Northern Graphite Announces Results of Expansion Case PEA
October 23 2013 - 7:45AM
Marketwired Canada
Northern Graphite Corporation (TSX VENTURE:NGC)(OTCQX:NGPHF) announces the
results of a Preliminary Economic Assessment (the "PEA") on an expansion case
for its 100% owned Bissett Creek graphite project. The PEA was undertaken to
demonstrate the ability to meet expected future growth in graphite demand by
substantially increasing production from the Bissett Creek deposit based on
measured and indicated resources only. The PEA builds on the Feasibility Study
(the "FS") completed by G Mining in August, 2012 and the expanded resource model
and updated FS economics (the "FS Update") subsequently completed by AGP Mining
Consultants ("AGP"). The PEA was authored by Marc Leduc P. Eng. AGP completed
the resource and reserve estimates and mine plan. A NI 43-101 Technical Report
will be filed on www.sedar.com within 45 days hereof.
The PEA estimates the economics of doubling mill throughput after three years of
operation and demonstrates that Bissett Creek has very attractive economics even
at or below current depressed graphite price levels. The pre-tax internal rate
of return ("IRR") is 26.3% (22.0% after tax) and the pre-tax net present value
("NPV") is $231.1 million ($150.0 million after tax) in the base case which uses
an 8% discount rate and a weighted average price of US$1,800/tonne of
concentrate. The PEA notes that the deposit was extensively investigated in the
1980s and this work was essentially redone over the last three years with
consistent results and brought up to NI 43-101 standards. In addition, resources
have been infill drilled and significantly expanded. Consequently, the project
has been substantially de-risked in terms of resources, metallurgy and
engineering.
Gregory Bowes, CEO, commented that: "The current graphite supply chain is
heavily dependent on China and is characterized by many inefficient producers
with poor environmental and labor practices and inconsistent product quality,
delivery and reliability. Bissett Creek will produce the highest quality
concentrates in the industry and will provide a stable, secure source of supply
at very competitive costs and prices."
Summary of PEA Results
PEA FS Update
Reserves/resources (million tonnes)(i) 39.4Mt(i) 28.3Mt(i)
Feed Grade (% graphitic carbon) 1.85%(i) 2.06%(i)
Waste to ore ratio 0.24 0.79
Processing rate (tonnes per day - 92% availability) 2,670-5,340 2,670
Mine life 22 years 28 years
Mill recovery 94.7% 94.7%
Average annual production 33,183t 20,800t
Initial capital cost ($ millions - including 10%
contingency) $101.6M $101.6M
Expansion capital $45.2M NA
Sustaining capital $58.7M $43.0
Cash operating costs ($/tonne of concentrate) $695/t $795/t
Mining costs ($/tonne of ore) $4.05 $5.63
Processing costs ($/tonne of ore) $7.35 $8.44
General and administrative costs ($/tonne of ore) $1.45 $2.50
CDN/US dollar exchange rate 0.95 0.95
(i) The probable reserve in the FS update consists of 24 million tonnes
("Mt") grading 2.20% Cg and 4.0 Mt of low grade stockpile ("LGS")
grading 1.26% Cg. The PEA accelerates the processing of the probable
reserve and processes an additional 11.1 million tonnes of measured and
indicated resources from the LGS at the end of the mine life. All
grades are diluted.
FS Update PEA Expansion Case
----------------------
(base
case)
Graphite prices (US$ per tonne) $1,800 $2,100 $1,800 $1,500
Pre-tax Net Present Value @8% (CDN$
millions) $129.9 $335.6 $231.0 $126.6
Pre-tax IRR (%) 19.8% 33.0% 26.3% 18.8%
After tax Net Present Value @8% (CDN$
millions) $89.3 $221.9 $150.0 $77.3
After tax IRR (%) 17.3% 27.7% 22.0% 15.7%
The proposed development of the Bissett Creek graphite deposit consists of an
open pit mine and a processing plant with conventional crushing, grinding and
flotation circuits followed by concentrate drying and screening. The PEA assumes
that the processing plant is twinned after three years of operation, except for
the crusher which has excess capacity, and that the capacity of the plant is
effectively doubled. Corresponding adjustments were made to the power plant,
mine fleet and tailings storage facilities and other infrastructure to account
for the increased throughput.
Measured and indicated resources for the Bissett Creek deposit consist of 69.8
million tonnes ("Mt") grading 1.74% graphitic carbon ("Cg") based on a 1.02% Cg
cutoff grade ("COG"). The final mine plan in the FS update only contemplated a
25 to 30 year operation and resulted in probable reserves of 28.3 Mt of ore
grading 2.06% graphitic carbon based on a COG of 0.96% Cg. Probable reserves
include 24.3 Mt grading 2.20% Cg that will be processed first and 4.0 Mt grading
1.26% Cg from a low grade stockpile ("LGS") that will be processed at the end of
the mine life. In order to increase head grades in the initial years of
production while maintaining a reasonable stripping ratio, measured and
indicated resources grading between 0.96% Cg and 1.5% Cg were stockpiled,
largely within mined out areas of the pit. The total LGS will be 16.5 Mt grading
1.26% Cg.
The PEA uses the same mine plan but accelerates the mining of the high grade ore
and processes all of the LGS thereafter. There are an additional 27.3 million
tonnes of measured and indicated resources grading 1.62% Cg which are not
included in the mine plan and 24 million tonnes of inferred resources grading
1.65% Cg which are treated as waste. Also, resources have not yet been closed
off by drilling and therefore further expansions are possible. Over the first
ten years of operation almost 38,000 tonnes of graphite concentrate will be
produced yearly and an average of 33,100 tonnes will be produced over the
project life.
Cash mine operating costs will average CDN$695 per tonne of concentrate over the
mine life. Due to the flat lying nature of the deposit, production can be
expanded without any capital investment required for additional stripping or
pushbacks of the pit walls. The waste to ore ratio actually declines in the PEA
expansion scenario and contributes to lower operating costs. The initial capital
cost estimate to construct the processing plant, power plant and all associated
mine infrastructure remains at $101.6 million including a $9.3 million
contingency. Under the PEA, an additional $45.2 million in expansion capital has
been added in year three for the parallel mill circuits and sustaining capital
over the mine life was increased by $15.7M for additional mining equipment,
tailings facilities and other infrastructure.
Sensitivities (pre-tax)
$2,100 $1,800 $1,500
NPV(i) IRR NPV(i) IRR NPV(i) IRR
Base Case $335.6 33.0% $231.1 26.3% $126.6 18.8%
Grade +10% $408.3 37.4% $293.3 30.4% $178.3 22.6%
Grade -10% $263.0 28.4% $168.9 21.9% $74.9 14.8%
Operating costs -10% $358.7 34.5% $254.2 27.8% $149.7 20.6%
Operating costs +10% $312.6 31.5% $208.1 24.7% $103.6 17.1%
Capex -10% $351.2 36.2% $246.7 29.0% $142.2 21.1%
Capex +10% $320.1 30.3% $215.6 23.9% $111.1 16.9%
(i) $ millions @ 8%
Graphite Markets and Pricing
After more than tripling from 2005 to 2012, graphite prices have fallen back 50%
or more due to the slowdown in China and a lack of growth in the US, Europe and
Japan. Recently it has been reported that Chinese flake production has fallen
27% and that the only North American producer has suspended operations which
indicates that current prices are close to the marginal cost of production for
many producers. These shutdowns have helped stabilize prices for the last six
months and should limit further price declines. The weighted average price that
would be realized by Bissett Creek concentrates in the current market is
estimated at US$1,800/t based on +50 mesh prices of approximately $2,100/t,
$1,350 for +80 mesh, $1,100 for -100 to +80 mesh and $900 for -100 mesh, all at
94% C or better. Sensitivities are presented at US$2,100/t and at US$1,500/t.
Qualified Persons
Pierre Desautels, P.Geo., Principal Resource Geologist, and Gordon Zurowski,
P.Eng., Principal Mining Engineer, both of AGP Mining Consultants and Qualified
Persons under NI 43-101 who are independent of the Company, prepared the mineral
resource estimates in the PEA. Gordon Zurowski, P.Eng., prepared the reserve
estimate and the updated Feasibility Study economics. Marc Leduc, P.Eng., who is
independent of the Company, prepared the PEA and approved and authorized the
release of the information contained herein.
Northern Graphite Corporation
Northern Graphite Corporation is a Canadian company that has a 100% interest in
the Bissett Creek graphite deposit located in eastern Ontario. Graphite demand
is expected to rapidly increase in the future due to strengthening economies and
the growth in new technologies such as lithium ion batteries, particularly due
to their use in hybrid and all electric vehicles. Northern Graphite is well
positioned to benefit from this compelling supply/demand dynamic with a high
purity, large flake, scalable deposit that is located close to infrastructure.
Additional information on Northern can be found at www.sedar.com and
www.northerngraphite.com.
This press release contains forward-looking statements, which can be identified
by the use of statements that include words such as "could", "potential",
"believe", "expect", "anticipate", "intend", "plan", "likely", "will" or other
similar words or phrases. These statements are only current predictions and are
subject to known and unknown risks, uncertainties and other factors that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from those anticipated by the
forward-looking statements. The Company does not intend, and does not assume any
obligation, to update forward-looking statements, whether as a result of new
information, future events or otherwise, unless otherwise required by applicable
securities laws. Readers should not place undue reliance on forward-looking
statements.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Northern Graphite Corporation
Gregory Bowes
CEO
(613) 241-9959
Northern Graphite Corporation
Stephen Thompson
CFO
(613) 241-9959
www.northerngraphite.com
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