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NI-43101 Technical Report

Click here to download a complete copy of the NI-43101 Technical Report.

The NI 43-101 Technical Report is a key requirement for a North American stock exchange listing, as well as for North American investors.

The report has been completed to a Prefeasibility Study level of accuracy, with some aspects of the capital cost and tailings disposal requiring additional engineering and costing for the entire study to be elevated to a Definitive Feasibility Study (DFS) level of accuracy.

The key attributes of the Buena Vista Iron Project that drive the robust economics are:

  • the very low waste to ore ratio (refer Figure 2 below);
  • the location of the project adjacent to existing rail infrastructure; and
  • the excellent metallurgy and soft ore.

Note: Unless otherwise noted, all currency disclosures are in US dollars and all weights and measures are in metric units. The NI 43-101 Technical Report was completed on an ungeared basis.


Operating summary

The NI 43-101 Technical Report was completed by:
  • AMC Consulting (mineral resource estimates);
  • Crosscut Consulting (mine plan, reserve estimate and mining capital and operating costs); and
  • Holland and Holland (metallurgical, process capital and operating costs). 
The mine has been designed as a simple open pit operation, with pits at Section 5, West and East Deposits. Mining will be via conventional mining methods, with drilling and blasting and using a 100t truck fleet for ore and waste haulage. Mining will commence at the West Deposit, then move to Section 5 and then to the East Deposit.

Table 1 contains a summary of the anticipated Life of Mine (LOM) statistics.

Table 1 LOM Statistics
 Average annual ore mined (tonnes)  8,783,935
 LOM average ore grade (% total Fe)  19
 Average annual total mined (tonnes)  12,854,063
 LOM average waste:ore ratio  0.46
 Average annual ore processed (tonnes)  8,822,644
 Average annual concentrate produced (tonnes)  1,825,871

Ore production is estimated to average 8.8 Mtpa over the LOM, with a peak of 11.5 Mtpa in year 5 of the project. Iron grades are estimated to average 19% total Fe over the LOM.

The LOM waste to ore ratio is estimated to be 0.46:1, which is among the lowest of the new iron ore developments globally, as seen in Figure 2. Almost all the material within the designed pits is mineralised. Average mining movement over the LOM is estimated to be 12.8 Mtpa, with a maximum of 16.2 Mtpa in years 2, 3 and 4 of the project life.

The very low waste to ore ratio is something that sets the Buena Vista Iron Project apart from many of the new iron ore developments. The mining costs account for a large percentage of the Free on Board (FOB) cost for new mines and the very low amounts of waste to be mined at Buena Vista are a major competitive advantage for the Company.

Figure 2: – Waste to ore ratios for new iron ore developments

Waste: Ore ratio

Processing of the ore is planned to be at a maximum rate of 10.44 Mtpa and using a standard flow sheet incorporating the following:

  • crushing to 3/8ths of an inch;
  • dry magnetic separation (cobbing) to reject approximately 40% of the feed with minimal loss of magnetic Fe;
  • milling of the ore;
  • wet magnetic separation to produce a clean, high grade concentrate of approximately 67.5% Fe;
  • filtration of the concentrate prior to transport to the rail head; and
  • filtration and dry stacking of the tailings, to be co-disposed of with the dry cobbing tailings.

The estimated LOM iron recovery is 76% of total Fe, into a concentrate grading 67.5% Fe. Concentrate quality is expected to be very good with no deleterious elements.

The plant has been designed and costed for the maximum production rate of 10.44 Mtpa and has significant excess capacity for the majority of the mine life, based on the current mine production schedule. The excess capacity provides the Company with the ability to treat ore as it produces it, rather than rehandling stockpiled ore later in the mine life (as was previously proposed for the project).

The available excess capacity will also provide the Company with the ability to treat additional ore from its own adjacent exploration prospects, or from third parties within the broader Buena Vista iron district, as and when ore becomes available.

Transport of the concentrate will initially be via truck to one of the two available rail load out facilities. The Company anticipates that within the first 4 years of operation, the transport of concentrate to the rail load out facilities will be by either truck or via a to be constructed concentrate slurry pipeline.

Concentrate production is estimated to total 28.3 Mt over the LOM, at an average of 1.8 Mtpa over the 15.5 year mine life. Peak concentrate production is forecast to be in Year 6 of the LOM at 2.53 Mtpa, which is driven by higher ore grades in that year.


Capital costs

The capital cost estimate for the mine fleet is considered to be at a DFS level, with the study being completed on the basis that the Company purchases the entire mining fleet. The Company will, however, retain the option of leasing this equipment, which is typically the route adopted by similar sized mining operations.


The process plant capital cost estimate requires additional engineering to be considered at a DFS level. In particular, additional engineering is required for the enlarged crushing area and the dry stacked tailings area.


The milling area of the plant has been sized at 6 Mtpa, which is the same as the previously completed study for the project.


Operating costs

Operating costs have been developed using current Nevada costs, quotes and personnel rates.

As can be seen in Table 2, the LOM FOB cost is estimated to be approximately US$64/dmt for 67.5% Fe concentrate. Mining and processing costs account for approximately equal proportions of this at 27% and 28% respectively, with site general and administration accounting for a further 3%. Offsite freight costs and loading account for the remaining 42% of the estimated costs.

Table 2  Operating Cost Breakdown
Cost Area US$/dmt Conc.
Mining $17.20
Processing $17.55
General and administration $2.19
Offsite freight to port and loading $26.81
Total FOB $63.75

The very low waste to ore ratio for Buena Vista translates into relatively low mining costs per tonne of concentrate.

Processing costs are also estimated to be relatively low, which is attributable to:

  • soft ore;
  • low prevailing energy cost in Nevada; and
  • the dry magnetic separation removing approximately 40% of the waste from the ore feed prior to the milling section of the plant (which is where most of the processing costs are incurred).

The offsite freight costs are a large component of the costs and work is continuing on ways of reducing these costs, which are predominantly third party costs.

Logistics

During the year the Company completed the purchase of land at an alternative rail siding to provide an additional site for loading concentrate. This gives the Company flexibility in designing rail load out facilities for the expanded operation and the potential to negotiate slightly better freight rates. This also prevents other potential users from securing the site ahead of the Company.

As can be seen in Figure 3, the Huxley Rail Siding is located in an area with no competing land use and provides scope for expansion of the facility in the future.

Figure 3: – Huxley rail siding location

Huxley rail siding location


Permitting

As the Company winds up the definition stage of the Buena Vista Iron Project, the focus of the Company is increasingly turning towards permitting. The decision to move towards trucking the concentrate to the railhead rather than piping has simplified the permitting procedure significantly. A number of permits are still required to be obtained, the main one being the Water Pollution Control Permit. This permit has the longest lead time and requires the most information. To facilitate the securing of this permit and the other required permits, the Company has hired a highly experienced Reno based full time Environmental Manager.

Financial summary

The financial evaluation of Buena Vista has been completed on a pre-tax basis and using a long term iron ore price of US$110/dmt of 62% Fe CFR China (Platts benchmark). This price has been adjusted for freight costs from the West Coast of the USA and the premium quality that a 67.5% Fe concentrate will receive over and above the Platts 62% Fe benchmark price.

After making these adjustments, the FOB price for the 67.5% Fe concentrate is estimated to be US$104/dmt. As discussed above, the estimated FOB cost for the Buena Vista Iron Project concentrate is approximately US$64/dmt, which results in an estimated margin of approximately US$40/dmt (39% operating margin).

Table 3 contains a summary of the LOM financial statistics.

Table 3 LOM Financial Summary (Pre tax)
 Net free cash flow (US$m)  $697
 NPV @ 5 % (US$m)  $367
 NPV @ 7.5 % (US$m)  $263
 NPV @ 10 % (US$m)  $184
 Operating margin (US$/dmt conc)  $40.55
 Operating margin (%)  39%
 Capital cost (US$m)  $259
 Payback period (years)  4


Summary

The completion of the NI 43-101 Technical Report was an important milestone for the Company and provides a valuation guide for the currently defined Buena Vista Iron Project.

Work is continuing on the engineering required to upgrade all aspects of the capital cost to a DFS level. This work is also required for the purposes of securing the required permits.

The increased plant size will enable the Company to take advantage of additional ore sources that may be found on either its own claims or from within the broader Buena Vista area.