First Point Minerals (FPX-T) is pleased to announce the positive results of a NI 43-101 compliant Preliminary Economic Assessment ("PEA") for the Decar nickel-iron alloy project ("the Project") in central British Columbia, demonstrating the economic potential of the project. The PEA study was prepared by Tetra Tech on behalf of Cliffs Natural Resources Exploration Canada Inc., an affiliate of Cliffs Natural Resources.
Highlights - | Pre-tax NPV (8% discount rate) | C$ 1,125 million | | Pre-tax IRR | 15.7% | | Post-tax NPV (8% discount rate) | C$ 579 million | | Post-tax IRR | 12.8% | | Cash operating cost | C$ 3.23/lb nickel | | First Point 1% NSR royalty, Post-tax NPV | C$ 46 million | | Key Assumptions - | | | Throughput | 114,000 tonnes per day | | Mine life | 24 years | | Life-of-mine strip ratio | 0.17:1 | | Life-of-mine average annual nickel in concentrate | 82.4 million lbs | | Concentrate grade * | 13.5% Ni | | Realized nickel price ** | US$ 7.04/lb | | Initial capital expenditure | C$ 1,384 million | | Sustaining capital expenditure | C$ 763 million | | Payback | 6.4 years | | Statutory tax rate *** | 39% | | Exchange rate | 0.97 US$/C$ |
"This is a key milestone for First Point and the Decar Project," said Jim Gilbert, President and CEO of First Point. "The PEA represents a solid, conservative first pass at the potential economics of the Project. In our view, there is considerable upside to be pursued in the area of nickel price realization, where higher-paying markets and/or products for Decar have yet to be tested. Improved payability would in turn unlock a larger portion of the resource base, as more than half the resource is currently constrained by price inputs. The commercial area will be a focus of the next phase studies of the Project."
"Cliffs is very encouraged by the scoping study results for the Decar Project. Decar has the potential to be a very long life mining operation once it is developed," said Sean Whiteford, Vice President, Global Exploration for Cliffs. "As Cliffs has a long history in conventional mining and processing, we would be able to apply our knowledge and expertise in developing this resource. Our preliminary economic assessment signals the prospect to be a future viable alternative in the nickel market as a low-cost producer. This fits with our growth strategy to market ferroalloys to steelmakers in North America and around the world."
Neither sulphide nor laterite, the Decar Project is a grassroots discovery of a naturally occurring nickel-iron alloy called awaruite. While the mineral itself has been known academically for well over 100 years, First Point and Cliffs are the first to have assessed the mineral's economic and technical viability as a potential commercial-scale new source of nickel.
The results of the PEA demonstrate the positive potential for establishing a greenfield open-pit nickel mine and an on-site magnetic separation and gravity concentration processing plant, using conventional technology and equipment. At a projected throughput rate of 114,000 tonnes per day (or 40 million tonnes per year) over a mine life of 24 years, annual production averages 37,369 tonnes nickel, or 82.4 million pounds, in concentrate at an operating cash cost of C$3.23 per pound.
The PEA provides a preliminary assessment of the nickel-iron alloy's economic potential, based on early-stage marketing studies. The PEA assumes that a nickel-iron-chromite concentrate grading 13.5% nickel will realize 75% of the London Metal Exchange ("LME") nickel price. The study assumes no by-product credits are realized for iron or chromite.
Based on these first-pass assumptions, the Decar Project, on a 100% basis, generates a pre-tax net present value ("NPV") at an 8% discount rate of C$1,125 million and an internal rate of return ("IRR") of 15.7%, using an average realized nickel price of US$7.04 per pound. The nickel price is calculated based on realizing 75% of the three-year trailing average nickel price of US$9.39 per pound. On a post-tax basis, the project has a NPV of C$579 million and a 12.8% IRR, assuming aggregate statutory rate for federal, provincial and BC Mineral Tax of 39%.
The initial capital cost is estimated at C$1,384 million, with a payback of 6.4 years. Sustaining capital over the life-of-mine is a further C$763 million.
Under the terms of the Decar Project Option Agreement between Cliffs and First Point, Tetra Tech's full and final NI 43-101 compliant PEA will be delivered to First Point on, or before April 11, 2013, and will be filed on SEDAR by First Point no later than April 26, 2013.
While the results of the Tetra Tech PEA are promising, the study, by definition, is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There can be no certainty that the PEA will be realized. It is important to note that mineral resources are not mineral reserves and do not have demonstrated economic viability.
Mineral Resources
Tetra Tech's PEA incorporates a January 23, 2013 NI 43-101 compliant mineral resource estimate and model for the Baptiste deposit developed by Caracle Creek International Consulting Inc. (see First Point's February 6, 2013 news release). The resource estimate is shown below in Table 1.
The PEA is based on 925 million tonnes of mineralized resources constrained by a GEMCOM Whittle pit, using a conservative overall operating cost, while allowing for 8% mine dilution, 82% process recovery and engineering 45 degree pit slopes and a life-of-mine stripping ratio of 0.17:1.
Table 2 below sets out the tonnage and grade of material mined and processed that form the basis for Tetra Tech's economic assessment based on 40 million tonnes per year being mined over the life of mine ("LOM").
It should be noted that approximately 21% of the tonnage of the material that forms the basis of the PEA is derived from inferred mineral resources. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
The Baptiste deposit remains open along strike in both directions, to the southeast in the higher-grade south-central area and at depth over the entire system providing future potential to significantly increase the size of the resource. Further drilling to determine the extent of the higher-grade mineralization in the southeast area is recommended by Caracle Creek. The limited amount of exploration drilling on the Decar property completed to date also clearly indicates there is substantial potential for additional discoveries.
The potential for additional similar nickel-iron alloy mineralization at Decar is illustrated by limited drilling on the Sidney and Target B prospects in 2010 and 2011, respectively. The Sidney target area is located 3 kilometres north of Baptiste on a broad ridge at approximately 600 metres higher elevation. The Sidney target currently measures 500 by 400 metres by surface mapping and is open to the northwest and southeast, where it is covered by overburden. Sidney was drilled with two holes in 2010 that intersected a previously reported 0.129% nickel-in-alloy across 163 metres in the lower half of hole 10SID-09 and 0.143% nickel-in-alloy across 282 metres in hole 10SID-10 (see First Point's news release dated October 19, 2010).
As previously reported (see First Point's news release dated December 16, 2011), Target B, located about 5 km north of Baptiste, was tested with a single exploration hole during the 2011 drilling campaign. Hole 11B-01 cut 258 metres averaging 0.138% DTR nickel.
Financial Assumptions, Results and Sensitivities
The financial analysis for the PEA indicates a pre-tax NPV at an 8% discount rate of C$1,125 million (including NSR royalties), with a 15.7% pre-tax IRR. The post-tax NPV at an 8% discount rate is C$579 million, with an IRR of 12.8% and a payback of 6.4 years. The post-tax analysis assumes a 39% aggregate statutory federal, provincial and BC Mineral Tax rate. The following table shows the pre-tax and post tax NPV at various discount rates.
Mining and Processing
The PEA is based on a conventional open-pit mining operation using traditional blast, truck and shovel methods, and a processing facility of 114,000 tonnes per day (40 million tonnes per year). Processing of the Baptiste deposit will involve a simple two-stage process to produce a nickel-iron-chromium concentrate. The process will consist of a primary coarse grind to P80 600 microns, followed by rougher magnetic separation, then a regrind to a P80 70 microns size fraction and Knelson gravity concentration to recover a nickel concentrate grading 13.5%.
The process recovery flow sheet and projected nickel recoveries are based on initial laboratory scale metallurgical studies carried out by SGS Canada Inc. and Knelson Research and Technology Centre in 2011 and 2012 on representative mineralized composites from the Baptiste deposit. At the assumed processing rate, the forecast in situ Ni metal in the concentrate is as follows.
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