Kanyika

Overview

• 56Mt multi-commodity (niobium, uranium, tantalum and zircon) inferred JORC resource announced in March 2008.
• Scoping Study carried out by Coffey Mining, announced in June 2008, concluded that "the Kanyika Project has the potential to become a very profitable operation with at least a 20 year mine life."
• Pre-Feasibility Study initiated in September 2008.
• Niobium the primary commodity at Kanyika - 20% p.a. consumption growth in the last 5 years.
• Globe positioning itself for strategic alliance and off-take partner.
• Inferred JORC resource developed over 24 months from an untested radiometric anomaly at a cost of A$3 million.

Current Work at Kanyika

The initial components of the Pre-Feasibility Study currently being undertaken are:

1. Resource Upgrade - to provide a greater level of geological confidence to the higher-grade, near surface component of the resource, by way of in-fill drilling, resulting in an upgraded JORC resource category for that component of the resource, above the current inferred category. It is expected that these parts of the deposit will be the focus of initial mining at Kanyika.

2. Metallurgy - to complete the nest stage of ongoing metallurgical work which has the objective of validating the entire process flow sheet proposed under the Scoping Study.

More detail on this current work is set out further below. Discussions with potential off-take partners (marketing) are ongoing.  Other aspects including mining, engineering, legal, operating, social and environmental will follow in due course.

Kanyika Licence and Geology

The Kanyika exploration licence (EPL 0188) was granted to Globe Metals & Mining in March 2006 and covers an area of 598 sq kilometres. The Company holds a 100% interest in the Project.

Kanyika is located in the southern part of the Mzimba District, Traditional Authority Mabulabo, about 150 kilometres north of the capital, Lilongwe (see Project Location Map on "Malawi" page, under "Projects"). The licence area covers igneous and metamorphic rocks of the Precambrian to Lower Palaeozoic Basement of the Mozambique Orogenic Belt. Much of the licence is underlain by biotite gneiss, granitic gneiss and calc-silicate gneiss.

The Nb, U, Ta and Zr mineralisation is hosted by a N-S striking alkalic granitoid body that is coincident with a strong airborne radiometric anomaly. An indicative section from the northen, Milenje Zone of the resource is shown below:

Resource

The initial JORC mineral resource estimate was carried out by independent mining consultants, Runge Limited. The resource covers approximately 2.1km strike length and remains open to the north, south and at depth.

Highlights:

• Kanyika the largest reported JORC metals deposit in Malawi.
• High-grade component of resource - majority at or near-surface (see 3D block model below).
• The resource is comprised of mineralisation from four major zones: the Pangano, Uzambazi and Chikoka Zones in the central area and the Milenje Zone in the north.  

Scoping Study

Coffey Mining carried out the Scoping Study into the economic potential of Globe's Kanyika Project.

The Study modelled an open-pit mining operation, and the on-site production of marketable products, being primarily a ferro-niobium alloy, and also high-purity metal oxides. An analysis of varying mill throughput volumes was also assessed. The Study was carried out with an order of accuracy of ±30% for mining costs and ± 50% for all other items.

Input parameters for the Study included results from initial metallurgical testwork conducted by SGS (Lakefield, Canada), the 56Mt Inferred JORC Resource estimated by Runge Limited and the environmental baseline study already completed by Coffey Natural Systems. Parameters for mining and processing operations, as well as transport and logistics, were developed by Coffey Mining.

Cashflow modeling was based on the actual Inferred Resource - Nb2O5 material grading >2,500 ppm is mined up to years 9 and 7 for the 3,000t and 4,000t Nb metal production scenarios respectively. After that point, further material at a grade of 2,500ppm Nb2O5 is mined from a combination of the remaining Inferred Resource material and further mineralisation that is assumed will be discovered through continuing exploration, to extend the project life to 20 years.

"Results show that the Kanyika Project has the potential to become a very profitable operation with at least a 20 year mine life."

Highlights from the Study include:

• $3B revenue and $1.1B free cash flow over a 20 year period.
• High Operating margins - $93M in year 1, averaging $77M over the life of the mine.
• Modest Upfront capex. - $177M.
• Short capital payback period <2 years.
• Financial returns have potential to improve significantly with futher work.
• Very low strip ratio (waste:ore) of between 0.5 and 0.9 over the planned life-of-mine.

Financial Summary:

Process Flow Sheet/Metallurgy:

Initial metallurgical testwork has been undertaken on representative samples of material from the Kanyika deposit to define a process flow sheet for production of niobium, uranium, tantalum and zircon products.  The main proposed stages of processing are:

1. Crushing - The ore is crushed to a sand size in order to liberate the pyrochlore grains that contain the Nb, Ta and U, and the zircon grains that contain Zr.

2. Gravity Concentration - The pyrochlore and zircon are concentrated with gravity methods including spirals and riffle tables. Some of the less heavy gangue (waste) minerals are removed in this way. A zircon concentrate will also be produced at this stage.

3. Flotation - From the gravity concentrate, a pyrochlore concentrate grading approximately 25% Nb2O5 and 1% Ta2O5 will be produced using conventional flotation techniques.

4. Smelting - The major product, a FeNb alloy with lesser amounts of tantalum, is produced via an aluminothermic reduction smelting process. The niobium combines with iron to form FeNb, whilst the U separates into the alumina-dominant slag.

Additional Upside Potential:

The Study undertaken by Coffey Mining is conservative in some key respects, in part because some of those assumptions used in the Study were requested by Globe.

1. Metallurgy - The Scoping Study used actual metallurgical recovery rates achieved to date, relying upon initial work carried out by SGS (Lakefield, Canada).

A further phase of metallurgical testing has however commenced, which is designed to optimise the gravity separation and flotation stages, and maximise both recovery rate and grades of the Nb-Ta-U (pyrochlore) concentrate.  Perth-based mineral processing specialists, Nagrom, have been engaged for this work, and are being supervised by Globe's consulting metallurgist, John W. MacIntyre & Associates.  The Company is confident this program will materially improve recovery rates above those achieved in the first-pass testwork (see Globe's ASX release of 26 May 2008).

2. U3O8 Revenues - The Study does not include any potential revenues from uranium oxide production (other than the downstream processing potential for a high-purity oxide - see 6 below). The metallurgical process adopted in the Study assumes that uranium reports to the slag during smelting of the pyrochlore concentrate and is not recovered.

Significant economic upside for the Project exists if uranium can be economically extracted from the slag.  Metallurgical testwork to ascertain whether this is feasible is proposed to commence shortly.

3. Further Exploration Success - The 56Mt Inferred Resource at Kanyika has considerable potential to be enlarged by further exploration. The deposit is open at depth and along strike, most importantly, to the north of the high-grade Milenje Zone (see Kanyika Resource 3D Block Model).

Discovery of further higher-grade material at Kanyika (i.e. > ~3,000ppm Nb2O5) will greatly improve the operating costs and/or revenues modelled in the Study and potentially extend the mine life considerably.

4. Metal Prices - The primary marketable commodity at Kanyika is niobium, and sensitivity analyses show the niobium price is the single largest variable that affects the Kanyika Project cash flows and valuation.

The niobium prices used in the Study are substantially below current spot prices.  A conservative approach to pricing was adopted because of the marked increases in prices (and demand) over the last 3 to 5 years.  Should prices remain at or near current spot levels for an extended period of time, the potential improvement to the modelled cash flows and valuations would be significant.

5. Power - The Study assumes Globe will be self-sufficient for power in Malawi, and would not rely on the domestic electricity grid. The Study assumes on-site generation of power using HFO (heavy fuel oil) or diesel generators.

A number of developments are currently taking place in relation to Sub-Saharan energy and power infrastructure which have the potential to enhance Malawi's access to reliable sources of grid power over the medium term.  The availability of reliable grid power would significantly reduce operating costs.

6. Downstream Processing Option - Coffey Mining also considered the option of a further stage of metallurgical processing, to produce high-purity niobium, tantalum and uranium oxides. The incremental cash flows and financial returns of this option are significant.

Resource Upgrade Drilling

The current drilling program is designed to:

• Upgrade the resource category of the majority of the high-grade, near surface mineralisation.
• Increase the Inferred Resource tonnage, specifically by targeting along strike and down-dip extensions to the high-grade northern part of the Milenje Zone.

The near-surface, high grade component of the current inferred resource is targeted for upgrading of resource category because it will be the focus of mining for the first 4-5 years of operations.  Mining this high-grade material first is expected to provide for earlier payback of capital expenditure.

Drilling has been extended 200m along strike to the north along the Milenje zone from last year's drilling.  In addition, a number of holes up to 300m deep, target down-dip extensions to the high grade mineralisation in the Milenje Zone.

The resource upgrade drilling program is near complete.  Runge have been appointed to carry out the new resource estimate, due for completion in Q1 2009.

Metallurgy 

The primary aim of current phase of metallurgy is to:

• Optimise the gravity and flotation recoveries to the concentrate.
• Produce a ferro-niobium alloy via smelting.

The smelted ferro-niobium alloy samples will then be sent to potential buyers for examination and assessment.

Secondary elements of the metallurgy program include:

• Examination of the potential to produce uranium from the smelting slag.
• Pre-smelt leaching tests to examine the possibility of removing the uranium from the concentrate by chemical means.
• Optimisation of the zircon concentrate into a possible saleable product.
• Investigation of the potential to produce a clean feldspar product for the ceramics industry.

John W. MacIntyre & Associates (JMA) have been retained by the Company to manage the metallurgical program.  John MacIntyre (FAusIMM) has over 33 years experience as a metallurgist working on a wide range of projects worldwide.  The past 27 years have been associated with all aspects of new project development, namely metallurgical evaluations, feasibility studies, technical audits for financial institutions, project commissioning and management, as well as mine management. 

The gravity testwork is being conducted at the Perth laboratories of Nagrom, who have extensive experience in gravity separation and beneficiation techniques (http://www.nagrom.com.au/). Nagrom have conducted work for many specialty and rare metals projects worldwide.

Flotation testwork is being conducted at the Perth laboratories of Ammtec, who have extensive experience in flotation techniques (http://www.ammtec.com.au/).

Marketing

The Company is actively investigating the market for ferro-niobium products, and has commenced discussions with a number of possible off-take partners.  The completion of the metallurgical test-work program will provide base-case finished products for testing by potential buyers.