Altona is debt free two years early and had another strong quarter of coppe

High volumes of production maintained. Copper grades up this quarter, year to date copper grade in line with reserve average

*    Realised price includes all realised and unrealised short and long-term hedge gains and losses (except gain from close-out of gold hedge).  Amounts may be subject to provisional pricing adjustments which are mitigated by quotational period hedging.

**   Revenues are before treatment and refining charges.

Safety performance improving

There were no Lost Time Incidents in the quarter but one Medically Treated Injury occurred when an ore truck driver strained his knee at the Luikonlahti mill. The mill has achieved 281 and the mine 128 days without a Lost Time Incident.

The rolling 12 months Lost Time Injury Frequency Rate remains high at 12 but is reducing.

Routine monitoring in the decline encountered traces of asbestiform fibre at the work face.  Underground works were temporarily halted to undertake a safety review to ensure the necessary procedures were being adhered to by all workers. An analysis is being undertaken to determine if it may be possible to amend the decline plan to avoid potentially asbestiform bearing rocks.

There was a minor water leakage at the Kylylahti mine in February.  A written notice to the local monitoring authority was issued. There were no harmful consequences to the environment, nor penalties payable.

Water recycling at the Luikonlahti mill is now routinely achieving 50% of total consumption thereby reducing the need to discharge waters to the receiving environment.

Altona has 225 employees and contractors in Finland and 13 employees in Australia.

Altona makes daily deliveries of copper-gold concentrate to New Boliden’s copper smelter at Harjavalta on the south-west coast of Finland and delivers zinc concentrate to New Boliden at Kokkola as production allows.  Copper concentrates were delivered without incident or penalty.  Zinc concentrates incur modest penalties for low grades and iron and cobalt content.   Copper and gold production levels were in line with revised guidance.  Excellent volumes were achieved at both mine and mill.

Quarterly Production of Metal in Concentrate and Cash Cost by Quarter

*C1 cash cost calculated per Brook Hunt methodology. Cost data during commissioning period not meaningful.

March Q cash costs impacted by higher development costs due to transition to transverse stoping method

C1 cash costs were higher in the March quarter due to a combination of high development costs and use of more contract mining services at the Kylylahti mine. The first transverse stopes are being developed driving much of the higher development costs. Transverse stoping brings better resource recovery and more flexibility in mine planning but requires more development.  A total of 731 metres of operating development occurred during the quarter, almost twice that of preceding quarters, however development is expected to reduce significantly next quarter and mine operating costs will fall accordingly. Grades for the June quarter are expected to be above average and cost performance will benefit.

Unit cost up due to mine operating development. Costs to return to more normal levels in June quarter

Unit cost performance in the local currency (Euros) is elevated this quarter reflecting higher mine development costs with the average for the quarter being €59 per tonne of ore milled. 

There remain opportunities to improve costs and mining and processing productivity and recovery and these are being addressed in a programme of continuous improvement.

Capital expenditure at the mine for the quarter consisted of approximately US$2.3 million of decline and level development which was 28% more than in the previous quarter due to larger amount of contractor made development work. Expenditure on ventilation, water management and electrification totalled US$0.7 million. Discretionary spending totalled US$0.3 million, mainly related to moving the administration office to the mine site.

Capital expenditure at the mill for the quarter consisted of approximately US$1.1 million reflecting the accelerated construction of the new cobalt-nickel concentrate storage dam. The forecast total cost for Stage 1 is currently estimated to be US$5.4 million (€4M) of which approximately US$1.8 million remains to be spent this financial year. US$0.2 million was spent on miscellaneous discretionary items.

Production guidance on track, costs likely to be slightly above guidance

Production for the full year is expected to meet the guidance range of 9,000-10,000 tonnes of copper and 9,000-10,000 ounces of gold.  The C1 cash cost for the twelve months to 30 June 2014 is likely to be above the guidance range of US$1.60-US$1.75 per pound.  Year to date C1 cost of US$1.94 per pound of copper but anticipated higher grades and lower development in the June quarter should reduce this.

The nameplate capacity of the Luikonlahti mill is 550,000 tonnes per annum and it has frequently achieved an annualised production rate of 600,000-650,000 tonnes per annum.  Altona has determined that it will sustain higher production levels of 650,000 tonnes per annum from financial year 2014/2015 onwards. This throughput was chosen to maximise mine life and avoid any step change in equipment and staffing at the mine or in capital expenditure requirements at the mill.

Now that the mine has reached steady state production a number of cost improvement initiatives are underway. In the mine the main focus will be on improving the efficiency and utilisation of Altona’s people and equipment to minimise reliance on contractors in order to meet production targets.  At the mill, debottlenecking activities have improved mill production capacity such that 650,000 tonnes per annum can now be consistently achieved. Going forward, processing efficiency, particularly with respect to copper and gold recovery will be the main focus.

A new reserve estimate will be released during the June quarter.

Capital expenditure at the Outokumpu operations will continue to be incurred whilst the mine is developed to its ultimate depth, which is expected to be reached at the end of calendar year 2016. Significant expenditure is occurring in the construction of the Life of Mine storage dam for cobalt-nickel concentrates.  The initial construction phase will be completed in late 2014.

Capital expenditure upon complimentary infrastructure such as ventilation, water management, electrification and the lifting of concentrate storage and tailing facility walls will continue beyond this date, and be incurred as required to ensure the operation continues to produce at the planned rate. It is anticipated that €4.5 million (US$6.1M) of capital costs will be incurred in the quarter to 30 June 2014. This level of capital expenditure will fall in future years.

Mine production volumes were excellent

Ore production was higher than planned for the quarter.  The copper grade of 1.62% was slightly below expectations due to the sequence in which stopes were to be extracted.

Six stopes were completed and filled during the quarter and one new stope was at opening stage at the end of the period. On average one to two stopes were open at any point in time.

Mine is 591 metres deep

Some 1,072 metres of decline and level development and 33 metres of ventilation raises were completed in the quarter and mine development is now down to 591 metres below surface. The decline is planned to reach its final depth of 800 metres in 2016.  However, given the results of deeper drilling, it is expected that mining will continue to greater depths.

Entering the lower Wombat orebody and transverse mining started

Mill performance

Copper circuit optimisation

Co-Ni concentrate storage dam on schedule

The production in the first transverse stope on the Wombat 440RL has commenced. This new mining method brings increased flexibility and certainty to stoping activities. Preparations for transverse stoping require more level development compared to longhole stoping which was used for the narrower Wallaby zone.

Rock conditions in the deeper parts of the mine are good but local weaker zones have resulted in additional ground support works being required which decreases development advance rates. Accordingly, additional utilisation was made of the decline contractor’s jumbo to meet the demand and additional rockbolting equipment was also contracted.  Development unit costs will therefore be elevated in the next few quarters.

The Luikonlahti processing plant operated at a rate controlled by ore availability and throughput matched the mine’s output for the quarter.

Feed rate averaged 81tph for the quarter relative to the 69tph design. Utilisation averaged 96%. The mill operated at an annualised rate of 660,000 tonnes for the quarter relative to 550,000 tonnes per annum design.  This represents a 20% outperformance

Copper recovery was in line with forecasts of 92.5% but gold recovery of 76.8% exceeded the planned 72% recovery. Concentrate grade was 21% copper.

The mill flow sheet was changed in March by closing the copper circuit. This means that a tailings stream which previously resulted in the loss of copper and zinc was instead recycled to the head of the circuit. The preliminary indications are that this will result in improved metal recoveries but further work may be required to achieve optimum results. In particular, the residence time in copper flotation will be reviewed now that mill treatment rates are to be stabilised at 650,000t tonnes per annum and it may be that a flotation capacity upgrade can be justified by improved metal recoveries.

Zinc recovery and concentrate grade of 45.6% and 47.0% zinc, respectively, were slightly below design of 50%. Relocation of the final zinc cleaner to a location more easily monitored and the recent addition of on-stream analysis to the zinc circuit will assist in its operation. However, the copper circuit will need to be optimised first because it is upstream of the zinc circuit and, more importantly, generates the bulk of the revenue.

Mineralogical studies have commenced to better understand gold losses in the circuit, particularly in light of the requirement to process higher grade “gold-only” lenses of ore in the future.

Construction of a new cobalt-nickel concentrate storage dam continued in the quarter.  The dam is required to ensure capacity is available in early 2015 when the current dam will likely be filled.

A permit to allow processing of up to 1 million tonnes per annum of a variety of ore sources and to operate the new concentrate dam is nearing the end of the regulatory approval process.  Public comment has been received and discussions held with relevant authorities.  The permit is expected to be available in May 2014.

Cobalt-nickel treatment pre-feasibility study underway

Processing cobalt-nickel concentrate to produce a commercial product has previously been examined at a pre-feasibility level utilising Xstrata Technology’s Albion Process.  A mixed cobalt-nickel-copper hydroxide was produced which is readily saleable to refineries.

In December 2013, Outotec was awarded a contract to complete a similar pre-feasibility study based on their atmospheric chloride leach technology. The study will comprise bench scale test work, process engineering, and estimates of both operation and capital costs at +/-35% accuracy. Samples for testwork have been sent to Outotec’s Pori Research Centre, and the study is scheduled to be completed in the June quarter.  

On completion of the study, Altona will select its preferred process route and determine if a full feasibility is warranted.

Reserves now exceed pre-mining estimates

An increased Mineral Resource was released for Kylylahti during the quarter. This is the regular update of Mineral Resources that Altona undertakes in conjunction with annual and half year reporting.

The Resource estimate for the Kylylahti mine is:

• 8.8 million tonnes at 1.33% copper, 0.78 g/t gold and 0.54% zinc.
• Contained metal in this resource is 117,480 tonnes of copper, 222,595 ounces of gold and 47,401 tonnes of zinc.
• This equates to 161,000 tonnes of copper equivalent metal determined by using actual Net Smelter Return to estimate revenues from concentrate sales*.
• Contained copper up 17% from June 2013 after mine depletion.
• Copper equivalent metal up 20% from June 2013 after mine depletion.
• Grades increasing at depth.

The previous estimate was reported on 29 August 2013 and is 7.7 million tonnes at 1.31% copper, 0.68g/t gold and 0.52% zinc for 100,670 tonnes of copper, 167,850 ounces of gold and 40,360 tonnes of zinc being 134,000 tonnes copper equivalent.

The Kylylahti mine has 5% more resource tonnes, 12% more copper metal with 6% higher copper grade, compared to estimates before mining started despite the production of 18,000 tonnes of copper since production commenced in February 2012.

Resources are reported above a 0.4% copper lower cut-off grade and include mine depletion to 31 December 2013 (see Table 2).

Reserve estimates based on this resource are in progress.

During the period 1 July 2013 to 31 December 2013, mining depleted the resource by 0.33 million tonnes at a grade of 1.66% copper. 

Additions to the resource have come from:

• Drilling at the lower limit of the deposit intersected mineralisation below previous drilling. The highlight of the campaign was an intercept of 108 metres at 2.4% copper including 58 metres at 4.2% copper reported on 26 November 2013.
• Delineation of hanging-wall gold-copper-nickel ore shoots.
• Delineation of the new nickel zone reported in the September 2013 Quarterly report. 
• High grade underground definition drilling in the top most part of the Wombat zone.
• Improved geological understanding of deposit geometry, structure and continuity of high-grade zones.

The following longitudinal section highlights the potential for further depth extensions to the Kylylahti deposit.

Note the increase in copper grade from -600 metres RL.  The decline in contained copper metal from -750 RL is a function of drilling density.

Longitudinal Section of the Kylylahti Mine Looking West

Decline in brown, drill intercepts (yellow).

Blue is the upper Wallaby zone which is largely mined out.

Red is the Wombat zone.

Green is a newly defined zone (Gap zone) in the hanging wall of Wombat zone.

Copper Metal with Depth

Copper metal (left hand scale) and grade (% on right hand scale) in the Kylylahti mine mineral resource inventory in 25 metre vertical levels (RL). Copper metal in the resources is depleted by production to 31 December 2013.

The 100% owned Little Eva Copper-Gold Project is 90 kilometres north-east of Mt Isa and 11 kilometres north of MMG’s $1.2 billion Dugald River zinc mine.  The project sits within granted mining licences and native title agreements and environmental authority are in place.

A Definitive Feasibility Study (“DFS”) on the Little Eva Project was released in May 2012 and was subject to a cost review by GR Engineering Services Limited (“GRES”) which was published in March 2014.

Definitive Feasibility Study and update delivers improved financials

There have been a number of significant developments that impact on costs and revenues since the completion of the DFS in May 2012.  They include:

• A marked reduction in contract mining costs
• A reduction in engineering and construction costs
• Changes to the macro-economic environment with consensus indicating a lower Australian dollar, lower near-term copper prices, lower gold prices and higher long term copper prices

The GRES review was based on market enquiry and the resulting financial outcomes for the Project improved significantly.  Key facts, assumptions and outcomes of the study are detailed on the next page, please refer to ASX release dated 13 March 2014 for further details.

Partnering process continues

The process to sell, partner or finance the Little Eva Project continues. A number of parties are active in the data room and dialogue with these parties continues.  The improved financial metrics will benefit the process of finding a partnering and financing solution for the asset. 

Resource review nearing completion

The Little Eva deposit was discovered in the 1970’s and has had drilling undertaken by a number of organisations using a variety of data capture and recording systems. 

An updated resource estimate with a better geological model and which meets JORC 2012 report standard is nearing completion.

Mineral Resources and Ore Reserves*

Tonnes

(million)

Copper

(%)

Gold

(g/t)

Measured, Indicated and Inferred Resources

123

0.55

0.10

Proven and Probable Reserves (ROM)

59

0.59

0.09

Proven and Probable Reserves (low-grade stockpile)

15

0.18

0.06

Contained metal in Reserves

375,000(t)

205,000(oz)

Production Summary (years 1-5)**

Project life (excluding potential mining inventory)

11 years

Little Eva strip ratio (after pre-strip)

1.8:1

Little Eva strip ratio including pre-strip

2.0:1

Annual processing rate (tonnes per annum)

7,000,000

Copper recovery

96%

Gold recovery

85%

Copper in copper concentrate (tonnes per annum)

38,800

Gold in copper concentrate (ounces per annum)

17,200

*   Resources are inclusive of Reserves.

** Production summary (target) is based entirely on ore reserves.

See ASX release date the 13 March 2014 for further details.

Project Sensitivities (NPV A$ million)

Increase

Decrease

Copper price +/- 10%               

+169

-170

Foreign exchange +/- 10%

-149

+181

Capital costs +/- 10%              

-29

+29

Operating costs +/- 10%                      

-79

+79

Addition of 1 year mine life (e.g. Turkey Creek)

+50

N/A

Real discount rate +/- 2% (5.5-9.5%)

-58

+68

Roseby South Joint Venture

Chinalco Yunnan Copper Resources Ltd (“CYU”) has commenced exploration activities to earn an interest in respect of the southern tenements at Roseby Project (see attached map).

Kuhmo Nickel Project

The Company has retained core tenements around defined resources at Kuhmo and is focused on permitting these potentially mineable deposits.

Corporate

Debt repaid in full

Altona has repaid the balance of its debt facility in full effective 31 March 2014. 

The debt repayment was made by the payment of US$10 million cash funded by US$8.3 million released from the closure of the majority of the Company’s copper and zinc hedge book.  The Company retains some 828 tonnes of copper hedged at approximately US$3.40/lb to July 2014 providing cover for the current period of volatility in copper markets. 

Altona previously reduced the balance of its debt facility from US$20.45 million to US$10 million following the repayment of US$10.4 million partly released from the closure of the Company’s gold hedge book (Refer to ASX announcement dated 6 January 2014).

Statutory Reporting

The highlights of the half year results are:

Strong half year result

• Sales of A$42.6 million (up 40% on H1 FY2013)
• Profit before tax of A$12.4 million
• Debt reduced to US$10 million, gearing down from 22% to 12%
• Copper production 4,822 tonnes (up 32% on H1 FY2013)
• Gold production 5,297 ounces (up 40% on H1 FY2013)
• Production guidance increased to 9,000 - 10,000 tonnes of copper

Altona reported a solid profit for the six months to 31 December 2013 reflecting a period of continued production and profit growth at its Finnish operations alongside a strengthening balance sheet.

Cash

Strong cash balance of A$15.8 million

The Company has A$15.8 million in cash after making an early debt repayment of US$10.0 million at the end of the quarter. Receivables from concentrate sales stand at A$7.9 million and ROM and concentrate inventories stand at A$0.7 million at the end of the quarter.  The cash balance is down from A$20.2 million on the prior quarter reflecting the early repayment of debt.

Cash movements for the quarter are tabulated below:

*   Sustaining capital includes mine decline development and tailings dam costs, etc.

** Other includes exchange rate adjustments.

Please note an Appendix 5B disclosure as required by ASX for exploration entities is enclosed.  The forecast cash expenditure for the next quarter is required to be presented in a form that excludes all revenues and does not reflect actual predicted cashflows.

Hedge book closed-out in March to repay debt

Hedging

The Company closed out 6,074 tonnes of copper and 1,878 tonnes of zinc during the quarter realising US$8.3 million. This was applied to the reduction of debt.  The Company retained some near-term copper hedges to protect against a weaker copper price.

The schedule of outstanding metal hedging is given below.  Hedge prices have been converted to US$ using the closing rate at the end of March 2014.

At the time of writing, the copper price was US$6,650 per tonne.

The Company also undertakes short-dated (3 months) hedging to secure revenue for the period (Quotational Period) between the receipt of the provisional invoice for concentrate sales and the final pricing.  Realised and unrealised gains and losses on Quotational Period hedging have been included in the realised prices per commodity shown in page 2. Altona has realised a gain of US$0.3 million on these hedges for the quarter.

Share Price Activity on ASX

Quarter open                          0.12¢

High                                       0.185¢

Low                                        0.12¢

Quarter close                         0.15¢

Average daily volume             584,935

Competent Persons Statement: The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Dr Alistair Cowden, BSc (Hons), PhD, MAusIMM, MAIG and Dr Iain Scott PhD Min. Processing, BSc Met. (Hons).  Dr Cowden and Dr Scott are full time employees of the Company and have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.  Dr Cowden and Dr Scott consent to the inclusion in the report of the matters based on their information in the form and context in which it appears.

Little Eva Project production target and forecast financial information: Information in this release refers to a production target and the forecast financial information derived from a production target as disclosed to the market in the ASX release “Cost Review Delivers Major Upgrade to Little Eva” dated 13 March 2014, which is available to be viewed at www.altonamining.com or www.asx.com.au. The Company confirms that all the material assumptions underpinning the production target and the forecast financial information derived from the production target referred to in the above-mentioned release continue to apply and have not materially changed.

Copper equivalence:  When used, copper equivalent refers to copper in concentrate produced, or planned to be produced.  It does not refer to metal contained within insitu resources, reserves or drill results.  The copper equivalent grade is calculated by factoring the copper grade by reserve from all metals (NSR) being copper, zinc, gold and silver.

Please direct enquiries to:

Alistair Cowden                                            James Harris

Managing Director                                          Professional Public Relations

Tel: +61 8 9485 2929                                      Tel: +61 8 9388 0944

altona@altonamining.com                               james.harris@ppr.com.au

Jochen Staiger

Swiss Resource Capital AG - Germany

Tel: +41 71 354 8501

js@resource-capital.ch

DEPOSIT

TOTAL

CONTAINED

MEASURED

INDICATED

INFERRED

METAL

Tonnes

Grade

Copper

Gold

Tonnes

Grade

Tonne

Grade

Tonnes

Grade

million

Cu

Au

tonnes

ounces

million

Cu

Au

million

Cu

Au

million

Cu

Au

%

g/t

%

g/t

%

g/t

%

g/t

Copper-Gold Deposits

Little Eva

100.3

0.54

0.09

538,000

271,000

36.3

0.63

0.08

41.4

0.48

0.08

22.6

0.49

0.11

Ivy Ann

7.5

0.57

0.07

43,000

17,000

5.4

0.60

0.08

2.1

0.49

0.06

Lady Clayre

14.0

0.56

0.20

78,000

85,000

3.6

0.60

0.24

10.4

0.54

0.18

Bedford

1.7

0.99

0.20

17,000

11,000

1.3

1.04

0.21

0.4

0.83

0.16

    Sub-total

123.4

0.55

0.10

675,000

384,000

36.3

0.63

0.08

51.7

0.52

0.09

35.5

0.51

0.13

Copper Only Deposits

Blackard

76.4

0.62

475,000

27.0

0.68

6.6

0.60

42.7

0.59

Scanlan

22.2

0.65

143,000

18.4

0.65

3.8

0.60

Longamundi

10.4

0.66

69,000

10.4

0.66

Legend

17.4

0.54

94,000

17.4

0.54

Great Southern

6.0

0.61

37,000

6.0

0.61

Caroline

3.6

0.53

19,000

3.6

0.53

Charlie Brown

0.7

0.40

3,000

0.7

0.40

    Sub-total

136.7

0.61

840,000

27.0

0.68

25.0

0.64

84.7

0.59

TOTAL

260.1

0.58

0.05

1,515,000

384,000

63.2

0.65

0.05

76.7

0.55

0.06

120.1

0.56

0.04

Tonnes

(m)

Cu

           (%)

Au

(g/t)

Zn

(%)

Co

(%)

Ni

(%)

Measured

1.2

1.19

0.48

0.56

0.22

0.19

Indicated

7.2

1.35

0.77

0.53

0.24

0.23

Inferred

0.5

1.38

1.71

0.54

0.27

0.24

TOTAL

8.8

1.33

0.78

0.54

0.24

0.22

Metal Tonnes

117,480

222,600oz

47,400

21,350

19,680

Tonnes

(m)

Cu

(%)

Au

(g/t)

Zn

(%)

Co

(%)

Ni

(%)

Proven Ore Reserves

0.6

1.51

0.75

0.66

0.25

0.15

Probable Ore Reserves

3.5

1.62

0.73

0.62

0.27

0.17

TOTAL

4.2

1.60

0.73

0.63

0.27

0.16

Metal Tonnes

66,700

97,700oz

26,100

11,100

6,900

Deposit

Classification

Tonnes

(m)

Cu

(%)

Au

(g/t)

Zn

(%)

Co

(%)

Ni

(%)

Kylylahti

Measured

1.2

1.19

0.48

0.56

0.22

0.19

Indicated

7.2

1.35

0.77

0.53

0.24

0.23

Inferred

0.5

1.38

1.71

0.54

0.27

0.24

TOTAL

8.8

1.33

0.78

0.54

0.24

0.22

Saramäki             

Inferred

3.40

0.71

-

0.63

0.09

0.05

Vuonos

Inferred

0.76

1.76

-

1.33

0.14

-

Hautalampi

Measured

1.03

0.47

-

0.06

0.13

0.47

Indicated

1.23

0.30

-

0.07

0.11

0.42

Inferred

0.90

0.30

-

0.10

0.10

0.40

Total

3.16

0.36

-

0.07

0.11

0.43

Riihilahti              

Indicated

0.14

1.69

-

-

0.04

0.16

Valkeisenranta    

Indicated

1.54

0.29

-

-

0.03

0.71

Särkiniemi           

Indicated

0.10

0.35

-

-

0.05

0.70

TOTAL                                               

17.94

0.97

0.39

0.45

0.16

0.26