2011 Chichester Hub Reserve Statement Fortescue Metals Group Ltd ( FMG, Fortescue) is pleased to release the results of the annual review of the Chichester Hub Reserves and the move to reporting these Reserves on a dry product tonne basis. Chichester Hub Reserves have been estimated based on current and future product mix, together with the expected final plant configuration at the Cloudbreak and Christmas Creek facilities. As advised in the 2010 annual report, Fortescue committed to an extensive work program pursuant to the restatement of the Chichester Hub Reserves that were originally estimated in 2006. This program of work has now been completed and Fortescue announces Chichester Hub Reserves of 1,547 million tonnes (mt) which comprises 38mt of Proved and 1,509mt of Probable Reserve.
The average iron Fe grade of the Reserve is 58.28%. Further detail of the Reserve Statement is provided in the attached including a restatement of the Chichester Hub Resources effective as at 30 June 2011. With the benefit of over three years of production and sales, Fortescue is now able to change the basis for reporting the Chichester Hub Reserves from run of mine (ROM) dry tonnes to product tonnes. With the combined knowledge of mining and processing data points, Fortescue considers that the provision of product tonnes provides a more relevant representation of the value of the Chichester Hub Reserves. The Reserve is calculated on a dry tonne basis consistent with Fortescues previous reserve statements noting that Fortescues final product averages approximately nine per cent moisture when converting to wet tonnes of production. In June 2010 Chichester Hub Reserves were reported based on ROM dry tonnes at a total of 1,540mt (98mt Proved and 1,441mt Probable) at an average Fe grade of 58.78%. The Chichester Hub Reserve work program had several key focus areas 1) Reconciliation of the assumptions used in the original estimate with information now gained from several years of mining at both Cloudbreak and more recently at Christmas Creek 2) The ultimate configuration of the Cloudbreak and Christmas Creek plants 3) Review of the beneficiation process and the product yields achieved in taking the ROM reserve inventory to finished product state and 4) Market acceptance of the product mix which has evolved over the years since the original estimate. The key points of the restated reserves are A Reserve of 1,547 million dry tonnes converts to approximately 1,700 million wet tonnes of product. This indicates an approximate mine life average for the Chichester Hub of 19 years, assuming a production rate of 90 million wet tonnes per annum.
As described below, with further known resources in the area and other targets and projects established by the company, there is considerable upside potential to this mine life. The product mix within the Chichester Hub Reserve includes Fortescues well established products that have proven positive sintering characteristics which demonstrate high value in use and have a history of customer acceptance through underlying demand. The life of mine strip ratio for the Chichester Hub is calculated at 4.2 1 and represents the tonnes of overburden and internal waste that must be mined per tonne of ore delivered to the processing plant. The reserve study was drawn from the pool of Measured and Indicated Resources. In addition to these tonnes there are also approximately 590mt of Inferred Resources as at 30 June 2011, which are not available for reserve studies but provide significant potential for Reserve upside. With further resource definition drilling, these Inferred tonnes may be upgradable for future reserve study consideration.
In addition, exploration drilling will be conducted within the Chichester Hub footprint that should add to the resource pool going forward. In conclusion, this restatement of the Companys Chichester Hub Reserves is the culmination of a significant program of work. Three years of mining and processing at Cloudbreak and over 18 months of mining and four months of processing at Christmas Creek allows Fortescue to transition to reporting product tonnes. We expect that once sufficient production experience is gained at future mine sites, including Solomon, Fortescue will similarly transition to reporting these reserves in product tonnes. Yours sincerely Fortescue Metals Group Ltd Mark Thomas Company Secretary Media contact Elizabeth Gosch Mobile 0414 319 775.
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Chichester Hub Reserve Statement