All data are collected in the Fiscal Year of 2008-2009.

Mauritania / Energy, Mining, Resources

Sphere Investments Limited is a West African focused iron ore company which is listed on the Australian Securities Exchange. Sphere became a resources company in October 2000. Its main assets are two iron ore projects in Mauritania: Guelb el Aouj, for which there is a Definitive Feasibility Study (DFS); and Lebtheinia, which is an advanced exploration and has a JORC resource.

Guelb el Aouj Magnetite Project is an advanced stage iron ore project with a total JORC Resource of 926mt @ 36.2% Fe. The DFS of this Reserve proposed 17mt/yr open cut mining for 30 years, to produce 7mt/yr of DR (direct reduction) pellets. There are two other magnetite-quartzite deposits, in the south of the licence area-Bou Derga and Tintekrate-which have an Exploration Target of 800mt-1050mt iron ore (head grade 35-37% Fe, DT conc grade 70% Fe, mass recovery 42-46%, Apr ’07).

Lebtheinia Magnetite Project is an advanced stage exploration project with a JORC Resource of fresh magnetite-BIF of 2,533mt @ 32.3% Fe (86% Indicated; DT mass recovery 27.4% for a concentrate grade of 68.5% Fe; Apr ’09) at Lebtheinia Centre Deposit, which is one of four deposits contained in two adjacent licenses.

Title to Exploration Permit EL172 (194km2) is held by Mauritanian Holdings Pty Ltd, a wholly owned Australian subsidiary company of Sphere Investments Limited.

The Guelb el Aouj Iron Ore Project is owned by El Aouj Mining Company SA (EMC) in a 50:50 joint venture with Société Nationale Industrielle et Minière (SNIM). SNIM was formed in 1974 as the national iron ore company of Mauritania. SNIM is 78% owned by the Mauritanian Government, with the remaining 22% held by five Arab financial and mining organisations. SNIM is currently the seventh largest supplier of iron ore to the international traded market. It exports 11Mt/a of iron ore from three mining centres in the Zouérate region of northern Mauritania. The ore is transported to the port at Nouadhibou on the Atlantic coast by a 700km heavy haul rail network that is owned and operated by SNIM. SNIM also owns and operates the ship loading and storage facilities near Nouadhibou.

Sphere and SNIM are currently undertaking a joint sale process through the investment bank UBS to find a suitable partner to take a majority stake in the project and support its development.

The Guelb el Aouj Project is located approximately 32km northwest of the iron ore mining town of Zouérate and approximately 26km from the mainline railway owned and operated by SNIM.

Lebtheinia (EL264 & EL325) is located inland from Nouadhibou, the deep water iron ore port in Mauritania, and 48km south of the iron ore railway owned and operated by SNIM.

EL172 is located in the Tiris Zemmour Region of Mauritania.

Sphere is a West African iron ore exploration and development company. Sphere is developing the 7Mtp/a Guelb el Aouj iron ore DR pellet project; the first pellet plant to be developed in the iron ore regions of Mauritania.

In addition to the Guelb el Aouj DR pellet project, Sphere and its partner SNIM own two other magnetite deposits in the south of the JV area which have the potential to contain over a billion tonnes of rich magnetite-quartzite capable of supporting additional pellet expansion projects in the JV area.

Sphere also owns 100% of the BF grade magnetite deposits Lebtheinia and EL172 which is located 50 km from SNIM’s railway and 180 km from the iron ore port of Nouadhibou.

The Company believes that Lebtheinia has the potential to support a 30Mt/a standalone BF pellet operation. The grade ranges of the Exploration Target are as follows: in-situ head grade 32-33% Fe; Davis Tube mass recovery 28.0-30.0%; and Davis Tube concentrate grade 67 – 69.5% Fe; 4.0 – 5.0% SiO2.

5 employees

To be determined

“To develop the company’s deposits in Mauritania”

“At the outset of the global consolidation of the iron ore industry in mid-2000, and before the rapid increase in consumption driven primarily by China’s growth in imports, Sphere’s Directors established an investment and development strategy of acquiring rights to high quality, large scale iron ore magnetite deposits in Mauritania. Mauritania was targeted given its: strong reputation as a reliable source of supply of high quality products into the European steel industry; competitive freight to those and other strategic markets; established iron ore port and rail infrastructure; massive undeveloped provinces of magnetite deposits located close to the railway; and welcoming approach to foreign investment in all sectors of the economy and particularly in the resources sector.

It is EMC’s desire to bring in a strategic industry partner with the financial strength and technical expertise to fast-track the development of the $US2,1 billion Guelb el Aouj Project. A number of international mining and steel companies have already expressed interest in the Project and we look forward to engaging a new partner to bring the Project into production.

In September 2009 the Board of (EMC) agreed to grant parties an extension until 15 December 2009 to submit final bids for a 51% stake in the Project through the UBS sale process. Despite granting an extension, there is no guarantee that the process will result in a commercially satisfactory outcome.

In parallel with the UBS process, and in light of rising iron ore asset valuations, Sphere has been evaluating options to significantly enhance the value of the project, including; Prodemas International Ltd (Prodemas), in conjunction with ProMet Engineers (ProMet) conducted a Concepts Study to review the capital and operating costs for the Project. The study identified opportunities to reduce the capital cost of the original 7Mt/a project by adopting an EPC package contracting strategy using western technology providers working with Chinese or Indian engineering and erection contractors. Based on this alternative contracting strategy, and by re-estimating key inputs to be in line with current market rates (including up to date costs for steel, labour and fuel), Prodemas estimate that the capital cost could potentially be reduced to around US$1.65B, a saving of over US$500M from the original DFS estimate; sphere’s geologists have recently updated Exploration Targets for the magnetite-quartzite deposits within the Exploitation Licence (EL609) to 1,500Mt-2,050Mt. EMC will therefore consider the option of further drilling of the deposits within the Exploitation Licence area (EL609); and based on the above, there may be potential to reconfigure and increase the scale of the Guelb el Aouj Project to 15-30Mt/a. The Prodemas Concept Study identified significantly enhanced project returns at these higher production rates.

The EMC Board will meet again in late December to decide on the best course of action for the Project in view of the outcome of the UBS process and the above opportunities to significantly enhance its value before introducing a new strategic partner to EMC.

Following the work at Guelb el Aouj, Sphere relocated the exploration and drilling team to Lebtheinia, its 100% owned magnetite project. Testwork has shown that blast furnace (BF) grade concentrate can be produced from the Lebtheinia mineralisation. The Company has carried out an extensive resource definition drilling program this year at Lebtheinia, having set an exploration target of 2,0-2,3 billion tonnes of in-situ magnetite-BIF mineralisation at the Lebtheinia Centre Deposit.

As the completion of the DFS approached, it was agreed to use EMC as the operating vehicle for the project. All non-project assets and liabilities were transferred to another subsidiary before 50% of the shares in EMC were transferred to SNIM in April 2008.

In October 2000, Sphere was invited by the Mauritanian Government to review the iron ore operations in Mauritania, and assess joint venture opportunities in the country, in collaboration with SNIM. Following extensive due diligence undertaken by former Hamersley Iron professionals now working with Sphere, SNIM and Sphere entered into a Joint Venture Agreement (JVA) in October 2001 to assess and develop a series of magnetite deposits situated close to SNIM’s existing railway and operations, with Sphere being appointed as the operator of the joint venture.

The JV was structured to allow staged work on the bankable feasibility study (BFS) on the Guelb el Aouj DR Pellet Project with Sphere to earn 50% in the joint venture area at its completion. Sphere then recruited additional iron ore industry veterans to oversee the work and promoted the project internationally to raise the funding needed for the BFS.

Through a release to the ASX on 7 August 2008 the company advised the market that a peaceful coup had occurred in Mauritania. The coup did not affect Sphere’s operations in Mauritania, or any other foreign mining or petroleum company operating in Mauritania. Business trading resumed as normal shortly after the event.

In mid-2009 Sphere announced that it has re-evaluated its Mauritanian iron ore properties and has set Exploration Targets totalling 1,030Mt-1,500Mt of magnetite-quartzite mineralisation, additional to the 800-1,050Mt Exploration Targets for Bou Derga and Tintekrate already announced.