Bankable Feasibility Study Delivers Over $1 Billion NPV8%
(All amounts expressed in US dollars unless otherwise indicated)
TORONTO, June 17, 2013 /CNW/ - Royal Nickel Corporation ("RNC") (TSX: RNX) is pleased to announce the positive results of a bankable feasibility study ("feasibility study") for its Dumont Nickel Project ("Dumont"), demonstrating a technically and economically sound project with an after-tax $1.1 billion NPV8%.
Dumont Feasibility Study Highlights1
"We are very pleased to have successfully completed this major milestone which confirms the project NPV of more than $1 billion. When in production, Dumont is expected to be one of the largest base metal mines in Canada and one of the top five sulphide nickel producers globally, targeting production of more than $27 billion of nickel1 over 33 years based on current reserves alone," commented Tyler Mitchelson, President and CEO of RNC. "With our economically and technically sound feasibility study completed, I look forward to accelerating project discussions with potential partners on a financing package that will allow RNC to rapidly advance the project into the construction stage following the anticipated completion of the main permitting process by the middle of next year."
|1||Based on price and exchange rate assumptions contained in "Key Assumptions" table found on page 9 of this news release. NPV and IRR calculated from assumed start of construction, Q3 2014 and based on June 2013 real costs.|
|2||C1 cash costs are defined as the cash cost incurred at each processing stage, from mining through to recoverable nickel delivered to the market, net of by-product credits.|
Economic Summary of 2013 Feasibility Study versus earlier Pre-Feasibility Studies
Dec. 16, 2011
May 14, 20121
Jun. 17, 20132
|Units||Base Case||Base Case +
|Nickel Recovery||% nickel||41||45||43|
|Payable Ni||Mlbs (kt)||2,393||(1,085)||2,655||(1,204)||2,774||(1,258)|
|Payable Co||Mlbs (kt)||89||(40)||55||(25)||59||(27)|
|Total C1 Costs||$/lb Ni ($/t Ni)||$4.68 ($10,582)||$4.32 ($9,524)||$4.79 ($10,560)|
|By-product Credits||$/lb Ni ($/t Ni)||$0.55 ($1,213)||$0.25 ($551)||$0.48 ($1,058)|
|Net C1 Costs||$/lb Ni ($/t Ni)||$4.13 ($9,105)||$4.07 ($8,973)||$4.31 ($9,502)|
|Average Free Cash Flow3||$M||$228||$262||$238|
During the feasibility study, the project has been significantly de-risked technically, through additional metallurgical, mineralogical, geotechnical and engineering work, and economically, through more detailed work on capital and operating cost estimates. "Throughout the feasibility study process, RNC successfully improved project design to reduce risk and achieve improvements in operational reliability, delivering a project that can rapidly start-up and achieve our planned operational and financial performance," added CEO Tyler Mitchelson. Some highlights of these decisions were:
RNC intends to continue to advance the project on multiple fronts and has targeted the following key milestones:
Additional Upside Opportunities
RNC has identified a number of additional upside opportunities that have the potential to add additional value to the project but were not included in the feasibility study in order to simplify the project and reduce implementation risk.
|1)||Alternative Downstream Processing Options
RNC has conducted study work to assess alternative processing options including concentrate roasting to produce a nickel oxide product, which could be used by nickel pig iron ("NPI") or ferronickel producers, and/or producing a final ferronickel product that can be used directly by the stainless steel industry. In lab scale testwork, high-grade ferronickel was produced using proven and widely used downstream roasting and reduction processes. This alternate processing option has the potential to increase recoveries, lower costs and provide greater flexibility than conventional smelting and refining.
|In March 2013, RNC announced it had entered into a memorandum of understanding ("MOU") with Tsingshan Holding Group Co., Ltd. The MOU sets out the objectives of the two companies to work together in relation to downstream concentrate processing and the potential to enter into an offtake and/or partnership arrangement with respect to the Dumont project. Tsingshan is the second largest Chinese stainless steel company and one of the leading innovators in the development of vertically integrated NPI and stainless steel production operations. After working in cooperation with RNC for more than a year, Tsingshan completed its own analysis and testwork on a sulphide nickel concentrate (utilizing a process similar to the one previously announced by RNC in the news release dated October 3, 2011) in its integrated NPI/stainless steel production facilities and plans to make the necessary investment in plant and equipment once concentrate feed is secured. This innovation represents the first time that nickel sulphide concentrate would have been used directly to create stainless steel. This contemplated plant is also expected to be capable of handling nickel sulphide concentrate like that anticipated to be produced from Dumont.|
|2)||Trolley Assist - Mining Cost Improvements
The revised pre-feasibility study ("revised PFS") demonstrated the potential to utilize trolley assist to improve the overall mining costs for the Dumont project by using electricity to replace a portion of the diesel fuel consumed by trucks. The current pit design allows for the potential to implement trolley assist during the expansion of the mine in year five. The trolley assist option has not been included in the feasibility study but will continue to be evaluated and considered depending on oil prices, electricity prices and several other factors at the time of the mine expansion.
|3)||Iron Ore (Magnetite) Concentrate - Potential Additional By-product Credit
The updated resource model increases the indicated resource and grade for magnetite (iron ore) compared to the revised PFS. There was a 92% increase in the indicated resource to 1,114 Mt grading 4.27% magnetite, equal to a 112% increase of contained magnetite to 47.6 Mt.
|RNC continues to believe there is good opportunity for magnetite to further strengthen the economics of the Dumont project by providing the potential of an additional by-product credit that could be a benefit during periods of strong prices for iron ore.|
Feasibility Study - Operating Summary
|Expit Mining Rate||Ktpd||206||375|
|Strip Ratio2||Waste : Ore||0.75||1.22||-||1.13|
|Ore Grade||% Ni||0.34||0.28||0.24||0.27|
|Nickel In Concentrate||Kt (Mlbs)||150 (331)||797 (1,757)||406 (895)||1,353 (2,983)|
Average Annual Production
(Contained metals in concentrate)
|Nickel3||kt (Mlbs)||33 (73)||51 (113)||31 (68)||41 (90)|
|Cobalt||kt (Mlbs)||1 (2)||2 (4)||1 (3)||2 (4)|
Operating Review and Costs
|Mine (ore milled)||$/t ore||5.98||5.53||0.69||3.50|
|Mine (material mined)5||$/t rock||1.49||1.52||-||1.52|
|Site Costs||$/t ore||11.39||10.31||5.34||8.27|
|Gross C1 Cash Cost||$/lb||4.43||5.00||4.52||4.79|
|Net C1 Cash Cost||$/lb||$4.01||$4.46||$4.12||$4.31|
The Dumont feasibility delivered a very strong project NPV8 of $1.1 billion. It was reduced by approximately $283 million from the prior revised PFS due to the following:
|NPV Reconciliation to Revised PFS ($ millions)||Increase/(Decrease)
vs. Revised PFS
|Revised PFS NPV8% - Base Case with Trolley Assist||$1,420|
|Higher mill throughput||143|
|PGE by-product credits||88|
|Higher capital cost||(59)|
|Higher mining costs||(186)|
|Lower mill recoveries||(205)|
|Project related impacts||(185)|
|Feasibility Study NPV8%||$1,137|
Royalty financings in August 2012 and May 2013 that raised $27 million in capital have helped RNC continue to aggressively advance Dumont while avoiding significant share dilution.
The Dumont project will be a conventional open pit mine/mill operation, using conventional drilling, blasting and loading with a combination of hydraulic and electric rope shovels and truck haulage. The mine is designed to produce ore at a rate of approximately twice the capacity of the mill, which will serve to mitigate the risk of feed shortages and allow for the highest value material to be processed in priority. As a result, an ore stock pile will be generated to continue to feed the mill for an additional 13 years at the end of the mine life with the tailings deposited in the open pit. The process plant will be constructed in two phases. Phase one will have an initial average throughput of 52.5 ktpd using a single SAG mill and two ball mills for grinding, desliming using cyclones, conventional flotation and magnetic separation, to produce a nickel concentrate also containing cobalt and PGEs. To accommodate phase two, the process plant has been designed to be expanded by the fifth year of operation to 105 ktpd by effectively duplicating most of the first mill. Additional mine equipment will also be purchased to allow the corresponding increase in mine throughput and the potential to implement trolley assist at that time.
The Dumont project has been designed to provide operational flexibility using proven technology to reduce bottlenecking risk, while at the same time building in rigid capital spending controls backed up with a highly detailed execution plan prepared by a proven and experienced project team.
A site layout diagram can be accessed at the following link.
The feasibility study was completed by Ausenco, a global leader in engineering and project management services for the resource and energy sectors. Ausenco was chosen for the feasibility study because of its expertise and experience with similar sized, large scale base metal projects and proven experience with processing of ultramafic nickel deposits. Ausenco has successfully designed and constructed the Lumwana concentrator (55 ktpd) for Equinox Minerals, the Phu Kham concentrator (33 ktpd) for PanAust and the GDP3 expansion (30 ktpd concentrator) of the Gibraltar Mine for Taseko and the $1.5 billion Constancia project for Hudbay (70 ktpd concentrator, currently in construction). The feasibility team included SRK Consulting (Canada) Inc. (resource model, geotechnical, mine waste, water balance, closure), Snowden Mining Industry Consultants ("Snowden"), (mine design), GENIVAR Inc. (environmental), Golder Associates (environmental geochemistry) and Norascon (civil).
The Dumont Nickel Project is located in the western portion of the province of Quebec. The property is located, in the municipalities of Launay and Trécesson, approximately 25 km west of the city of Amos, approximately 60 km northeast of the industrial and mining city of Rouyn-Noranda and 70 km northwest of the city of Val-d'Or.
Mineral Resources (inclusive of mineral reserves)
Mineral Resource Statement, Dumont Nickel Project, Quebec, SRK Consulting (Canada) Inc.,
April 30, 20131
|Resource Category||Quantity||Grade||Contained Nickel||Contained Cobalt|
|(000 t)||Ni (%)||Co (ppm)||(000 t)||(Mlbs)||(000 t)||(Mlbs)|
|Measured + Indicated||1,665,600||0.27||107||4,430||9,750||180||394|
|Resource Category||Quantity||Grade||Contained Palladium||Contained Platinum|
|(000 t)||Pd (gpt)||Pt (gpt)||(000's ounces)||(000's ounces)|
|Measured + Indicated||1,665,600||0.020||0.009||1,008||461|
|Resource Category||Quantity||Grade||Contained Magnetite|
|(000 t)||Magnetite (%)||(000 t)||(Mlbs)|
|Measured + Indicated||1,114,300||4.27||47,580||104,905|
Mineral Reserve Statement, Dumont Nickel Project, Quebec, Snowden,
June 17, 20131
|Category||000 t||(% Ni)||(ppm)||(gpt)||(gpt)||Mlbs||Mlbs||000 oz||000 oz|
Approximately 55 million tonnes of material would be pre-stripped prior to start-up of operations. The life-of-mine plan is expected to mine 2.5 billion tonnes of material consisting of 1.3 billion tonnes of waste rock and overburden and 1.2 billion tonnes of ore over a 20-year mine life using electric rope shovels and large scale haul trucks. The trolley assist option can potentially be implemented during the expansion in year five. The lower grade, lower recovery portion of the ore will be stockpiled in order to maximize throughput of higher value ore in the earlier years. The overall strip ratio for the project is 1.1:1.
Approximately 0.5 billion tonnes of the lower grade ore stockpile is expected to remain at the end of mine life and be processed for an additional 13 years, utilizing the open pit mine for tailings disposal.
A detailed production schedule can be accessed at the following link.
The nickel recovery plant and associated infrastructure facilities will process run-of-mine or stockpiled ore to a primary crusher feeding a conventional milling process consisting of a primary gyratory crusher, SAG and ball mill combination, desliming, nickel flotation and magnetic separation of the flotation tails. Subsequent cleaning stages on both the flotation and magnetic concentrate then occur. The nickel concentrate will be thickened and filtered on site prior to shipment by truck or rail to third party smelters.
In addition to nickel, PGEs and cobalt are also recovered in the nickel concentrate. PGE recovery is estimated to be 61%. Cobalt recovery has been estimated to be an average of 42% to follow nickel recovery, as the deportment of cobalt between the recoverable minerals and silicates is similar to nickel.
The average nickel concentrate grade over the life of the project is estimated to be 29%. This relatively high grade is one of the important reasons why Dumont concentrate is suitable for the alternative downstream processing options discussed above.
The tailings storage facility ("TSF") is located immediately west of the mine/mill complex. The TSF is designed in two phases with the first phase holding 142 million tonnes of tailings and the second phase holding an additional 538 million tonnes of tailings — enough for the first 20 years that the pit will be active. After that, as mining has ceased in the open pit, the mill tailings will be pumped directly into the open pit. Process water will be sourced from a combination of water pumped from the mine, recycled from the TSF and surface water captured and stored in a reservoir at the southeast end of the open pit. No water extraction from the Villemontel River is planned under normal operating conditions.
The Dumont project is located adjacent to a rail line and highway and a power line with sufficient capacity for the construction period. A short 6 km rail spur will be built off the rail line to provide access into the mine property and a 10 km power line feed from an existing high voltage line south of the property will be constructed to provide sufficient power for operations.
Capital Cost Estimate
Summary of Capital Costs1,2
|($ millions)||Initial Capital||Expansion
Contingency and growth of 12% on direct and indirect costs for the initial capital estimate is based upon a line item review of the level of engineering definition achieved for the feasibility study by area.
Operating Cost Estimate
|Operating Costs||$/pound||Operating Costs||$/t ore|
|G & A||0.20||Maintenance||1.57|
|Total Site Cost||3.52||Diesel||0.97|
|TC / RC||1.27||Electricity||1.53|
|By-product Credits||(0.48)||Contracts & Other||0.40|
Break even NPV0 is $5.50 per pound of nickel and break even NPV8% is $7.04 per pound of nickel.
Economic Analysis and Sensitivities
|NPV ($ millions @ 8%)||$2,003||$1,137|
|Simple Payback Period (years)||5.3||6.1|
|NPV calculated from assumed construction start date (Q3 2014) using June 2013 real dollar estimates.|
|Nickel Price ($ per pound)||$9.50||$10.00||$10.50||$9.00|
|US$/CDN$ exchange rate||$0.95||$0.95||$0.90||$0.90|
|Platinum Price ($ per ounce)||$1,800||$1,800||$1,800||$1,800|
|Palladium Price ($ per ounce)||$700||$700||$700||$700|
|Cobalt Price ($ per pound)||$14||$14||$14||$14|
|Electricity (CDN$ per kilowatt hour)||$0.0445||$0.0445||$0.0445||$0.0445|
|Oil ($ per barrel)||$90||$90||$90||$90|
|C1 Cash Cost
|Nickel Price ±$1/lb||$494||$505||$0.10||$0.10||2.9%||3.1%|
|Nickel Price ±10% ($8.10 - $9.90/lb)||$451||$461||$0.09||$0.09||2.7%||2.9%|
|Cobalt Price ±$1/lb||$11||$11||$0.02||$0.02||0.1%||0.1%|
|Platinum Price ±10%||$5||$5||$0.01||$0.01||0.0%||0.0%|
|Palladium Price ±10%||$4||$4||$0.01||$0.01||0.0%||0.0%|
|Oil Price ±$10/bbl||$30||$35||$0.04||$0.04||0.2%||0.2%|
|Sulfuric Acid Price ±10%||$6||$6||$0.01||$0.01||0.0%||0.0%|
|Initial Capital Expenditure ±10%||$83||$87||$0.00||$0.00||1.0%||1.1%|
|Expansion Capital Expenditure ±10%||$38||$42||$0.00||$0.00||0.4%||0.4%|
|Total Capital Expenditure ±10%||$140||$141||$0.00||$0.00||1.4%||1.7%|
|Site Operating Costs ±10%||$201||$203||$0.35||$0.35||1.2%||1.2%|
|Mill Recovery ±1.0%||$105||$101||$0.07||$0.07||0.6%||0.6%|
|Payable Nickel ±1%||$54||$49||$0.04||$0.04||0.3%||0.3%|
In November 2012, the Environmental and Social Impact Assessment ("ESIA") for the Dumont project was filed with the Quebec Ministry of Sustainable Development, Environment and Parks (MDDEP) and the federal Canadian Environmental Assessment Agency (CEAA). Reviews and exchanges of information are ongoing. RNC anticipates permits for Dumont will be obtained by mid-2014.
To further assist in the permitting process, RNC initiated a stakeholder consultation process in the early stages of the project and earlier this year opened a community liaison office to further enhance the flow of information between RNC and the local community. The results of consultations have been integrated into the ESIA and have been considered where possible in the development of the PFS, revised PFS, and feasibility study.
Geochemical testwork has shown that waste rock and tailings will not be acid generating and that tailings will not require sub-aqueous deposition. Multiple baseline studies have been completed and others are ongoing. The completed studies have not indicated any major environmental constraints.
NI 43-101 Compliance
The technical information in this news release has been prepared in accordance with Canadian regulatory requirements by, or under the supervision of, Paul Staples, P.Eng., of Ausenco, Sébastien Bernier, P.Geo., of SRK Consulting (Canada) Inc. and David A. Warren, Eng., of Snowden, all of whom are independent Qualified Persons as set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101").
The Mineral Resource estimate set out in this news release was classified according to the CIM Definition Standards for Mineral Resources and Mineral Reserves (November 2010) by Sébastien Bernier, P.Geo (OGQ#1034, APGO#1847), Principal Consultant - Resource Geology at SRK.
The Mineral Reserve estimate set out in this news release was classified according to the CIM Definition Standards for Mineral Resources and Mineral Reserves (November 2010) by David A. Warren (OIQ 121481), Principal Consultant - Mining at Snowden.
Readers are advised that Mineral Resources not included in Mineral Reserves do not demonstrate economic viability. Mineral Resource estimates do not account for mineability, selectivity, mining loss and dilution. These Mineral Resource estimates include Inferred Mineral Resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that Inferred Mineral Resources will be converted to Measured and Indicated categories through further drilling, or into Mineral Reserves, once economic considerations are applied.
Based on the resource estimate, a standard methodology for pit limit analysis, mining sequence and cut-off grade optimization, including application of mining dilution, process recovery, economic criteria and physical mine and plant operating constraints has been followed to design the open pit mine and to determine the mineral reserve estimate for the deposit as summarized in the Mineral Reserve table.
The full feasibility study, prepared as an NI 43-101 compliant technical report, will be filed under RNC's profile on SEDAR at www.sedar.com within 45 days.
Royal Nickel will be hosting a conference call and webcast to discuss the feasibility study highlights today beginning at 10:00 a.m. (Eastern Time). Participants may join the call by dialing toll free 1-888-231-8191 or 1-647-427-7450 for local calls or calls from outside Canada and the United States. A live webcast of the call will be available through CNW Group's website at: www.newswire.ca/en/webcast/index.cgi.
A recording of the conference call will be available for replay for a one week period beginning at approximately 1:00 p.m. (Eastern Time) today by dialing toll free 1-855-859-2056 or 1-416-849-0833 for local calls or calls from outside Canada and the United States. The pass code for the replay is 77422497. A replay of the webcast and the associated webcast presentation will be available through a link on our website at www.royalnickel.com.
About Royal Nickel Corporation
Royal Nickel Corporation is a mineral resource company focused primarily on the exploration, evaluation, development and acquisition of base metal and platinum group metal properties. RNC's principal asset is the Dumont Nickel Project strategically located in the established Abitibi mining camp, in the municipalities of Launay and Trécesson, 25 kilometres northwest of Amos, Quebec. RNC has a strong management team and Board with over 100 combined years of mining experience in the nickel business at Inco and Falconbridge. RNC's common shares trade on the TSX under the symbol RNX.
Cautionary Statement Concerning Forward-Looking Statements
This news release contains "forward-looking information" including without limitation statements relating to mineral reserve estimates, mineral resource estimates, realization of mineral reserve and resource estimates, capital and operating cost estimates, project and life of mine estimates, construction of the mine and related infrastructure, the timing and amount of future production, costs of production, success of mining operations, ability to obtain permitting by the time targeted, size and ranking of project upon achieving production, economic return estimates and potential upside and alternatives. Readers should not place undue reliance on forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RNC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The feasibility study results are estimates only and are based on a number of assumptions, any of which, if incorrect, could materially change the projected outcome. Even with the completion of the feasibility study, there are no assurances that Dumont will be placed into production. Factors that could affect the outcome include, among others: the actual results of development activities; project delays; inability to raise the funds necessary to complete development; general business, economic, competitive, political and social uncertainties; future prices of metals; availability of alternative nickel sources or substitutes; actual nickel recovery; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; delays in obtaining governmental approvals, necessary permitting or in the completion of development or construction activities. The MOU is non-binding and there is therefore no assurance that the objectives set out in the MOU will be realized. The use of the term "bankable" in this news release should not be construed as an indication that RNC has arranged or will be able to arrange project financing. For a more detailed discussion of such risks and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, refer to RNC's filings with Canadian securities regulators available on SEDAR at www.sedar.com.
Although RNC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this news release and RNC disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws
SOURCE: Royal Nickel Corporation
Director, Investor Relations
T: (416) 363-0649
Mélanie Corriveau (French contact)
Community Relations Coordinator
T: (819) 727-3777
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