How Much Do We Need to Drill? C Taylor and E Retz Disclaimer Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Limited ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This presentation contains certain statements which may constitute "forward-looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements. No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will be achieved or prove to be correct. 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Additional Information This presentation should be read in conjunction with the Annual Financial Report at 30 June 2014 and Half Year Financial Report at 31 December 2014 and together with any announcements made by Fortescue in accordance with its continuous disclosure obligations arising under the Corporations Act 2001. Any references to reserve and resources estimations should be read in conjunction with Fortescue’s Mineral Resource and Ore Reserve Statement at 30 June 2014 as released to the Australian Securities Exchange on 20 August 2014 and the Chichester Range Mineral Resource update released to the Australian Securities Exchange on 8 January 2015. All amounts within this presentation are stated in United States Dollars consistent with the Functional Currency of Fortescue Metals Group Limited. Tables contained within this presentation may contain immaterial rounding differences. How Much Do We Need to Drill? Overview • • • • • • • Introduction Location and Exploration History Geology Methodology – Study area and domain selected – Sequential Gaussian Conditional Simulation • Parameters • Validation • Selection of simulations – Drill holes, variography and estimation Results – Grade tonnage curves – Histograms Discussion Conclusion Introduction • • • • Fortescue currently has approximately 11.9 Bt of hematite Mineral Resources. Approximately 63% of these are Inferred Mineral Resources. Selection of drill grids is challenging in greenfields areas. Sequential Gaussian Conditional Simulation has been used to maximise productivity at Fortescue’s Eliwana deposit. Location Exploration History • In 2011, Fortescue released an Inferred Mineral Resource on the Eliwana and Flying Fish deposits. Tonnes (Mt) 624 Fe % 58.7 SiO2 % Al2O3 % P % 5.44 3.06 0.091 LOI % 6.61 JORC (2004) Inferred Mineral Resource as at 23 March 2011, refer to ASX announcement of same date for further details • An updated Inferred Mineral Resource for the two deposits was also completed in 2014. Tonnes (Mt) 740 Fe % 59.1 SiO2 % Al2O3 % P % 5.21 2.88 0.091 LOI % 6.5 JORC (2012) Inferred Mineral Resource as at 20 March 2014, refer to ASX announcement of same date for further details Geology of Eliwana Methodology for this Study Exploratory data analysis Creation of simulations Selection of simulations Creation of theoretical drilling grids Creation of block models Estimation into block models Analyse estimates Study Area and Domain Selected • • • An area within the J2 mineralised domain was selected. The area was tested to find if the local distribution was representative of the global distribution. The area was tested for stationarity (statistical homogeneity). Sequential Gaussian Conditional Simulation Parameters • • • • Variogram models were created using data from the entire domain. Simulations were completed on 5m × 5m × 1m points. Simple kriging was used. Neighbourhood parameters were based on a kriging neighbourhood analysis. Sequential Gaussian Conditional Simulation Validation of Parameters Sequential Gaussian Conditional Simulation Selection of simulations Theoretical Drill Holes • Drill spacings created on an offset and grid pattern were: 200m × 100m 50m × 50m 100m × 100m 50m × 25m 100m × 50m 25m × 25m Variography • • Variography was completed on the flagged drill holes from the best simulation. The quality of the experimental variograms was ranked as either good, medium or poor. Estimation • • • Two sets of models with different block sizes were created: – 12.5m × 12.5m × 1m and 50m × 25m × 1m Estimates were completed using ordinary kriging. The ‘best’ simulation was regularised to act as the ‘truth.’ Results – Grade Tonnage Curves 200m × 100m – SiO2 Results – Grade Tonnage Curves 100m × 100m – SiO2 Results – Grade Tonnage Curves 50m × 50m – SiO2 Results – Grade Tonnage Curves 25m × 25m – SiO2 Results – Grade Tonnage Curves Cut-off Plots – 5th to 95th Percentile Range • Al2O3 at a 3% cut-off Results – Grade Tonnage Curves Cut-off Plots – Relative Difference • Al2O3 at a 3% cut-off Results - Histograms • Al2O3 histograms Discussion • • • • 100m × 50m is required for reasonable variograms. Ranges stabilise at 100m × 50m for SiO2/Al2O3 and 50m × 50m for Fe. The largest relative difference is seen at 200m × 100m or 100m × 100m. 50m × 50m or 100m × 50m is required for the histograms to be similar to the truth. Discussion • • • Variation between the two drill patterns is due to the difficulty in representative sampling. Little variability was noted between the drill patterns at the closer spacings. The smaller block size estimates’ grade tonnage curves and histograms became more similar to the truth. Conclusion • • • • • The most significant improvement in results is noted at 100m × 50m or 50m × 50m. 100m × 50m should first be targeted. The block size should be optimised with drill spacing. Either a grid or offset pattern is acceptable. Additional domains are planned to be tested at Eliwana. Thanks to: • • My co-author and everyone who reviewed the paper and presentation. All Fortescue Exploration staff and contractors that have been involved in the Eliwana deposit. www.fmgl.com.au @FortescueNews Proudly supporting: