Minmetals Resources Limited (HKSE 1208) (ASX:MMR) announced Monday that its zinc ore reserves climbed 103.9 per cent due to the inclusion of the Dugald River ore exploration in estimates.

This development came with the approval of the environmental impact statement by the Queensland government, prompting the board of directors of Minmetals to approve expenditure of A$157 million for the next stage of the Dugald River Project, a statement released to the Australian Stock Exchange said.

"Dugald River is one of the largest undeveloped zinc deposits globally and a key feature of MMR's future project pipeline. If the project continues to move through the stages as planned, Dugald River could commence zinc production and be cash flow accretive in 2014," said MMR CEO Andrew Michelmore.

MMR also operates Australia's largest zinc mine, Century, which produces approximately 500,000 tonnes of zinc in zinc concentrate annually. Given the discrete nature of the Century ore body, current estimates put Century's mine life ending in approximately 2015. Dugald River has the potential to replace nearly half this annual zinc production.

Dugald River Development

Dugald River is an undeveloped zinc deposit located in North West Queensland, Australia. When developed, the project is expected to produce approximately 2 million tonnes of ore and 200,000 tonnes of zinc in zinc concentrate per annum from an underground mine with a life of over 22 years.

The next stage will progress project activities up to receipt of full environmental approval. Major work will include detailed engineering, metallurgical test work, long lead time major equipment procurement, continuation of early site works and underground decline development. Key local infrastructure development, including load-out, power and accommodation, will also be advanced during this period. Following completion of this phase the board will consider final approval of project development and construction.

MMR's mineral resources

Mineral Resources additions exceeded mining depletion at Rosebery and Sepon gold and partly offset depletion at Golden Grove demonstrating the success of near mine exploration programs. Century and Sepon copper Mineral Resources have decreased in line with mining depletion

Mineral Resources (contained metal) as at 30 June 2011 are estimated to contain 16.4 million tonnes of zinc, 3.3 million tonnes of copper, 2.8 million tonnes of lead, 334.3 million ounces of silver, 7.4 million ounces of gold and 0.26 million tonnes of nickel. In general, Mineral Resources, except zinc have increased since the June 2010 estimate predominantly due to exploration success.

The Avebury Mineral Resource has increased with the extension of the East Avebury and Viking Deep deposits through recent drilling work. MMR will continue to study the economic configuration of Avebury in view of long-term price assumptions while the mine remains on care and maintenance. This will include ongoing assessment of third-party approaches following the completion of an expression of interest process during 2011.

Ore Reserves

Ore reserves (contained metal) as at 30 June 2011 are estimated to contain 8.1 million tonnes of zinc, 0.9 million tonnes of copper, 1.3 million tonnes of lead, 102.4 million ounces of silver and 0.6 million ounces of gold. The total ore reserve estimate for June 2011 represents a significant increase in zinc up 103.9 per cent with the inclusion of Dugald River in the ore reserves for the first time.

Other highlights of the ore rreserves statement included the increase in other mineral ores. Lead was up 126.1 per cent and silver was up 108.2 per cent, there was a minor increase in gold of 1.1 per cent and a 6.1 per cent decrease in copper compared with the June 2010 estimate. Comparison to the 2010 estimate indicates an overall ore tonnage reduction of 11.2 million tonnes due to mill processing at all sites being offset by added ore reserves tonnage. This was significant with gold at Sepon up 2 million tonnes, Century up 0.9 million tonnes, Golden Grove up 4.2 million tonnes and Rosebery up 1.4 million tonnes. Sepon copper Ore Reserves decreased 1.6 million tonnes.