(DNI : TSX-Ven)
(DG7 : Frankfurt)
TORONTO, Dec. 5, 2013 /CNW/ - DNI Metals Inc.
(DNI:TSX-Ven)(DG7:FSE) announces a summary of results from an
independent NI 43-101 Preliminary Economic Assessment
Technical Report (the "PEA") for the Buckton Deposit on its 100%
owned SBH Property, located 120 kilometres north of Fort McMurray in northeast Alberta. The polymetallic Buckton Deposit is
hosted in black shales and is in one of six mineralized zones
discovered on the Property. The PEA outlines a conceptual mining
and metals recovery scenario relying on the NI 43-101 mineral
resource estimate for the Buckton Deposit announced on August 27, 2013. The PEA relates to mining and
processing operations for the production of Ni-U-Zn-Cu-Co and Rare
Earth Elements (REE) including Yttrium from the Buckton
Deposit.
This press release is a summary of the
conclusions from the PEA technical report which will be filed to
SEDAR within the next forty-five days and will be available from
www.sedar.com. The technical report will also be available from
DNI's website www.dnimetals.com once it has been filed.
The PEA demonstrates that the Buckton Deposit
has the potential to be a significant supplier of uranium and
REE. The mining design is a low strip ratio, high tonnage
co-production of Ni-U-Zn-Cu-Co-REE-Y from the Labiche and Second
White Speckled formations. The metals extraction design basis is
bio-heap leaching, followed by metals extraction from leach
solution, and a process plant for separating purified individual
REE oxides. The projected average annual production capacity is
approximately 1 million pounds of uranium yellowcake and 5,500
tonnes of rare earth oxides, of which over 40% are made up of heavy
rare earth elements. The PEA also identified a number of key
opportunities which can significantly enhance economics through
strategic cost reductions and/or revenue enhancements, some of
which can be achieved with minimal additional testwork.
The PEA indicates that the envisaged Buckton
operation has a net present pre-tax value of $1.6 billion at a 6% discount rate, with an 8.7%
internal rate of return (100% equity financed basis). The Buckton
mining operations will cost an estimated $3.76 billion in pre-production capital to
construct with a 10.5 year payback. The mining operations would
generate an average of $349 million
in pre-tax net cash flow annually from the production of
Ni-U-Zn-Cu-Co-REE-Y over the 64 year mine life, with life of mine
revenues of $75 billion. The PEA is
based on mineral resources consisting mostly of Inferred resources
that are too speculative geologically to have economic conditions
applied to them that would enable them to be characterized as
mineral reserves, and there is no certainty that the conclusions of
the PEA will be realized.
The PEA was prepared by P&E Mining
Consultants Inc. with assistance from others. The mineral resource
estimate for the Buckton Deposit was prepared by Apex Geoscience
Ltd. Hatch Ltd. was retained to review DNI's metals recovery
testwork to formulate process engineering design criteria and
metals recovery flow sheets, and to develop related capital and
operating cost estimates. The Hatch process engineering was
reviewed and reported by Mr. Bruce
Cron P.Eng. of Cron Metallurgical Ltd. The foregoing parties
are independent of DNI and are the Qualified Persons in connection
with preparation of the PEA. All currency in this announcement is
in Canadian dollars, unless stated otherwise.
This PEA is the initial economic assessment of
the potential of the Buckton Deposit and is preliminary in nature.
It is based on the collective of information from all exploration,
mineral resource and metal extraction studies completed by DNI
during the past five years, augmented by extrapolations from other
similar projects. This assessment was initiated early in the
Deposit's development history to better focus DNI's next stage of
work, given the array of recoverable metals from the deposit, the
differing leaching parameters required for economic recoveries of
the various metals, and the geometry of the deposit being hosted in
two layered (stacked) sedimentary formations of differing head
grade and slightly different compositions.
The PEA achieved its principal objective of
evaluating viability of producing metals from the Buckton Deposit,
and formulated a conceptual plan for high throughput open pit
mining and metals recovery flowsheets for the production of
Ni-U-Zn-Cu-Co-REE-Y. It was particularly successful in identifying
the critical mining and processing parameters which can have a
significant impact on economics at Buckton. Whereas mineral
resource studies for the Buckton Deposit estimated recoverable
Ni-Mo-U-V-Zn-Cu-Co-Li-REE-Y, certain metals were provisionally
omitted from the PEA based on economic considerations (Mo-Li-V) or
due to uncertainties in their markets (Sc-Th). As such, the PEA
contemplates production of saleable final products of Ni-Co and
Zn-Cu as sulfides, U as oxide "yellowcake", and REE-Y as separated
oxides.
DNI has been exploring and evaluating the
Buckton Deposit during the past five years as a long term future
source of numerous metals. The Buckton mineralization is hosted in
two flat-lying "stacked" shale formations beneath overburden cover.
The lower formation is the higher grading Second White Speckled
Shale Formation which lies beneath the Labiche Formation shale. The
PEA, accordingly, evaluated two separate scenarios. The Base Case
scenario focuses on mining and processing of both formations
on a blended basis, whereas the Alternate Case contemplates mining
and processing of only the lower formation (the Second White
Speckled Shale Formation) with a considerably higher strip ratio
over a shorter mine life while treating all overlying material as
waste. In general terms, with the exception of different mine and
plant capacities, both scenarios contemplate the same mining and
metal processing methods. The Base Case yielded more favorable
economics than the Alternate Case and therefore is the preferred
development approach.
This announcement concerns itself with
details relating to the Base Case scenario, although salient
aspects of the Alternate Case are also summarized for
reference.
The PEA identified a number of key parameters
which can significantly enhance economics through strategic cost
reductions or revenue enhancements some of which DNI believes can
be achieved with minimal additional testwork. These are discussed
in detail later in this announcement to highlight potential
realistic upside to be assessed in a future update of the PEA.
Highlights from the two mining scenarios are tabulated below.
|
Base Case |
Alternate Case |
Mining Target |
Second White
Speckled Shale
Formation
+ overlying Labiche Formation |
Second White
Speckled Shale
Formation Only |
Final Products |
Ni-Co-sulfide;
Zn and Cu sulfides
U3O8 yellowcake
Separated REE-Y oxides |
Ni-Co-sulfide;
Zn and Cu sulfides
U3O8 yellowcake
Separated REE-Y oxides |
Optimized Pit Shell
Mineable Mineral Resource |
4,544 million tonnes |
976 million tonnes |
Annual Mining/Processing
Throughput Feed |
72 million tonnes per year
by open pit |
36 million tonnes per year
by open pit |
Strip Ratio (waste:feed) |
0.50 |
6.27 |
Life of Mine |
64 years |
29 years |
Metals Extraction
Metals Recovery |
Bio-Heapleaching
Selective Precipitation
REE-Y Separation |
Bio-Heapleaching
Selective Precipitation
REE-Y Separation |
Pre-production Capital Cost |
$3,766 M |
$3,077 M |
Contingency (incl. in Capex) |
$ 474 M |
$ 426 M |
Sustaining Capital Over Life of
Mine |
$ 2,446 M |
$ 706 M |
Operating Cost |
$ 10.3 per tonne |
$ 16.6 per tonne |
Gross In-Situ Recoverable
Value |
$ 16.5 per tonne |
$ 26.6 per tonne |
Net Operating Margin
(pre-tax) |
$ 6.2 per tonne |
$ 10.0 per tonne pre tax |
Payback |
10.5 years |
9.2 years |
Gross Revenues Over Life of
Mine |
$ 75,000 M |
$ 26,000 M |
Total Cash Flow (NPV0%) |
$ 18,900 M pre tax
$ 14,145 M after tax |
$ 5,147 M pre tax
$ 3,847 M after tax |
Average Annual Operating Cash
Flow |
$ 349 M pre tax
$ 276 M after tax |
$ 284 M pre tax
$ 239 M after tax |
NPV @ 5% Discount |
$ 2,589 M pre tax
$ 1,667 M after tax |
$1,059 M pre tax
$ 611 M after tax |
NPV @ 6% Discount |
$ 1,616 M pre tax
$ 904 M after tax |
$ 640 M pre tax
$ 273 M after tax |
NPV @ 7% Discount |
$ 887 M pre tax
$ 328 M after tax |
$295 M pre tax
$ (7) M after tax |
IRR (equity funded) |
8.7% pre tax; 7.7% after
tax |
8.0% pre tax; 7.0% after
tax |
USD:CDN Exchange Rate |
1.05 |
1.05 |
Life
of Mine excludes two year pre-production construction; All $ as
CDN; US$1=CDN$1.05; $/t= $ per tonne; M=million |
Cautionary Note: The PEA study is
based on a conceptual mining plan and metals recovery flowsheets to
support estimation of cost parameters to serve as the basis for
assessing the Buckton Deposit. As such, the PEA is intended to
provide the necessary technical disclosure in prescribed regulatory
format to enable a reasonable person to form a reasonable opinion
of the potential of the Buckton Deposit based on economic
sensitivity to key operational criteria. The PEA is not intended as
a study of definitive economic viability as it is preliminary in
nature and is based on technical and economic assumptions or
extrapolations to be refined in future studies. The PEA is,
furthermore, based on mineral resources consisting mostly of
Inferred resources that, despite uniformity of grade and
continuity, are too speculative geologically to have economic
conditions applied to them that would enable them to be
characterized as mineral reserves, and there is no certainty that
conclusions of the PEA will be realized.
Buckton Polymetallic Deposit
The PEA relies on the Buckton mineral resource as outlined in the
Updated and Expanded Buckton Mineral Resource Study (the "Buckton
resource study") prepared by Apex Geoscience Ltd ("Apex"),
Edmonton, which complies with
National Instrument 43-101 and CIM resource estimation guidelines
and was announced on August 27,
2013.
The Buckton mineral resources are hosted in two
near-surface stacked black shale horizons which are mineralized
with recoverable Mo-Ni-U-V-Zn-Co-Cu-Li-REEs-Y-Th-Sc. The mineral
resources consist of an upper mineralized portion hosted in the
Labiche Formation which directly overlies a higher grade black
shale hosted in the Second White Speckled Shale Formation beneath
it. The two formations together comprise an approximately 13m-140m
thick wedge of mineralized black shale, extending westward from the
eastern erosional edge of the Birch Mountains where they are
exposed on surface but are under progressively thicker overburden
cover westwards. Due to differing head grades and slight
lithogeochemical contrasts, the two formations offer two mining
targets which were discussed separately in previous resource
studies for the Buckton Deposit and reported on a segregated basis
as well as on a combined (blended) basis.
The Buckton mineral resource represents an
aggregate of 4.7 billion tonnes of mineralized material consisting
of 4.4 billion tonnes classified as an Inferred resource and 271
million tonnes classified as an Indicated resource. The Buckton
Inferred and Indicated resources together extend over 21.9 square
kilometres, 20.4 square kilometres of which represents the aerial
extent of the Inferred resource. The Buckton Inferred resource is
open to the north, northeast and south, and eastward to the
erosional edge of the Birch Mountains over a large area with thin
overburden cover where mineralization intermittently outcrops at
surface or is intermittently exposed throughout several kilometres
of valley walls. The Inferred resource is open to the south over
the approximately seven kilometres separating it from the Buckton
South Zone mineral resource (announced January 11, 2013). Stratigraphic and surface
exploration information suggests that the Buckton and Buckton South
Zones may well be connected. The Buckton Indicated resource is
located in the middle of the deposit surrounded by the Inferred
resource which may be upgraded into the Indicated class subject to
minimal infill drilling.
The PEA is based on mineralized material
consisting of the aggregate of Inferred and Indicated resources,
comprising mineralized material 94% of which consists of an
Inferred resource. The PEA mineral resource can, accordingly, be
deemed to consist entirely of an Inferred resource for disclosure
purposes.
Polymetallic black shale is an emerging deposit
type which has gained recognition over the past decade mainly due
to advances in application of bulk bioleaching procedures to
extract low grade metals from the shale. There is currently only
one active mining operation extracting polymetals via
bio-heapleaching (Talvivaara Mine, Finland) and two other scoping stage projects
that are exploring/developing polymetallic deposits in Swedish
black shale. These operations provide some resource estimation and
operating cost guidelines that are relevant to evaluating the
Buckton Deposit.
The resource block model from the Buckton
resource study was utilized by P&E Mining Consultants Inc. to
delineate a mining pit shell using pit optimization software,
relying on various constraining design, operating and processing
cost parameters collectively comprising threshold cut-offs of
$12.5/tonne and $10/tonne for the Second White Speckled Shale and
Labiche formations, respectively. The recoverable in-situ value for
each resource block was tested against the cut-offs to determine
its inclusion into the optimized pit shell. A portion of the
optimized pit shell was further revised to reduce pre-stripping
costs during the initial years of production. The final designed
open pit outlined by the PEA, accordingly, delineates that portion
of the mineralized material which meets economic threshold criteria
and represents tonnages that are economically extractable by open
pit method.
The PEA reports that 4.5 billion tonnes (roughly
96%) of the total resources can be mined by open pit at a 0.5:1
strip ratio for Base Case (both the Labiche Shale and the Second
White Speckled Shale are mined together and processed on a blended
basis). This material would be overlain by 2.3 billion tonnes of
overburden waste (for comparison, under the Alternate Case scenario
976 million tonnes, or 99%, of the total resources hosted in the
Second White Speckled Shale can be mined by open pit at a 6.27:1
strip ratio, this tonnage is overlain by 6.1 billion tonnes of
waste material consisting of the Labiche Formation Shale and till
overburden above it). Details of the various tonnages are tabulated
below.
|
Buckton Mineral
Resource (000,000 tonnes)
per Resource Study Aug/2013 |
Mineable Material
and Cover (000,000 tonnes)
per PEA Optimized Pit Shell |
|
Indicated |
Inferred |
Base Case |
Alternate Case |
Overburden |
28 |
1,571 |
2,287 |
6,119 |
Labiche Fm |
207 |
3,517 |
4,544 |
2nd White Speckled Shale Fm |
65 |
923 |
976 |
Notes: Figures may not
add exactly due to rounding; Buckton Mineral Resource per the
Updated and Expanded Buckton Mineral
Resource Study announced August 27, 2013. |
Mineral resources are not mineral reserves
and do not have demonstrated economic viability. There is no
guarantee that all or any part of the mineral resources reported
herein will be converted into a mineral reserve. An 'Inferred
Mineral Resource' is that part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of
geological evidence and limited sampling and reasonably assumed,
but not verified, geological and grade continuity. The estimate is
based on limited information and sampling gathered through
appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes. An 'Indicated Mineral Resource' is
that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be
estimated with a level of confidence sufficient to allow the
appropriate application of technical and economic parameters, to
support mine planning and evaluation of the economic viability of
the deposit. The estimate is based on detailed and reliable
exploration and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for
geological and grade continuity to be reasonably assumed. The metal
recoveries reported represent preliminary mineral recovery testing
results collated from the collective bench scale laboratory
testwork completed by DNI to date and may not reflect actual
process recoverability that might be achieved in a mineral
production operation, all of which is the subject of ongoing
studies.
Metal Grades & Recoveries
Whereas the mineral resource study for the Buckton Deposit
estimated resources for recoverable
Ni-Mo-U-V-Zn-Cu-Co-Li-REE-Y-Th-Sc, some of these metals were
provisionally omitted from the PEA based on economic considerations
(Mo-Li-V) or due to uncertainties in their markets (Sc-Th). As
such, the PEA contemplates production of saleable final products of
Ni-Co and Zn-Cu as sulfides, U as oxide "yellowcake", and REEs as
separated REE oxides. Should markets for Sc-Th be better defined in
the future, they can be expected to present additional economic
value which might be captured into subsequent updates of the PEA.
Similarly, should future testwork achieve higher recoveries for
Mo-Li-V to outweigh costs of their respective recoveries, they too
can be expected to present additional future value.
The PEA relies on metal recoveries after
applying estimated leaching, entrainment and processing circuit
losses as tabulated below. The metal recoveries reported represent
preliminary mineral recovery testing results from the collective
bench scale laboratory testwork completed by DNI to date and may
not reflect actual process recovery achievable in a mineral
production operation. Metal recoveries are the focus of ongoing
studies by DNI to be more definitively established during a future
pilot plant demonstration leaching test for a bulk sample from the
deposit. The recoveries are, however, consistent with initial
results from column leaching testwork currently in progress thereby
providing guidance for extrapolation and suggesting that column
leaching might achieve metal recoveries similar to those documented
from the benchscale stirred tank testwork.
The PEA utilizes metals recoveries per the
Buckton resource study which are more conservative than those used
in prior resource studies for the Buckton Deposit. These recoveries
are believed to represent bioheapleaching field conditions, relying
on benchscale bioleaching testwork results from work in progress at
Canmet conducted under moderately acidic conditions (ie: lower
recoveries than tests from more aggressive acidic conditions). This
view was guided by extrapolations from the Talvivaara
bioheapleaching operation in central Finland which is the only mining operation
worldwide relying on bioheapleaching to concurrently recover a
suite of metals from its mineralized black shale. The conditions
for leaching of metals from the Buckton black shales is subject to
further optimization via additional testwork..
In the absence of advanced metals processing
testwork and data from a hydrometallurgical plant pilot test, there
is some uncertainty in estimates of ultimate metal recoveries in
the downstream hydrometallurgical plant envisaged for the Buckton
Deposit. Anticipated recovery losses related to hydrometallurgical
processing were, accordingly, established by Hatch based on
extrapolations from other projects and estimates based on
experience. Solution entrainment, precipitation efficiency, and
re-dissolution efficiency estimates were built into the mass
balance framework. Aggregate metals leaching and processing costs
were estimated separately for the Labiche and the Second White
Speckled Shale formations by relying on two separate mass balances
to determine processing losses and reagent consumption for each.
This enables evaluation of various mining scenarios whereby the two
formations are blended in different proportions during mining.
Mineral resources, metal grades, recoveries and
average quantities of projected annual metal production are
tabulated below including adjustments for entrainment and
processing efficiencies. Total recoverable metals per the Buckton
resource study and per the PEA production plan are shown for
comparison, in addition to average quantities of projected annual
metal production as projected by the PEA production schedule.
Buckton Mineral
Resource - Grades, Tonnages and Metals Quantities |
Mineralized Shale (tonnes) |
4,544
million tonnes per PEA Optimized Pit Shell |
|
Raw Grade
(ppm) per
Resource
Study (1) |
Benchtests
Recovery %
per
Resource
Study |
Recovery %
after Leaching
and Processing
Losses
per PEA (2) |
Metal/Oxide
Price (3)
(US$) |
Recoverable
metal/oxide
(tonnes)
per Resource
Study |
Recoverable
metal/oxide
(tonnes)
per PEA |
Projected
metal/oxide
Production
(tonnes/year)
per PEA |
Ni |
67.6 |
64% |
51% |
$8.3 /lb |
162,375 |
156,208 |
2,441 |
U3O8 |
10.8 |
70% |
62% |
$60.7 /lb |
31,415 |
30,043 |
469 |
Zn |
169.9 |
52% |
48% |
$0.9 /lb |
384,376 |
370,226 |
5,785 |
Cu |
40.3 |
25% |
23% |
$3.6 /lb |
43,663 |
42,041 |
657 |
Co |
15.4 |
72% |
57% |
$14.4 /lb |
41,380 |
39,872 |
623 |
La2O3 |
48.6 |
20% |
15% |
$44.6 /kg |
34,024 |
33,055 |
516 |
Ce2O3 |
84 |
30% |
23% |
$43.2 /kg |
90,166 |
87,563 |
1,368 |
Pr2O3 |
10.5 |
40% |
30% |
$140.4 /kg |
14,691 |
14,273 |
223 |
Nd2O3 |
40.1 |
43% |
33% |
$156.2 /kg |
61,751 |
59,926 |
936 |
Sm2O3 |
7.9 |
47% |
36% |
$68.2 /kg |
13,267 |
12,858 |
201 |
Eu2O3 |
1.7 |
61% |
46% |
$2,742.1 /kg |
3,550 |
3,442 |
54 |
Gd2O3 |
6.7 |
63% |
48% |
$105.8 /kg |
14,968 |
14,510 |
227 |
Tb2O3 |
1 |
65% |
49% |
$1.1 /kg |
2,386 |
2,315 |
36 |
Dy2O3 |
5.9 |
65% |
49% |
$1,240.3 /kg |
13,578 |
13,185 |
206 |
Ho2O3 |
1.2 |
64% |
48% |
$202.9 /kg |
2,630 |
2,555 |
40 |
Er2O3 |
3.4 |
62% |
47% |
$169.0 /kg |
7,532 |
7,318 |
114 |
Tm2O3 |
0.5 |
60% |
46% |
$97.0 /kg |
1,104 |
1,072 |
17 |
Yb2O3 |
3.4 |
58% |
44% |
$102.9 /kg |
6,982 |
6,787 |
106 |
Lu2O3 |
0.5 |
55% |
42% |
1,273.0 /kg |
1,066 |
1,035 |
16 |
Y2O3 |
40.4 |
67% |
51% |
$107.8 /kg |
96,106 |
93,094 |
1,455 |
Mineral resources are not mineral reserves and do not have
demonstrated economic viability. There is no guarantee that all
or any part of the mineral resources reported herein will be
converted into a mineral reserve. Notes: (1) The Buckton
mineral
resource consists of 94% Inferred resource and 6% Indicated
resource. For the purposes of the PEA the resource is deemed
to consist entirely of an Inferred resource representing the
aggregate of the two classes. Mo, V, Li, Th and Sc excluded
from
PEA; (2) Recovery losses per the PEA represent the aggregate
of leaching entrainment losses and metals processing circuit
losses; (3) Metal or oxide prices are the two-year trailing
average to May 31, 2013 (three-years for
Tm2O3). Sources:
Metal-pages.com; Asianmetal.com; USGS. USDx1.05=CDN; Metal prices
vary among various commodity information sources
and, in all conflicting instances, the lower pricing was used.
t=tonne; lb=pound; kg=kilogram. Some figures may not add
exactly due to rounding. |
Metal Prices
The PEA economics are based on the Buckton resource study announced
August 27, 2013, which relied on the
two-year (three-years for Tm2O3) trailing average metal/oxide
prices to May 31, 2013, without
forecasting the future nor extrapolating forward from current
market trends over the long anticipated mine life spanning several
decades. Metal/oxide prices used are as quoted by Metal-pages.com,
Asianmetal.com; and USGS. Metal prices vary among various commodity
information sources and, in all conflicting instances, the lower
pricing was used. The prices used are shown in the table above
along with grades and recoveries. For the purposes of the PEA, REEs
are valued per their respective price quotes as separated final
saleable products given that the Buckton metal processing
contemplated by the PEA provide for REE separation facilities.
It is of note that, based on the price scheme
used, recoverable REEs currently represent majority of the per
tonne value represented by the two shales, whereas five years ago
at the outset of DNI's launch of exploration of the Buckton Zone
(and the SBH Property) the bulk of the gross in situ value of the
shales was related to their base metals and Uranium content. This
is a typical characteristic of polymetallic deposits, whose value
is the aggregate of the individual recoverable values represented
by each of the contained recoverable metals which do not
necessarily follow the same commodity market trends at any given
time.
Since REEs account for a significant proportion
of the recoverable gross value of the resource, ultimate economics
of the Buckton Deposit are subject to uncertainties of long term
REE pricing, viability of REE demand and the unknown effect of new
production on future REE markets.
Current demand for REEs is robust considering
they are critical to a wide spectrum of high tech and electronics
based products, as well as magnets and greening industries, and
they are generally predicted to remain in high demand well into the
future. As critical metals in short supply, however, their future
demand can realistically be expected to be subject to unpredictable
unknowns including technological innovation which can likely have a
more significant affect on pricing fluctuations than simple
traditional supply demand dynamics. Considering the multiplicity of
metals that the Buckton Deposit can produce, a detailed predictive
marketing study was not completed as part of the PEA, especially
given the long mine life of contemplated operations at Buckton.
Mining Operations Overview
The PEA envisages a large shallow open pit mine with 30 degree pit
slopes to extract a tabular and nearly horizontal shale package
over a 64 year mine life at a production rate of 72 million tonnes
of mineralized feed per year at an average strip ratio of 0.5:1.
The mining scenario contemplates extracting and processing the
Second White Speckled Shale Formation as well as the overlying
Labiche Formation by stripping away the overlying till overburden
to be backfilled behind the advancing open pit face. To extract the
foregoing tonnage of mineralized feed, an average of 105 million
total tonnes will be mined annually including overburden and
mineralized feed.
Due to the poorly consolidated nature of the
shales, the PEA contemplates that all material can be excavated by
free-digging without any drilling and blasting. The run-of-mine
feed material to be leached will be mechanically stacked on a
multi-compartment 2km x 3km leach pad after screening/sizing and
agglomeration with sulfuric acid. The overburden waste material
will be will be mined similarly and backfilled into the open pit
(except during the initial few years when it is stacked outside the
pit).
The leach pad will be stacked up to a height of
8m and irrigated with bioleaching solution in a traditional heap
leaching procedure whereby the leach solution (PLS) carrying
dissolved metals is collected at the bottom of the heaps once it is
percolated through the heap, and is fed to a metal processing plant
through a series of pipes. The heap will be equipped with aeration
piping and blowers to supply the necessary oxygen for the well
being of the bio-organisms, which will be harvested from the shale
itself and cultured as was done during DNI's prior testwork. Only a
single heap leaching cycle is envisaged given the relatively rapid
metal dissolution rates observed during the testwork completed to
date suggesting that a six month leaching gestation would be more
than adequate for extraction of the metals. The barren leach
material will be reclaimed, neutralized and conveyed as backfill
into the previously mined out portions of the open pit.
The mining development schedule envisages a two
year construction period ahead of the initial six month mining and
heap stacking period followed by six months of leaching. As such,
only partial revenues are recognized during the first year of
production.
Mineralized feed and overburden waste will be
excavated by large capacity cable shovels and dumped into mobile
sizers which feed a network of dedicated conveyors either
transporting material to the waste dump or the leach pad
area. Barren leach material will be conveyed from the leach
pad area and placed upon the backfilled overburden waste material
using large capacity stackers.
Metals Leaching, Recovery and Processing
Overview
The PEA relies on a process engineering framework formulated by
Hatch Ltd. for the extraction, recovery and processing of metal
products from the Buckton Deposit. The process engineering was
reviewed by Mr. Bruce Cron
P.Eng. who is the independent Qualified Person for the
metals leaching and processing design portion of the PEA.
Considering the multiplicity of potential final
metal products, Hatch completed an initial evaluation to identify
the metals which have potential of economic viability to guide
further process design development and the PEA. The screening study
identified Cu-Zn-U-Ni-Co-Li-REE-Y as the metals which have
potential economic viability. The screening study recommended
omitting Mo-V-Li from final products since the costs of their
recovery outweighed revenues they might contribute, and also
recommended omitting Sc-Th based on uncertainties in their market
demand (to some extent V is also subject to a concern about
potential market oversupply).
Hatch subsequently formulated a block flow
diagram and process description entailing extraction by low reagent
dosage bio-heap-leaching which minimizes operating costs while
providing reasonable metals recoveries. Bio-heap leaching is a form
of acid heap leaching. The keys to low cost operation lie in the
minimal amount of required size reduction (ie: crushing), as well
as utilization of sulfide components in the feed, with the help of
microbial activity, to generate some or all of the acid required to
overcome the acid consuming components in the rock. Although both
the Labiche Formation and the Second White Speckled Shale Formation
contain acid generating sulfide minerals, they are both net acid
consuming given their carbonate contents.
The metals recovery procedures envisaged are
similar to other shale bio-heapleaching processes which use
hydrometallurgical selective base metal precipitation by addition
of hydrogen sulfide to the pregnant leaching solution. Next,
ion exchange is used to recover Uranium from the leach
solution. The main stream is then neutralized with lime and
mildly re-acidified to concentrate the rare earths and some base
metals into a smaller stream. Ni-Co are precipitated as sulfides by
treatment with H2S, and finally, REEs are precipitated
from the solution as a mixed REE-oxide chemical concentrate using
oxalate reagent. The final metal recovery products are: a mixed
Copper-Zinc sulfide concentrate; a mixed Nickel-Cobalt sulfide; dry
Uranium oxide (yellowcake) and a REE-Y bulk concentrate. which is
further refined at a separation plant to produce final separated
individual oxides (+/- carbonates) for sale.
The majority of leaching solution is
re-circulated to the heaps during the leaching process. Residues
consisting predominantly of inert gypsum are separated out during
the neutralization/re-acidification process. Final leached tailings
from the heaps are neutralized with lime and backfilled into the
pit, and effluent solutions are similarly treated prior to
discharge.
Ancillary to the mining and leaching operations
are the operation of several plants for producing the necessary
processing reagents, namely; an H2S plant, sulfuric acid
plant with capacity for 9,600 tonnes per day, and a calcining plant
for the production of quicklime. These reagents are further
discussed later in this announcement.
Opportunities identified by Hatch for
improvement include possibility for selective pre-concentration of
the pregnant leaching solution prior to its treatment in the metal
recovery circuits (eg: membrane separation by nano-filtration)
to enhance metals concentrations leading to potential for better
recovery or lower reagent consumption.
Hatch relied on the available test data to
establish reasonable estimates of operating conditions and metal
extraction rates, to prepare process design criteria to construct a
mass balance model for the determination of equipment throughputs
as a basis for equipment sizing, reagents consumption, production
rates, chemical compositions, and energy usage. Hatch prepared
capital and operating cost estimates for the Base Case annual
leaching throughput rate of 72 million tonnes as well as the
Alternative Case scenario for a 36 million tonnes annual rate.
Reagent Consumption
The contemplated leaching and metals processing system will consume
a variety of reagents. Natural gas, lime and sulfuric acid
represent the critical reagents required in relatively large
quantities and have by far the greatest impact on overall operating
costs, and low-cost feed-stocks were identified for each of these.
Reasonably priced natural gas is available throughout Alberta. The contemplated operations entail
on-site calcining of locally sourced limestone to produce
quicklime. On-site production of sulfuric acid relies on large
local supplies of sulfur which is one of the principal waste
products from oil sands operations in the region and is currently
stockpiled on surface with no foreseeable economic use. Lime and
sulfuric acid production costs are capital intensive and sensitive
to transportation cost. Reduction of their consumption is an
opportunity for improvement that would also reduce acid/lime plant
sizing and thereby reduce capital as well as operating costs. This
is discussed in a later section of this announcement.
The PEA estimates that leaching and metals
processing will consume on average approximately 40kg of sulfuric
acid per tonne of mineralized feed processed. Lime consumption for
processing of the two shale formations is different and on average
requires 31kg of limestone per tonne of blended mineralized feed.
These figures are based on preliminary stirred tank and column
leaching testwork results as at July/2013 (results from additional
work completed since then suggest that sulfur consumption might be
lowered without significantly sacrificing metals recoveries).
The PEA uses a sulfuric acid cost of
$59 per tonne of acid, consisting of
the cost of producing sulfuric acid at the onsite acid generation
plant and an allowance of $10 per
tonne for transportation of sulfur to the plant from nearby oil
sands operations. A collateral benefit of the sulfuric acid
generation plant is the excess electricity produced from its
operation, which is reflected in operating costs as a power credit
of $0.15 per tonne. The PEA assumes
that the excess power would be fed back into the local electrical
grid.
The PEA uses a cost for limestone delivered to
the on-site calcining plant of $35
per tonne of limestone, nearly half of which ($16 per tonne) is the cost of transporting the
limestone from a nearby operating quarry. Although a number of
outcroppings of limestone exist nearer the Buckton Deposit, none is
currently in production. The proximity of possible sources for
limestone nearer the Buckton Deposit offer future opportunities for
reducing costs.
Effluents and Tailings
The majority of effluent volume is from a bleed stream of partially
neutralized leach solution which is further neutralized by the
addition of lime to a pH of 10 for removal of residual
contaminants, then adjusted to a final release pH. The clarified
solution is temporarily held in an effluent pond before discharge.
Solid residues from effluent treatment consist largely of very fine
gypsum and various iron precipitates which are held in a gypsum
pond for dewatering.
Tailings consist of leached residue which is
unloaded from the leach pads by shovel and conveyor system.
The barren material is stored on surface in the initial few years
but subsequently backfilled in the open pit. The tailings may be
blended with lime if additional neutralization is required.
DNI has not yet completed the necessary pilot
testwork to establish definitive parameters relating to treatment
of effluents and tailings from the contemplated operations.
Rare Earth Element Oxides Bulk Concentrate
and Separation Plant
The Buckton black shales have similarities with Chinese ionic clays
in that REEs from Buckton are readily extracted from the shale with
reasonably high recoveries by a mild leaching solution. One of the
final products of the conceptual flow sheet for the envisaged
Buckton hydrometallurgical plant is precipitation of a relatively
pure mixed rare earth element oxide (REO) concentrate that is
calcined as an intermediate product. This becomes the feed for a
separation plant to produce respective final saleable products
(oxides +/- carbonates) of individual REEs. Expected chemistry of
the Buckton REO bulk concentrate is in contrast to concentrates
produced from most other REE projects many of which are hosted in
hard rocks and typically produce mineral concentrates which are
relatively impure and potentially require aggressive leaching and
purification before they are fed into a separation plant.
Appropriate pricing of REE final products is
highly dependant on their purity; namely, on whether they are 99%+
pure or have purities as high as 99.99% commanding a large sale
price differential between the two. DNI has not yet completed
the necessary REE precipitation and separation testwork to
establish definitive guidelines to prepare estimates of capital and
operating costs for separation of the REE concentrate contemplated
as the final products from the Buckton Deposit. To provide an
interim guide, the PEA relies on recent third party public
information to prepare an extrapolated estimate, assuming that all
referenced separation plants can achieve separation of products
with 99%+ purity, and further assuming that a separation facility
constructed by DNI would be designed to specification capable of
achieving similar purity.
Considering that little, if any, spare REE
separation capacity is presently available outside of China which dominates current world REE
supply, the PEA recommends that DNI would benefit from including a
REE separation plant of its own into its plans for developing the
Buckton deposit. Since no meaningful cost data is published by
Chinese REE producers, the PEA's cost estimates for Buckton rely on
NI 43-101 publicly available information from selected public
companies which are advancing their projects toward construction.
Notably, the Thor Lake project (Avalon Rare Metals Inc)
Pre-Feasibility studies include information for a REE separation
plant in Geismar, Louisiana.
This plant is designed to process a REO hydrometallurgical
plant precipitate bulk concentrate, presenting the best technology
and processing benchmark for the expected high purity REO mixed
concentrate that is envisaged to be produced from the Buckton
Deposit.
Public information for the Geismar plant consist of a summary from its
Pre-Feasibility study (Avalon press April
2012) which reported a capital cost of US$302 million and an operating cost of
US$5.6 per kg of REE oxide product
for this plant, with an annual capacity to process/produce
approximately 10,000 tonnes of final product. These figures were
revised by Avalon's pre-feasibility study but disclosed (Avalon
press April 2013) on a blended basis
along with other overall operating costs. Relying on the foregoing
and benchmarking from other REE projects in the upper range of
operating cost estimates (eg: approximately US$14/kg of product for Lynas Corporation's Mount
Weld operations), the PEA uses an operating cost of US$10 per kg of final product as a conservative
estimate for separation of REEs from Buckton. The PEA estimates a
capital cost of US$269 million for
the construction of the separation plant capable of processing up
to 7,200 tonnes of REO mixed concentrate annually.
The contemplated Buckton mining operations have
a projected capacity for the annual production of an average of
5,600 tonnes of mixed REO bulk concentrate (ranging 4,100-7,200
tonnes as a function of grade fluctuations). Any excess processing
capacity of the separation plant may offer opportunities for
additional revenue through toll-milling of third party REO
concentrates.
The PEA notes that although the basic metrics of
feeding an REO concentrate to a purification and separation
facility apply equally well to all REE separation plants in general
terms, the plants are ultimately custom designed to feed
characteristics. But as purity is progressively improved by
intermediate processing steps, the final separation processes tend
to look progressively more like standardized combinations of
solvent extraction, final precipitation, drying and calcining to
produce oxides or carbonates. Accordingly, even though the
projected REE production rate for Buckton is similar to those from
other REE projects in the Western world such that interpolation
from these provides a reasonable benchmarks to guide an early stage
PEA, the need for strategic testwork by DNI to establish physical
and chemical characteristics of contemplated REO bulk concentrate
from Buckton is self evident.
The PEA further notes that location of the
contemplated separation plant on-site or off-site is predominantly
a function of evaluating synergies provided by the envisaged
Buckton on-site infrastructure against benefits provided by an
off-site location with easy access to infrastructure and highly
skilled operating staff. These considerations are beyond the scope
of the PEA and are best assessed in the context of a future
Pre-Feasibility study.
While the PEA prepared estimates of capital and
operating costs for the construction and operation of a stand-alone
separation plant customized to the Buckton concentrates,
consideration of third party toll-milling is an alternative worthy
of future investigation if such capacity becomes available.
Capital Costs
The PEA covers all aspects of organizing, constructing and
conducting mining and processing operations at the Buckton Deposit
including mining, metals extraction from the shales by heap
leaching, metals recovery from the pregnant leach solution and REE
separation into saleable final products, as well infrastructure and
maintenance thereof. The PEA capital cost estimates rely on
quotations and estimates from suppliers and contractors, augmented
by estimates from experience from other comparable operations. The
PEA contemplates a two year pre-production construction and
pre-stripping period, during which pre-production capital
expenditures are incurred.
Estimates of capital costs were prepared
generally consistent with an AACE Class 5 estimate with an accuracy
of -20%/+50%, in-line with guidelines for an order of magnitude
study at the level of engineering and method employed to develop
the cost estimates for Buckton. A 30% contingency was, accordingly,
applied to direct installed costs of all metals leaching and
processing equipment except the REE separation plant, 5% applied to
the acid plant costs, and an overall 20% applied to mining
equipment costs and infrastructure. The benchmark capital cost
estimate for the REE separation plant includes a contingency.
The PEA estimates a pre-production capital cost
on a constant (undiscounted) dollar basis of $3,766 million, which includes $55 million of indirect owner costs and
$474 million of contingencies. In
addition, annual sustaining capital requirements during the mine
life are estimated to $38 million per
year (equivalent to approximately 1.25% of pre-production capital
costs) representing an aggregate of $2,445
million over the 64 year mine life ($547 million if discounted at 6%). Sustaining
capital represents the aggregate cost of mining and processing
equipment replacement, capitalized infrastructure and facility
upgrades over the 64 year mine life, as well as ongoing capitalized
repairs and maintenance to leaching pads.
Details of capital costs are tabulated below,
showing costs of mining and processing equipment and
facilities.
|
|
|
Summary of Capital Costs |
Pre-Production Capital Costs |
|
($000) |
Pre-stripping |
|
19,632 |
Mining Equipment |
|
476,600 |
Metals Leaching & Processing (direct
installed costs) |
|
1,839,000 |
Metals Leaching & Processing (indirect costs
incl owner costs) |
|
518,000 |
Infrastructure |
|
156,000 |
Contingency |
|
474,447 |
Subtotal Pre-Production Capital Costs |
|
3,483,679 |
|
|
|
REE Separation Plant (Direct & Indirect
installed costs and contingencies) |
|
282,450 |
Total Pre-Production Capital
Costs |
|
3,766,129 |
|
|
|
Aggregate Sustaining Capital Over 64 year Mine
Life |
|
2,445,600 |
Note: Contingency
includes a $344 million related to metals leaching and processing;
Figures are stated on a constant
dollar basis; Sustaining Capital includes closure and reclamation
costs; Numbers may not add exactly due to rounding. |
Metals leaching and processing capital costs
comprise by far the largest component of overall capital costs for
both mining scenarios evaluated. They represent, excluding
sustaining capital, an estimated $2,983
million for direct and indirect costs, including a
$344 million contingency. Sustaining
capital requirements relating to metals leaching and processing
also comprise the bulk of the sustaining capital requirements
representing approximately $37
million annually or the aggregate of $2,361 million over the 64 year mine life
($534 million if discounted at 6%).
Contingencies related to metals leaching and processing make up 72%
of the aggregate $474 million of
contingencies. Details of leaching and processing costs are
tabulated below.
Metals Leaching
and Processing Capital Costs |
|
Installed
Cost
($000,000) |
($000,000) |
Materials Handling
(Transportation conveyor system, Agglomeration drum, Heap leach
stacking equipment) |
156 |
|
Heaps
(Heaps, Blowers, PLS and Irrigation Ponds, Pipelines) |
380 |
|
Metals Recovery Plant
(Cu/Zn and Ni/Co sulfide recovery, Uranium Recovery,
Neutralization, Re-Acidification, REO
Precipitation) |
241 |
|
Reagents Production
(Acid Plant, Calcining Plant, H2S Plant) |
937 |
|
Tailings
(Gypsum Pond, Interim Tailings Facility) |
125 |
|
Subtotal Installed Equipment
Direct Cost |
1,839 |
|
Indirect Costs (28% of installed costs)
(EPCM, Construction facilities, Capital spares, Commissioning
indirects, Ramp-up support, Owners costs) |
|
518 |
Contingency
(5% of direct installed cost for acid plant; 30% for all else) |
|
344 |
Total Installed Equipment
Cost |
2,701 |
|
|
|
Rare Earth Separation Plant
(Direct & Indirect Costa and Contingencies) |
|
282 |
Total Metals Leaching and
Processing Pre-production Capital Cost |
2,983 |
The acid plant, with an estimated $790 million installed direct cost, makes up
nearly half of the $1,839 million
total processing equipment direct installed cost. This figure
represents $1,075 million when its
pro-rata share of indirect costs are included, and makes up 36% of
the overall $2,983 million capital
cost for metals leaching and processing equipment and 28% of the
total pre-production capital cost. The capacity (size), hence cost,
of the acid plant is a function of the amount of sulfuric acid
required during operations and may be downsized should acid
consumption be reduced (possible capital and operating cost savings
are described in a later section of this announcement).
The heap leach pads ($380
million) and the REE separation plant ($282 million) represent the second and third
highest installed metals processing equipment direct costs.
Capital costs of mining equipment represent an
estimated $575 million including a
$99 million contingency. The bulk of
the foregoing costs are related to conveyors ($113 million), sizers ($122 million) and shovels ($100 million).
Capital costs for the mine provide an estimated
$187 million for basic site
facilities and infrastructure which include costs of construction
of a 50km main access road to the mine, a 30km power-line, a 30km
gas line and a 30km raw water system. Infrastructure costs also
include provision for camp, office facilities, air strip and a 20%
contingency.
Operating Costs
The PEA estimates overall operating costs to be $10.34 per tonne of mineralized shale mined and
processed, including $0.29 per tonne
for G&A. Metals leaching and processing costs make up bulk of
the overall operating costs representing $8.07 per tonne (78%) in addition to an average
of $0.78 per tonne for REE
separation. The cost of REO separation is calculated as a cost per
kg of REO produced and processed, its per tonne cost fluctuates
from one year to the next due to REO grade variations in the tonnes
of mineralized shale mined. Operating Costs are tabulated
below.
Operating
Costs |
|
($ per tone of feed) |
Waste Excavation |
0.40 |
Mining |
0.80 |
Metals Leaching and Processing |
8.07 |
REE Separation cost |
0.78 |
G&A |
0.29 |
Total |
10.34 |
Notes: Operating costs
shown represents the average cost over the mine life. |
Details of costs for the leaching and processing
of metals are tabulated below, reiterating the significance of
reagent consumption costs, consisting mostly of the costs for
upstream acidification of heaps during leaching, their subsequent
neutralization during remediation, and similar costs related to
downstream processing of metals extracted into solution from the
shale. Cost relating to leaching and processing of the Second White
Speckled Shale Formation and the Labiche Formation are shown
separately alongside a cost blended in the proportion of their
respective relative tonnages per the Buckton production plan. Due
to minor local variations in the relative thickness of the two
formations throughout the Buckton Deposit, the blended operating
cost will vary from one year to the next based on the relative
proportion of material mined and processed from each Formation.
Metals Leaching
& Processing Operating Costs ($/tonne) |
|
Second White Speckled Shale |
Labiche Shale |
Blended Shale Resource |
Reagents - Upstream |
2.35 |
2.35 |
2.35 |
Neutralization/Re-acidification |
2.01 |
1.36 |
1.50 |
Reagents - Metals Recovery |
0.98 |
0.23 |
0.39 |
Labour |
0.58 |
0.58 |
0.58 |
Power (Credit) |
(0.15) |
(0.15) |
(0.15) |
Maintenance |
1.20 |
1.20 |
1.20 |
Effluent Treatment |
0.11 |
0.11 |
0.11 |
Tailings Treatment |
1.80 |
1.80 |
1.80 |
5% non-specified costs |
0.35 |
0.28 |
0.29 |
Total |
9.23 |
7.77 |
8.07 |
Notes:
Figures exclude G&A and Sustaining Capital; Costs for Blended
Shale Resource are the average cost over the mine life
as weight averaged based on proportionate tonnages of Second White
Speckled and Labiche shales. |
Taxes and Royalties
The PEA reports various economic parameters such as cash flows, Net
Present Value and Internal Rate of Return on a pre-tax as well as
after-tax basis, calculated based on a Canada Federal tax rate of
15% and an Alberta Provincial tax rate of 10% levied on net
operating revenues after deducting capital property amortization
and the Alberta Provincial Mining
Royalty.
The Buckton Deposit (and the SBH Property) is
held 100% by DNI, and there are no royalties due to any third
parties other than the Provincial Mining Royalty due to the
Province of Alberta levied against
production revenues. This royalty is equivalent to a 1% royalty
levied on gross revenues until all development and capital
expenditures are recouped, but which converts thereafter to the
greater of a 1% royalty levied on gross revenues or 12% royalty
levied on net operating revenues.
Economic Discussion & Sensitivity Analysis
The PEA financial model assumes 100% equity financing although DNI
envisages that the Buckton operations might more likely be financed
through a combination of debt, equity and offtake arrangements.
On an undiscounted basis, the contemplated
mining operations for the Buckton Deposit are projected to yield an
estimated $75 billion in gross
operating revenues over the 64 year mine life (average $1.15 billion per year), from material with a
gross in situ recoverable average value of $16.5 per tonne.
Metals production profile is tabulated below
showing also the relative contribution of the respective metals to
gross value.
Projected Metals Production
Profile |
|
Projected Metals/Oxide Production
(tonnes) |
Projected Gross Value
($000,000) |
|
Life of Mine |
Annual |
% |
Life of Mine |
% |
Ni
U3O8
Zn
Cu
CO
TREO |
156,208
30,043
370,226
42,041
39,872
352,990 |
2,441
469
5,785
657
623
5,515 |
16%
3%
37%
4%
4%
36% |
$1,368
$4,225
$806
$354
$1,327
$66,993 |
2%
6%
1%
0.5%
2%
89% |
Totals |
991,380 |
15,490 |
100% |
$75,072 |
100% |
|
TREO
LREO
HREO |
352,990
207,676
145,315 |
5515
3,245
2,271 |
100%
59%
41% |
$66,993
$18,370
$48,623 |
100%
27%
73% |
Notes: HREO (Total
Heavy Rare Earth Oxides) = the aggregate of Y203, Eu203, Gd203,
Tb203, Dy203, Ho2O3, Er203,
Tm203, Yb203 and Lu203; LREO (Total Light Rare Earth Oxides) = the
aggregate of La2O3, Ce2O3, Pr2O3, Nd2O3,
Sm2O3. TREO (Total Rare Earth Oxides) = HREO plus LREO. Numbers may
not add exactly due to rounding. |
Projected REE
Production Profile |
|
La2O3 |
Ce2O3 |
Pr2O3 |
Nd2O3 |
Sm2O3 |
|
|
|
|
|
Life of Mine (tonnes) |
33,055 |
87,563 |
14,273 |
59,926 |
12,858 |
|
|
|
|
|
Annual (tonnes) |
516 |
1,368 |
223 |
936 |
201 |
|
|
|
|
|
%of Tonnes |
9% |
27% |
6% |
27% |
8% |
|
|
|
|
|
Life of Mine Gross Value
($000,000) |
1,547 |
3,972 |
2,104 |
9,826 |
920 |
|
|
|
|
|
% of Gross Value |
2% |
6% |
3% |
15% |
1% |
|
|
|
|
|
|
|
Eu2O3 |
Gd2O3 |
Tb2O3 |
Dy2O3 |
Ho2O3 |
Er2O3 |
Tm2O3 |
Yb2O3 |
Lu2O3 |
Y2O3 |
Life of Mine (tonnes) |
3,442 |
14,510 |
2,315 |
13,185 |
2,555 |
7,318 |
1,072 |
6,787 |
1,035 |
93,094 |
Annual (tonnes) |
54 |
227 |
36 |
206 |
40 |
114 |
17 |
106 |
16 |
1,455 |
%of Tonnes |
2% |
10% |
2% |
11% |
2% |
7% |
1% |
7% |
1% |
100% |
Life of Mine Gross Value ($000,000) |
9,910 |
1,612 |
5,325 |
17,171 |
545 |
1,299 |
109 |
734 |
1,384 |
10,534 |
% of Gross Value |
15% |
2% |
8% |
26% |
1% |
2% |
0.2% |
1% |
2% |
16% |
Notes: Numbers may not
add exactly due to rounding. |
On average, the Buckton Deposit will yield an
estimated $349 million of pre-tax
annual net operating income ($276
million after-tax) after payment of the Alberta Provincial
Mineral Royalty, from material with an in-situ recoverable value of
$16.5 per tonne which is mined and
processed at a $6.2 per tonne
operating margin. On an undiscounted basis, during its 64 year mine
life, the deposit will yield an aggregate of $18.9 billion of pre-tax net operating income
($14.1 billion after-tax) after
paying an aggregate of $3 billion in
Alberta Provincial Mineral
royalties. There are no additional royalties to be paid since DNI
holds a 100% interest in the deposit.
On a discounted basis, the foregoing net
revenues represent a pre-tax net present value (NPV) of
$1.6 billion at a discount rate of 6%
($904 million after-tax), and a
pre-tax IRR of 8.7% assuming 100% equity financing (7.7%
after-tax). Based on the foregoing, payback period is estimated to
be 10.5 years pre-tax (10.6 years after-tax). Net aggregate
revenues, NPV and IRR are tabulated below showing also comparative
figures for various discount rates.
Summary of Economics
- NPV - IRR - Payback |
|
Discount
Rate |
|
0% |
5% |
6% |
7% |
8% |
NPV pre-tax ($000,000) |
$ 18,900 |
$ 2,589 |
$ 1,616 |
$ 887 |
$ 327 |
NPV after-tax ($000,000) |
$ 14,145 |
$ 1,667 |
$ 904 |
$ 328 |
$ (117) |
IRR pre-tax (%) |
8.7% |
8.7% |
8.7% |
8.7% |
8.7% |
IRR after-tax (%) |
7.7% |
7.7% |
7.7% |
7.7% |
7.7% |
Payback pre-tax (yrs) |
10.5 |
10.5 |
10.5 |
10.5 |
10.5 |
Payback after-tax (yrs) |
10.7 |
10.6 |
10.6 |
10.6 |
10.6 |
Notes:
Net revenues calculated after payment of the Alberta Provincial
Mineral Royalty; Taxes due based on a 10% Provincial
and 15% Federal corporate tax rate after deducting
amortization. |
As a large deposit with long mine life, most of
the revenues that can be generated from the Buckton Deposit beyond
the initial 20 years do not make a material contribution to the
discounted cash flow figures given the vagaries of discounting cash
flows over a long term.
As a high mining throughput operation, economics
of the contemplated mining scenario are more sensitive to
fluctuations in operating costs and revenues than to changes in
capital costs. Changes in NPV-IRR-Payback in response to
fluctuations in capital cost are tabulated below.
Pre-tax
NPV-IRR-Payback Sensitivity to Changes in Pre-production Capital
Cost |
|
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
payback
(yrs) |
Baseline Capex + $600 M |
18,381 |
1,102 |
7.6% |
12.0 |
Baseline Capex + $400 M |
18,581 |
1,286 |
8.0% |
11.5 |
Baseline Capex + $200 M |
18,735 |
1,449 |
8.3% |
11.1 |
PEA Baseline Capex = $3,766 M |
18,900 |
1,616 |
8.7% |
10.5 |
Baseline Capex - $200 M |
19,100 |
1,799 |
9.2% |
9.9 |
Baseline Capex - $400 M |
19,300 |
1,983 |
9.7% |
9.5 |
Baseline Capex - $600 M |
19,449 |
2,141 |
10.2% |
9.1 |
Notes:
NPV on pre-tax basis; IRR on pre-tax basis and assumes 100% equity
financing; M=million |
Aside from fluctuations in capital costs due to
changes in equipment costs and mining scheme modifications, some
fluctuations in capital costs can be attributed to changes in
reagent consumption (notably acid and lime consumption) given that
capacity (size) of the contemplated on-site acid generation and the
calcining plants are scaled to annual reagent requirements. This is
particularly true for acid consumption when considering that
capital cost of the acid plant represents 28% of the total
pre-production capital cost.
Changes in NPV-IRR-Payback in response to
fluctuations in gross recoverable per tonne value are tabulated
below. While the foregoing value is dependant on commodity price
fluctuations which are outside DNI's control, it is noteworthy that
a 5% relative change in metal recovery (equivalent to a 1%-3%
absolute change depending on the respective metal) represents
approximately a $1 change in gross
recoverable per tonne value. Optimized enhancement of recoveries is
a significant focus of DNI's ongoing testwork. Fluctuations in
revenues can also be achieved by increasing or decreasing the
proportion of the lower grading Labiche Shale material blended with
the higher grading Second White Speckled Shale (under the PEA
mining scheme and cash flow model, all tonnages of the two shales
are mined and processed with no attempt to optimize economics
through disproportionate blending).
Pre-tax
NPV-IRR-Payback Sensitivity to Changes in Recoverable $/tonne
Value |
|
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
payback
(yrs) |
Baseline Recoverable Value + $3/t |
30,973 |
4,324 |
12.9% |
7.3 |
Baseline Recoverable Value + $2/t |
26,917 |
3,405 |
11.5% |
8.1 |
Baseline Recoverable Value + $1/t |
22,914 |
2,514 |
10.1% |
9.1 |
PEA Baseline In-Situ Recoverable Value
$16.52/t |
18,900 |
1,616 |
8.7% |
10.5 |
Baseline Recoverable Value - $1/t |
14,892 |
718 |
7.2% |
12.5 |
Baseline Recoverable Value - $2/t |
10,911 |
174 |
5.7% |
14.9 |
Baseline Recoverable Value - $3/t |
6,894 |
(1,087) |
3.9% |
19.2 |
Notes: NPV on pre-tax
basis; IRR on pre-tax basis and assumes 100% equity financing. |
Changes in NPV-IRR-Payback in response to
fluctuations in per tonne operating cost are tabulated below.
Pre-tax
NPV-IRR-Payback Sensitivity to Changes in Operating Cost |
|
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
payback |
Baseline Opex + $3 |
6,835 |
(1,196) |
3.8% |
19.7 |
Baseline Opex + $2 |
10,882 |
(244) |
5.6% |
15.2 |
Baseline Opex + $1 |
14,928 |
704 |
7.2% |
12.5 |
PEA Baseline Opex $10.34/t |
18,900 |
1,616 |
8.7% |
10.5 |
Baseline Opex - $1 |
22,924 |
2,547 |
10.2% |
9.0 |
Baseline Opex - $2 |
26,936 |
3,470 |
11.7% |
7.9 |
Baseline Opex - $3 |
30,924 |
4,379 |
13.1% |
7.2 |
Notes:
NPV on pre-tax basis; IRR on pre-tax basis and assumes 100% equity
financing. |
While the most aggressive operating cost
reductions might be achieved through reductions in reagent
consumption, notably the consumption of lime and sulfuric acid,
reduction of acid consumption would also reduce capital costs.
A significant portion of the cost of limestone
is the cost of its trucking to the Buckton Deposit. Changes in
NPV-IRR-Payback in response to fluctuations in cost of limestone
(for lime) are tabulated below showing the PEA cost of $35 per tonne of limestone delivered to Buckton
from an operating quarry 100km away from the Deposit, and
variations related to the lowest cost of $25 per tonne which might reflect a limestone
source nearer the property and the highest cost of $105 per tonne for limestone from greater
distances (south-central Alberta).
Several outcroppings of limestone exist near the Buckton Deposit,
none of which are currently being quarried.
Pre-tax
NPV-IRR-Payback Sensitivity to Changes in Cost of
Limestone |
Change
in Metals Leaching and Processing Operating Cost
Relative to $/t Cost of Limestone |
Revised Pre-tax
NPV-IRR-Payback
Relative to Cost of Limestone |
Cost of
Limestone
Delivered to Buckton
($/tonne) |
Processing
Opex Change
for Second White
Speckled Shale |
Processing
Opex Change
for Labiche
Formation |
Processing
Opex Change
for Blended Shale
PEA Resource |
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
Payback
(yrs) |
$ 105/t |
$ 2.94 |
$ 2.04 |
$2.23 |
9,986 |
(425) |
5.2% |
15.7 |
$ 85/t |
$ 2.10 |
$ 1.46 |
$1.59 |
12,523 |
159 |
6.3% |
14.0 |
$ 45/t |
$ 0.42 |
$ 0.29 |
$0.32 |
17,638 |
1,331 |
8.3% |
11.2 |
PEA Baseline $
35/t |
0 |
0 |
$0.00 |
18,900 |
1,616 |
8.7% |
10.5 |
$ 25/t |
$ (0.42) |
$ (0.30) |
($0.32) |
20,227 |
1,924 |
9.2% |
9.9 |
Notes:
PEA metals leaching and processing operating cost is $8.07 per
tonne of feed processed made up of the two shales.
This blended cost represents the weighted average over mine life
for the blended PEA mineral resource based on
respective tonnages of the two shales mined. |
Changes in NPV-IRR-Payback in response to
fluctuations in sulfuric acid dosage (consumption) are tabulated
below, showing operating and capital costs savings which can be
achieved by reducing acid consumption. The table shows reductions
in acid dosage from the PEA baseline of 40kg of acid per tonne of
feed processed toward 20kg per tonne representing preliminary
results from agglomerated column testwork which has not yet been
confirmed by duplication.
Pre-tax
NPV-IRR-Payback Sensitivity to Changes in Acid Consumption |
Change in Metals
Leaching and Processing Operating & Capital Costs
Relative to Acid Dosage (Consumption) |
Revised Pre-tax
NPV-IRR-Payback
Relative to Acid Dosage (Consumption) |
Acid dosage
(kg/tonne) |
Operating Cost
Change
($/tonne) |
Capital Cost
Change
($000,000) |
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
Payback
(yrs) |
PEA Baseline
40kg/t |
0 |
0 |
18,900 |
1,616 |
8.7% |
10.5 |
35 |
$ (0.26) |
$ (108) |
20,070 |
1,965 |
9.4% |
9.7 |
30 |
$ (0.52) |
$ (190) |
21,158 |
2,262 |
9.9% |
9.3 |
25 |
$ (0.78) |
$ (272) |
22,300 |
2,586 |
10.6% |
8.7 |
20 |
$ (1.04) |
$ (380) |
23,412 |
2,905 |
11.2% |
8.3 |
Notes:
PEA metals leaching and processing operating cost is $8.07 per
tonne of mineralized shale feed processed made up
of the two shales both of which require the same acid dosage. |
Changes in NPV-IRR-Payback in response to
fluctuations in operating cost of REE separation are tabulated
below, showing the benchmark cost suggested by the PEA for Buckton
relative to the industry benchmark maximum and minimum costs
identified. Operating costs tabulated are per kilogram of final
saleable products produced from the separation plant consisting of
REEs as oxide/carbonate.
Pre-tax
NPV-IRR-Payback Sensitivity to REE Separation Operating
Costs |
REE Separation
Operating Costs |
Comments |
Revised
NPV-IRR-Payback Relative to REE Separation Cost |
NPV0%
($000,000) |
NPV6%
($000,000) |
IRR
(%) |
Payback
(yrs) |
US$14 per kg of product |
Mount Weld - Lynas
Corp |
17,663 |
1,325 |
8.2% |
11.2 |
PEA Baseline $10 per kg
product |
PEA Baseline |
18,900 |
1,616 |
8.7% |
10.5 |
US$5.6 per kg of product |
Geismar - Avalon |
20,297 |
1,952 |
9.3% |
9.8 |
PEA Conclusions Recommendations
The PEA overall concludes that the Buckton Deposit has economic
potential and warrants additional expenditures and work to move it
forward. In addition, the PEA makes certain conclusions and
recommendations and identifies opportunities which collectively can
enhance economics of the contemplated mining operations. These are
as follows:
- While the Buckton Deposit has considerable demonstrable
potential to expand with further drilling, additional resources of
similar grade will not enhance its economics given that it is
already of substantive size. Upgrading of the deposit to the
Indicated resource classification through infill drilling is,
however, recommended to enable advancing it to Pre-Feasibility.
- It is significant that the mineable tonnage based on the mine
plan is nearly the same as the entire geological mineral resource
currently defined for the Buckton Deposit.
- The PEA recommends that DNI focus future work on optimizing
agglomeration and column leaching parameters toward reducing
sulfuric acid consumption to reduce capital cost of the acid plant
as well as overall cost of its operation.
- Due to limited column leaching testwork from Buckton, the PEA
has relied on a conservative estimate of six months of leaching
irrigation time required to extract the metals from the shale based
on preliminary testwork, even though the tests indicate relatively
fast leaching kinetics and easier than usual liberation of metals.
The PEA recommends that DNI conduct broader comprehensive testwork
to make a more precise determination of the required irrigation
time, and if leaching kinetics are shown to be rapid then the size
of the heaps could be decreased, hence lowering capital and
operating costs.
- The PEA suggests that leaching technologies suitable to
processing of material with a high clay content but requiring a
short leaching time (eg: vat leaching) may unlock further potential
from the deposit and should be investigated as potential
alternatives to large scale heap leaching. The PEA also recommends
investigation of various promising new technologies (eg: membrane
separation by nano-filtration) to selectively pre-concentrate the
pregnant leaching solution prior to feeding it to the metals
processing hydrometallurgical plant, and that application of these
technologies holds potential to reduce capital as well as operating
costs by lowering the volume of liquid to be processed.
- The PEA notes that while Sc and Th content of the shales were
omitted from the PEA economic models due to the lack of a
significant world market for these metals, their future production
from Buckton may warrant further investigation if significant uses
of these metals is developed (Buckton has an estimated capacity to
produce approximately 1,100% and 16,800% of current world Th and Sc
demand, respectively). Scandium is a particularly useful alloying
element and it is generally accepted that its widespread use has
been hampered by its low availability.
- The PEA suggests that DNI investigate emerging ion exchange
options for recovery of REEs from the pregnant leaching solution as
alternatives to the neutralization/re-acidification parts of the
hydrometallurgical circuit formulated in the PEA to make
significant reductions to operating costs at Buckton.
- The PEA notes that alternate mining configurations and
schedules, including mining scenarios of only partial blending of
the two shales, might enhance economics of the Buckton Deposit. A
comparative detailed investigation of various alternatives is
beyond the scope of this PEA and was deferred to a future update of
the study.
DNI's Analysis of PEA Results, Potential Upside and Next
Steps
The PEA was successful in achieving its principal objective of
evaluating production of metals from the Buckton Deposit, and
identifying critical parameters which can significantly impact the
economics of the deposit, and other parameters which can improve
them.
The PEA demonstrates that the Buckton Deposit
has potential to be a significant supplier of uranium and REE with
a projected annual capacity to produce on average approximately 1
million pounds of uranium yellowcake (U3O8
equiv) and 5,500 tonnes of rare earth oxides of which 41% are made
up of heavy rare earth elements. Projected REE output is dominated
by Nd, Eu, Dy and Y which represent 15%, 15%, 26% and 16% of
overall REE output, respectively.
The "intangible" value of a long term source of
supply of critical REE elements are not reflected in the Deposit's
economics which are based on traditional discounted cash flow
modeling. The Property's location in northeast Alberta adjacent to large oil sands mines, in
a mature mining district, in a well organized regulatory,
jurisdictional and permitting framework tailored to the development
of large deposits, and the local availability of key processing
reagents provide significant logistical and infrastructural
advantages rarely available elsewhere, representing benefits whose
intangible value is also not reflected in the current economic
assessment of the Buckton Deposit.
In a statement Mr.S.Sabag, DNI's president & CEO, commented:
"… the PEA is a significant step forward to advancing the Buckton
Deposit toward pilot plant scale testing by better focusing DNI's
testwork to collect the necessary strategic data. While the PEA was
successful in formulating a conceptual mining plan and metals
recovery flowsheets for the production of Ni-U-Zn-Cu-Co-REE-Y from
Buckton, it was particularly successful in identifying key
opportunities which can significantly enhance economics through
strategic cost reductions or revenue enhancements some of which DNI
believes can be achieved with minimal additional testwork."
DNI believes that metals processing and recovery
risks are more relevant to the ultimate potential of the Buckton
Deposit than are risks of resource definition given the excellent
uniformity of grade and continuity characterizing the deposit and
the surrounding broader Zone that extends for many additional
kilometers beyond it. In the foregoing regard, the PEA reinforces
that reagent consumption during leaching and processing of metals
from Buckton represents by far the largest component of operating
cost, and to a lesser degree of capital costs, and that reducing
consumption of sulfuric acid and lime can have the largest impacts
on its economics. Obtaining limestone from sources nearer the
property would also be a significant benefit.
Whereas DNI's testwork has so far focused
exclusively on enhancing recoveries of metals from the shales at
Buckton, its focus going forward will shift to optimizing
recoveries while reducing reagent consumption relying on guidelines
from the PEA. Reduction of lime and acid consumption represent
particularly significant goals which DNI believes are achievable
with minimal additional work as suggested by results from ongoing
column leaching testwork. Preliminary results from this work are
encouraging and, through appropriate agglomeration and slightly
longer leaching time, report lower acid consumption to a dosage of
as low as 20kg of acid per tonne of feed without significantly
sacrificing metals recoveries. This reduction is significant and
alone would serve to reduce operating costs by an estimated
$1.04 per tonne and capital costs by
$380 million as shown in the acid
consumption sensitivity table above to enhance economics to a
pre-tax NPV6% of $2.9 billion and an
11.2% IRR. Once verified through duplicate tests, the results will
be incorporated into a future update of the PEA along with any
other additional enhancements.
Other enhancements which DNI plans to explore in
the near term include evaluation of alternate pit phase designs to
excavate higher grading material earliest in the mining schedule.
Clarification of REE separation cost benchmarks is another area
worthy of near term attention. DNI will assess other
recommendations made by the PEA with a view to incorporating them
into its longer term work plans.
NI 43-101 Disclosure
The PEA was prepared by P&E Mining Consultants Inc. with input
from Hatch which was retained to review DNI's metals recovery
testwork to formulate process engineering guidelines and metals
recovery flow sheets with related operating cost estimates. The PEA
relies on a mineral resource estimate study for the Buckton Deposit
as prepared by Apex Geoscience Ltd.. Metals leaching, recovery and
processing were reviewed and accepted by Mr.Bruce Cron P.Eng. The foregoing parties are
Qualified Persons under National Instrument 43-101 Standards of
Disclosure for Mineral Projects and are independent of DNI.
The technical information summarized in this
announcement has been prepared in accordance with Canadian
regulatory requirements by, or under the supervision of, the
following independent Qualified Persons: Mr. Eugene Puritch P.Eng. (per P&E Mining
Consultants Inc.), Mr. Michael Dufresne
P.Geol. (per APEX Geoscience Ltd.) and Mr. Bruce Cron P.Eng. (per Cron Metallurgical Ltd.),
all of whom have reviewed, and consented to, its release. DNI's
Qualified Person in respect of its Alberta polymetallic black shale projects is
Mr. Shahé F.Sabag P.Geo., President
and CEO of DNI.
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 release.
DNI - TSX Venture
DG7 - Frankfurt
Issued: 74,857,022
We seek Safe Harbour. This announcement includes
forward looking statements. While these statements represent DNI's
best current judgment, they are subject to risks and uncertainties
that could cause actual results to vary, including risk factors
listed in DNI's Annual Information Form and its MD&As, all of
which are available from SEDAR and on its website.
SOURCE DNI Metals Inc.