2 ASX Announcement Hodges Resources Ltd (ASX: HDG or “Hodges” or the Company) is pleased to announce the updated resource statement for the Morupule South project in Botswana. Hodges is currently earning 75% in the project, and has the right to earn 99%. The 2.3 billon tonne JORC (2004) Inferred Resource and indicative product washing yields have exceeded the Company’s initial expectations of the project by 485%. (see HDG ASX Announcement: 15 th March 2011). Hodges Managing Director Mark Major said the material increase in the resource estimate along with the project’s open cut potential make Morupule South an exciting prospect for shareholders. “We have identified significant shallow thick coal seams and have the coal quality to support moving this project into the next stage of development. The coal quality and the low strip ratios are extremely encouraging and now the confirmation of a 2.3 billion tonne JORC Inferred Resource puts Morupule South on the radar of a number of prospective end users and strategic investors,” Mr Major said. 25 June 2012 Resource upgrade increased by 485% on previous Maiden Resources ( as refered to in ASX Announcement 15 th March 2011). 2.3 billion tonne JORC (2004) compliant Inferred Resource with the Morupule Main Seam representing 83% of the resource. 1.2 billion tonne is potentially amenable to open cut mining with indicative insitu coal to overburden ratios ranging from 1.7 to 2.7 within these areas. The Bottom Morupule Seam raw calorific value average 4,967 Kcal/kg and less than 30% raw ash. Indicative product seam yields up to 51 % delivering product 14.5% ash & 6,200Kcal/kg for the Bottom Morupule Seam. Infill drilling and coal quality analysis is continuing with the aim of potentially upgrading open cut resources to JORC Indicated status suitable for mining scoping studies. 2.3 Billion Tonne JORC Inferred Resource Upgrade Exceeds Target Expectations at Morupule South by 485%. For personal use only
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ASX Announcement
Tenement
Hodges Resources Ltd (ASX: HDG or “Hodges” or the Company) is pleased to announce the updated resource statement for the Morupule South project in Botswana. Hodges is currently earning 75% in the project, and has the right to earn 99%.
The 2.3 billon tonne JORC (2004) Inferred Resource and indicative product washing yields have exceeded the Company’s initial expectations of the project by 485%. (see HDG ASX Announcement: 15th March 2011).
Hodges Managing Director Mark Major said the material increase in the resource estimate along with the project’s open cut potential make Morupule South an exciting prospect for shareholders.
“We have identified significant shallow thick coal seams and have the coal quality to support moving this project into the next stage of development. The coal quality and the low strip ratios are extremely encouraging and now the confirmation of a 2.3 billion tonne JORC Inferred Resource puts Morupule South on the radar of a number of prospective end users and strategic investors,” Mr Major said.
25 June 2012
Resource upgrade increased by 485% on previous Maiden Resources ( as refered
to in ASX Announcement 15th March 2011).
2.3 billion tonne JORC (2004) compliant Inferred Resource with the Morupule Main Seam representing 83% of the resource.
1.2 billion tonne is potentially amenable to open cut mining with indicative insitu coal to overburden ratios ranging from 1.7 to 2.7 within these areas.
The Bottom Morupule Seam raw calorific value average 4,967 Kcal/kg and less than 30% raw ash.
Indicative product seam yields up to 51 % delivering product 14.5% ash & 6,200Kcal/kg for the Bottom Morupule Seam.
Infill drilling and coal quality analysis is continuing with the aim of potentially upgrading open cut resources to JORC Indicated status suitable for mining scoping studies.
2.3 Billion Tonne JORC Inferred Resource Upgrade Exceeds Target Expectations at Morupule South by 485%.
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Diagram 1. Location of Hodges Coal projects in Botswana
The Morupule coal project is located directly to the south of the operational Morupule Colliery in central east Botswana. The project consists of one prospecting licence (PL121/2010), which covers a total of 264.4km2 (Diagram 1). Hodges is completing a JV earn in for 75% and up to 99% with SDNP Manufacture Mining and Construction Services (Pty) Ltd.
Previous prospecting within the area was undertaken by Geological Survey in 1957, Anglo-American between 1967 and 1971 and a Shell Coal Botswana and Government of Botswana joint venture in 1974. Three recent exploration drilling campaigns were carried out between 2006 and 2008 by SRK Consulting on behalf of MCL.
EXPLORATION DRILLING
The updated resource estimate is based on an additional 52 drill holes including 15 diamond drill holes (2,076 meters) and 37 reverse circulation (RC) open holes (5,070 meters). These plus geologically correlatable historical holes were used in estimating the current resource update. Diamond holes were drilled to a nominal HQ size.
All diamond and the majority of RC open holes were geophysically logged and depth corrected. Coal bore core samples were delivered to the SANAS accredited M & L Inspectorate Pty Ltd laboratory in Middelburg, South Africa for proximate analysis and washability test work (refer Figure 1 for drill hole locations).
GEOLOGY
PL 121 Morupule South is located within the sub-basin of the Karoo Supergroup being composed predominantly of shale and mudstone, with subordinate amounts of siltstone, coal, sandstone and tillite.
There are up to four main coal seams occurring within the resource area PL121 Morupule South. The typical sequence of coal seams are the Serowe Bright Seam (SSB), followed by the Lotsane Bright Seam (SLB), the No.2 Seam (S2B) then the thicker Morupule Main Seam (SMM); which has been broken down into two separate sub seams, namely the Top Morupule Seam (SMT) and Bottom Morupule Seam (SMB). Refer to the stratigraphic column displayed in Diagram 2. The coal seams are considered relatively flat. The floor dip ranges between 0-6°, with an average dip of 1.4°. High dips are related to geological structures, as well as proximity to basement floor ridges. Average seam thickness range from 0.6m for the SSB seam, 2.6m for the SLB seam, 1.9m for the S2B seam,10.3m for the SMT seam, and 7.3m for the SMB seam. Refer to Table 1.
Not all seams are present within the entire tenement, with the upper seams not existing in areas influenced by basement highs or removed by varying weathering profiles or erosional events. Igneous intrusions are present within the tenement, with intruded or heat effected coal not included within the Resource estimate.
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RESOURCE ESTIMATION
GEMECS (Pty) Ltd from South Africa was commissioned to estimate the current JORC (2004) compliant 2.3 Billion tonne Inferred Coal Resource within PL121 Morupule South.
Coal resource classification
Coal resource classification was done using the JORC (2004) code as a guideline. An inferred coal resource was delineated up to areas with a maximum of 4000m borehole spacing. Only boreholes with adequate sampling coverage for each coal zone, were considered for this classification.
Table 1: PL121 Morupule South Resources and Raw Coal Quality.
SEAM NAME
GROSS INSITU
TONNES
RAW COAL QUALITIES (AIR DRIED)
Ave Seam
TK
CV (Kcal/kg)
Ash (%)
Inherent Moisture (%)
Volatile Matter
(%)
Fixed Carbon
(%)
Total Sulphur
(%)
SSB 1.0 MT 0.6 4,346 34.2 3.1 29.6 33.8 1.84
SLB 319 MT 2.6 4,442 35.3 3.5 25.1 36.1 2.25
S2B 35 MT 1.9 4,069 38.6 4.1 21.2 36.2 1
SMT 1,010 MT 10.3 4,083 38.2 3.9 20.1 37.8 0.87
SMB 965 MT 7.3 4,967 29.6 3.7 20.2 46.6 1.13
Total 2,330 MT
Figure 1: Location of Diamond and Open RC Drill Holes in PL121, Morupule South Project.
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Diagram 2: Generalised Schematic Stratigraphy of the Morupule South Coal field.
Morupule shallow section Morupule shallow Morupule deep
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The resource estimate was compiled from data collected from 15 vertical diamond holes and 37 vertical reverse circulation open holes recently drilled by Hodges Resources, plus verified historical bore holes. Coal quality results to date have only been available for 11 of the 15 cored holes. Bore hole coal seam data was correlated by geological logging and down hole geophysics, with subsequent geological modelling and coal resources estimated using Gemcom MinexTM software.
(LOW) Limit of weathering
Limit of weathering is defined as the base of the Kalahari sediments, or up to the highly weathered strata as defined and noted by the geologist during the logging process. The base of this surface is used to cut away any coal bearing strata.
Coal seams and zones
All coal seams and stratigraphic zones were used as correlated in the borehole logs. Missing seams and zones were interpolated using the Minex seam interpolation, and added to the borehole sequence, to ensure a complete stratigraphic horizon to be available for modelling. This ensures a more accurate structural model, eliminate any potential crossing of seams, and allow for more accurate interpretation of sub outcropping of coal seams. Missing coal zones interpolated within the borehole sequence were set to 0 thicknesses to eliminate the addition of coal volumes where seams are not present. Seams were cut away by the base of the Limit of weathering, as well as by the areas that were interpreted to have no coal and pre-Karoo basement.
The Morupule Main Seam was subdivided into a top and bottom zone, where the bottom selection is a predominant coal bearing horizon, and the Top selection a more coal/carbonaceous/inferior coal selection.
Depth below surface was calculated from the topographic surface to the roof of each coal seam.
Basement and no-coal areas
Basement and no-coal areas were identified using all available borehole intersections, as well as guided by the aeromagnetic interpretations as provided in the following report: Interpretation of Ultra High Resolution Airborne Magnetic Horizontal Gradiometer Data over the Morupule Area, Eastern Botswana For Hodges Resources (Pty) Ltd, March 2012, by SPECTRAL GEOPHYSICS.
Coal quality modelling
Coal qualities were modelled and reported on an air-dried basis as reported from the lab. Model grids were created on a 50x50 mesh size, for the following coal qualities for each coal seam: Ash (AS), CV (CV), Relative density (RD), Volatile Matter (VM), Inherit Moisture (IM), Fixed Carbon (FC) & Total Sulphur (TS). Coal qualities were only composited for seams that have a sampling coverage of at least 90%. Compositing of qualities is done on a density weighted basis across the total thickness of the coal seam/selection. Model expansion of the qualities was limited to 500m from the last known data point.
Coal resource areas
The coal resource area is subdivided into potential open cut and underground areas (refer Diagram 3 & Table 2). A strip ratio cut off at 3:1 was used as a guideline to determine the split between opencast and underground areas. In addition, the underground area is generally deeper than 100m below surface (for the Morupule Main seam). The opencast areas were subdivided into 3 areas, based on possible major faults & structural domains. It is worth noting that the SSB seam & the S2B seam were present in the North West Block, yet seam thickness was considered too thin to be considered for current underground mining practices (1.8m thick).
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Coal resource reporting
Gross in-situ coal resources were reported for the total resource area, as well as potential opencast and underground coal resource areas. Coal seams thinner than 50cm, as well as coal with a raw ash of >45% were excluded from the resource estimation reporting.
Three of these zones including the East, Central & West exhibit indicative Insitu Coal: Overburden ratios amenable to Conventional Open Cut Mining practices. Within the current JORC (2004) 2.3 billion tonnes Inferred Resource up to 1.2 billion tonnes may be amenable to open cut mining.
The table below shows the JORC inferred classified gross insitu resource tonnage with the coal quality reported on a raw air dried basis, using a 45% ash cut-off and coal seam thickness greater than 0.5m.
INDICATIVE COAL WASHABILITY RESULTS
Washing test work was undertaken on 11 of 15 diamond bore core holes to date. Results from outstanding holes are envisaged to be completed within the following quarter.
Bore Cores samples with a Seam Raw Ash <40% were selected for further float sink washability test work. Indicative Washed product yields and quality are described below in Table 3.
Yields have been calculated for a specific CV target, using MinexTM Washing Module to wash and report for the following CV (Mj/kg) targets: 23, 24, 25, 26 & 27. This was done to develop an understanding of potential yields and products at a range of product CV’s.
It is worth noting that Raw Coal Bore core analysis is still being completed and it is envisaged that further washability test work will be completed on resultant seams. Indicative Yields and Product qualities are very encouraging and higher than previously anticipated, with the Bottom Morupule Seam producing indicative seam yields upto 51% delivering product 14.5% ash and 6,200Kcal/kg CV.
Diagram 3: Location of Resource Zones within PL121, Morupule South Project.
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Table 2: PL121 Morupule South Resource Zones and Raw Coal quality
Continuing drilling of a further 20 holes is being undertaken on the East and Central block areas. All holes are being drilled using diamond core techniques and the core is being sampled and is ongoing detailed coal quality analysis at M&L inspectorate laboratories in Middelburg South Africa. This drilling and coal quality will assist with undertaking conceptual mining and economic studies in the future.
“We are still drilling and undertaking more coal characteristic laboratory work on the Central and Eastern blocks. This will help confirm the viability of the coal beneficiation as well as aid with upgrading the resource into a Measured or Indicated category; and eventually into a Reserve, so we can determine the economics for future mining,” Mr Major said.
Further interpretation of seam correlations and the extent of the shallow coal in the Eastern Block are still being investigated and shareholders will be updated as new drilling data and laboratory analysis came to hand.
Mr Major said “the open cut potential of the coal seams remains an important consideration for any future commercial mining operations and the recent results continue to support this case.”
Mark Major Managing Director
For Further Information Please contact Mark Major should you have any queries regarding this announcement. Telephone: (+618) 9322 6412 Email: [email protected] Competent Persons Statement The information in this report that relates to exploration results, Coal Resources or ore reserves is based on information compiled by Nico J Denner, Pr.Sci.Nat (400060/98), B.Sc Hons (Geology), who is a Fellow of the GSSA and a member of the SEG, and employed as a full time geologist at Gemecs. Mr Denner is a mining geologist with 18 years’ experience in the mining industry. Nico Denner has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources, and Ore Reserves’. NJ Denner consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
ASX Code: HDG Fully paid Shares: 78,254,029 Unlisted options: 9,925,000 CORPORATE DIRECTORY Company secretary: Julie Hill Stock exchange listing: Australian Securities Exchange Code: HDG
BOARD MEMBERS
Peter Mullens – Chairman Mark Major – Managing Director Nathan McMahon – Non-Exec Director Bryan Dixon – Non-Exec Director Auditors MGI Perth Level 7, The Quadrant 1 William Street Perth WA 6000
HEAD OFFICE
Level 2, 38 Richardson St West Perth, WA 6005 T: +61 8 9322 6412 F: +61 8 9322 6398 Media Enquires Please contact Fortbridge on +612 93310655 Mr. Kemmery +61 400 122 449
Share registry: Advanced Share Registry Service 110 Stirling Highway Nedlands WA 6009 T: +61 8 9389 8033 F: +61 8 989 7871 Solicitors: Cardinals Ground Floor, 57 Havelock Street West Perth WA 6005
