First Point Minerals Receives Positive Preliminary Economic Assessment for Decar Nickel Project in Central British Columbia
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 03/22/13 -- First Point Minerals Corp. (TSX: FPX) ("First Point" or the "Company") 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 Inc. (NYSE: CLF)(Paris: CLF) ("Cliffs").
Decar Project PEA Assumptions and Highlights:
----------------------------------------------------------------------------
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 (i) 13.5% Ni
----------------------------------------------------------------------------
Realized nickel price (ii) US$ 7.04/lb
----------------------------------------------------------------------------
Initial capital expenditure C$ 1,384 million
----------------------------------------------------------------------------
Sustaining capital expenditure C$ 763 million
----------------------------------------------------------------------------
Payback 6.4 years
----------------------------------------------------------------------------
Statutory tax rate (iii) 39%
----------------------------------------------------------------------------
Exchange rate 0.97 US$/C$
----------------------------------------------------------------------------
(i) Concentrate includes by-product iron (45% - 50%) and chromium (approx.
2.0%)
(ii) Based on early-stage marketing studies, the PEA assumes that a nickel-
iron-chromite concentrate grading 13.5% nickel will realize 75% of the
three-year trailing average LME nickel price of US$9.39 per pound. The
PEA assumes no by-product credits are realized for iron or chromium.
(iii) Includes Federal income tax at 15%, Provincial income tax at 11%, and
the British Columbia Mineral Tax at 13% (applied to adjusted net
revenue).
"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.
Table 1: Baptiste Deposit Mineral Resource Estimate(i):
Category Tonnes(ii) Davis Tube Recoverable Nickel Content
--------------------------------------------------
(% Ni) (Tonnes) (Pounds)
Indicated 1,159,510,000 0.124 1,437,800 3,169,700,000
Inferred 870,400,000 0.125 1,088,000 2,398,600,000
(i) Note: Reported at a cut-off grade of 0.06% Davis Tube Recoverable ("DTR") nickel. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
(ii) Ore Tonnes have been rounded to the nearest 10,000. Grade has been rounded to three significant digits.
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").
Table 2: Tonnage of Mineralized Material Mined and Processed as a
Basis for the PEA
Tonnes Nickel Content
--------------------------------------------
(% Ni) (Tonnes) (Pounds)
925,268,000 0.118 1,094,000 2,411,100,000
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.
Table 3: Base Case IRR and NPV at Various Discount Rates
----------------------------------------------------------------------------
Post-Tax
Discount Rate Pre-Tax NPV Pre-Tax IRR Post-Tax NPV IRR
----------------------------------------------------------------------------
6% C$1,715 million C$981 million
----------------------------------------------------------------------------
8% C$1,125million 15.7% C$579 million 12.8%
----------------------------------------------------------------------------
10% C$ 699 million C$286 million
----------------------------------------------------------------------------
Sensitivities were also run around key revenue and cost variables. These are summarized in the tables below.
Table 4: Sensitivity Analysis on Key Parameters at an 8% Discount Rate (C$
millions)
----------------------------------------------------------------------------
Sensitivity -20% -10% Base Case +10% +20%
----------------------------------------------------------------------------
Operating Costs
Pre-Tax
NPV $ 1,604 $ 1,364 $ 1,125 $ 886 $ 646
IRR 18.7% 17.2% 15.7% 14.2% 12.6%
Post-Tax
NPV $ 901 $ 740 $ 579 $ 416 $ 251
IRR 15.3% 14.1% 12.8% 11.5% 10.1%
----------------------------------------------------------------------------
Capital Costs
Pre-Tax -
NPV $ 1,423 $ 1,274 $ 1,125 $ 976 $ 827
IRR 19.3% 17.4% 15.7% 14.3% 13.0%
Post-Tax -
NPV $ 807 $ 693 $ 579 $ 463 $ 346
IRR 15.9% 14.2% 12.8% 11.6% 10.5%
----------------------------------------------------------------------------
Nickel Price
Pre-Tax -
NPV $ 126 $ 625 $ 1,125 $ 1,625 $ 2,126
IRR 9.0% 12.5% 15.7% 18.6% 21.4%
Post-Tax -
NPV $ (102) $ 242 $ 579 $ 910 $ 1,239
IRR 7.1% 10.1% 12.8% 15.3% 17.6%
----------------------------------------------------------------------------
(i) Sensitivity to nickel price can also be read as a proxy for the revenue
impact of equivalent percentage changes in head grade, recovery, and%
LME nickel price realized.
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.
Table 5: Production Forecast
----------------------------------------------------------------------------
Description Value
----------------------------------------------------------------------------
In situ Ni metal in concentrate, LOM 896,865 tonnes (or 1,977,200,000
pounds)
----------------------------------------------------------------------------
Average Annual in situ Ni metal in
concentrate 37,369 tonnes (or 82,385,000 pounds)
----------------------------------------------------------------------------
Overall Head Grade, LOM(i) 0.118%
----------------------------------------------------------------------------
Overall process recovery, LOM 82%
----------------------------------------------------------------------------
(i) Head grade takes into account 8% mining dilution (zero grade material).
Infrastructure
The Decar Project is 245 square kilometres in size and covers part of the Mount Sidney Williams ultramafic/ophiolite complex 90 kilometres northwest of Fort St. James in central British Columbia. The project has significant infrastructure advantages. The property is a two-hour drive from Fort St. James on a high-speed logging road (the first 40 minutes of which is a paved road). A branch line of the Canadian National Railway is less than 5 kilometres east from the Baptiste deposit and the BC Hydro power grid is within 110 kilometres to the south of the property.
Infrastructure development is anticipated to include:
-- Plant site, haul roads and bridge
-- Processing plant
-- Mine maintenance garage, warehouse and fuel storage facility
-- Administration buildings, accommodation facilities and assay lab
-- Fresh water supply and sewage treatment
-- Open pit
-- Valley-fill tailings dam
-- Power supply via an approximately 110-kilometre long transmission line
Operating costs
The results of the PEA show Decar has the potential to be a low-cost producer, with operating costs potentially averaging in the lower half of the industry cost curve. The Project benefits significantly from the low strip ratio, relatively moderate terrain, simple conventional processing and close proximity to major infrastructure. A breakdown on the operating cash costs are provided in Table 11.
Table 6: Operating costs
----------------------------------------------------------------------------
General & Administrative C$0.80 per tonne
----------------------------------------------------------------------------
Mining C$2.86 per tonne
----------------------------------------------------------------------------
Milling C$3.25 per tonne
----------------------------------------------------------------------------
Total operating cash costs C$6.91 per tonne or C$3.23 per lb.
----------------------------------------------------------------------------
Capital Costs and Life of Mine Sustaining Costs
Total capital cost estimates are outlined in Tables 12 below. The initial capital cost to bring Decar into production is C$1.384 billion, with additional life-of-mine sustaining capital forecast at C$763 million.
Table 7: Capital Costs
----------------------------------------------------------------------------
Initial Direct Costs C$ 970 million
----------------------------------------------------------------------------
Initial Indirect & Owner's Costs C$ 197million
----------------------------------------------------------------------------
Initial Contingency (20%) C$ 217 million
----------------------------------------------------------------------------
Total Initial Capital Costs C$ 1,384 million
----------------------------------------------------------------------------
Life-of-Mine Sustaining Capital Costs C$ 763 million
----------------------------------------------------------------------------
The overall capital cost has been compiled with an estimated accuracy level of +/-26%.
Marketing
Cliffs engaged the consulting group Hatch Ltd. ("Hatch") to assess the marketability of nickel- iron-chromium concentrate with a grade of 15% total nickel, and a lower grade concentrate of 4% total nickel. The current process flow sheet is expected to produce a 13.5% nickel concentrate, also containing 45% - 50% iron and approx. 2.0% chromium. Assays performed on the two concentrates confirm that most of the nickel is present as awaruite, a naturally occurring metallic nickel-iron alloy. Magnetite is the dominant mineral present in the concentrate. The major gangue species present is serpentine.
The awaruite-iron-chromite concentrate is unique. There is no direct analogy that can be made between the awaruite concentrate and existing sales of nickel ore or concentrates to downstream smelters or treatment plants. Hatch's study showed there are no known impurities that would prove to be fatal flaws and no major technical issues associated with the pyrometallurgical treatment of either concentrate. The following pyrometallurgical processing options were assessed as part of Hatch's study:
-- Ferronickel smelters - Low and Mid (Iron) Reduction
-- Nickel Pig Iron Smelters - Blast Furnace and Electric Arc Furnace - High
(Iron) Reduction
-- Sulphide Smelters - Roast Reduction Sulphide Smelter and Flash Furnace
Sulphide Smelter
The study confirmed a number of potential customers would find the concentrates suitable and, in some cases, desirable. Both concentrates would make a potentially desirable feed to any ferronickel plant, while the higher-grade 15% nickel concentrate would also be a suitable feed for a sulphide smelter, albeit a more desirable feed to Roast Reduction than Flash Furnace due to the overall higher recovery of nickel. Hatch also found that the lower-grade 4% nickel concentrate is suitable feed for nickel pig iron plants in China, but the estimated realized value in this market is much lower, at 36% of the LME nickel price, than other alternative markets for Decar product.
Based on Hatch's findings, the PEA assumes a 13.5% nickel-iron-chromite concentrate will realize 75% of the LME nickel price. The PEA assumes no by-product credits are realized for iron or chromite. In terms of suitability as direct feed to stainless steel production, Hatch recommends further evaluation is necessary to determine if this is a valid alternative.
Recommendations of the PEA
Following the positive outlook of the PEA, the Tetra Tech report recommends that further drilling should be undertaken to enhance the Project economics:
-- Additional infill drilling to increase the confidence of the Inferred
resource such that the Inferred resource at the edges of the Whittle
optimized pit can be classified as Indicated.
It is also recommended that future metallurgical test work conducted on the Decar Project include:
-- Further investigation into the effect of grind size on recovery;
-- Determination of the optimum magnetic concentration conditions including
magnetic separation intensity;
-- Grindability tests with samples selected to determine the variability of
the work index of the mineralized material;
-- Investigation into variability of the Baptiste deposit block model;
-- Environmental and Tailings Management testing; and
-- Pilot-scale testing of an optimized beneficiation circuit including
magnetic and gravity separation.
The PEA has been prepared in compliance with the standards of the NI 43-101 by Tetra Tech and Caracle Creek. Hatch Engineering produced a marketing study to evaluate the technical, economic and marketing of potential Decar concentrates into the existing nickel market.
Cliffs is advancing the Decar nickel project under an option/ joint venture agreement with First Point that was signed in November 2009. Under the original agreement, Cliffs could earn an initial 51% interest in Decar by spending US$4.5 million over a period of four years. In September 2011, Cliffs was deemed to have earned a 51% stake, more than two years ahead of schedule. Upon delivery of the NI 43-101 compliant PEA study, Cliffs will have earned an additional 9% interest in the Decar project to hold 60%. Cliffs will have 120 days from the date the PEA is delivered to First Point to elect to increase its ownership to 65% by completing a NI 43-101 prefeasibility study within a two-year time period. Absent such election, a joint venture will be formed, with Cliffs and First Point having initial participating interests of 60% and 40%, respectively.
Dr. Ron Britten, P. Eng., First Point's Qualified Person under NI 43-101, has reviewed and approved the technical content of this news release
About First Point
First Point Minerals Corp. is a Canadian base metal exploration company operating worldwide. For more information, please view the Company's website at www.firstpointminerals.com.
On behalf of First Point Minerals Corp.
Jim Gilbert, President and CEO
Forward-Looking Statements
Certain of the statements made and information contained herein is considered "forward-looking information" within the meaning of applicable Canadian securities laws. These statements address future events and conditions and so involve inherent risks and uncertainties, as disclosed in the Company's periodic filings with Canadian securities regulators. Actual results could differ from those currently projected. The Company does not assume the obligation to update any forward-looking statement.
Neither the TSX Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.
Contacts:
First Point Minerals Corp.
Jim Gilbert
President and CEO
(604) 681-8600
First Point Minerals Corp.
Rob Robertson
VP Corporate Development
(604) 681-8600
info@firstpointminerals.com
www.firstpointminerals.com
