Accelerating cobalt demand in lithium-ion
batteries for electric vehicles is driving decision to examine the
feasibility of expanding production by 20 to 30% to produce more
cobalt units
Issued Capital:
302,085,257
LONDON, ON, Nov. 9, 2017 /CNW/ - Fortune Minerals
Limited (TSX: FT) (OTCQX: FTMDF) ("Fortune" or
the "Company") (www.fortuneminerals.com) is pleased to
announce a change in scope for the updated Feasibility Study in
progress for its 100% owned NICO Cobalt-Gold-Bismuth-Copper Project
in Canada ("NICO Project").
Responding to positive feedback from potential strategic partners,
Fortune is examining the feasibility of a 20 to 30% increase in the
planned NICO production rate over the 4,650 metric tonnes
("t") of ore per day used in the previous 2014 Feasibility
Study and produce between 1,700 and 2,000 t of cobalt units per
year in a battery grade cobalt sulphate heptahydrate.
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Robin Goad, President and CEO of
Fortune commented, "Transformative electrification of the
automotive industry is accelerating as cost parity with internal
combustion engines is being reached and as more governments
announce future bans on gasoline and diesel-powered vehicles.
Forecasts of electric vehicle adoption are increasing with
estimates of up to 25% penetration of global vehicle sales by the
mid 2020's. Fortune is increasing its planned cobalt production to
in response to the growing cobalt supply chain bottleneck".
The NICO Project consists of a planned mine, mill and
concentrator in the Northwest
Territories and refinery near Saskatoon where concentrates will be processed
to cobalt sulphate, gold, bismuth, and copper. NICO has already
been assessed in a positive Feasibility Study in 2014, which is
being updated by Hatch Ltd. ("Hatch"), P&E Mining
Consultants Inc. ("P&E") and Micon International Limited
("Micon") using updated costs, commodity price and exchange
rate estimates, and recent project improvements, including the
examination of the proposed expanded production rate. NICO has
received environmental assessment ("EA") approval and the
major mine permits for the facilities in the Northwest Territories and EA approval for the
refinery in Saskatchewan. NICO is
attracting attention from potential partners that need reliable
supplies of ethically procured cobalt with preference for a
Canadian primary producer with supply chain transparency and
custody control of metal from a vertically integrated project.
Fortune has engaged PricewaterhouseCoopers Corporate Finance Inc.
("PwC") to arrange the project financing for the
construction and operation of the project through a combination of
strategic partnerships, debt and equity.
Highlights of Items Being Examined in the Updated Feasibility
Study:
- Accelerating demand for lithium-ion batteries in electric
vehicles and stationary storage;
- Examining a response to market demand with a 20 to 30%
increase in the planned production rate and annual cobalt
production of between 1,700 and 2,000 t per annum;
- Mineral Reserves being updated using higher cobalt prices
and greater economies of scale from a higher production
rate;
- Mine plan and schedule optimization to increase cobalt and
gold production in early years of the mine life;
- Grade control and stockpiling strategy to better align
bismuth output with market conditions as they evolve within a
growing green economy;
- Additional metallurgical testwork completed to improve
process for manganese removal from cobalt sulphate and indicating a
potential cobalt recovery improvement;
- Improved copper cementation process;
- Design engineering and cost estimation proceeding for
expanded production rate;
- Project Execution Plan being refined to construct the
Northwest Territories facilities
using existing winter roads and align mine operations with the
timeline for availability of the government road to Whati;
Cobalt Market
Cobalt is an essential commodity used in the manufacturing of
cathodes in lithium-ion batteries to store energy in portable
electronic devices, electric vehicles ("EV's") and
stationary cells for the electrical grid. Battery demand has driven
cumulative annual growth in the market of approximately 6% over the
last 20 years and production of refined cobalt is now approximately
110,000 t per year. Adoption rate forecasts for EV's are
accelerating and between 12 and 25% of all vehicles sold by 2025
are projected to be electric according to analysts, major
automotive manufacturers and parts suppliers. Exane BNP Paribas has
indicated that it anticipates cobalt demand to triple during this
period to 300,000 t as the world moves to a less carbon intensive
green economy. Current worldwide government policy shifts aimed at
reducing greenhouse gas emissions are being imposed to mitigate the
impacts of climate change with intensifying policies to increase
EV's and renewable energy from wind and solar generation and
off-peak charging of the electrical grid. Cobalt is also used in
superalloys for aerospace applications, high strength alloys for
cutting tools and cemented carbides, permanent magnets, surgical
implants, pigments, catalysts, and additives in food and
agricultural products.
As the demand for cobalt grows there are also concerns about
limitations on current supply due to geographic concentration of
mine and refinery production in countries with political
instability and/or policy risks. Ethical sourcing of raw materials
has also become an issue that can damage the brands of major
automotive, electronics and technology companies from suppliers
with poor labour and environmental practices. With 98% of
non-artisanal cobalt supply currently produced as a by-product of
copper and nickel mining there are concerns about producers being
able to respond to demand growth when production criteria are
focused on the primary metals. The cobalt market has transitioned
into deficit and shortages of supply are expected to persist for
the foreseeable future with few new deposits in the development
stream. The current price of cobalt metal is approximately
US$30 per pound, well above the
US$16 per pound used in Fortune's
2014 Feasibility Study and more in line with the US$25 per pound, 20-year inflation adjusted
average price reported by Commodities Research Unit ("CRU").
New cobalt deposits are required as the market enters its most
significant demand pull in history.
The existing NICO Mineral Reserves also contain 1.1 million
ounces of gold and approximately 12% of global bismuth reserves.
Bismuth is an Eco-metal used in the automotive and pharmaceutical
industries and as a non-toxic environmentally safe replacement for
lead in solder, steel, brass and aluminum alloys needed in a
growing green economy.
Mineral Reserves
The Proven and Probable Mineral Reserves for the NICO deposit were
determined for the Company's 2014 Feasibility Study and are 33.1
million t containing 82.3 million pounds of cobalt (37k t), 1.11
million ounces of gold, 102.1 million pounds of bismuth (46k t) and
27.2 million pounds of copper (12k t) (see Fortune's news release
dated April 2, 2014 for details). The
Mineral Reserves were sufficient to support a 21-year mine life at
the 4,650 t of ore processed per day in the 2014 Feasibility Study.
Several million tonnes of marginally sub-economic mineralized
material were also identified in 2014 that would be stockpiled for
processing during periods of higher metal prices. Mineralized
material was also identified beneath the open pit design, but was
insufficient to warrant a push back of the pit high wall and
deepening of the pit or the additional development work required to
mine it from underground at that time. At today's higher cobalt
prices and greater economies of scale through an increased
production rate, Fortune expects to be able to apply a mine cut-off
net smelter return ("NSR") value that may make some of this
higher grade mineralized material economic to process. Accordingly,
the Mineral Reserves are being updated by P&E for the updated
Feasibility Study.
Mine Plan and Schedule
The Mine Plan and Schedule for the updated Feasibility Study will
examine the feasibility of a 20 to 30% increase in production rate
and economies of scale from a larger mining and processing rate.
The Mine Schedule is also being optimized to target cobalt-rich
parts of the deposit in earlier years of the mine life to increase
revenues, accelerate payback, and maximize cobalt production to
address market demand and the needs of potential strategic
partners. The pit design is not expected to change significantly
because any additional mill feed will likely be generated from
lower grade mineralized material within the pit shell that may
become economic in the updated Mineral Reserve statement.
A grade control and stockpiling strategy will also be pursued to
schedule ores through the process plant that are better aligned
with metal market conditions. Specifically, lower grade ores will
be stockpiled to defer processing until later in the mine life and
align processing of bismuth-rich ores with market demand as it
evolves in a growing green economy focused on environmentally safe
metals and its unique physical properties.
Metallurgical Testwork
The processing of NICO ores has already been verified by pilot
plant tests validating the flowsheet, metal recoveries and
producing a high quality cobalt sulphate heptahydrate meeting the
specifications of lithium ion battery manufacturers. Two
metallurgical testwork programs were recently conducted at SGS
Lakefield Research Limited to address gaps identified in the
previous 2014 Feasibility Study. This testing indicates that the
sequencing for manganese removal prior to cobalt sulphate
heptahydrate crystallization can be changed without impacting
cobalt recovery, and there is potential for a cobalt recovery
improvement, subject to confirmation from METSIM modelling now in
progress by Hatch. The results are also providing the information
needed for equipment sizing, detailed engineering, and costing. An
improved copper cementation flowsheet was also tested and confirmed
for the updated Feasibility Study.
All-Season Road
Earlier this year, the Canadian, Northwest Territories and Tlicho governments
announced conditional approval of federal funding for 25% of the
construction costs for an all-weather road to the community of
Whati through the P3 Canada Fund (See
Fortune's January 12, 2017
News Release). In September, the Government of the Northwest Territories announced that it had
completed the Request for Qualification phase for
Private-Public-Partnership ("P3") funding for the remaining
75% cost of the road. Three consortiums of Canadian and
International firms were short-listed to participate in the Request
for Proposal stage commencing in December and submit bids to
design, build, finance, operate and maintain this road and be
repaid over time with interest by the Northwest Territories
Government (see Fortune's September 19,
2017 News Release). Fortune has already received EA approval
to build a 50km spur road from Whati to the mine site and the cost
for the construction of this spur was included in the 2014
Feasibility Study. Fortune is now planning to construct the NICO
mine, mill and concentrator from the existing winter ice road in
order to align mine operations with the timeline for availability
of the government road and mitigate schedule uncertainty.
Feasibility Study Update
The scope of the updated Feasibility Study was initially based on a
simple re-statement of economics of the 2014 Feasibility Study
based on current costs and updated commodity price and exchange
rate estimates. No significant new engineering was required for
this scope because the requisite engineering had already been
largely completed in the Company's 2012 Front-End Engineering and
Design ("FEED") and 2014 Feasibility studies. With the new
plan to examine increasing production by 20 to 30% over the
previously contemplated 4,650 t of ore processed per day,
additional engineering will now be required to support the economic
analysis and produce engineered designs to support project
financing efforts and strategic partner due-diligence. Although it
is expected that the higher production rate will increase capital
costs for the development of the NICO Project, sensitivities
prepared for the Company to assess the impact of such costs against
the economies of scale of a larger project and an optimized mine
plan schedule, indicate that this change may be warranted. The
higher cobalt production target is also responding to the feedback
received from a number of potential strategic partners interested
in participating in the development. While these scope changes will
delay completion of the updated Feasibility Study, they are not
anticipated to impact the construction timeline for the project,
which will be primarily subject to receipt of Project
Financing.
About NICO
NICO is a planned Canadian, vertically integrated, primary producer
of cobalt with supply chain transparency and uninterrupted custody
of metal from ore through to the production of battery chemicals,
gold, bismuth and copper. The existing 2014 feasibility study
proposes that the NICO deposit will be mined primarily by
conventional truck and shovel open pit methods. In the 2014
Feasibility Study, approximately one eighth of the process feed
during the first two years of operations was planned to be mined
using underground blast hole open stoping to process higher margin
ores from deeper in the deposit in early years of the mine life.
Most of the pre-production development for the underground portion
of the mine has already been established from previous test mining
operations.
Processing of ores in the proposed NICO mill and concentrator
will be by simple flotation to produce a bulk concentrate
containing the recoverable metals. The concentrate will be
filtered, bagged and trucked to the rail head at Hay River for delivery by train to the
Company's planned refinery straddling the Canadian National Railway
near Saskatoon. The refinery will
recover metals from the concentrate using a combination of
secondary flotation, followed by pressure and atmospheric acid
leaching, electro-winning and precipitation of value-add metals and
chemicals. Should the proposed 20 to 30% increase in production
rate prove feasible, cobalt production would target 1,700 to 2,000
t of units per year in a cobalt sulphate heptahydrate.
The disclosure of scientific and technical information
contained in this news release has been approved by Robin Goad, M.Sc., P.Geo., President and Chief
Executive Officer of Fortune, who is a "Qualified Person" under
National Instrument 43-101. The Technical Report on the Feasibility
Study referred to above, entitled "Technical Report on the
Feasibility Study for the NICO-Gold-Cobalt-Bismuth-Copper Project,
Northwest Territories, Canada",
dated April 2, 2014 and prepared by
Micon, from which certain information in this press release has
been extracted, has been filed on SEDAR and is available under the
Company's profile at www.sedar.com.
About Hatch
Hatch has over six decades of business and technical experience in
the mining, energy, and infrastructure sectors. The firm has 9,000
staff with experience in over 150 countries and is well known for
the design and construction of mineral beneficiation process plants
and supporting infrastructure, including projects in remote and
cold climate regions and Arctic regions of Canada.
About P&E
P&E provides geological and mine engineering consulting,
Mineral Resource Estimate Technical Reports, Preliminary Economic
Assessments and Pre-Feasibility Studies and is affiliated with
major Toronto based consulting
firms for the purposes of joint venturing on Feasibility Studies.
P&E's team has experience in geological interpretation, 3D
geologic modeling, Technical Report writing, Mineral Resource and
Mineral Reserve Estimates, property evaluations, mine design,
production scheduling, operating and capital cost estimates and
metallurgical engineering.
About Micon
Micon is a mining consultancy providing independent professional
advice to mining companies and their providers of capital, law
firms and government agencies worldwide. Micon is staffed by senior
mineral industry consultants with extensive international
experience in the fields of geology, mining engineering,
metallurgy, processing, environmental management, market analysis
and mineral economics.
About Fortune Minerals
Fortune is a Canadian mining company focused on developing the
vertically integrated NICO cobalt-gold-bismuth-copper project in
the Northwest Territories and a
related refinery the Company plans to construct in Saskatchewan. Fortune also owns the Sue-Dianne
copper-silver-gold deposit located 25 km north of NICO and a
potential future source of incremental mill feed to potentially
extend the life of the NICO mill.
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This press release contains forward-looking information and
forward-looking statements within the meaning of applicable
securities legislation. This forward-looking information includes
statements with respect to, among other things, the Company's plans
to develop the NICO Project (including the Company's plans to
secure project financing to start construction), the updated
feasibility study for the NICO Project, the estimated capital costs
for the construction of the NICO Project, estimated future
production, anticipated growth in the demand for cobalt,
anticipated constraints on the supply of cobalt and plans for the
construction of an all-season road needed for operations at the
NICO Project. Forward-looking information is based on the opinions
and estimates of management as well as certain assumptions at the
date the information is given (including, in respect of the
forward-looking information contained in this press release,
assumptions regarding the Company's ability to arrange the
necessary financing to continue operations and develop the NICO
Project, assumptions regarding the results of the updated
Feasibility Study, growth in the demand for cobalt, restrictions on
the supply of cobalt and the proposed construction of the
all-season road, the economic environment in which the Company will
operate in the future, including the price of gold, cobalt and
other by-product metals, anticipated costs and the volumes of
metals to be produced at the NICO Project). However, such
forward-looking information is subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the
forward-looking information. These factors include the risks that
the Company may not be able to finance and develop NICO on
favourable terms or at all, the updated Feasibility Study may take
longer than anticipated, the results of the updated feasibility
study may not be as anticipated, the all-season road may not be
built within the anticipated time frame, the market for
rechargeable batteries and the use of stationary storage cells may
not grow to the extent anticipated, the future supply of cobalt may
not be as limited as anticipated, the Company's production of
cobalt and other metals may be less than anticipated and other
operational and development risks, market risks and regulatory
risks. Readers are cautioned to not place undue reliance on
forward-looking information because it is possible that
predictions, forecasts, projections and other forms of
forward-looking information will not be achieved by the Company.
The forward-looking information contained herein is made as of the
date hereof and the Company assumes no responsibility to update or
revise it to reflect new events or circumstances, except as
required by law.
SOURCE Fortune Minerals Limited