Geology and Exploration

The Heemskirk Tin deposits are granite related cassiterite and basemetal stockwork and replacement style mineralisation hosted in older sediments and volcaniclastics of the Zeehan Sub Basin, Western Tasmania.  Mineralisation is generally stratabound. The stratabound mineralisation is structurally controlled on fold/fault dilation zones between lithologies of contrasting rheology.

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Schematic Geology Cross-Section Showing Queen Hill and Severn Tin Deposits

A total of 58 diamond drillholes (18,709m) have been completed by Stellar over the Heemskirk deposits since 2010. A further 133 historic diamond drillholes (31,485m) have been completed prior to 2010 by other companies over the Heemskirk deposits.

Four deposits have been defined at Heemskirk over a total strike length of approximately 1,300m to depths of <500m below surface.

Mineralisation in all of the Heemskirk deposits remains open down plunge. Tin occurs principally as cassiterite with minor stannite and base-metal sulphides located towards the top and periphery of the Queen Hill and Montana Deposits.

Orientation, Strike Length, Dip and Thickness of Heemskirk Tin Deposits

Resources

An updated total mineral resource for the Heemskirk tin deposits of 6.6mt @ 1.1% Sn (70,930t of contained Sn) at a cut-off grade of 0.6% Sn has been defined in accordance with the JORC Code 2012 by technical consultant, Resource and Exploration Geology, in May 2019. There has been no material change to assumptions since the resource estimate was completed in 2019.

Heemskirk Tin Project Mineral Resource Statement (JORC 2012), May 2019

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The Heemkirk Tin Project October 2019 Scoping Study focuses on mining primarily the Heemskirk Indicated Mineral Resources contained withing the Queen Hill and Severn deposits. The Scoping Study does not include mining any of the Montana or Oonah Inferred Resources, or much of the Severn Inferred Mineral Resource component.

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Heemskirk May 2019 Mineral Resource Model @ 0.6% Sn Cut-off Grade – Indicated Resources highlighted in Red with Inferred Resources in Green

Heemskirk Tin Scoping Study

Cautionary Statement

The Heemskirk Tin Scoping Study completed in October 2019 has been undertaken for the purpose of ascertaining whether a business case can be made to proceed to more definitive studies on the viability of the Heemskirk Tin Project. It is a preliminary technical and economic study of the potential viability of project and is based on low level technical and economic assessments that are not sufficient to support the estimation of ore reserves. Further exploration and evaluation work and appropriate studies are required before Stellar will be in a position to estimate any ore reserves or to provide any assurance of an economic development case.

Stellar believes it has reasonable grounds under ASIC information Sheet 214 to report the results of the Scoping Study Update.

The mine plan on which the updated valuation is based contains 58% Indicated Mineral Resources and 42% Inferred Mineral Resources over the life of the project. The first 4 years of mining are based on 100% Indicated Mineral Resources and the 5th Year of mining is based on 89% Indicated Mineral Resources. Thereafter, the later part of the mine plan (years 6 to 10) is based on increasing amounts of Inferred Mineral Resources, reaching 100% Inferred Mineral Resource in years 9 and 10 of the project.  In year 11 of the mine plan, mining is entirely from the St Dizier satellite deposit which is a 100% Indicated Mineral Resource. The Inferred Mineral Resource is not a determining factor in the viability of the Heemskirk Project. The Heemskirk project is viable based purely on the Indicated Mineral Resource and the payback period of the project of approximately 3.0 years is based purely on the Indicated Mineral Resource.

There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the Production Target itself will be realised.

The Scoping Study is based on the material assumptions outlined in Appendix 1 of this announcement. These include assumptions about the availability of funding.  While Stellar considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved.

To achieve the range of outcomes indicated in the Scoping Study, funding of in the order of A$57m will likely be required for project development in addition to pre-development funding of approximately $8m for exploration to convert the mineral resource to an ore reserve and to complete a Bankable Feasibility Study. Investors should note that there is no certainty that Stellar will be able to raise that amount of funding when needed.  It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of Stellar’s existing shares.  It is also possible that Stellar could pursue other ‘value realisation’ strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce Stellar’s proportionate ownership of the project.

Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

See Stellar Resources announcement dates 1 October 2019 for further information on the Scoping Study.

Project Outline

The Heemskirk Tin Project Scoping Study completed in October 2019 is based on development of an underground mine, processing plant, tailings storage facility and surface infrastructure to mine ~ 350ktpa ore at a LOM head grade of ~ 0.95% tin from the Queen Hill and Severn tin deposits (2 of the 4 Heemskirk deposits) over a 10 year mine-life. The project also includes open-pit mining of the St Dizier satellite tin deposit and trucking of ore to the Heemskirk processing plant during year 11 of the mine plan.

The processing plant is expected to produce ~ 4,500 tpa of concentrate containing ~ 2,200 tpa of tin. As in the case of the neighboring Renison tin mine, the plan calls for trucking of concentrate 150km to the north via a sealed road to the Port of Burnie for export to smelters in Asia.

Mining

A study of mining the Queen Hill and Severn deposits based on the updated May 2019 Heemskirk mineral resource estimate was completed in September 2019 by technical consultants, Mining One.

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Conceptual Heemskirk Mine Design Showing Stopes based on Indicated Mineral Resource (Grey) and Inferred Mineral Resource (Brown)

Key parameters of the mine design selected for the 2019 Scoping Study include:

  • Long hole stoping underground mining method with either Cemented Aggregate Fill or Cemented Rockfill.
  • Mine access via a single decline enabling quick access to Upper Queen Hill, with an initial underground connection access to Severn, followed by an internal decline at Severn and a second connection from Queen Hill to Severn for recovery of upper Severn later in mine life.
  • Mine ventilation provided by using two exhaust shafts and an emergency escape way system designed as a second egress and fresh air intake.
  • Decline dimensions 5mW x 5.5mH
  • Ore drives dimensions 5mW x 4.5mH
  • Stope height 20 m
  • Minimum stope width 2 m
  • Maximum stope width 100 m
  • Strike length 15 m
  • Pillar width 5 m

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Heemskirk Tin Project – Preliminary Production Schedule by Resource Category

The preliminary mining schedule for Queen Hill and Severn used in the 2019 Scoping Study includes total mineral resources of 3.29Mt @ 0.95% Sn after application of mining dilution and recovery factors and mining cut-off grades.

For the first 5 years of production and most of year 6, ore is mined from indicated resources.

Tin head grades during the early years are generally higher than later in the schedule.

Mining of indicated resources from the St Dizier satellite deposit has also been included in the final year (year 11) of the 2019 Scoping Study preliminary mining schedule.

Indicated resources represent 58% of total ore mined over the 11-year life of the project.

Metallurgy

The Heemskirk Tin Project’s Queen Hill and Severn tin deposits are broadly similar with cassiterite being the principle tin mineral (97% of total tin) in association with coarser grained sulphides (pyrite and pyrrhotite), silicates and carbonates (siderite) and accessory fluorite and rutile. Minor amounts of lead and zinc sulphide occur in the Upper Queen Hill deposit but become less common below 1100RL.

A number of metallurgical test work programs have been completed between 2010 and 2015 on composited drill core samples from the Queen Hill and Severn deposits by ALS Metallurgical Laboratory in Burnie, Tasmania, and supervised by Worley Parsons.

The table below summarises the recovery and concentrate grade estimated from test work completed and the Life of Mine average head grades for each ore type.

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Average Head Grade, Recovery and Concentrate Grade by Deposit

Processing Plant and Surface Infrastructure

Due to similarities between ore types, metallurgical test work at Heemskirk and St Dizier has used a modified version of the Renison Tin processing flowsheet. The Renison plant has operated for more than 50 years and under-gone several adaptions over its history to deal with changing ore-types. Such demonstrated flexibility will be a significant advantage for the Heemskirk processing plant.

The flowsheet for the Heemskirk processing plant was designed by GR Engineering and later reviewed by Mincore in July 2016 as shown in the Figure below.

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Heemskirk Tin Project – Process Flow Diagram  (Mincore)

The main elements of the Heemskirk processing plant flowsheet include:

  • 2 stage crushing followed by grinding (open-circuit rod mill feeding a closed-circuit ball mill)
  • Primary sulphide flotation, regrind of sulphide concentrate and flotation of fine sulphide
  • Coarse and fine gravity separation using spirals and wet tables to produce a concentrate
  • Gravity middling regrind and recycle
  • Flotation of deslimed fine cassiterite
  • Sulphuric acid leach of concentrate to remove carbonate
  • Concentrate dressing using sulphide flotation and magnetic separation

In July 2016, engineering consultants, Mincore, completed plant layout, typical equipment drawings and a +/-35% capital cost estimate for a 200ktpa Heemskirk Processing Plant and Surface Infrastructure.

Mincore were re-engaged by Stellar in August 2019 to scale their June 2016 estimate up to a 350ktpa Heemskirk Processing Plant and Surface Infrastructure capital cost estimate which has been used as the basis for this 2019 Scoping Study. The Mincore (August 2019) 350ktpa Processing Plant and Surface Infrastructure capital cost estimate includes; the processing plant, site infrastructure and buildings, concentrate handling, tailings handling and the 6.7km tailings pipeline.

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Proposed Heemskirk Tin Processing Plant (Mincore 2016)

Tailings Pipeline and Storage

Tailings from the Heemskirk Tin processing plant will be thickened to recover process water and pumped via a 6.7km slurry pipeline to the planned tailings storage facility located within ML 2M/2014. Tailings water is to be reclaimed from the tailings storage facility and pumped back via return water pipeline for use in the process.

Waste rock is to be crushed on site for use as mine fill.

An area has been selected for a tailings storage facility located in a concealed valley on crown land with no competing land use and no observed endangered flora or fauna. The site is secured by ML2M/2014 and has no observed geological structures that might make the site unsuitable. The valley is naturally shaped to contain tailings with only a relatively small embankment required to be constructed at the northern limit, minimizing the cost of construction.

The tailings pipeline route selection, design and capital cost estimate for the tailings pipeline and tailings storage facility construction was completed by GHD Engineering for John Miedecke and Partners in July 2015.

Initially the embankment at the northern end of the tailings storage facility would only need to be constructed to a height of 5-10m. This would need to be increased up to 20m high over the life of the mine. Volume estimates show that the proposed tailings storage facility should have in excess of 25 years storage capacity at a process plant production rate of 0.6mtpa (almost twice the 0.35mtp rate that this 2019 Scoping Study is based on).

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Proposed Heemskirk Tailings Storage Facility Plan (Initial Stage) and Site Photograph

Capital Costs

The Heemskirk Tin Project pre-production total capital cost is estimated to be ~A$57M. Mine development cost is expected to be relatively low at ~A$8M due to the rapid 6-month decline development schedule required to support a 350ktpa operation. In addition, the Zeehan location is well serviced by existing and available infrastructure resulting in little additional mine specific infrastructure to connect to existing services.

A breakdown of the Capital Cost estimate from the 2019 Scoping Study is shown in below.

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Heemskirk Tin Project Capital Cost Summary (±35% accuracy)

Operating Costs

A breakdown of the Operating Cost estimate from the 2019 Scoping Study is shown in below.

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Heemskirk Tin Project – Operating Costs Summary (±35% accuracy)

Economic Evaluation

An economic evaluation of the Heemskirk Tin Project was undertaken by Stellar based on the scoping study input assumptions described in the 1st October 2019 Scoping Study announcement.

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Heemskirk Tin Project – Summary of Financial Parameters (±35% accuracy)

At an All-In Sustaining Cost (AISC) of approximately US$13,100/t of tin produced over the Life of Mine, the Heemskirk Tin Project Base Case generates an attractive expected operating margin of approximately 34% based on the US$20,000/t tin price assumed.

The Heemskirk Tin Project Scoping Study has demonstrated attractive economics with a Base Case pre-tax NPV10% of approximately A$83m, at a tin price of US$20,000/t, determined to an accuracy of ±35%. The pre-tax IRR of the project is approximately 45% and the payback period is approximately 3.0 years. The project has a Base Case post-tax NPV10% of approximately A$71m as a result of tax shielding from A$24.2m Stellar group accumulated losses and capital depreciation on the project.  A 30% tax rate and depreciation over the life of the project have been assumed.

Capital costs required for the project have been significantly reduced to $57m from earlier internal estimates and ore production accelerated with mine and process plant production commencing 6 months and concentrate sales 9 months from the start mine development.

Environment

A Stage 1 environmental review of the Heemskirk and St Dizier project areas has been completed by John Miedecke and Partners Pty Ltd. The Mediecke Stage 1 environmental review concluded that there are no environmental issues that would prevent development of the Heemskirk or St Dizier projects.

Stellar has registered the projects with the Tasmanian Environmental Protection Authority by lodging a notice of intent. The EPA has responded by issuing guidelines for the preparation of a Development Proposal and Environmental Management Plan for each of Heemskirk and St Dizier.

Stage 2 environmental surveying will be conducted in accordance with EPA guidelines and compiled into a DPEMP submission to the EPA and the West Coast Council in support of final mining approvals.

Community

The Heemskirk tin deposits surround Queen Hill a prominent topographical feature (70m elevation above town) that marks the northwest extremity of Zeehan. Housing is sparse on the town side of Queen Hill and non-existent on the northwest side of the hill.

All surface infrastructure including the mine portal, processing plant, surface stockpiles, workshops and offices are sited on the northwest side of Queen Hill above the Trial Harbour Road. The location selected prevents the transmission of noise and dust emissions into the town precinct. Mine access routes are also designed to prevent any interaction between mine vehicles and private vehicles operated within the town.

Underground mine development, particularly of the Severn tin deposit, will extend below the sparsely populated town side of Queen Hill. Much of this activity will occur below 200m from the surface and should have no impact on surface dwellings. Stellar expects to confirm this assessment with vibration and seismic modelling as part of a DPEMP.

Zeehan has a population of 728 people many of whom are involved in the mining industry and would support an increase in mining activity in the area. Stellar has conducted a number of diamond drilling programs on the town side of Queen Hill with the cooperation and support of local residents. The Company also has a good relationship with the West Coast Council who would like to see a Heemskirk workforce making use of the many unoccupied dwellings in the town.

Benchmarking Heemskirk Tin Project

A benchmarking study completed by Stellar in November 2019 shows that the Heemskirk Tin Project is the highest-grade undeveloped tin project in Australia and second highest globally. See Stellar Investor Presentation announced on 26 November 2019 for further details).

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Benchmarking of Heemskirk (Nov 2019) – Heemskirk has a Competitive Grade/Tonnage Position

Heemskirk – The Potential to become the next Renison Tin?

Mineralisation in all of the Heemskirk Tin deposits remains open down dip and down plunge.

Renison Tin, Australia’s oldest and largest tin mine is located 18km to the NE of Heemskirk and shares the same ore genesis and geology. The Heemskirk deposits have been drilled to a maximum depth of 500m and are open at depth to granite source rocks assumed from geophysics to be 1km from surface.  Renison started with a 4.0mt reserve or 5-year mine life in 1968 and successful underground exploration has increased mine life to 50 years with at least another 15 years to go. The Heemskirk deposits total 71kt of contained tin or just 20% of the tin found at Renison to date.

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Renison long projection with overlay of Heemskirk deposits