Kun-Manie Nickel-Copper Sulphide TEO Results
$333 Million NPV10%, 15.6% IRR
Amur Minerals Corporation (“Amur” or the “Company”), the exploration and resource development company, announces the completion of its TEO Project (a Russian feasibility level study) approved by the Russian Federation State Committee on Reserves (“GKZ”) with regard to its Kun-Manie nickel copper sulphide project located in the Russian Far East.
· The TEO Project was compiled by Oreoll LLC (“Oreoll”) and GKZ Russian Federation (“RF”) certified experts from all project disciplines.
· The GKZ expert commission approved a 19 year open pit operational design with revenue generation derived from two saleable concentrates allowing for the recovery of payable values for both copper and nickel. Minor payable amounts for gold, platinum and palladium will also be recovered.
· The design parameters maximise revenue generation to the RF based on fully loaded taxation and royalty schemes. The total Net Present Value (“NPV10%”) deliverable to the RF is projected to be US$ 628 million. This approach does not optimise the financial return to the project operator which is addressed during the next and final requirement of the DEMP, the mine planning stage.
· The GKZ commission reviewed Oreoll’s submission. Necessary adjustments allowing for the identification and approval of operational parameters and considerations, associated capital / operating costs, the revenue generation from the sale of individual nickel and copper concentrates and selected commodity prices were defined. As a result of the expert evaluations, a Life of Mine (“LOM”) cutoff grade (“COG”) was defined to be 0.2% Ni. The annual nominal production rate of 12.4 million ore tonnes was selected.
· Lerchs Grossman open pit production analyses including mining loses and dilution indicate the average LOM ore production grades for delivery to the sulphide flotation plant will be 0.66% Ni, 0.18% Cu, 0.015% Co, 0.05 grammes per tonne (“g/t”) Au, 0.90 g/t Ag, 0.14 g/t Pt and 0.14 gt/ Pd. The total cumulative LOM RF NAEN certified Reserve totals 187.1 million ore tonnes. Approximately 4.6 cubic metres (“m3”) of waste will be extracted per ore tonne.
· The total metal delivered from the mine to the processing plant will be 1.2 million nickel tonnes, 343 thousand copper tonnes, 25.5 thousand tonnes of cobalt, 25.7 tonnes of platinum, 26.5 tonnes of palladium, 9.0 tonnes of gold and 168.5 thousand tonnes of silver.
· The Oreoll and GKZ experts have determined the LOM capital cost estimate is US$ 1.92 billion with US$ 1.14 billion allocated as preproduction and construction costs, US$ 698 million in sustaining costs and US$ 85 million in working capital. The increase in the capital cost estimate from previously reported projections is attributable to the more than doubling of the previous annual operational capacity impacting the expansion of the open pit mining fleet, the addition of a copper recovery circuit within the process plant, tailings expansion, power plant requirements and the need to construct a dual carriage way access road capable of handling the increased mine support and concentrate transport needs. All capital expenditure sectors include contingencies specific to the project and its location.
· Operating costs per ore tonne are projected to be US$ 42.32 including ore and waste mining costs, depreciation and royalties.
· The LOM combined payable metals from the two concentrates total 627 thousand nickel tonnes, 177 thousand copper tonnes, 1.5 tonnes of gold, 3.3 tonnes of platinum and 3.5 tonnes of palladium. The payable metal schedules and all fees are based on confidential metal trading schedules provided by two reputable, recognised industry metals traders.
· Nickel and copper account for 95% of the LOM revenue obtained from the two intermediate nickel and copper intermediate concentrate products. The GKZ approved prices for the primary revenue generators of nickel and copper were US$ 14,468 per Ni tonne (US$ 6.56 per pound) and US$ 6,758 per Cu tonne (US$ 3.07 per pound). Minor credits were included for gold (US$ 58.90 / g), platinum (US$ 34.35 / g) and palladium (US$ 80.75 / g).
· For the 19 year production schedule, the NPV10% is US$ 333 million with an Internal Rate of Return (“IRR”) of 15.6%. The payback period for the 12.4 million ore tonne per year operation is projected to be 5.5 years.
Robin Young, CEO of Amur Minerals, commented:
“The TEO Project feasibility study results generated by the GKZ expert commission indicates the Kun-Manie operation should be scaled up to as much as 12.4 million ore tonnes per year for a 19 year open pit operation. This is a more than doubling of the previously anticipated capacity of 6.0 million ore tonnes per year.
“Given the current commodity prices for nickel and copper are substantially higher than the $6.56 per pound nickel and $3.07 per pound copper utilised in the TEO Project, there is substantial upside potential to enhance the GKZ commissions NPV10% of US$ 333 million and IRR of 15.6% financial results. The GKZ Project Feasibility Study did not include sensitivity analysis as related to metal prices which is typical of western studies. Today’s approximate price of US$ 13.50 per pound nickel and US$4.25 per pound of copper support the of upside potential to improve the financial results.
“The Company also notes that the present geopolitical situation related to the Russian Federation will impact the Company’s ability to develop Kun-Manie due to sanctions and restrictions implemented by the Federation. Sources for capital funding will likely be limited and western companies are no longer considering investment within Russia.”
As a requirement of the terms and conditions of the Detailed Exploration and Mine Production Licence (“DEMP”), the RF GKZ has reviewed, adjusted and approved the Oreoll independently compiled RF feasibility study. All documentation has been registered with all appropriate local, state and federal agencies. Work was undertaken by RF experienced, licenced and certified individuals and organisations experienced in the evaluation of nickel copper sulphide projects.
It has been established that a 19 year open pit operation at an annual rate of 12.4 million ore tonnes should be implemented. Financial results have derived a NPV10) of US$ 333 million and an IRR of 15.6%. A nickel price of US$ 14,468 per tonne (US$ 6.56 per lb) and a copper price of US$ 6,758 per tonne (US$ 3.07 per lb) were used in the RF feasibility study. The results provide the basis for the next phase required as a part of the DEMP where RF approved mine plans and designs are to be compiled.
The results have been determined by experts utilised by the RF certified company of Oreoll and the expert commission of the GKZ. The expert opinions confirm that it is appropriate to more than double the scale of the previously reported operation.
Keys elements driving the expert commission’s approval for the expansion of the operation are based on NorNickel’s wholly owned subsidiary (Gipronickel Institute) metallurgical test work, flowsheet and plant designs that confirmed two revenue generating intermediate concentrate products (nickel and copper) can be generated. This supercedes the previously understood design wherein a single all commodity bulk concentrate design was planned wherein only nickel was payable. Scaling up of the operation has required adjustments in most sectors of the operation and there is now the need to construct a dual carriage way access road between the mine site and Baikal-Amur (“BAM”) rail station. The RF expert commission have also provided capital and operating costs for the 12.4 million ore tonne per annum production scenario.
AMC notes that Reserves reported herein are in accordance with Russian Reserve reporting standards (NAEN). JORC resources and reserves are not allowed for use in the definition or classification of Reserves in the RF. There are three Russian categories identified as B, C1 and C2. Those that are within an open pit (mineable) are reported as in-balance reserve whilst those not mined or below cutoff grade and within the pit are off-balance reserves. Per the Committee for Mineral Reserves – International Reporting Standards (“CRIRSCO”), RF and western resources / reserves (JORC) are somewhat correlative. In-Balance Russian B Reserves equate to JORC Proved with Russian C1 and portions of C2 approximating JORC Probable Reserves.
All USD values quoted herein are based on Russian Ruble derived estimates and have been converted at an exchange rate of 73 RUR per US$.
- The Company released details of the TEO Project (a Russian feasibility level study) on the Kun Manie nickel/copper sulphide project located in the Russian Far East.
- The TEO compiled by Oreoll, mining consultants, and Russian GKZ (State Committee on Reserves) underpins the GKZ Approved Mineral Reserve estimate comprised of
- 172mt at 0.71% Ni, 0.20% Cu, 0.14g/t Pt and 0.16g/t Pd across B, C1 and C2 categories for In Balance Reserves (above 0.2% Ni cut off grade);
- 24mt at 0.51% Ni, 0.15% Cu, 0.14g/t Pt and 0.16g/t Pd across B, C1 and C2 for Out of Balance Reserves (below 0.2% Ni cut off grade).
- The study is based on more than double flotation plant capacity that is projected to run at 12.4mtpa producing two concentrates (nickel and copper) with minor payable amounts of gold, platinum and palladium compared to a single bulk concentrate envisaged previously.
- The Kun Manie mine is expected to supply 187mt of ore grading 0.66% Ni, 0.18% Cu, 0.14g/t Pt and 0.14gt/t Pd over 19 year mine life.
- Operating costs are estimated at ~$42/t ore including $6.7/t depreciation charge and using 4.6m3/t was stripping ratio.
- Capital cost includes $1.2bn (including working capital) project development cost and $0.7bn in maintenance costs.
- Higher development capital cost is attributed to more than doubling plant capacity (12.4mtpa from 6mtpa) as well as higher infrastructure costs including development of a dual carriage way road able to handle increased volume of concentrate shipments.
- GKZ used significantly lower nickel and copper prices ($6.56/lb Ni and $3.07/lb Cu) in project valuation to arrive at NPV10% of $333m and IRR of 15.6%.
- Study results will be used for the approval of mine plans and design by authorities.
Conclusion: The TEO results highlight the case for a larger scale more straightforward open pit only operation running two flotation separate concentrate streams (nickel and copper) securing better payability terms. Kun Manie is envisaged as a 12.4mtpa operation producing +40ktpa and +10ktpa of payable Ni and Cu. GKZ estimated Kun Manie NPV10% and IRR and $333m and 15.6% using significantly lower nickel and copper prices (~$14,500/t and $6,800/t, respectively) which given larger scale and lower grade nature of the deposit underestimates value potential in the current strong nickel/copper prices environment.
*SP Angel act as Nomad and Broker to Amur Minerals
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