LionOre posts a solid quarter

Vancouver The first quarter of 2003 proved to be a good one for LionOre Mining International (LIM-T).

The nickel-gold miner earned US$9.1 million, or $0.06 per share in the three months ended March 31, compared with a profit of US$100,000, or nil per share in the corresponding period of 2002. The jump was helped by a US$2.9 million gain from the sale of Australian-listed Jubilee Mines shares during the quarter. Sales soared to US$41.5 million, up from the US$2 million tallied last year.

Driving the stellar profit growth was the company’s Australian operations, which contributed US$8.7 million for the three months. This marks a significant increase over the US$200,000 profit put in last year. .

In the Lake Johnston greenstone belt of Western Australia, the Emily Ann underground mine contributed 1,551 tonnes of nickel in the first quarter at a cash cost of US$2.12 per lb. The operation mined 63,281 tonnes of material during the quarter at an average grade of 3.06% nickel, compared to 44,213 tonnes mined in last year’s quarter at an average grade of 2.94% nickel. Recoveries came in at 87.4% , a marked improvement over the 78.5% tallied in the first quarter of 2002.

The company also began development of the nearby Maggie Hays nickel deposit, which is expected to ramp up Australian nickel production for the junior to between 10,000 and 12,000 tonnes per year by the end of 2004.

Located only 3-km south of its wholly owned Emily Ann operation, the larger Maggie Hays deposit was giving the green light for a US$13 million development program based on the completion of a feasibility study on the main massive sulphide zone, which contains an indicated resource of 633,000 tonnes grading 3.55% nickel.

The company envisions mining the lower massive sulphide zone (probable reserve of 475,000 tonnes at 3.55%), while evaluating a small high-grade section at the upper part of the massive sulphide zone by decline drilling. Lionore Mining believes that incremental production from the high-grade section could be achieved by the second half of the year, with production from the lower zone coming in the third quarter of 2004.

Using a US$3.25 per lb. nickel price, average cash operating costs ring in at US$170 per lb., generating some US$15 million is cash flow for LionOre Mining. Underground development costs, expected to hit US$13 million, will be funded using existing cash. Nickel concentrates will be sold to Inco (N-T) under the life-of-mine off-take agreement covering the Emily Ann concentrates.

In anticipation of the go ahead, underground development at the Emily Ann mine has been ramped up with production rising to 350,000 tonnes per year by the second quarter of 2003, from the 250,000 tonnes currently.

The Emily Ann process plant will be upgraded in incremental stages to accommodate the Maggie Hays ore. By the third quarter of 2004, capacity is slated to hit 500,000 tonnes per year. Capital cost for the up grade come in at a low US$4 million. Combined with the Emily Ann mine, nickel production from the Lake Johnston region is likely to increase to 7,000-to-8,000 tonnes per year in 2003, a 50% jump.

The high-grade section of the Maggie Hays deposit was discovered in 1993, and despite hosting an overall resource of 11 million tonnes grading 1.5% nickel, advancement of the project has been delayed by a complex ownership structure. In May of 2002, LionOre Mining secured a 9-month exclusive option agreement with the BHP Billiton (BHP-N) group to acquire the latter’s 69% interest in Maggie Hays and its 67% interest in the surrounding exploration tenements. The price tag to move to 100% ownership of Maggie Hays is A$16.7 million, with A$6 million paid in April 2003, and the remainder due over the next 5 years.

Overall, the deposit is 1.4 km long and has a maximum down-dip extension of 500 metres. Mineralization comprises mainly pyrrhotite and pentlandite, with lesser amounts of pyrite and chalcopyrite. The Main zone hosts disseminated mineralization up to 40 metres thick, stratigraphically underlain by a massive sulphide zone up to 7 metres wide. The disseminated mineralization contains 15-20% sulphides, while the basal massive sulphide contains around 80% sulphides.

A complex tabular zone of stringer and massive sulphides, hosted by felsic volcanics marks the Maggie Hays North zone. The mineralization ranges from 3 to 8 metres wide and is controlled by a shear zone that dips 60 to the east.

The combined indicated resource of the two zones is about 3 million tonnes grading 2.4% nickel.

Moving over to the Northeastern gold fields of Western Australia, the company’s 60% owned Thunderbox gold mine cranked out 62,878 oz of gold at a cash cost of US$106 per oz. in its first full quarter of production. Sales of gold hit US$13.2 million. The operation mined some 636,198 tonnes of material grading 3.14 grams gold per tonne with a recovery rate of 96.8%.

In Botswana, LionOre’s 85% held Tati Nickel produced 1,577 tonnes of nickel in the first quarter at a cash cost of US$2.67 per lb. This compares to 1,485 tonnes of nickel produced at a cash cost of US$215 per lb last year. The operation comprises the Phoenix open pit mine some 80-km east of Francistown in the northeastern part of the country where sales rang in at US$19.1 million with US$16 million coming from nickel sales, US$1.9 million from copper and about US$700,000 from platinum group metals. The remaining US$500,000 came from other byproduct metals.

Production in the quarter was held back by the 5-week shutdown of the BCL smelter. However, Tati continued to produce and stockpile concentrate during the period of closure at BCL, except for a two-week period in which production was ceased to allow a number of engineering projects to be undertaken.

Tati Nickel posted earnings, before non-controlling interest, of US$1.8 million, compared to US$1.7 million earned in the first quarter of 2002.