EqUATORIAL RESOURCES - The International Resource Journal

FEBRUARY 2012 The International Resource Journal3MINING & METALSourcesthe world’se 02Photography c/o Equatorial Resources

4 MINING & METALS Equatorial ResourcesAfrica continues to transform into iron ore’snext major frontier with plans in place forthe development of several new multibilliontonne projects. And as the reality of Africaniron ore production unfolds, which miningcompanies will traverse the many issuessurrounding infrastructure, generate lastingvalue, and satisfy environmental and socialconcerns en-route?Which assets have the capacity to provide neartermproduction backed by iron mineralisationof a scale and quality that warrants world-classmines, coupled with management who possessthe drive and motivation to meet the many challengesof building an operating iron ore mine andpioneering the world’s next iron ore province?Photography c/o Equatorial ResourcesWith two 100 per cent-owned large scale ironprojects in the Republic of Congo (ROC), EquatorialResources (ASX: EQX) (“Equatorial”) has alreadyattracted investment from the lion’s share of London’sblue chip natural resources institutions.Equatorial’s Mayoko-Moussondji Iron Project(“Mayoko”) has access to existing bulk commodityinfrastructure and an exploration target ofalmost four billion tonnes of iron mineralisation,and the company’s confirmed geological modelsupports the potential to fast-track high gradehematite production to generate early cashflow.“I see the West of Africa as the world’sthird great frontier for iron ore. Thevalue that has been created out of thePilbara and South America is goingto be matched in the next 20 yearsby an incredible ramp up in iron oreproduction along the west coast ofAfrica,” John Welborn, managingdirector and chief executive says.

8 MINING & METALS Equatorial ResourcesRepublic of Congo project locations & exploration target.Photography c/o Equatorial Resources.“Expanding our footprint by continuing alongthat railway west towards the Gabon border,adding around 3,000 more square-kilometres,is important given how globally significant theresource looks to be.”The rail and access to port are pivotal inEquatorial’s plans to reach production quickly.Likening Mayoko to the Tonkolili Iron Project—from which London-listed African Minerals Limited(L:AMI) loaded the first shipment to leaveSierra Leone’s shores for 30 years in 2011—Welborn notes that projects triggering the startof West Africa’s globally significant productionprofile are those with the infrastructure edge.

FEBRUARY 2012 The International Resource Journal9“At Mayoko, with our hugeexploration target made up ofmore than 500 million tonnes ofhaematite potential overlaying alarge body of magnetite, there is thevery real opportunity to commenceproduction using existinginfrastructure and to then developa much higher capacity productionprofile in due course,” he says.“That’s why we have a particular approach. It’sunusual to be doing the detailed feasibility workwe’re doing on the rail and port at our relativelyearly stage. We’re drilling out our exploration targetsto define a maiden resource and at the sametime preparing for a ramp up to production.”Mayoko’s iron mineralisation consistsof a large magnetite banded iron formation(BIF) capped by weathered haematite. Atthe Makengui Prospect, from which surfacehaematite samples graded as high as 62 percent iron, initial drilling in 2011 containedintersections such as ~20 metres from surfaceat 60 per cent iron as part of a 40 metreintersection showing 55 per cent iron. Thehaematite cap is the focus for the current33,000 metre drilling programme focused ongenerating a sufficient sized JORC resourceof haematite mineralisation to justify initialproduction.“The current drilling programme will give usthe opportunity to delineate an initial resource ofbetween 50 and 100 million tonnes of iron ore,”Welborn says.“This will come from an area which representsa small fraction of the 46 kilometres of ironstrike on the tenement.“The initial JORC resource will enable us toidentify the high quality, high grade material thatwe can ship immediately using existing infrastructureto start generating cashflow. The resourcebase will continue to grow as we work on ourlonger-term goal to convert our large explorationtargets into resources.”Equatorial has a systematic approach to thework on rail and port requirements seldom seenat this stage of play. A second stage rail agreementwith the ROC rail authority has been inked,which will allow the company to fund rail refurbishmentworks confident in the knowledge thatits expenditures will be offset as pre-paymentsagainst future transport charges. Negotiationson similar agreements for building ship loadingfacilities to cater to the first production profile arewell advanced, and inland—where the team hasan extensive heavy equipment fleet—Equatorial

10 MINING & METALS Equatorial Resourceshas already built an air strip, exploration base camphousing 40 staff, sample lab and satellite telecommunicationsand internet facilities.In taking up residence at Mayoko, Welbornadds, Equatorial has chosen to integrate its facilitieswithin the project’s namesake village and hired over100 local people in the process.“We have more than 100 locals as staff onsitetraining with us and there are various programmesin relation to up-skilling the local population with aview to having them work with us for the long-term,”he explains.“We’ve also invested in facilities for the village,not just our camp: Water purification and pumpingfacilities which were broken before we arrived,providing power and establishing the local medicalclinic to service our workers and provide a previouslynon-existent service to the local population.”Australian Reliance is a leading corporateinsurance broker with extensive experiencein servicing clients in the African region.We can provide significant cost savings and innovativeinsurance solutions to clients in all industry sectors.Awarded Australia’sleading insurance brokerin 2010 and 2011Equipped with the landholding, high grades,infrastructure, funding, government accords andlocal presence to take Mayoko into quick and longtermproduction, and working with world leadingconsultants to get ahead in environmental impactworks, Equatorial continues to attract the attentionof investors by delivering on Mayoko’s potential.BETTER PEOPLEPerth | Sydney | Melbournewww.australianreliance.com.auBETTER SOLUTIONSBETTER SERVICEAustralian Reliance Pty Ltd T/as Australian Reliance AFS License 227041 ABN 71 103 351 122High grade & multinational interestat BadondoIn CMEC’s Belinga project, Core Mining’s Avima project(note Glencore International AG’s April 2011 investmentin the company) and Sundance’s Mbalamproject (and Sichuan Hanlong Group’s A$1.65takeover bid for the company), the ROC’s northwesthouses a knot of heavy duty iron-focused residentswith multibillion dollar values. These groups affirminvestor appetite for the locale, and also enableEquatorial to draw synergies for Badondo with someof its more advanced neighbours.SRK Consulting completed detailed mappingand sampling across the Badondo’s targets during2011, Welborn says. These results are in the pipeline,and given that rock chip assays confirm highgrade surface haematite of up to 68 per cent iron,

FEBRUARY 2012 The International Resource Journal11anticipation is mounting ahead of the scout drillingset to commence in the first quarter of 2012.“This campaign will see us put down a series ofscout holes to illustrate the potential. The best wayof describing what we’re looking to achieve fromthis is to look at Mbalam when Sundance first purchasedthe project,” Welborn explains.“They had a limited amount of historical drill resultswhich demonstrated the potential and they’venow defined a JORC reserve of 352 million tonnesat 62 per cent iron. At Badondo, our scout drillingprogramme is designed to achieve a similar startpoint and give an early indication of the scale andquality of future resources.”Equatorial’s first pass drilling will identify thedepth and consistency of the high grade haematitefound at Badondo and, noting that the onlydownside of having so much iron is that it can betough to drill, Welborn says that the team eagerlyawaits the arrival of its specially built, heavy dutyyet highly portable diamond drill rig currently on itsway from Perth.While perhaps overshadowed by Mayoko—andEquatorial’s break-neck speed progress at the flagshipproject—Badondo’s potential hasn’t gone amisswith the multinationals. It might not have fairlyimpacted the company’s market cap just yet, but ifSundance’s reception withMbalam offers any indication, it’s possible thatProud to support Equatorial Resources & CongoMining in the Republic of Congo• 47 years experience in Mineral Exploration• Reverse Circulation Drilling• Diamond Core Drilling• Aircore Drilling54 Beaconsfield Avenue Midvale, WA, Australia 6056 Ph: +618 9374 1111 F: +618 9374 1166E: info@wallisdrilling.com.au | www.wallisdrilling.com.authe scout campaign could pose massive re-ratingimplications for the company.Interest swirls in Africa’s iron ore frontierDuring 2011 a swell ofmultinational miners clamoured toget into the ROC, not least Xstrata,Glencore, Hanlong, and mostrecently Exxaro Resources with aA$338-million cash takeover bid forAfrican Iron; a company in whichEquatorial holds a crucial 20 percent interest.

12 MINING & METALS Equatorial ResourcesMayoko base camp. Photography c/o Equatorial Resources“I am convinced that in 20-30 years’ timepeople will say that it was obvious Africa wouldbecome a major iron ore producer. Currently wehave almost one billion tonnes of seaborne ironore hitting the market every year. In the futurethis will grow and a significant percentage of thatgrowth will come out of Africa,” Welborn says.“The Congo has had strong and stable oilproduction for more than 30 years. The newmining code of 2005 was a direct response tothe government’s desire to diversify the economyand reduce the reliance on the oil industry.Mining has a huge future in the ROC and ironore will lead the way.”

FEBRUARY 2012 The International Resource Journal13Equatorial is emerging as one of the fewcompanies blessed with both large projectsand infrastructure advantages, and has agenuine local-level commitment to lead Africa’semergence as the next iron ore frontier. Theprior successes of its board and management(think Mantra Resources and Coalspur Mines)and its early positioning of Mayoko towardsfast production have gained the good opinionof international investors, and moves to carryout detailed feasibility studies and work withthe government on port and rail reflect an abilityto think outside the box and maximise competitiveadvantages.Welborn has even mastered French—a productof a professional rugby career in France—which has been another important factor whencoupled with Equatorial’s commitment to be apositive economic force in the country; resultingin strong support from the ROC government forthe company’s agenda.2012 will be a monumental year for Equatorialwith a maiden JORC resource at Mayokounderpinning plans to fast-track production andmove the company from an ambitious, successfulexplorer-developer to a first stage producer.In the longer term, the expansion of Mayoko’scapacity and realising potential from Badondowill form steps in what promises to be a fascinatingstory. All told, Equatorial’s goal to becomea large iron miner and a pioneer of Africa as theworld’s next iron ore province is a mere matter oftime from fruition.www.equatorialresources.com.au

AS SEEN IN THE FEBRUARY 2012 ISSUEOF THE INTERNATIONAL RESOURCE JOURNAL