Northern Graphite Announces Update of Expansion Case PEA
June 24 2014 - 9:24AM
Marketwired Canada
Northern Graphite Corporation (TSX VENTURE:NGC)(OTCQX:NGPHF) announces that it
has updated the Preliminary Economic Assessment (the "PEA") on its 100% owned
Bissett Creek graphite project to assess the economics of building a process
plant with twice the capacity of the plant contemplated in the Company's
Feasibility Study ("FS"). The larger process plant was evaluated due to recent
developments in the lithium ion battery industry and strong buyer interest in
the extra large flake, high purity concentrates that will be produced using
Northern's proprietary purification technology.
The updated PEA indicates that the Bissett Creek Project has very attractive
economics even at or below current depressed graphite price levels. The pre-tax
internal rate of return ("IRR") is 31.7% (26.7% after tax) and the pre-tax net
present value ("NPV") is $264.7 million ($178.9 million after tax) in the base
case which is based on an 8% discount rate and a weighted average price of
US$1,800/tonne of concentrate which reflects current market conditions.
Development capital costs in the updated PEA have been estimated at $134.1
million (including a 10% contingency) for an operation that will produce an
average of approximately 44,200 tonnes of graphite concentrate annually over the
first 10 full years of operation. Almost 90% of production will consist of large
and extra large flake and battery grade graphite which is by far the highest
ratio in the industry. There are also 27.3 million tonnes of Measured and
Indicated resources and 24 million tonnes of Inferred resources that are not
part of the PEA mine plan and the deposit has not yet been closed off by
drilling, all of which indicates that further production expansions are
possible.
Gregory Bowes, CEO, commented that: "It has been reported that multiple new
graphite mines will be required to supply proposed lithium ion battery
manufacturing plants because graphite deposits typically produce a high
percentage of non battery grade material, and two thirds of the material that is
battery grade is lost in the manufacturing process. However, Bissett Creek may
be the only mine that is required to meet market demand due to its very high
percentage of battery grade material, lower manufacturing losses and future
expansion potential."
Summary of updated PEA Results
Potential Economically Extractable Resources (million
tonnes)(i) 40.5Mt(i)
Feed Grade (% graphitic carbon) 1.83%(i)
Waste to ore ratio 0.25:1
Annual processing rate (tonnes per year) 2,000,000
Processing rate (tonnes per day - 92% availability) 5,480
Project life (based on 2.0 Mtpa) 21 years
Mill recovery 94.7%
Average annual concentrate production (tonnes - first 10
years) 44,200
Capital cost ($ millions - including 10% contingency) $134.1
Sustaining capital ($ millions) $55.1
Cash operating costs ($/tonne of concentrate) $736
Mining costs ($/tonne of process feed material) $3.74
Processing costs ($/tonne of process feed material) $7.78
General and administrative costs ($/tonne of process feed
material) $1.45
Concentrate transportation to Montreal ($/tonne of process
feed material) $0.55
CDN/US dollar exchange rate $0.95US = $1 CDN
(i) The PEA production plan is based on 24 million tonnes ("Mt") grading 2.20%
Cg (as estimated in the FS) being processed first followed by the processing of
16.1 million tonnes of Measured and Indicated resources grading 1.26 % Cg from a
low grade stockpile. All grades are diluted. Mineral resources that are not
mineral reserves do not have demonstrated economic viability.
PEA Update
------------------------------------
(base case)
Average graphite price (US$ per tonne) $2,100 $1,800 $1,500
Pre tax Net Present Value @8% (CDN$
millions) $380.9 $264.7 $148.4
Pre tax IRR (%) 40.7% 31.7% 22.2%
After tax Net Present Value @8% (CDN$
millions) $257.9 $178.9 $99.0
After tax IRR (%) 33.9% 26.7% 18.9%
The PEA was originally undertaken to demonstrate the ability to meet expected
future growth in graphite demand by substantially increasing production from the
Bissett Creek deposit after three years of operation based on Measured and
Indicated resources only. The PEA built on the Feasibility Study completed by G
Mining in August, 2012 and the expanded resource model, mine plan and updated FS
economics completed by AGP Mining Consultants ("AGP") in September, 2013. P&E
Mining Consultants Inc. ("P&E") reviewed the AGP mine plan and modified it to
commence production at the expanded 2.0 Mtpa production rate in Year 1 rather
than ramping up in Year 3 and to more aggressively backfill the open pit with
waste. WorleyParsons Canada updated the capital and operating costs for the
process plant which represents a portion of the total capital and operating
costs for the project. Consistent with industry practice, the estimates have
been prepared with an engineering accuracy of +15/- 20%.
Graphite Markets and Pricing
Graphite prices have fallen 50% or more from their 2012 peak due to the economic
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 30% as uneconomic and
polluting mines are being closed. Current prices are at the marginal cost of
production for many producers which 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 which is the highest in the
industry because approximately 50% of production will be +50 mesh extra large
flake and another 40% is +80 mesh large flake. Current graphite pricing is
approximately $2,100/t for +50 mesh XL flake concentrates, $1,300/t for +80 mesh
large flake, $1,100/t and $900/t for +100 mesh and +150 mesh medium and small
flake respectively, and less than $500/t for -150 mesh fines. Typical graphite
deposits only have about 15% XL flake and over one third -150 mesh fines, and
would realize average prices in the range of $1,000-1,200 per tonne of
concentrate under current conditions, assuming a market for the fines.
Qualified Persons
Ken Kuchling, P.Eng., Senior Mining Associate of P&E Mining Consultants Inc.
prepared the revised mine plan for the PEA update. Dan Peldiak, P.Eng.,
Principal Process Engineer WorleyParsons Canada prepared the revised capital and
operating costs for the process plant. Andrew Bradfield, P.Eng., of P&E, who is
independent of the Company, approved and authorized the disclosure of the
technical information contained in this press release. Readers should refer to
the NI 43-101 technical reports relating to the FS and the PEA for further
details with respect to the Bissett Creek Project.
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. The Company
expects graphite prices to outperform those of other commodities in an economic
recovery because of Chinese supply problems and the continued rapid growth in
new uses such as lithium ion batteries. Bissett Creek is the only true large
flake deposit and the only one with a bankable Feasibility Study and its major
environmental permit. It also has the best infrastructure of any new graphite
project, the lowest capital costs and the highest operating margin. A copy of
this press release which includes detailed cash flows for the updated PEA
economics, as well as 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
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