its inception in 2007, Alara has been a
resource development company that has looked
throughout the world for suitable and attainable
projects and ore bodies that could be taken forward
by the Company into profitable production. As a result
of the success of this approach and work, Alara is
ready and poised to take its next step in its corporate
development and plans.
The past year (2013 Financial Year) saw Alara focus
on asset and resource development in the Middle
Eastern countries of Saudi Arabia and Oman. As a
result of this focus and effort, Alara completed its
resource drilling programs and study work in these
areas during the year and has advanced its flagship
Khnaiguiyah Zinc-Copper Project in Saudi Arabia
through a successful Definitive Feasibility Study
(DFS) and its early stage Daris/Washihi Copper-
Gold Project through a successful Scoping Study.
Both Projects are robust in their own right with
considerable upside potential.
Going forward, Alara will focus its efforts and
resources on taking the Khnaiguiyah Project though
the finance stage and into construction while
divesting some or all of the Oman Projects.
2013
Annual Report
ABN 27 122 892 719
SHARE REGISTRY:
Western Australia – Main Office
ALARA RESOURCES LIMITED
150 Stirling Hwy
Nedlands WA 6009
T | +61 8 9389 8033
F | +61 8 9389 7871
New South Wales – Branch
Suite 601, Level 6
225 Clarence Street
Sydney NSW 2000
T | +61 2 8096 3502
A.C.N. 122 892 719
ASX Code: AUQ
Principal & Registered Office:
Level 3, 35 Havelock Street,
West Perth, Western Australia 6005
Local
T | +61 8 6323 5900
F | +61 8 6323 5999
E | info@alararesources.com
W | www.alararesources.com