Midgee Uranium Project

Stellar Resources Limited, via its wholly owned subsidiary Hitaba Gold Pty Ltd, holds Exploration Licence EL 6350 over the Midgee Uranium Project on Eyre Peninsular, South Australia.

EL6350 reached the end of its initial 2 year licence term on 25 March 2021. Stellar has applied for a further 2 year renewal of EL6350 in February 2020, relinquishing the previously held 73km2 area to a retained area of 38 km2. The renewal application is currently being processed by Department for Energy and Mining, SA.

On 18th May 2021, Stellar entered into a Binding Term Sheet with Alligator Energy Limited (ASX:AGE, or “Alligator”) to sell EL6350 for a total consideration of 7,105,263AGE shares.  Key terms of the Binding Term Sheet signed between Stellar and Alligator include:

  • Stellar’s 100% owned subsidiary, Hiltaba Gold Pty Ltd has agreed to sell EL6350 to Alligator’s 100% owned subsidiary, S Uranium Pty Ltd (SUPL) for a total consideration of 7,105,263 AGE shares.
  • The transaction is subject to obtaining necessary regulatory approvals including;
    • Approval of the EL6350 renewal application lodged on 19th February 2021 by the South Australian Department for Energy and Mining (DEM), and
    • Ministerial approval of the transfer of EL6350 to SUPL.
  • The issue of Alligator shares payable to Stellar under the transaction is subject to approval by AGE shareholders at an Extraordinary General Meeting targeted to be held at the end of June 2021.
  • The transaction is also subject to Hiltaba completing all 2020/21 compliance reporting obligations to DEM which are due by 25 May 2021.
  • Alligator will assume all tenement expenditure commitments and liabilities in relation to EL6350 at the time the transaction completes and will also cover annual rentals and other costs from the date of executing the Binding Terms Sheet.

Results of the 2010 drilling on EL6350 indicate that the licence is unlikely to have the potential to support a stand-alone project and as such is a non-core asset for Stellar. Stellar will benefit from the 7.1M AGE to be paid as consideration for the transaction providing an investment exposure to the uranium sector and to Alligators exciting portfolio of projects. The sale will also result in savings to Stellar in expenditure commitments and tenement management costs for EL6350 moving forward.

The retained 38 km2  area of EL6350 under renewal application contains two geologically and physically distinct blocks: the NE Block and the SW Block

NE Block

The north east block is prospective for southern continuations of the known Plumbush sediment hosted uranium deposit (north of the EL boundary within EL 5926 held by Alligator Energy Limited). Previous rotary mud drilling completed by Stellar’s JV partner in 2010, UraniumSA Limited, intersected potentially economic sediment hosted uranium mineralisation in a number of holes within the northern part of the NE block.

Hole MRM136 provided the best result with an intersection of 7.6m at 0.041% eU3O8, including 1.4m grading 0.106% eU3O8. Hole MRM137, 800m to the east of MRM136 recorded an intersection of 5.0m grading 0.032% eU3O8. Other significant intersections included: MRM128 (2.9m grading 0.016% eU3O8), MRM127 (0.7m grading 0.039% eU3O8), and MRM138 (0.5m grading 0.014% eU3O8).

SW Block

A south-western block which is prospective for uranium and base metals mineralisation associated with the Hiltaba age Charleston granite.

EL6350 – February 2021 Renewal Application Tenement Location Map

EL6350 Midgee: NE Block 2010 USA Drilling with best intercept U3O8 grades

 

North East Tasmania Gold Exploration Project

NE Tasmania – A Continuation of Victorian Western Lachlan Fold Belt

Gold deposits in North East Tasmania lie within a continuation of the Western Lachlan Fold Belt in Victoria – one of the world’s largest orogenic gold provinces.

The Western Lachlan Fold Belt in Victoria hosts the >3 MOz Fosterville Mine, Bendigo and other Tier 1 goldfields and has produced >80 MOz gold.

NE Tasmania hosts the Beaconsfield Mine (2.3 MOz), New Golden Gate Mine (0.3 MOz) and Lefroy Goldfield (0.2MOz), along with hundreds of smaller historic gold mines and occurrences.

While Victoria is currently experiencing intense gold exploration activity, NE Tasmania has had very little modern gold exploration undertaken.

Continuation of Western Lachlan Fold Belt from Victoria into NE Tasmania

Gold deposits in NE Tasmania share the same geological setting as their Victorian counterparts:

  • Ordovician turbiditic meta-sediments (Mathinna Super-Group).
  • Ordovician to Devonian deformation and metamorphism (Western Lachlan Orogen).
  • Associated with nearby Devonian granitoid intrusives.
  • Gold commonly in quartz veins occupying dilational zones along large- scale faults related to folding and deformation during the Lachlan Orogen.
  • Predominantly NW oriented lodes controlled by regional structures and rheological contrasts between sedimentary units.
  • Intrusion Related Gold System (IRSG) deposits also occur in NE Tasmania.

Timing of Geological Events in NE Tasmania vs Melbourne and Bendigo Zone of Western Lachlan Fold Belt in Victoria (after Bierlein et al, 2005)

NE Tasmania Exploration Licence Applications

Stellar has 12 first-in-time Exploration Licence Applications (ELAs) covering an area of 2,534 km2 in NE Tasmania which is highly prospective for Victorian-style and IRGS gold exploration and contains ~77 recorded historic gold occurrences and 25 recorded historic tin occurrences:

  • 10 first-in-time ELAs were registered in September 2020 covering an area of 2,295 km2. These are expected to be granted by the end of June 2021.
  • 2 first-in-time ELAs were registered in March 2021 covering an area of 240 km2. These are expected to be granted later in 2021.

Stellar ELA’s, NE Tasmania Geology and Mineral Occurrences

NE Tasmania Gold Exploration Targets

Numerous gold exploration targets have been identified within Stellar’s ELA’s areas based on the following targeting criteria:

  • Ordovician turbiditic meta-sediments (Mathinna Super-Group)
  • Ordovician to Devonian deformation and metamorphism (Western Lachlan Orogen)
  • Devonian granitoid intrusives nearby
  • Predominantly NW Regional scale structural trends/lineaments identified in aeromagnetic and gravity surveys and corresponding mapped faults. Intersecting NE trends/faults also identified in some of the ELA’s
  • Intrusive Related Gold Style (IRSG) targets identified from aeromagnetic surveys on some ELA’s
  • Location of recorded gold (and tin) occurrences
  • Ground open for application

A number of desktop orogenic and IRGS gold exploration targets have already been identified using full GIS targeting capability developed by Stellar’s technical team including; recently reprocessed aeromagnetic, radiometric and gravity data, geology, recorded gold and tin occurrences, historic drilling and geochemical data. A summary of the gold exploration targets within each of Stellar’s 12 NE Tasmania ELA’s is shown in the table below.

Summary of Stellar NE Tasmania ELA Gold Targets

Proposed Exploration Program

NE Tasmania Gold Exploration Project – Proposed Work Program Summary

2021 Tin Exploration Drilling Program

Phase 1 Drilling Program

A Phase 1 drilling program (~9 diamond holes, ~4,900m) aimed at identifying new areas of high-grade tin mineralisation near the defined Heemskirk tin deposits / resources is being undertaken in 2021 including:

  • Part A – 7 holes targeting depth extensions below key historic silver-lead mines
  • Part B – 2 holes targeting depth extensions of the Severn tin resource

Phase 1 Drilling Program Summary

Phase 1 Part A – Historic Silver-Lead Mines – Depth Extension Drilling

The highly mineralised Zeehan mineral field contains many historically significant high-grade silver-lead mines which have a total recorded production of 26 MOz Silver & 190,000 t Lead and resulted in the development of a major town and smelters at Zeehan in the late 1800’s / early 1900’s.

Part A of the Phase 1 drilling program includes 7 planned holes (total of ~3,000m) aimed at identifying new areas of high-grade tin mineralisation below 4 of the largest historic silver-lead mines in the Zeehan mineral field (Montana No.1, Zeehan Western, Oonah & Zeehan Queen No. 4) which are located on Stellar’s licences and typically had:

  • Ore grades of 20 Oz/t Silver to 100 Oz/t Silver
  • Mining widths of a few cm up to 2.7m (fissure veins)
  • Mining lengths up to 300m
  • Mining depths of 70m to 300m

Silver-Lead lodes typically transition into tin (with pyrite) lodes at depth. The 7 Phase 1 Part A holes target depths below the historically mined silver-lead lodes where transition to tin mineralisation is expected although there is also potential to intersect deeper high-grade silver-lead-zinc fissure lodes. No drilling ever done below these mines.

 

Zeehan Mineral Field – Sn Deposits & Historic Ag-Pb-Zn Mines on simplified Geology

Phase 1 Part B – Severn Resource Depth Extension Drilling

Part B of the Phase 1 drilling program includes two ~700m holes with provision for wedging & daughter holes planned (total of ~1,900m) targeting depth extensions of the Severn tin resource.

Severn is the largest of the Heemskirk Tin Project deposits and has been drilled only to ~500m depth. The 2 holes planned target extension of the Severn deposit ~100m below the current resource limit at a depth of ~600m. Severn remains open at depth where it is hoped that mineralisation will continue and increase in grade towards the underlying granite contact, predicted to be >1,000m below the surface from geophysical surveys.

Phase 2 Drilling Program

A Phase 2 diamond drilling program is under review by Stellar including:

Severn and Queen Hill Indicated Resource Infill Program

Severn and Queen Hill  are the two largest Heemskirk Tin Project deposits with a combined total Mineral Resource of 5.33Mt @ 1.0% Sn, of which 40% is Indicated & 60% Inferred.

The Phase 2 drilling program under review comprises Infill drilling to upgrade a significant part of the Severn and Queen Hill Inferred Resource to an Indicated Resource in order to support a PFS / BFS for the project.

Deep Hole

A deep hole is being considered as part of a Phase 2 drilling program to target the main conduit of mineralising fluids into the Severn and Queen Hill deposits from the underlying interpreted granite.

Advancement of Heemskirk Tin Project to PFS/BFS Completion

Other project work streams and studies required to advance the Heemskirk Tin Project to PFS and BFS completion are also under review by Stellar.

Many of the project work streams and studies have already been completed to a PFS level.

Work towards completion of the DPEMP is well progressed with environmental assessment program agreed and stage 1 surveys completed.

The project has secure Mining Leases granted over mine site, tailings pipeline route and tailings dam site.

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Heemskirk Tin Project Scoping Study

Scoping Study Overview

In October 2019, Stellar announced the results of its Heemskirk Tin Project Scoping Study 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 initial 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 ~ 2,200tpa of tin. Concentrate produced will be trucked 150km to the north via sealed road to the Port of Burnie for export to smelters in Asia.

The Heemskirk Tin Project 2019 Scoping Study was 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 potential project viability 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.

Economic Evaluation

The 2019 Scoping Study confirmed the Heemskirk Tin Project has attractive economics:

  • With a low pre-production capital base of A$57m, the Heemskirk Tin Project generates a pre-tax NPV10% of approximately A$83m (post-tax NPV10% of approximately A$71m), at a tin price of US$20,000/t and 0.70 USD:AUD exchange rate, to an accuracy of ±35%. The pre-tax internal rate of return of the project is approximately 45%.
  • A competitive All-In Sustaining Cost of ~US$13,100/t of tin generates ~34% operating margin based on US$20,000/t tin price and 0.70 USD:AUD exchange rate.

Heemskirk Tin Project – Key Results from 2019 Scoping Study

Sensitivity analysis undertaken as part of the 2019 Scoping Study highlights the robustness and attractiveness of higher tin prices to the Heemskirk Tin Project.

Heemskirk Tin Project – Sensitivity Analysis

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.

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

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

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.

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.

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.

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.

Opportunities exist for optimisation of the flow sheet and recovery including addition of ore sorting.

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.

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.

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.

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

Operating Costs

The Heemskirk Tin Project has competitive operating costs of ~A$123/t ore or ~US$13,100/t tin All in Sustaining Cash Cost (AISC).

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

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 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.

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