Cardero Resource Corp. – Focused on Steel Commodities: Metallurgical Coal and Iron Ore
OVERVIEW
Cardero Resource Corp. (TSX:CDU,AMEX:CDY) is a Vancouver-based exploration company focused on iron ore and metallurgical coal. The Company’s two key assets are Sheini Hills iron ore project and the Carbon Creek metallurgical coal project. The Sheini Hills project is in Ghana within the emerging West African Iron Ore Province. The Company anticipates completion of an NI 43-101 resource calculation on Sheini Hills in Q4 2012. Cardero is committed to responsible and sustainable mining with a strong focus on building positive stakeholder relationships.
INVESTMENT HIGHLIGHTS
Sheini Hills Iron
- First ever comprehensive drill program completed on the project in 2012 – completion of an NI 43-101 resource calculation anticipated before the end of Q4 2012
- Highlights from 2012 drill program include:
- Hole 039, which returned 278 metres from surface grading 43.2% iron, including 10.7 metres grading 50.6% iron
- Hole 063, which returned 51.60 metres from surface grading 48.50% iron, including 16.00 metres grading 50.81% iron.
- Airborne magnetic survey identifies outcrop-supported exploration potential over an additional 24 kilometres of strike – multibillion tonne potential
- Ghana is a stable modern democratic country with strong economic ties to global markets
Carbon Creek Metallurgical Coal
- One of the largest, contiguous deposit of coal in the Peace River coalfield in northeastern British Columbia
- NI 43-101 compliant resource estimate of 121 Proven and Probable Reserves (468 million tonnes measured and indicated resource)
- One of the lowest operating cost in the region – $110/tonne FOB
- Base case NPV8 $633M on a post-tax, post NPI basis, with 23.7% IRR
- Undiscounted cash flow valuation of $2,132 million
- First coal production planned for Q4 2014 – average production rate of 4.1Mtpa
- Percentage of hard coking coal increased from 35% to 60% of planned production
KEY PROJECTS
Sheini Hills Iron Project – Republic of Ghana, West Africa
The Sheini Hills Iron Project is located in the Zabzugu-Tatale District in the Northern region of the Republic of Ghana. The large-scale iron project comprises three prospecting licenses covering the Sheini Hills iron ore deposit (397.5 square km). The Government of the Republic of Ghana acting by the Ministry of Lands and Natural Resources has issued a licence document dated December 8, 2011 for each of the three Prospecting Licences (Sheini North, Sheini and Sheini South). Infrastructure is good to moderate with graded roads, power and communications available at the district capital of Zabzugu, some 20 kilometres north-west of Sheini.
Ghana is a modern developing country with strong economic ties in West Africa and with Europe and North America. West Africa is an emerging iron district with the potential to garner a significant percentage of annual global production in the coming years. Thirty iron projects are at various stages of development in the region with 15 major projects by big players such as Xstrata, Arcelormittal and Rio Tinto spanning eight nations. Typical primary ore grades of existing West African resources range from 27 percent to 38 percent with an average tonnage of 2.2 billion tonnes.
Cardero, through its wholly-owned subsidiary Cardero Ghana Ltd., has a joint venture agreement with Emmaland Resource Limited, a Ghanaian company, to explore and, if warranted, develop the project. Cardero has the right to earn a 100 percent working interest in the project subject to a 10 percent NPI in favor of Emmaland and a 10 percent fully carried interest in favor of the Government of Ghana. Cardero has the right to purchase the 10 percent NPI held by Emmaland. In order to earn its interest, Cardero Ghana is required to fund all expenditures under each of the particular joint ventures and make cash payments to Emmaland totalling USD 16,600,000.
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Geology
At the regional scale, the Sheini Hills project is located within the eastern part of the West African Craton called the Eastern Pan African Domain. The project area is located in the Togo Belt, starting in southeast Niger and running south-southwest to southeastern Ghana, comprising supracrustal sediments and volcanics of probable late Precambrian to early Phanerozoic age. The Togo Belt consists of Buem Formation and Togo Formation. The rocks of the Buem Formation are dominated by east- to southeast-dipping clastic sediments, mainly sandstones, siltstones, shales and mudstones. Massive chert (silexites), limestones and dolomites are known from Togo.
The Iron Formation is located mainly within the Ghanaian part of the Buem Formation, but some of the bodies also cross the border into Togo. The iron mineralization is associated with tillites situated near the base of the Buem Formation.
Ironstone Ridges - From Air
The observed geological, mineralogical and geochemical features indicate that the Sheini mineralization fits a Banded Iron Formation (BIF) model. Based on similarities to other West African BIFs, the upper, oxidized layer is likely to be 70-120 metres in thickness. The oxidized layer is likely to be underlain by a magnetite-facies, primary BIF.
Exploration Work
Beginning in late 2010 and throughout 2011, Emmaland, with input from Cardero, carried out exploration work focused on obtaining sufficient data to meet the requirements of the Minerals Commission of Ghana and to successfully win the tender to obtain prospecting licenses over the Sheini area. Following the issue of the three prospecting licences to Emmaland in late 2011, the second phase of exploration consisted of reconnaissance mapping over new areas to the north and south of the original, non-exclusive exploration licence.
According to the available historical reports, there was extensive exploration carried out in the Sheini area between 1945 and 1980. No maps or tables showing the exact location of the historical workings (trenches and boreholes) remain. For this reason, prospecting was focused on locating these old workings to obtain an overview of the scale of the historical exploration work.
A total of 35 historical trenches, mainly trending east-west with total length of around 2,076 metres, have been located to date. The trenches are situated primarily along the ridges and steep slopes exposing the iron mineralization where access for drilling was difficult. Most of the trenches are oriented in an east-west direction, which is perpendicular to the trend of the iron mineralization.
In addition to the trenches, 18 historical boreholes have been located during prospecting. According to the historical reports, 23 boreholes were drilled between the 1950s and 1970s.
The results of 269 trench samples (excluding blanks and duplicates) adequately confirm the findings presented by historical explorers. The results also confirm the field geological and mineralogical observations that BIF, due to its composition, grain size, and texture, is typically higher grade than Fragmental Iron Formation (Fragmental) (BIF and Fragmental are collectively referred to as the “Iron Formations”).
The $5.79 million 2012 exploration work program at Sheini Hills includes multi-spectral acquisition and interpretation, high-resolution imagery acquisition, mapping, sampling, Ironstone drill testing (9,000m), Ferricrete drill testing (2,000m) and airborne geophysics (3,500 line km), all of which have been completed.
Outcropping Ironstone
In August 2012, Cardero completed Phase I of the 2012 program in which exploration targeted outcropping haematite ironstones and surface haematite ferricretes. Highlights from the results include Hole 063, which returned 51.60 metres from surface grading 48.50% iron, including 16.00 metres grading 50.81% iron. The program focused on a core 9 kilometre-long zone of outcropping haematite-ironstone ridges with peripheral surface ferricretes. A total of 67 diamond drill holes have been completed with results received for all holes.
Regional work, including satellite interpretation, airborne geophysical surveys and verification mapping have identified an additional 24 kilometres of potential ironstone deposits, which will be drill-tested in Phase II.
Metallurgical testing (bench scale) and a NI 43-101 resource calculation are currently underway on the project, and the Company anticipates completion in Q4 2012.
The proposed work program for 2013 includes 18,750 m of Ironstone drill testing, 4,000m of Ferricrete drill testing, metallurgical testing and a Preliminary Economic Assessment.
Carbon Creek Metallurgical Coal Project – British Columbia, Canada
The Carbon Creek deposit is an advanced 17,200 hectares metallurgical coal development project located in the Peace River Coal District of northeast British Columbia, Canada. Cardero has a 100 percent interest in the project which it acquired from Coalhunter Mining Corp. (now a wholly-owned subsidiary of Cardero and the operator of the project) in June 2011. Carbon Creek has a current NI 43-101 compliant resource estimate of 121 Proven and Probable Reserves as well as 468 million tonnes measured and indicated resources with an additional 232 million tonnes inferred resources.
In September 2012, Cardero announced the positive results of a Prefeasibility Study (PFS) on the Carbon Creek project. The results show pre-production capital costs estimated at $217M to bring this project into production. Additional capital estimated at a total of $475M will be required to bring the project to full production. Sustaining capital of $364M will be required over the remaining life of the mine. Operating costs per tonne of clean coal average $74 (mining & processing costs). Cardero plans to construct a 1200 tonnes per hour Coal Processing Plant to be located at Carbon Inlet.
The 2012 drill program is nearing completion. The Company expects an Application Information Requirements to be completed by the fourth quarter of 2012 followed by the preparation of an effects assessment in the first quarter of 2013 and submission of the final Environmental Assessment Certificate in the second quarter of 2013. The Feasibility Study is planned for completion in Q2 2013.
For more information on the Carbon Creek Project, click here.
SUMMARY
Cardero Resource is focused on generating shareholder value through the acquisition and development of large-scale bulk-tonnage iron and metallurgical coal deposits. Both the Sheini Hills iron ore and Carbon Creek metallurgical coal projects exemplify that strategy.
Exploration work at the Sheini Hills iron ore project in Ghana, West Africa has proven up promising drill results with highlights from Phase I of the 2012 program including Hole 063, which returned 51.60 metres from surface grading 48.50% iron, including 16.00 metres grading 50.81% iron. Cardero anticipates completion of an NI 43-101 resource calculation on the Sheini Hills project in Q4 2012.
MANAGEMENT
Hendrik van Alphen – Chief Executive Officer and President
Mr. van Alphen has had a successful career in the mining business for over 25 years. Since 1999, he has been a Director of Cardero Resource Corp and was instrumental in establishing the Cardero Group of Companies. Mr. van Alphen holds senior management and director positions with several resource exploration and development companies. He has raised over $200 million for mining exploration. His leadership, knowledge and access to capital are an invaluable asset to the company.
Since founding the Company in 1999, Mr. van Alphen has created significant value for shareholders, not least through acquisition of undervalued projects like Pampa de Pongo, which was acquired for less than $1 million six years before it was sold for $100 million. He will continue to focus on corporate strategic initiatives for Cardero.
Angus Christie – Chief Operations Officer
Mr. Christie is a highly respected senior executive with over 25 years international experience in coal mining operations, resource and reserve management, mine development and exploration and strategic planning.
In his career, Mr. Christie has been involved in several projects from exploration and feasibility through to mine commissioning. His operational experience has focused on both underground and surface operations extending from deposits including five underground and open pit mines. He most recently served as Manager of Strategy and Resources for Anglo Coal (Peace River Coal).
Lawrence W. Talbot – Vice President and General Counsel
Mr. Talbot is a mining lawyer with over 25 years experience representing a wide range of clients in the mining industry, from individual prospectors, junior and mid-size explorers and producers through to major mining companies, in both the hard-rock and industrial mineral fields. He has extensive experience acting for public natural resource companies and providing advice on all aspects of their businesses, including corporate finance, securities and regulatory matters, corporate governance and shareholder issues, and all aspects of corporate acquisitions, takeovers, divestitures and reorganizations.
Keith Henderson – Executive Vice President
Mr. Henderson, formerly Vice President Exploration, brings 19 years’ global mining-industry experience to Cardero. Prior to joining Cardero, he was Project Manager for Anglo Coal’s Canadian subsidiary, focused on metallurgical coal deposits in northeast British Columbia. At Cardero, Mr. Henderson played a critical role in advancing the Pampa de Pongo through a positive scoping study and ultimate sale for US$100 million (2009). Most recently, he was responsible for Cardero’s original investment in Coalhunter (2010), acquiring 49% of the company for $3.6 million.
Mr. Henderson is a mining industry executive with global experience in Africa, Europe, and the Americas. He has extensive knowledge of the exploration and mining business from both a major and junior public company perspective. With a proven track record he has successfully managed exploration and mining companies through significant growth periods.
Blaine Bailey – Chief Financial Officer
Mr. Bailey is a Certified General Accountant who has worked with numerous private and public companies over the past 20 years. He brings complementary skills to the team in the areas of finance, administration and financial reporting.
Ryan Dunfield – Director
Mr. Dunfield has financial professional experienced in capital markets. He specializes in acquisition and divestiture in resource sector.
Stephan Fitch – Director
Mr Fitch has a background in international corporate finance and investment banking. He has been specializing in venture capital for 27 years.
Leonard Harris – Director
Mr. Harris has 52 years of experience in mineral processing and mining. He has a strong background in large-scale mine operations start-up.
Paul Matysek – Director
Mr. Matysek is a mining entrepreneur that specializes in mine development and divestment. He is the Founder of Lithium One (2012) and the Founder of Energy Metals Corp (2007). Mr. Matysek is the former CEO of Potash One.
Andrew Muir – Director of Investor Relations
Mr. Muir holds a Bachelor of Science (Honours) in Geology from the University of British Columbia and the Chartered Financial Analysts (CFA) designation. He joins Cardero from Haywood Securities Inc. in Vancouver, an independent full service investment dealer, where he served as an Investment Advisor building and managing retail and institutional relationships. Prior to Haywood, Mr. Muir was a highly regarded Mining Analyst with Vancouver based investment dealers Canaccord Capital Corporation, PI Financial Corp., and Yorkton Securities Inc.
Guy Gilron – Vice President Environment and Regulatory Affairs
Mr. Gilron has 22 years’ global experience, most recently specializing in BC coal projects. He was previously Teck’s Director Environmental Science.
David Thompson – Resource Manager
Mr. Thompson is a geologist with 15 years’ metallurgical coal experience. He was previously a Project Manager with Anglo Coal.
Bob Osborne – Community Relations Director
Mr. Osborne has 25 years’ experience in Aboriginal Affairs. He was the previous Aboriginal Affairs Coordinator for BC Environmental Assessment Office.
Leigh Harris – Material Logistics
Mr. Harris has 20 years’ experience in material handling and transportation. He was previously with Smit Marine Canada.
