Serenje Manganese Project

The Serenje Manganese Project in Zambia was identified by Zamanco based on the known widespread occurrences of high grade manganese, the available power supply and the ability to transport beneficiated product to port.

The business case for smelting manganese from high grade ore close to the mine is attractive when taking into consideration the cost of transport from African mines to smelters elsewhere in the world. The projects become more feasible where longer distances preclude the transportation of larger volumes of direct shipping ore material.

The Serenje Manganese Project comprises three individual components - mining/ore supply, ferromanganese smelters and an aluminothermic manganese metal smelter.

Exploration and Mining

With regards to the exploration and mining phase, Zamanco has entered into joint ventures over known manganiferous landholdings in the Mansa and Mkushi areas of Zambia.

At Mkushi, Zamanco has entered into a Joint Venture with Jack Stuart, a Zambian national, who holds a granted Prospecting Permit (15836-HQ-SPP) in the Mkushi region of Zambia. This tenement provides a strategic fit for Zamanco as it provides a foothold into the Mkushi region, which is closer to the proposed Serenje smelter site. The other major benefit is that the Mkushi tenement is not subject to the moratorium that is currently in place and allows exploration to commence as soon as practicable.

The tenements in Mansa, LPL12897 and LPL14554, are currently subject to the moratorium on the granting and renewal of licences in Zambia. These tenements will undergo high priority trenching and drill testing once the tenements have been renewed.

Zamanco has also entered into discussions with various small scale miners in the Mansa area regarding the purchase of fines material, currently being stockpiled as waste. Zamanco has a competitive advantage with regards to the fines material in that it can smelt this material in the DC smelters to produce a high value product.

Photos of outcrops within the Mansa tenement (LPL12897)

Proposed Ferromanganese and Manganese Metal Production

Once resources have been defined and feasibility studies confirm the economic viability of the Project, construction of the mining and processing operations is expected to commence.

Once mining operations are established, the Company plans to transport ~220,000 tonnes of beneficiated ore (~50% Mn) via truck to the Company's proposed smelter location at Pensulo, near Serenje. The Pensulo location has been selected based upon its proximity to Zesco'sPensulo sub-station, tar road access to Beira and the rail system linking to Dar-Es-Salaam. Zamanco has secured 150ha of land near Pensulo for its smelting hub.

The smelting operations at Pensulo will consist of an aluminothermic smelter, producing 12,000 tonnes of 95% content low carbon manganese metal per annum, and three 8MVA DC smelters producing 60,000 tonnes of High Carbon Ferro-Manganese per annum.

Low carbon manganese metal is used as an alloying agent for aluminium as well as in the stainless steel industry, where it is increasingly being used as a substitute for nickel. The aluminothermic reduction method for producing manganese metal involves an exothermic reaction between aluminium and manganese ore to produce 95% manganese metal. High carbon ferromanganese is essential to iron and steel production by virtue of its sulphur-fixing, deoxidizing, and alloying properties. Steelmaking,including its ironmaking component, has accounted for most manganese demand, presently in the range of 85% to 90% of the total demand. Zamanco is proposing to construct three 8MVA DC smelters, which will have the capacity to produce a combined 5,000 tonnes of 78% high carbon ferromanganese per month.

Both the manganese metal and ferromanganese will be transported either via rail to Dar-Es-Salaam or via road to the port of Beira in Mozambique. Trucks returning from port will be loaded with either aluminium (for the manganese metal process) or coking coal (for the ferromanganese process).

Proposed transportation routes to port

Studies by Zamanco indicate that the production of manganese metal and ferromanganese will result in an operating margin (per tonne) approximately seven times greater than that for direct shipping ore product. When the lower Proposed transportation routes to port tonnages due to beneficiating are factored in, the production of manganese metal and ferromanganese produces an overall net margin increase of 2.2 to 2.6 times that of DSO.

All the logistical, engineering and mining elements required for the implementation of the business have been identified and a Bankable Feasibility Study ("BFS") is currently underway. It is expected that the BFS will take ~9 months to complete with a deliverable report expected by end of Q3 2013. All of the equipment manufacturers and construction engineering firms have extensive experience in southern Africa.