Anfield Announces Positive Results of Prefeasibility Study on Mayaniquel Nickel Project
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 10/24/12 -- Anfield Nickel Corp. ("Anfield") (TSX VENTURE: ANF) is pleased to announce the results of a Prefeasibility Study (the "PFS") on its 100% owned Mayaniquel nickel project located in northeastern Guatemala (the "Project"). The results of the PFS, which has considered significantly higher mining and processing rates (average 36,500 tonnes per year of nickel over the life of the mine) due to the addition of a second rotary kiln electric arc furnace unit in the fifth year of production compared to the 2011 Preliminary Economic Assessment ("PEA") (average 19,900 tonnes per year of nickel), demonstrates that a ferronickel operation at Mayaniquel is economically viable and the Project should be advanced to a feasibility study. Highlights of the study's various estimates are as follows (all dollar figures in US dollars):
Highlights
-- Robust project economics driven by a higher grade starter pit (plant
feed grade of 1.86% nickel for first 3 years of operation), low strip
ratio (0.4:1), positive metallurgy (average nickel recoveries of 90%),
large reserve base and good existing infrastructure.
-- Base case ("Base Case") net present value ("NPV") of $1.39 billion, at
an 8% discount rate, and an internal rate of return ("IRR") of 19.9%
(compared to an NPV of $606 million and IRR of 14.1% in the PEA).
-- The Base Case assumes a long term nickel price of $8.50/lb, a $0.18/lb
contained iron credit, $0.08/kWh power cost and $113/tonne long term
coal price (including freight).
-- An upside case (the "Analyst Case") based upon the consensus long term
nickel price of $8.94/lb nickel as forecast by 23 banking analysts was
also considered. Under the Analyst Case, the net present value for the
Project increases to $1.58 billion at an 8% discount rate, and an IRR of
21.2%.
-- The Project contains proven mineral reserves of 6.7 million tonnes
grading 1.57% nickel, and probable mineral reserves of 63.2 million
tonnes grading 1.39% nickel - for total proven and probable reserves of
69.9 million tonnes grading 1.41% nickel.
-- Average Life of Mine ("LOM") nickel in ferronickel production will be
36,500 tonnes per year for 22 years with an average nickel in
ferronickel grade of 22.5%. Production will peak in year 9 with 42,800
tonnes of nickel in ferronickel produced following the commissioning of
a second furnace in year 5.
-- C-1 LOM cash costs (net of iron credits) estimated to average $3.05 per
pound of nickel sold ($3.14/lb nickel in the PEA).
-- Initial capital of $946 million and total LOM sustaining capital of $1.1
billion (compared to initial capital of $1.23 billion and total
sustaining capital of $200 million in the PEA). The increased sustaining
capital is due principally to the addition of a second 80MW rotary kiln
electric arc furnace unit and associated infrastructure and equipment to
the processing plant in the fifth year of production ($533 million).
-- Capital payback (initial and the capital for the second furnace) is
expected to be in 5.3 years after production begins.
-- The Project is expected to generate approximately 800 permanent jobs at
the start of production and an additional 150 permanent jobs once the
second furnace unit is commissioned in year 5 for a total of 950
permanent jobs. During the initial 3 year construction period, 1,000
direct jobs will be generated with another 700 direct jobs required for
the construction of the second furnace unit in years 3 and 4.
-- The Project will potentially generate $2.3 billion in taxes and
government royalties payable to the Guatemalan government.
The salient details of the PFS are summarized in the table below (all dollar figures are in US dollars):
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Prefeasibility Study PEA
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NPV (8% discount rate) $1,387 million $606 million
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IRR 19.9% 14.1%
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Nickel price $8.50/lb $8.25/lb
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By-production iron credit $0.18/lb iron $0.19/lb iron
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Initial Capital Expenditure $946 million $1,224 million
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LOM Total Sustaining Capital
Expenditure $1.1 billion $199 million
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LOM C-1 Cash Costs (net by-product
credits) $3.05/lb Ni sold $3.14/lb Ni sold
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Rotary Kiln Electric Arc Furnace
Capacity 2x 80MW 1x 80MW
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LOM Annual Mining Rate 3.30 million tonnes 1.33 million tonnes
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Strip Ratio (excluding sorting plant
rejects) 0.4:1 0.35:1
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Mine Life 22 years 29.5 years
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Average grade of material delivered
to plant 1.68% Ni 1.68% Ni
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LOM average annual nickel in
ferronickel production 36,500 tonnes 19,900 tonnes
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Note: The 2011 PEA is preliminary in nature and includes the use of inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Thus, there is no certainty that the PEA will be realized. Actual results may vary, perhaps materially. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Anfield will host a conference call on Wednesday October 24th, 2012 at 11:00 am (Pacific Time) or 2:00 pm (Eastern Time) to discuss these results. Call-in information is provided at the end of this news release.
The PFS was supervised by Mr. Neil Prenn, P.E., an independent qualified person. Mr. Prenn has reviewed and approved the contents of this news release. The PEA was managed by MTB Project Management Professionals, Inc. (project management, infrastructure, ancillary capital and operating costs and cash flow modeling) and comprised several studies prepared by: SIM Geological Inc. and BD Resource Consulting, Inc. (resource estimate and model, quality assurance, quality control program); Neil Prenn, P.E. President of Mine Development Associates, (reserve estimate, mine plan, production schedule, and mining capital and operating costs); Dr. Nic Barcza, PrEng., (metallurgical consultant); Laser Analytical Systems & Automation GmbH (ore sorting test work); IGEO Mineracao Inteligente (pilot plant test work, process engineering, infrastructure, plant capital and operating costs); MineSense Technologies (ore upgrading test work, pilot-scale upgrading test work, pilot- and upgrading plant design); Ausenco Vector (geotechnical facilities, port facilities, and capital and operating costs); Gochnour & Associates, Inc. (environmental studies); and Social Capital Group (socioeconomic studies).
The National Instrument 43-101 ("NI 43-101") technical report summarizing the results of the PFS will be available on the Company's website (www.anfieldnickel.com) and SEDAR (www.sedar.com) by December 8, 2012.
The following consultants will serve as qualified persons for their respective sections of the PFS technical report:
-- Robert Sim, P. Geo. of SIM Geological Inc.
-- Bruce Davis, FAusIMM of BD Consulting, Inc.
-- Dr. Nic Barcza, HLF SAIMM
-- Neil Prenn, P.E. of Mine Development Associates.
Each of the above qualified persons is independent of Anfield within the meaning of NI 43-101.
Project Economics
MTB Project Management Professionals, Inc. developed a cash flow valuation model for the Project based upon the geologic and engineering work completed to date. The Base Case was developed using a long term forecast nickel price of $8.50/lb. This price forecast is lower than the consensus long term forecast of approximately $8.94/lb nickel made by 23 banking analysts. In addition, a by-product credit of $0.18/lb iron contained within the ferronickel product has been included in the Base Case.
The following table shows the NPV of the Base Case and the Analyst Case at various discount rates:
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NPV NPV
Discount Rate (Real) (Base Case) (Analyst Case)
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0% $5,375 million $5,908 million
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4% $2,740 million $3,052 million
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6% $1,957 million $2,202 million
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8% $1,387 million $1,582 million
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10% $967 million $1,124 million
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12% $654 million $783 million
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The following chart shows the sensitivity of the Base Case's NPV (8% discount rate) and IRR to changes in the nickel price: http://media3.marketwire.com/docs/anf-1024-chart1.pdf.
Mineral Resources and Reserves
Mine Development Associates used an updated mineral resource estimate (effective date of March 22, 2012) completed by Sim Geological Inc. and BD Resource Consulting, Inc. and the corresponding block model, to estimate the Project's mineral reserves and develop the mine plan and production schedule for the Project.
The Project's mineral reserves and mine plan were estimated using only those mineral resources contained within the measured and indicated categories. Inferred resources were treated as waste where applicable.
Floating cone analyses were used to determine the extent of laterite mining areas and the best sequence for economic development. The floating cone analysis, based on a nickel price of $5.00/lb, defined the mineral reserves, which were subsequently adjusted to conform to current concession boundaries. The resulting pit limits were then used to estimate the Project's mineral reserves, total waste of 27.6 million tonnes, mine plan and production schedule. This mine plan resulted in a LOM stripping ratio of 0.4:1.
The updated mineral resource estimate (at a 1% nickel cutoff grade) and mineral reserve estimate are shown in the table below:
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Mineral Resources(1)(2) Mineral Reserves(1)(3)
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Contained Contained
Ni Ni
Tonnes Ni Grade (million Tonnes Ni Grade (million
Category ('000) (%) lbs) Category ('000) (%) lbs)
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Measured(2)
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Transition
&
Saprolite 4,176 1.80 165.4
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Limonite 2,350 1.23 63.8
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Total
Measured 6,526 1.59 229.2 Proven(3) 6,689 1.57 231.0
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Indicated(2)
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Transition
&
Saprolite 48,556 1.47 1,575.5
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Limonite 21,752 1.17 560.9
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Total
Indicated 70,307 1.38 2,136.4 Probable(3) 63,200 1.39 1,938.1
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Measured + Indicated(2)
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Transition
&
Saprolite 52,731 1.50 1,740.8
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Limonite 24,102 1.18 624.7
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Total
Measured
+ Proven +
Indicated 76,833 1.40 2,365.5 Probable(3) 69,889 1.41 2,169.0
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Inferred(4)
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Transition
&
Saprolite 31,282 1.39 958.1
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Limonite 10,504 1.16 268.5
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Total
Inferred 41,786 1.33 1,226.6
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Notes: (1) Mineral reserves have been estimated as at August 28, 2012.
Mineral resources have been estimated as at March 22, 2012.
Totals may not add up due to rounding.
(2) Mineral resources presented herein include amounts that have
been identified as mineral reserves. Mineral resources that are
not mineral reserves have no demonstrated economic viability.
(3) Mineral reserves presented herein have also been identified
herein as mineral resources.
(4) Inferred mineral resources have a great amount of uncertainty
as to their existence and as to whether they can be mined
legally or economically. It cannot be assumed that all or any
part of inferred mineral resources will ever be upgraded to a
higher category.
The Program's quality assurance/quality control (QA/QC) program is monitored by independent consultant Dr. Bruce M. Davis, FAusIMM of BD Consulting, Inc. Logging and sampling are completed at Anfield's secure facility located at the project. Drill core is mechanically split on site with sample preparation completed at a facility at Anfield's exploration compound. Samples are prepared in accordance with ALS Chemex's standards with pulps subsequently shipped to their laboratory in Vancouver, Canada for X-Ray Fluorescence Spectroscopy analysis, the common analytical technique used in nickel laterite exploration. Quality from the on-site sample preparation lab is monitored by an independent, rigorous program including pulp and coarse-reject duplicates and analyzing cleaning materials from the crusher and pulverizer units to assure contamination-free sample processing. Anfield also inserts blanks and standards selected on a random basis into the sample stream and sends 5% of the sample pulps to a check laboratory in Vancouver, Canada. The results of this QA/QC program indicate that the Program's database of sampling, analytical and test data is of sufficient accuracy and precision to be used for the generation of mineral resource and mineral reserve estimates.
Mining & Processing
The Project will utilize conventional open pit mining methods and production is scheduled to mine approximately 9,000 tonnes per day (3.30 million tonnes per year) of lateritic ore to the plant for 22 years. Twenty four percent of the mined ore will be delivered directly to the processing plant, while the remaining mined material (2.5 million tonnes per year) will be sent to the upgrading plant, where low nickel grade and high iron material will be rejected, thereby providing the processing plant with a total average feed grade of 1.68% nickel LOM (1.85% average nickel grade over the first 3 years of production). The plant feed will be sent to a double line rotary kiln where it will be dried, calcined and partly pre-reduced with the addition of coal prior to being fed into one of two 80MW electric arc smelting furnaces and subsequent refining furnaces to produce the ferronickel product (for the first four years of operation, the plant will operate with a single line rotary kiln and furnace). The processing plant is forecast to produce approximately 162,000 tonnes per year of ferronickel over the mine's life containing approximately 36,500 tonnes of nickel at an average grade of 22.5% nickel at an average nickel recovery rate of 90%.
Capital Cost Estimates
IGEO Mineracao Inteligente, MTB Project Management Professionals, Inc., Ausenco Vector, MineSense Technologies and Mine Development Associates developed capital cost estimates for the proposed mining and ferronickel operation. The mine will start operating with one of the two 80MW rotary kiln electric arc furnace units built. In year 3, construction of the second 80MW rotary kiln electric arc furnace unit will start with production commencing from that furnace unit in year 5. The following table summarizes the capital cost estimates in the PFS for the Project:
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Direct Capital Costs $501.2 million
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Indirect Capital Costs $103.3 million
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Owner Direct and Indirect Capital Costs $166.5 million
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Other incl. 13% contingency $175.1 million
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Total $946.1 million
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Startup Working Capital $9.7 million
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Capital costs for 2nd 80MW rotary kiln electric arc
furnace unit and associated capital costs $533.0 million
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LOM Sustaining Capital Costs $577.2 million
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The capital cost estimates have been compiled with an accuracy level of -15% to +25%.
Operating Cost Estimates
The results of the PFS show that a mine at the Project will be a low cost operation, with operating costs potentially averaging in the lower quartile of the industry cost curve(1). The Project benefits significantly from the low strip ratio, relatively easy terrain, positive metallurgy, and close proximity to major infrastructure. Based upon a comprehensive study of future power supply in Guatemala that has estimated long term power costs of between $0.06 and $0.09/kWh, the Base Case has assumed a long term power cost of $0.08/kWh. In addition, long term coal prices used in the Base Case were assumed to be $113/tonne (including freight). The PFS estimates that the C-1 cash costs (net of iron credits) over the life of the mine will average $3.05 per pound of nickel sold. C-1 cash costs include at-mine cash operating costs, royalties (BHP Billiton and government), mine reclamation and closure costs, and ferronickel transportation and freight costs (http://media3.marketwire.com/docs/anf-1024-chart2.pdf).
(1) Per nickel mining industry operating costs forecast for 2010 contained in Roskill's Information Services Ltd report - Nickel: Market Outlook to 2014 (Twelfth Edition, 2010).
Infrastructure
Substantial regional infrastructure is in place within the vicinity of the Project. The Project is located within 70 kilometers of the Caribbean Sea and 166 kilometers by road from the largest port in Guatemala, Santo Tomas, thus facilitating the exportation of ferronickel and importation of coal and other consumables. In addition, major power infrastructure is within two kilometres of the Project. The local labour force is large and while not versed in mining and nickel processing, provisions have been made in the capital cost estimate to train the local labour force, with the assumption that labour drawn from within Guatemala will ultimately manage and operate the mine and plant facilities.
Environmental
The Project has been designed to meet World Bank Guidelines for social and environmental management practices. Baseline studies completed to date have included surface water quality, meteorological, air quality, noise, archaeological, social context analysis, stakeholder mapping, community health, community census, land-use, biological (flora and fauna) and re-vegetation studies. As the nickel deposits are largely soil based, mine waste material will be largely overlying topsoil and low grade limonitic soils. Provisions have been made within the mine plan and operating costs to account for the storage of both the topsoil and low grade limonitic soils and the recontouring and re-vegetation of mined areas with these soils once the deposits have been mined. It is expected that this process will allow the mined areas to largely return to their pre-mined state of vegetation.
Three Environmental Impact Assessments ("EIA") have been completed in support of the Exploitation Licence applications for the Project's mining areas (Sechol, Tres Juanes and Amanecer) and have been submitted to the Guatemala Ministry of Environment ("MARN"). The Sechol EIA was approved by the MARN in 2011 and the Tres Juanes and Amanecer EIA's were submitted to the MARN in October 2012.
Exploitation Licence Applications
Anfield has submitted three exploitation licence applications for the Project's mining areas to the Guatemala Ministry of Energy of Mines ("MEM"). Upon approval, the exploitation licences, which encompass all of the planned mining areas, will allow the Company to mine the mineral reserves for a period of 25 years from the time of approval with an option to renew the licence for an additional 25 year period. No date has been set for the approval of the exploitation licences but the Company expects them to be approved prior to the completion of a feasibility study on the Project.
Next Steps
With the completion of the PFS, Anfield is focused on working with the MARN to gain approval of the Tres Juanes and Amanecer EIAs and with the MEM to obtain approval for the exploitation licences.
A feasibility study will be initiated on the Project once Anfield has determined all of the necessary work requirements to complete the study, including infill drilling meterage required to convert inferred resources to the measured and indicated categories, additional metallurgical test work and the other engineering, logistics and infrastructure studies.
Anfield will also continue to work with the local communities and stakeholders around the Project focusing on further developing the environmental and social programs it has operating in the area.
Conference Call
Call-in details for the conference call to be held on October 24 at 11:00am (Pacific Time) are:
North American toll-free: 1-888-789-9572
International: 1-416-695-7806
Participant Code: 1132147
A replay of this conference call will be available from Wednesday, October 24 until Wednesday, November 7 and will be posted on Anfield's website at www.anfieldnickel.com. The replay numbers are:
North American toll-free: 1-800-408-3053
International: 1-905-694-9451
PIN: 7473353
David Strang, Chairman
CAUTION REGARDING FORWARD LOOKING STATEMENTS: Information and statements contained in this news release that are not historical facts are "forward-looking information" or "forward-looking statements" within the meaning of applicable Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995, respectively, and involve risks and uncertainties. Examples of forward-looking information and statements contained in this news release include, information and statements with respect to:
-- The PFS and PEA;
-- Anfield's plans and expectations for the Project;
-- the results of the economic analysis of the Project, including, but not
limited to, base case parameters and assumptions, base case analysis,
forecasts of net present value, internal rate of return, upfront capital
costs, sustaining capital costs, capital payback, operating costs,
working capital and sensitivity analyses;
-- Anfield's plans related to mine development and design, operations,
equipment, and infrastructure;
-- Anfield's production schedule and life-of-mine estimates;
-- Anfield's plans related to mining methods, mineral processing, recovery
methods and ore-upgrading and blending;
-- nickel price projections and estimates of iron by-product credits;
-- mineral reserve and resource estimates and assumptions;
-- Anfield's applications for new exploitation licenses and submission of
EIAs;
-- estimates of long term power costs, coal prices, water requirements and
waste:ore stripping ratios;
-- industry cost curves;
-- generation of jobs, taxes and government royalties;
-- availability of labour in Guatemala and training the local labour force;
-- the results of Anfield's metallurgical testing programs including, but
not limited to, estimates of recovery rates;
-- Anfield's plans relating to exploration and development of the project,
including permitting and regulatory requirements related to any such
plans;
-- Anfield's plans to complete additional infill drilling, metallurgical
test work, other engineering, logistics and infrastructure studies and a
feasibility study;
-- Anfield's plans to meet World Bank Guidelines for social and
environmental management practices; and
-- Anfield's plans for environmental reclamation.
In certain cases, forward-looking information can be identified by the use of words such as "estimates", "plans", "expects", "is expected", "forecast", "designed", "proposed", "scheduled", "believes", "appears", "likely", "largely", "potential" or "proposed", or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions, events or results, "may", "could", "should", "would", "will be" or "shall" be taken, occur or be achieved.
Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information and statements. In some instances, material assumptions and factors are presented or discussed in this news release in connection with the statements or disclosure containing the forward-looking information and statements. You are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to, assumptions concerning: nickel prices and iron by-product credits; cut-off grades; short and long term power and coal prices; processing recovery rates; mine plans and production scheduling; process and infrastructure design and implementation; accuracy of the estimation of operating and capital costs; applicable tax and royalty rates; open-pit design; accuracy of mineral reserve and resource estimates and reserve and resource modeling; reliability of sampling and assay data; representativeness of mineralization; accuracy of metallurgical test work; and amenability of upgrading and blending mineralization.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation:
-- risks relating to nickel, iron and other mineral price fluctuations;
-- risks relating to estimates of mineral reserves and resources,
production, purchases, costs, decommissioning or reclamation expenses,
proving to be inaccurate;
-- the inherent operational risks associated with mining and mineral
exploration, development, mine construction and operating activities,
many of which are beyond Anfield's control;
-- risks relating to Anfield's ability to enforce Anfield's legal rights
under permits or licenses or risk that Anfield will become subject to
litigation or arbitration that has an adverse outcome;
-- risks relating to the Project being in Guatemala, including political,
economic and regulatory instability;
-- risks relating to the uncertainty of applications to extend and renew
exploration licenses, applications for new exploration licenses and an
application for an exploitation license for the Sechol license area;
-- risks relating to potential challenges to Anfield's right to explore
and/or develop the project;
-- risks relating to mineral reserve and resource estimates being based on
interpretations and assumptions which may result in less mineral
production under actual circumstances;
-- risks relating to Anfield's operations being subject to environmental
and remediation requirements, which may increase the cost of doing
business and restrict Anfield's operations;
-- risks relating to being adversely affected by environmental, safety and
regulatory risks, including increased regulatory burdens or delays and
changes of law;
-- risks relating to inadequate insurance or inability to obtain insurance;
-- risks relating to the fact that Anfield's properties are not yet in
commercial production;
-- risks relating to the uncertainty as to whether Anfield will acquire
permitting required to further explore and develop the project and risks
related to the permitting timelines;
-- risks relating to fluctuations in foreign currency exchange rates,
interest rates and tax rates; and
-- risks relating to Anfield's ability to raise funding to continue its
exploration, development and mining activities.
This list is not exhaustive of the factors that may affect the forward-looking information and statements contained in this news release. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking information and statements. The forward-looking information and statements contained in this news release are based on beliefs, expectations and opinions as of the date of this news release. For the reasons set forth above, readers are cautioned not to place undue reliance on forward-looking information. Anfield does not undertake to update any forward-looking information and statements included herein, except in accordance with applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Contacts:
Anfield Nickel Corp.
David Strang
Chairman
+ 604 646 1899
+ 604 687 7041 (FAX)
dstrang@anfieldnickel.com
www.anfieldnickel.com
