Background

Independence Group's wholly owned subsidiary Lightning Nickel Pty Ltd ("Lightning"), acquired the Long Nickel Mine and the lease of related infrastructure and equipment from WMC Resources Ltd for $15 million in September 2002. The mine was successfully commissioned in October 2002.

The mine is located at Kambalda in Western Australia. The mine provides a healthy cash flow to the Company and has significant upside for further mine life extensions.

Historic production from the Long Nickel Mine represents the second largest concentration of nickel in the Kambalda region, and qualified as one of WMC's longest operating nickel mines with a 21 year mine life. Total production to closure in 1999 was 5.43 million tonnes at an average reconciled grade of 3.7% per cent nickel (203,184 nickel tonnes). 

Since IGO recommissioned the mine in 2002, exploration and development activities have resulted in the discovery of an additional 9 years of reserves increasing current mine life to at least 2015, based on reserves only, at a production rate of approximately 9,000 tonnes of nickel per annum.

The McLeay nickel deposit was discovered in 2005 and is still open to the south.

The high-grade Moran deposit was discovered in 2008. It currently has a resource of 32,400 nickel tonnes and is still open to the south. Further exploration success at McLeay and Moran has the potential to significantly increase mine life.

At 30 June 2009 the mine had an estimated resource of 1,685,000t @ 5.6% for 93,900 nickel tonnes and an estimated reserve of 1,327,000t @ 3.9% for 51,800 nickel tonnes. Resources are inclusive of reserves.

Tenure

The Long Complex assets are located on three Western Australian Mining Act (1904) Mineral Leases and a portion of East Location 48. East Location 48 was originally sub-leased to Independence until April 2011. During 2005/6 Independence purchased the sub-leased area and other portions of Location 48 as well as several adjoining tenements from WMC Resources Ltd. Location 48 is one of a number of freehold land grants created in the Eastern Goldfields district in 1890. 

Offtake Agreement

The Company has an agreement with WMC (now BHP Billiton Nickel West Pty Ltd) whereby the ore produced from the mine is delivered to the adjacent Nickel West Kambalda Nickel Operations Concentrator for toll treatment and production of nickel concentrates, which are then sold to BHP on terms set out in that agreement. The agreement expires on 27 February 2019.

Safety

The mine plan adopted by the Company incorporates a number of procedures and policies to ensure the safety of our team is not jeopardised. Only 8 Lost Time Injuries ("LTI") have occurred since the mine was purchased in 2002, which is a great credit to the dedication of all personnel on site.

Lightning's safety policy requires that operators undertake regular emergency training, and teams from surrounding mines have also participated in safety and training activities with Lightning's personnel.

The occupational health and safety regime is stated in the Lightning Nickel Safety Policy, which is based on the belief that profits can be made without compromising safety. It is management's conviction that a positive attitude is the key to any safety programme. Hazard identification, accident/incident investigation, competency training, work procedures development, competency reassessment and regular workplace inspections, are carried out with the help of every employee.

Ground Conditions and Seismicity

The risks of "mine-induced" seismicity are well known and understood at Long. The ore body is disrupted by a swarm of cross-cutting porphyries, some of which are stressed. When mining the discrete ore blocks within the Long Mine, procedures to manage these conditions are built into the operating standards and are well understood by our mining team.

Lightning is a sponsor of the Australian Centre for Geomechanics Research ("ACGR") seismicity research studies. ACGR and the University of Western Australia have been undertaking ground support studies at the Long Nickel Mine with the assistance of the Company's mining and geotechnical team.

Mine Work Force

Lightning currently employs 120 full-time staff and 6 full time contractors. Many employees are ex-WMC Kambalda employees, who brought a pool of sound operating knowledge, experience and skills to the mine. 

Lightning's work force has been very stable with a high retention rate since the commencement of mining in October 2002. All miners apart from the hand-held team are on salary, and an incentive scheme is in place to reward all on site when various production and development targets are achieved. 

Mine Production

Mining methods range from long-hole open stoping with mullock/sand backfill and mechanised Jumbo flat-back stoping, to hand-held mining which is utilised to extract blocks in narrow stopes not suitable for mechanisation. Wherever necessary, non-entry, mechanised mining methods are employed for safety reasons. The spacing of stoping sub-levels and other aspects of the mining methods have been designed to minimise dilution.

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