OTTAWA, ONTARIO--(Marketwired - Oct 23, 2013) - Northern
Graphite Corporation (TSX
VENTURE:NGC)(OTCQX:NGPHF) announces the results of a
Preliminary Economic Assessment (the "PEA") on an expansion case
for its 100% owned Bissett Creek graphite project. The PEA was
undertaken to demonstrate the ability to meet expected future
growth in graphite demand by substantially increasing production
from the Bissett Creek deposit based on measured and indicated
resources only. The PEA builds on the Feasibility Study (the "FS")
completed by G Mining in August, 2012 and the expanded resource
model and updated FS economics (the "FS Update") subsequently
completed by AGP Mining Consultants ("AGP"). The PEA was authored
by Marc Leduc P. Eng. AGP completed the resource and reserve
estimates and mine plan. A NI 43-101 Technical Report will be filed
on www.sedar.com within 45 days hereof.
The PEA estimates
the economics of doubling mill throughput after three years of
operation and demonstrates that Bissett Creek has very attractive
economics even at or below current depressed graphite price levels.
The pre-tax internal rate of return ("IRR") is 26.3% (22.0% after
tax) and the pre-tax net present value ("NPV") is $231.1 million
($150.0 million after tax) in the base case which uses an 8%
discount rate and a weighted average price of US$1,800/tonne of
concentrate. The PEA notes that the deposit was extensively
investigated in the 1980s and this work was essentially redone over
the last three years with consistent results and brought up to NI
43-101 standards. In addition, resources have been infill drilled
and significantly expanded. Consequently, the project has been
substantially de-risked in terms of resources, metallurgy and
engineering.
Gregory Bowes, CEO,
commented that: "The current graphite supply chain is heavily
dependent on China and is characterized by many inefficient
producers with poor environmental and labor practices and
inconsistent product quality, delivery and reliability. Bissett
Creek will produce the highest quality concentrates in the industry
and will provide a stable, secure source of supply at very
competitive costs and prices."
|
Summary of PEA Results |
|
|
|
|
PEA |
FS Update |
|
Reserves/resources (million tonnes)* |
39.4Mt* |
28.3Mt* |
|
Feed Grade (% graphitic carbon) |
1.85%* |
2.06%* |
|
Waste to ore ratio |
0.24 |
0.79 |
|
Processing rate (tonnes per day - 92% availability) |
2,670-5,340 |
2,670 |
|
Mine life |
22 years |
28 years |
|
Mill recovery |
94.7% |
94.7% |
|
Average annual production |
33,183t |
20,800t |
|
Initial capital cost ($ millions - including 10% contingency) |
$101.6M |
$101.6M |
|
Expansion capital |
$45.2M |
NA |
|
Sustaining capital |
$58.7M |
$43.0 |
|
Cash operating costs ($/tonne of concentrate) |
$695/t |
$795/t |
|
Mining costs ($/tonne of ore) |
$4.05 |
$5.63 |
|
Processing costs ($/tonne of ore) |
$7.35 |
$8.44 |
|
General and administrative costs ($/tonne of ore) |
$1.45 |
$2.50 |
|
CDN/US dollar exchange rate |
0.95 |
0.95 |
*The
probable reserve in the FS update consists of 24 million tonnes
("Mt") grading 2.20% Cg and 4.0 Mt of low grade stockpile ("LGS")
grading 1.26% Cg. The PEA accelerates the processing of the
probable reserve and processes an additional 11.1 million tonnes of
measured and indicated resources from the LGS at the end of the
mine life. All grades are diluted.
|
|
FS Update |
PEA Expansion Case |
|
|
|
|
(base case) |
|
|
Graphite prices (US$ per tonne) |
$1,800 |
$2,100 |
$1,800 |
$1,500 |
|
Pre-tax Net Present Value @8% (CDN$ millions) |
$129.9 |
$335.6 |
$231.0 |
$126.6 |
|
Pre-tax IRR (%) |
19.8% |
33.0% |
26.3% |
18.8% |
|
After tax Net Present Value @8% (CDN$ millions) |
$89.3 |
$221.9 |
$150.0 |
$77.3 |
|
After tax IRR (%) |
17.3% |
27.7% |
22.0% |
15.7% |
The proposed
development of the Bissett Creek graphite deposit consists of an
open pit mine and a processing plant with conventional crushing,
grinding and flotation circuits followed by concentrate drying and
screening. The PEA assumes that the processing plant is twinned
after three years of operation, except for the crusher which has
excess capacity, and that the capacity of the plant is effectively
doubled. Corresponding adjustments were made to the power plant,
mine fleet and tailings storage facilities and other infrastructure
to account for the increased throughput.
Measured and
indicated resources for the Bissett Creek deposit consist of 69.8
million tonnes ("Mt") grading 1.74% graphitic carbon ("Cg") based
on a 1.02% Cg cutoff grade ("COG"). The final mine plan in the FS
update only contemplated a 25 to 30 year operation and resulted in
probable reserves of 28.3 Mt of ore grading 2.06% graphitic carbon
based on a COG of 0.96% Cg. Probable reserves include 24.3 Mt
grading 2.20% Cg that will be processed first and 4.0 Mt grading
1.26% Cg from a low grade stockpile ("LGS") that will be processed
at the end of the mine life. In order to increase head grades in
the initial years of production while maintaining a reasonable
stripping ratio, measured and indicated resources grading between
0.96% Cg and 1.5% Cg were stockpiled, largely within mined out
areas of the pit. The total LGS will be 16.5 Mt grading 1.26%
Cg.
The PEA uses the
same mine plan but accelerates the mining of the high grade ore and
processes all of the LGS thereafter. There are an additional 27.3
million tonnes of measured and indicated resources grading 1.62% Cg
which are not included in the mine plan and 24 million tonnes of
inferred resources grading 1.65% Cg which are treated as waste.
Also, resources have not yet been closed off by drilling and
therefore further expansions are possible. Over the first ten years
of operation almost 38,000 tonnes of graphite concentrate will be
produced yearly and an average of 33,100 tonnes will be produced
over the project life.
Cash mine operating
costs will average CDN$695 per tonne of concentrate over the mine
life. Due to the flat lying nature of the deposit, production can
be expanded without any capital investment required for additional
stripping or pushbacks of the pit walls. The waste to ore ratio
actually declines in the PEA expansion scenario and contributes to
lower operating costs. The initial capital cost estimate to
construct the processing plant, power plant and all associated mine
infrastructure remains at $101.6 million including a $9.3 million
contingency. Under the PEA, an additional $45.2 million in
expansion capital has been added in year three for the parallel
mill circuits and sustaining capital over the mine life was
increased by $15.7M for additional mining equipment, tailings
facilities and other infrastructure.
|
Sensitivities (pre-tax) |
|
|
$2,100 |
$1,800 |
$1,500 |
|
|
NPV* |
IRR |
NPV* |
IRR |
NPV* |
IRR |
|
Base Case |
$335.6 |
33.0% |
$231.1 |
26.3% |
$126.6 |
18.8% |
|
Grade +10% |
$408.3 |
37.4% |
$293.3 |
30.4% |
$178.3 |
22.6% |
|
Grade -10% |
$263.0 |
28.4% |
$168.9 |
21.9% |
$74.9 |
14.8% |
|
Operating costs -10% |
$358.7 |
34.5% |
$254.2 |
27.8% |
$149.7 |
20.6% |
|
Operating costs +10% |
$312.6 |
31.5% |
$208.1 |
24.7% |
$103.6 |
17.1% |
|
Capex -10% |
$351.2 |
36.2% |
$246.7 |
29.0% |
$142.2 |
21.1% |
|
Capex +10% |
$320.1 |
30.3% |
$215.6 |
23.9% |
$111.1 |
16.9% |
|
*$ millions @ 8% |
Graphite
Markets and Pricing
After more than
tripling from 2005 to 2012, graphite prices have fallen back 50% or
more due to the slowdown in China and a lack of growth in the US,
Europe and Japan. Recently it has been reported that Chinese flake
production has fallen 27% and that the only North American producer
has suspended operations which indicates that current prices are
close to the marginal cost of production for many producers. These
shutdowns have helped stabilize prices for the last six months and
should limit further price declines. The weighted average price
that would be realized by Bissett Creek concentrates in the current
market is estimated at US$1,800/t based on +50 mesh prices of
approximately $2,100/t, $1,350 for +80 mesh, $1,100 for -100 to +80
mesh and $900 for -100 mesh, all at 94% C or better. Sensitivities
are presented at US$2,100/t and at US$1,500/t.
Qualified
Persons
Pierre Desautels,
P.Geo., Principal Resource Geologist, and Gordon Zurowski, P.Eng.,
Principal Mining Engineer, both of AGP Mining Consultants and
Qualified Persons under NI 43-101 who are independent of the
Company, prepared the mineral resource estimates in the PEA. Gordon
Zurowski, P.Eng., prepared the reserve estimate and the updated
Feasibility Study economics. Marc Leduc, P.Eng., who is independent
of the Company, prepared the PEA and approved and authorized the
release of the information contained herein.
Northern
Graphite Corporation
Northern Graphite
Corporation is a Canadian company that has a 100% interest in the
Bissett Creek graphite deposit located in eastern Ontario. Graphite
demand is expected to rapidly increase in the future due to
strengthening economies and the growth in new technologies such as
lithium ion batteries, particularly due to their use in hybrid and
all electric vehicles. Northern Graphite is well positioned to
benefit from this compelling supply/demand dynamic with a high
purity, large flake, scalable deposit that is located close to
infrastructure. Additional information on Northern can be found at
www.sedar.com and www.northerngraphite.com.
This press release
contains forward-looking statements, which can be identified by the
use of statements that include words such as "could", "potential",
"believe", "expect", "anticipate", "intend", "plan", "likely",
"will" or other similar words or phrases. These statements are only
current predictions and are subject to known and unknown risks,
uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or
achievements to be materially different from those anticipated by
the forward-looking statements. The Company does not
intend, and does not assume any obligation, to update
forward-looking statements, whether as a result of new information,
future events or otherwise, unless otherwise required by applicable
securities laws. Readers should not place undue reliance on
forward-looking statements.
Neither 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
release.