DGAP-News: Champion Iron Mines Limited: Champion Announces Preliminary Feasibility Study Results Indicating $3.3 Billion NPV and 30.9% IRR for West and East Deposits of the Consolidated Fire Lake North Project
ID: 227611
(firmenpresse) - DGAP-News: Champion Iron Mines Limited / Key word(s): Miscellaneous
Champion Iron Mines Limited: Champion Announces Preliminary
Feasibility Study Results Indicating $3.3 Billion NPV and 30.9% IRR
for West and East Deposits of the Consolidated Fire Lake North Project
08.02.2013 / 09:35
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NEWS RELEASE
Champion Announces Preliminary Feasibility Study Results Indicating
$3.3 Billion NPV and 30.9% IRR for West and East Deposits
of the Consolidated Fire Lake North Project
Toronto (Canada), February 7th, 2013 - Champion Iron Mines Limited (TSX:
CHM; OTCQX:CPMNF; FSE: P02) ('Champion', or the 'Company') is pleased to
announce the results from its Preliminary Feasibility Study ('PFS') for the
West and East deposits of the Consolidated Fire Lake North ('CFLN') Project
that was performed by BBA Inc. ('BBA') of Montréal, Québec. The study is
based on an initial 20 year mine life and produced a Net Present Value
('NPV') of $3.295 billion using an 8% discount rate. The financial model
shows an Internal Rate of Return ('IRR') of 30.9% and a capital payback
period of 3.4 years. The financial results included in this press release
are expressed in Canadian dollars and pre-tax (unless otherwise noted).
Summary of Preliminary Feasibility Study Results
$ 3,295Champion's President and CEO, Tom Larsen commented, 'Completion of this
NPV at 8% discount rate (Pre-tax) million
IRR (Pre-tax) 30.9%
Payback Period at 8% discount rate 3.4 years
$ 1,394
Pre-production Capital Cost (excluding rail cost) million
$ 213
Rail capital contribution million
$ 44.05
Average Operating Cost (loaded at Port of Sept-Îles including per tonne
rail capital and debt service costs) of concentra
FOB Concentrate Selling Price based on CFR China benchmark price te
at 62 % FeT adjusted for higher CFLN Fe grade (at) $5.00 per percent
and $20.00/t freight cost
Year 1-5 $ 115.00
Year 6-20 $ 110.00
per tonne
Mine Life 19.6 years
Concentrate Grade (percent contained Fe) 66%
Process Recovery (Iron) 82%
Weight Recovery 39.9%
Average Annual Concentrate Production 9.3 M
In-pit Optimized Measured and Indicated Resources Tonnes
West and East Deposits, CFLN Project 691.3 M
(COG of 15 %, 31.5% Total Iron) Tonnes
Engineered Optimized In-Pit Mineable Reserves
West and East Deposits, CFLN Project 464.6 M
(COG of 15 %, 32.4% Total Iron) Tonnes
Projected Concentrator Plant Start-up and Commissioning Q1 2016
Projected Start of Nominal Production Q2 2016
Preliminary Feasibility Study is the result of our team's dedicated efforts
over the past couple of years and we believe the results confirm
theexcellent project at our Consolidated Fire Lake North property. The
delivery of the Preliminary Feasibility Study is another major milestone
for Champion. Our progress in securing port access and material handling
capacity at Sept-Îles, advanced negotiations for electric power to the
project and permits to start the mine construction camp has resulted in
material de-risking of the Fire Lake North Project.' Mr. Larsen added,
'The recent increase in the estimated mineral resources at Consolidated
Fire Lake North to over 2.6 billion tonnes including the Oil Can deposits
creates strong support for a potential increase in annual concentrate
production to 20 million tonnes with a mine life greater than 20 years.
The release of this study on CFLN and what we believe to be a potential
world-class mine will accelerate our discussions with potential strategic
partners.'
Consolidated Fire Lake North Project Mineral Reserves
The iron process recovery of 82% yields an average production of 9.3
million tonnes per year ('Mtpa') of iron concentrate grading 66% total Iron
('FeT') during a 19.6 years mine life. The current optimized engineered
pits yield reserves of 464.6 M tonnes grading 32.37% FeT at a 15% FeT
cut-off grade with a weight recovery of 39.9%. The first five years of
production will average 9.8 Mtpa of concentrate.
Table 1 underneath summarizes the reserves and stripping estimates for both
the West and East pit.
Consolidated Fire Lake North Table of West Pit East Pit Both Pits
Reserves Combined
Ton- Fe % Ton- Fe % Ton- Fe %
nag- Tot- Weigh- nag- Tot- Weigh- nag- Tot- Weigh-
e(Mt) al% tReco- e(Mt) al% tReco- e(Mt) al% tReco-
very very very
Proven Reserves 20.7 36.2 45.7 3.0 34.2 40.2 23.7 36.0 45.0
Probable 268.1 33.4 42.2 172.8 30.2 35.6 440.9 32.2 39.6
Reserves
Total 288.8 33.6 42.4 175.8 30.3 35.6 464.6 32.4 39.9
Overburden 100.8 19.4 120.2
Waste Rock 616.8 490.7 1,10
7.6
Inferred 29.9 15.9 45.8
Resources
(waste)
Total of Waste 747.6 526.0 1,27
Stripping 3.5
Stripping Ratio 2.6 3.0 2.7
(Waste
Striping/Ore)
Life of Mine 12.6 years 7.1 years 19.6 yearsThe engineered pits recover 67% of the current In-pit Optimized Measured
and Indicated Resources totalling 691.3 Mt grading 31.5% FeT. The
engineered pits limit the inclusion of In-pit Inferred resources to 45.8 Mt
which are categorized as waste.
Additional drilling of the 480 Mt grading 30.4% FeT current Inferred
Resources within the limits and proximal to the Optimized Pit Shells could
provide additional Measured and Indicated resources required to double
production capacity and support a second concentrator line that would
produce an estimated 20 Mt of concentrate annually for a mine life of 20
years.
Financial Analysis
Compared to the result of the Preliminary Economic Assessment (see press
release dated November 21st, 2011) the following main differences in the
capital costs of the project are as follows:
- Rail costs increased from $275.4 million to $1.334 billion, reflecting
the estimate for a rail system from the CFLN Project to Point Noire at
the Port of Sept-Îles as contained in the 2012 Feasibility Study
prepared for Champion by Rail Cantech. However, $200 million of upfront
costs in this rail scenario are attributed to Champion and $1.134
billion is financed via construction financing and repaid from project
cash flows over a 12 year period.
- Concentrator and site infrastructure cost was increased by $145.9
million to support an increased concentrate production capacity to 10
Mtpa and a dual voltage substation.
- Pointe Noire port facilities cost was increased by $109.8 million after
consideration to a more suitable storage location which could be
expanded at minimal cost.
- Environmental cost increased by $83.4 million due to a cost
underestimation in the PEA.
- All mining equipment is capitalized ($55.4 million) compared to the PEA
where the mining equipment was leased.
The addition of these significant cost components clarify the project scope
with regards to the project schedule and estimated budget. The financial
model illustrates the robust economics of the West and East iron ore
deposits on their own merit. With the adjacent resources within the CFLN
project boundaries, the mid and long term growth profile of this project
are exceptional (refer to Press Release dated January 9th, 2013).
The $US exchange rate is assumed to be at par value with the Canadian
dollar. Table 1 provides the Net Present Values calculated at various
discounted cash flow rates for the Base Case production scenario of 10 Mtpa
of iron concentrate. The financial analysis in the PFS study used a sale
price of $115 per tonne of iron concentrate ($/tonne is FOB Sept-Iles) for
the first 5 years, and $110 per tonne for years 6 to 20. A sale price of
$115 per tonne was used for the Updated PEA.
Table 1: CFLN West and East Deposits Preliminary Feasibility Results (Pre-
Tax)
Internal Rate of Return (IRR) (8% Discount Rate) 30.9%Receipt of the general Certificate of Authorization from the Québec
Undiscounted Cash Flow $9.0 billion
Net Present Value (at) 5% Discounted Cash Flow $4.7 billion
Net Present Value (at) 8% Discounted Cash Flow $3.3 billion
Net Present Value (at) 10% Discounted Cash Flow $2.6 billion
Payback Period (8% Discount Rate) 3.4 years
Government is expected in Q1 2014 which will be followed by the
construction and start-up. Pre-construction activities are scheduled to
take place in 2013. The commissioning period is planned for Q1 2016 and
feasibility study production levels are planned for mid-2016 in line with
rail transportation availability. The Environmental and Social Impact
Assessment study is planned to be submitted to the MDDEFP and CEAA within
Q1 2013.
The PFS study has an accuracy of +15/-10%, which is considered industry
standard for capital and operating cost estimates in a feasibility study.
The only component that is not at a feasibility study precision level is
the multi-user rail infrastructure component. Champion has signed a
contract with CN Railway Company ('CN') whereby CN would present a
feasibility study on this multi-user concept by May 31st, 2013.
In order to complete the PFS in a timely manner, the Company included the
metrics from its Rail Cantech feasibility study completed in August 2012.
This study is based on a 310 km railway designed for an initial capacity of
20 Mtpa that is located on the east side of the Ste. Marguerite River,
starting at the CFLN project loading station and ending in the Pointe Noire
area of the Sept-Îles port.
Therefore, the PFS includes an estimated cost of $9.47/tonne of concentrate
for rail debt service in addition to 4.80 $/tonne for operations, totalling
$14.27/tonne based on 9.3 Mtpa mine-life average production of iron
concentrate. This is a higher cost than the initial rates proposed by the
CN multi-user rail transportation solution. Nonetheless, it shows that the
project economics are strong enough to support the construction of a new
310 km railway on its own.
Excluding the rail transportation capital cost component, the total capital
expenditures during the pre-production period were estimated at $1.39
billion of which $227.3 million is allocated to the Pointe Noire
concentrate stockyard facilities, as itemized in Table 2. The cost to
develop the CFLN concentrator and site facilities near Fermont totals
$1.167 billion, which equates to a capital intensity of $125/tonne for the
9.3 million tonnes of annualized production of iron ore concentrate.
This PFS study takes into consideration the usage of the Sept-Iles
multi-user Port facility project that is currently in construction and
planned for completion by Q1 of 2014. The Port Authority has communicated
in December 2012 that the project is on schedule and on budget.
Table 2: Pre-production Capital Costs
C$Operating costs are outlined in Table 3:
million
Mine equipment and pre-stripping 133.8
Site infrastructure 192.0
Concentrator including load out facilities 410.7
Environmental and Tailings Management 85.0
Other Pre-production Costs (rail rolling stock lease) 13.4
Port Facilities: Car dumper, stacker/reclaimer, stockyard 158.3
Railway (Owner's cost for 310 km distance including turnaround
loop and sidings) 200.0
Sub Total 1,193.2
Indirect Costs (including Owner's Costs) 300.2
Contingency (10%) 114.6
Grand Total (100% of the project) 1,607.8
Table 3: Operating Costs ($/Tonne of Concentrate)
Cost Parameters Average20 Averageyears 1Optimization of the mine-life production schedule resulted in a strip ratio
years to 5
Mining 18.89 12.76
Concentrator crushing and processing 4.38 3.89
Site Infrastructure Maintenance,&General 4.05 3.66
Administration
Environmental Tailings and Management 0.13 0.12
Rail Transport including lease for rolling 4.80 5.42
stock
Port facilities 2.34 2.14
Total Direct Operating Cost 34.58 27.99
Railway capital repayment ( $1,133.6 million) 6.22 7.40
Railway interest payment ($592.6 million) 3.25 7.29
Total operating cost 44.05 42.68
of 1.56:1 (waste/ore) for the first three years of production, 2.02:1 for
the first five years of operation; and a 2.74:1 strip ratio for the current
20 year mine-life.
As in the 2012 updated PEA study, the mill flowsheet of this PFS is based
on a standard three stage spiral iron beneficiation process. The
run-of-mine iron ore is crushed in a 60'' by 89'' gyratory crusher and then
ground in a 38' by 21.5' autogenous grinding mill ('AG Mill'). The AG mill
diameter and associated horsepower was increased for the PFS in order to
optimize the production rate throughput and enhance the economic metrics in
comparison to the 2012 PEA study. The AG mill will have two AC variable
drive motors totalling 21,450 HP. Larger mills of up to 42' are currently
in operation in the mining industry.
The PFS operating costs were reduced by 16% in comparison to the 2012 PEA
despite a significant cost increase related to the construction of a new
railway and associated debt service of $1,133.6 million. Mining costs were
reduced by $5.34/tonne of concentrate primarily associated with a reduction
in strip ratio ($4.19/tonne) combined with the removal of the mine
equipment lease cost ($1.15/tonne). Costs at the Pointe Noire Port
facilities were reduced by $1.38/tonne of concentrate following the signing
of an agreement with the Port of Sept-Iles Authority. The concentrator,
environmental, and general and administration costs were slightly reduced
by $0.14/tonne, $0.16/tonne and $0.35/tonne respectively, following a
detailed analysis of each cost component by BBA.
Manpower levels are expected to be 508 employees in Year 1 and peak at 688
in Year 15 when the mine reaches maximum production.
There is potential for the CFLN Project to become a significant low cost
iron ore producer with a new concentrator equipped with today's advanced
mineral processing technologies. The Company continues to analyze lower
cost opportunities.
Results from the PFS indicate that the CFLN project is a very technically
feasible and economically robust project with a Base Case scenario
including one production line yielding 9-10 Mtpa of concentrate from 464.6
M tonnes of in-pit reserves processed over a 20 year mine-life. The PFS
study is based on a stand-alone operation at CFLN and does not consider the
current Mineral Resources identified at other iron deposits located on the
CFLN Property (see Press Release dated Jan. 9th, 2013). The outstanding mid
and long term growth profiles for the Company are evident from mineral
resources identified within the CFLN Property and surrounding Fermont
Holdings.
Investor and Analyst Conference Call
Champion will host a conference call today at 8:30 am EST (February 7th,
2013) to discuss the Preliminary Feasibility Study results and address any
questions from analysts and shareholders.
The dial-in numbers for the conference call are as follows:
Local / International: (647) 426-1845
North American Toll Free: 1- 866-782-8903
The technical information in this news release was prepared by Mr. Jean-Luc
Chouinard, ing., M.Sc., VP Project Development for Champion Iron Mines
Limited and approved by Dr. AndréAllaire, ing., M.Eng., Ph.D. and Mr.
Patrice Live, ing., from BBA Inc., and all individuals are Qualified
Persons under NI 43-101 standards. Mr. Allaire and Mr. Live are both
independent of the issuer.
About Champion Iron Mines Limited
Champion is an iron exploration and development company with offices in
Montréal and Toronto, and is focused on developing its significant iron
resources in the provinces of Québec and Newfoundland&Labrador. Champion
holds a 100% interest in the Fermont Iron Holdings and a 44% interest in
the Attikamagen Iron Project located in both Québec and Labrador. The
Attikamagen Project is under option to Labec Century Iron Ore Inc.
('Labec'), a subsidiary of Century Iron Mines Corporation, under which
Labec can earn up to a 60% interest.
Champion's Fermont Iron Holdings, including its flagship Consolidated Fire
Lake North Project, are located in Canada's major iron ore producing
district, in close proximity to five producing iron mines, existing
transportation and power infrastructure. Consolidated Fire Lake North is
located immediately north of ArcelorMittal's operating Fire Lake Mine and
60 km south of Cliffs Natural Resources Inc.'s Bloom Lake Mine in
northeastern Québec. Champion's management and advisory board includes
mining and exploration professionals with the mine development and
operations experience to build, commission, and operate the future
Consolidated Fire Lake North mine.
For further information please contact:
Thomas G. Larsen, President and CEO, or Jorge Estepa, Vice President at
Tel: (416) 866-2200.
For additional information on Champion, please visit our website at
www.championironmines.com.
This news release includes certain information that may constitute
'forward-looking information' under applicable Canadian securities
legislation. Forward-looking information includes, but is not limited to,
statements about planned operations at the Company's projects, including
its Consolidated Fire Lake North Project. Forward-looking information is
necessarily based upon a number of estimates and assumptions that, while
considered reasonable, are subject to known and unknown risks,
uncertainties, and other factors which may cause the actual results and
future events to differ materially from those expressed or implied by such
forward-looking information, including the risks identified in Champion's
annual information forms, management discussion and analysis and other
securities regulatory filings by Champion on SEDAR (including under the
heading 'Risk Factors' therein). There can be no assurance that such
information will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such forward-looking
information. Accordingly, readers should not place undue reliance on
forward-looking information. All forward-looking information contained in
this press release is given as of the date hereof and is based upon the
opinions and estimates of Champion's management and information available
to management as at the date hereof. Champion disclaims any intention or
obligation to update or revise any forward-looking information, whether as
a result of new information, future events or otherwise, except as required
by law. This press release has been prepared by Champion Iron Mines Limited
and no regulatory authority has approved or disapproved the information
contained herein.
End of Corporate News
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