SRK UPDATE

RNS Number:2767X
Nikanor Plc
25 May 2007

25 May 2007

CONFIRMATION OF PROJECT COST ESTIMATE & GENERAL UPDATE

Nikanor PLC (LSE: NKR) announces today the results of an independent review of
the estimated total cost of its project to rehabilitate the KOV mine and
construct a state of the art solvent extraction electro-winning ("SX-EW")
refinery (the "Project"). In summary, the independent review confirms that the
projected total capital cost for the Project is in line with the Company's
revised cost estimate set out in its preliminary year-end results. Nikanor is
also pleased to provide an operational update on progress made to date.

Notwithstanding the developments referred to in the Company's announcement of 16
May, Nikanor is actively considering its options to secure funding for the
Project and is keen to secure additional funding with urgency in order to
maintain the project schedule.

Project Cost Review

On 30 March 2007, the Company announced that it had received a revised direct
capital cost estimate for the Project of $1.6 billion in nominal terms,
including expected escalation, a 26% increase on the estimate made at the time
of the company's IPO in July 2006. The Company also announced that it proposed
to engage an independent consultant to review these project costs. This review
has now been completed by SRK Consulting ("SRK") and covered:

1. Refinery: The updated design of the new state of the art SX-EW refinery and
the costs associated with constructing the plant and the associated
infrastructure.
2. Mine: The updated mining capital costs based on revised pit designs, mining
schedules and revised equipment cost estimates.
3. Infrastructure: The updated capital cost estimates for the remaining
infrastructure.

SRK's key findings are as follows:

1. A reasonable capital cost estimate for the Project is approximately $1.5
billion in January 2007 prices, including a contingency allowance of around
$150 million. An escalation allowance of $100-120 million should be added to
this amount. This reconciles with the capex estimate of $1.6 billion as
provided in the Company's preliminary year-end results.
2. The total Project funding estimate of $1.8 billion is realistic. This
includes $300 million for escalation, working capital costs and other
pre-production owner's costs but excludes finance charges. This is in line
with the total funding requirement as provided in the Company's preliminary
year-end results.
3. The metallurgical process flowsheet which had been revised to facilitate
lower operating costs following the receipt of testwork results has been
reviewed and deemed appropriate.
4. The plan to start producing cathode by the end of 2009 and to then approach
full capacity by the end of 2010 is challenging but achievable, with full
production reached shortly thereafter.

Operational update highlights

*Further progress made on a number of important contracts including the
mine fleet, run of mine ("RoM") handling, EW (electro-winning) cranes, waste
handling, the milling plant and fuel supply. Negotiations are also advanced
concerning an agreement to supply the entire 220MW electricity requirement
of the Project.

*Mine plan revision underway with a reduction in early pre-stripping;
geotechnical drilling expected to be complete by the end of June.

*Majority of capital equipment has been procured for third phase of
dewatering plan to remove water and silt. Pumps to maintain water level
performing well. Rehabilitation of boreholes has commenced.

*Kolwezi Concentrator output improved; initial results from drilling
programme supportive of plans to further ramp up concentrate production.

*Operational and project management teams significantly strengthened.

Further details relating to the operational update are included in the appendix.

Discussing the Company's progress to date, Executive Chairman Jonathan Leslie
said:

"Ten months ago we had a feasibility study and a mandate to rebuild operations
at one of the world's great copper / cobalt ore bodies. Today's update clearly
shows the major strides that the Company has taken to bring this project to
fruition. I'm pleased with the pace of our progress on all fronts and look
forward to announcing further developments in the months to come."

For further information, please contact:

Nikanor PLC
Jonathan Leslie, Executive Chairman +44 (0)20 7529 5800
Peter Sydney-Smith, Finance Director
Richard Boorman, Head of Investor Relations

JPMorgan Cazenove
Ian Hannam +44 (0)20 7588 2828
Adam Brett
Robert Stafler

Merlin PR
David Simonson +44 (0)20 7653 6620
Tom Randell

Notes to Editors

Nikanor is a mining group which owns assets in the heart of the African
copperbelt in the Democratic Republic of Congo. The group's key mine is KOV,
containing one of the world's largest high quality copper and cobalt ore bodies.
Nikanor is rehabilitating this proven and well documented brownfield site and
building a major state of the art refining plant to produce 250,000 tonnes per
year of LME A-grade copper cathode and 27,500 tonnes per year of cobalt
products. Nikanor is working in partnership with the DRC government owned
company Gecamines.

Nikanor was admitted to the London Stock Exchange (AIM) on 17 July 2006.

APPENDIX

KOV and KTK Progress

In the 10 months since its admission to London's AIM market, Nikanor has made
considerable advances in the complex process of translating the feasibility
study to operational reality. In excess of 100,000 man hours have been spent on
detailed engineering and test work for the new refinery. The specification of
key equipment, especially long-lead items has been finalised, tenders have been
issued and received and we are now in a position to place orders. Furthermore,
the team has made good progress refining the mine plan which is expected to have
a beneficial impact on operating costs and refinery output. Positive
developments can also be reported on a wide variety of areas that presented
potential challenges at the inception of the project. These areas include
further improving the output of KTK (Kananga, Tilwezembe, Kolwezi Concentrator),
steps towards securing the entire electricity requirement of the project,
meeting critical milestones in the dewatering plan, and announcing important
management hires.

Since the last update on 30 March 2007, progress has been made on a number of
important contracts. The details are as follows:

*Sandvik Materials Handling has been selected for the first phase of the
refurbishment of the waste conveyor which has the capacity to handle in
excess of 8,000 tonnes per hour of waste rock.

*Sandvik Materials Handling has also been selected to engineer and install
RoM materials handling equipment covering primary ore crushing, conveyors,
stock piles and mill feed. RoM is expected to be fed to the plant site at a
rate of 1,000 tonnes per hour.

*Earthworks for the new refinery are underway following the signing of a
$30 million contract in February.

*The contract to fabricate and deliver the milling plant with a throughput
of 640 tonnes per hour is being finalised and the order will be placed
shortly. The primary elements of the milling plant will be a 6.1 metre
diameter ball mill and an 8.5 metre diameter SAG mill.

*Diesel deliveries have commenced following the signing of a contract
covering the supply and distribution of 450,000 litres of fuel per month.

*Tenders for the manufacture and supply of the mining fleet have been
adjudicated and negotiated.

*Long-lead items such as EW cranes have been tendered and adjudicated.

Revised Mine Plan

Significant progress has been made reworking the mine plan for KOV. The first
five years of the plan have been amended, reducing prestripping in 2007 and 2008
from 16 million tonnes to 3 million tonnes and deferring this to 2009. In
addition, ore head grades in 2010, the first full year of production, have
increased by 20%. A full life of mine schedule is being developed by SRK with
the intention of maintaining copper output at the plant's initial design
capacity of 250,000 tonnes of cathode per year.

Geotechical diamond drilling at KOV is expected to be completed by the end of
June and revised slope angles available during the fourth quarter of 2007, ahead
of schedule. It is believed that there is upside potential to reduce stripping
costs by slope steepening in certain areas of the pit.

Dewatering Plan Implementation

We continue to make good progress implementing our three part dewatering plan.
This dewatering plan supports the revised mine plan, which only requires access
to the pit bottom in 2009.

Nine dewatering pumps with a capacity of 4,500 m3 per hour are currently in
place. These pumps, which represent the first element of the dewatering plan,
are designed to maintain the water level in the pit despite rainfall and
groundwater ingress. It is encouraging that the water level in the pit was
maintained throughout the exceptionally heavy rainy season and the water level
has now begun to decrease.

The second element of the dewatering plan is to remove groundwater before it
reaches the pit. The rehabilitation of five existing boreholes has already
commenced and 28 new holes are planned to be drilled.

The third element of the dewatering plan is designed to remove both the water
from the pit and silt from the pit bottom. It was originally envisaged that the
silt would be removed by mechanical methods; we have revised our plans to now
remove as much of this material as possible using hydraulic methods. The current
plan consists of installing agitation and slurry pumps on five rafts and
installing three booster stations. The installation of this equipment is
expected to more than double our dewatering pumping capacity. The detailed
design work for this phase of dewatering has been completed and the majority of
the capital equipment including pumps, valves and more than 15 kilometres of
piping has been procured. As planned, we only expect to see a significant
reduction in the pit water level when the equipment for this element of the
dewatering plan is in place.

The construction of decanting dams to separate sludge from the water/silt slurry
removed from the pit is now well underway, and access roads have been
refurbished to facilitate the installation of pipelines and other equipment.

Electricity Supply

Discussions leading to an amendment of the current memorandum of understanding
with SNEL, the DRC state electricity provider are well advanced. The proposed
amendment would provide for the supply of our entire electricity requirement of
220MW at full production. As part of the proposed agreement, the company would
provide further funding for the repair of hydroelectric power generation plants
as well as funding for the repair and reinforcement of power transmission lines.
The estimated cost of the repairs is within the budget included in the revised
total project cost estimate.

Road Refurbishment

Tenders to upgrade the road from Kolwezi to Nguba (118km) from the current
unsealed 6 metre wide road with single drainage to a sealed (tarred) 9 metre
wide road with upgraded drainage have been received. We believe that costs can
be shared on this project with other road users. This is part of a larger
project promoted by the Governor of Katanga to upgrade the entire length of the
road from Kolwezi through Lubumbashi to the border at Kasumbalesa. This project
has been given priority over the building of new routes.

KTK Update

Progress at KTK (Kananga, Tilwezembe, Kolwezi Concentrator) has been mixed. The
output of Tilwezembe mine has been above planned rates to accommodate the
temporary suspension of mining activities at Kananga pending the results of
exploratory drilling and the completion of a mine plan. Head grades from
Tilwezembe have been higher than expected whilst those from Kananga have been
lower.

Steps taken to improve output from the Kolwezi Concentrator have been
successful, with production in March and April exceeding 3,500 tonnes of
concentrate per month. While the plant remains fragile during this period of
rehabilitation, concentrate production remains on track to exceed 4,000 tonnes
in May. We continue to focus on fixing bottlenecks in the crushing, milling and
filtration sections. We have bolstered our logistics capability with respect to
concentrate shipments and this is beginning to show positive results.
Concentrate stocks currently stand at approximately 10,000 tonnes.

The Company is pleased to announce initial exploration drill results from Kananga
and Tilwezembe.
.

Table 1: Preliminary Results From Initial Drillholes, First Quarter Exploration
Drilling, Kananga and Tilwezembe Projects:

Hole ID Coordinates Dip Azi Intercept (m) Intercept Grade Grade
---------------------------------------------------------------------------------------------

M North* m East* (degrees) (degrees) From To width (m) (TCu%) (TCo%)
-----------------------------------------------------------------------------------------------
KNGW03 8818013 331357 45 341 26 37.3 11.3 2.04 0.99
-------- ------- ------- ------ ------- ------ ------ -------- -------- -------
KNGW04 8818001 331362 64 340 60.5 76.63 16.13 1.85 0.83
-------- -------- ------- ------ ------- ------ ------ -------- -------- -------
KNGW05 8818012 331411 45 339 55.1 76.29 21.19 2.28 0.97
-------- -------- ------- ------ ------- ------ ------ -------- -------- -------
KNGW15 8817852 331471 45 340 198.5 217.7 19.2 1.20 0.66
-------- -------- ------- ------ ------- ------ ------ -------- -------- -------
KNGW15 8817852 331471 45 340 233.7 248.22 14.52 1.79 0.83
-------- -------- ------- ------ ------- ------ ------ -------- -------- -------
KNGW16 8817883 331510 45 340 192.1 203.25 11.15 1.85 0.84
-------- -------- ------- ------ ------- ------ ------- -------- -------- -------
KNGW16 8817883 331510 45 340 218.19 224.69 6.50 0.88 0.98
-------- -------- ------- ------ ------- ------ ------- -------- -------- -------
TLW01 8805772 356705 45 0.55 104.41 132.32 27.91 2.30 0.60
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW03 8805770 356706 70 1.20 119.51 135.27 15.76 2.81 1.30
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW04 8805919 356872 42 2.00 21.15 25.55 4.40 0.18 1.22
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW05 8805891 357039 45 6.50 59.02 80.86 21.84 1.60 2.18
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW05 8805891 357039 45 6.50 96.85 105.68 8.83 5.41 0.23
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW06 8805843 357040 49 6.50 87.69 104.69 17.00 2.29 1.67
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW07 8805981 357262 45 4.50 14.37 17.37 3.00 0.87 1.40
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW08 8805979 357262 62 4.55 28.71 62.32 33.61 5.54 1.89
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW10 8805891 356875 45# 0# 40.34 48.34 8.00 0.13 1.03
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------
TLW13 8805858 356747 42 14.50 91.32 98.32 7.00 0.91 0.39
-------- -------- ------- ------ ------- ------- ------- -------- -------- -------

*UTM WGS84 Zone 35L

#Planned dip and azimuth, down hole surveys pending

Positive results have been received for seven holes out of a total of twenty-
seven holes drilled at Kananga, with the remainder of results outstanding. This
drilling campaign has demonstrated that the Kananga mineralized zone is open
ended at depth and towards the west. Holes KNGW03, KNGW15 and KNGW16 intersected
the lower and upper ore-bodies while the other holes intersected the upper ore-
body. Copper grades are up to 2.30% while cobalt grades are approximately 1%.
All the holes were drilled towards 3410 with inclinations ranging from 450 to
900.

At the Tilwezembe mine, over 3,000 metres were drilled during the first quarter
of 2007. Results indicate the persistence of high grade copper and cobalt
towards the east of the currently mined pit and down dip. Detailed results
from 19 holes remain outstanding with 15 of these having intersected the
mineralized zone. Two of the outstanding holes TLW35 and TLW37 intersected
native copper within the mineralized zone. This drilling has indicated the
continuation of the mineralized zone beyond a 600 metre EW strike length.

Significant intersections are reported in Table 1 and thicknesses given are
thicknesses down the hole. In general the mineralized zone is flattening towards
the south, and thus suggesting potential mining operations will encounter
reduced overburden on the hanging wall.

The results suggest that Tilwezembe and Kananga are likely to be able to supply
ore with significant copper and cobalt grades to the Kolwezi Concentrator at
the present rate of mining for the life of the project.

Management Team

Nikanor's operational and project management team under Managing Director Jim
Gorman has been substantially strengthened through the following recent
appointments:

* Chief Operating Officer - Fernando Fernandez - 35 years' experience in
mining and metallurgy having previously held senior positions at Rio Tinto
and Sibelco
* KOV Project Director - Colin Healy - 20 years' experience with project
delivery in Africa
* DCP Chief Financial Officer - Jackie Callaway - 15 years' experience in
both professional services and commercial roles, formerly with Kazakhmys
* DCP Head of HSE - Jamie White - 20 years' HSE experience on diverse
projects across a number of emerging markets

A new head of sales and marketing will be joining the company in June. Details
will be announced in due course.

This information is provided by RNS
The company news service from the London Stock Exchange

END
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