"This is a key milestone for First Point and the Decar Project," said Jim Gilbert, President and CEO of First Point. "The PEA represents a solid, conservative first pass at the potential economics of the Project. In our view, there is considerable upside to be pursued in the area of nickel price realization, where higher-paying markets and/or products for Decar have yet to be tested. Improved payability would in turn unlock a larger portion of the resource base, as more than half the resource is currently constrained by price inputs. The commercial area will be a focus of the next phase studies of the Project."
"Cliffs is very encouraged by the scoping study results for the Decar Project. Decar has the potential to be a very long life mining operation once it is developed," said Sean Whiteford, Vice President, Global Exploration for Cliffs. "As Cliffs has a long history in conventional mining and processing, we would be able to apply our knowledge and expertise in developing this resource. Our preliminary economic assessment signals the prospect to be a future viable alternative in the nickel market as a low-cost producer. This fits with our growth strategy to market ferroalloys to steelmakers in North America and around the world."
Neither sulphide nor laterite, the Decar Project is a grassroots discovery of a naturally occurring nickel-iron alloy called awaruite. While the mineral itself has been known academically for well over 100 years, First Point and Cliffs are the first to have assessed the mineral's economic and technical viability as a potential commercial-scale new source of nickel.
The results of the PEA demonstrate the positive potential for establishing a greenfield open-pit nickel mine and an on-site magnetic separation and gravity concentration processing plant, using conventional technology and equipment. At a projected throughput rate of 114,000 tonnes per day (or 40 million tonnes per year) over a mine life of 24 years, annual production averages 37,369 tonnes nickel, or 82.4 million pounds, in concentrate at an operating cash cost of C$3.23 per pound.
The PEA provides a preliminary assessment of the nickel-iron alloy's economic potential, based on early-stage marketing studies. The PEA assumes that a nickel-iron-chromite concentrate grading 13.5% nickel will realize 75% of the London Metal Exchange ("LME") nickel price. The study assumes no by-product credits are realized for iron or chromite.
Based on these first-pass assumptions, the Decar Project, on a 100% basis, generates a pre-tax net present value ("NPV") at an 8% discount rate of C$1,125 million and an internal rate of return ("IRR") of 15.7%, using an average realized nickel price of US$7.04 per pound. The nickel price is calculated based on realizing 75% of the three-year trailing average nickel price of US$9.39 per pound. On a post-tax basis, the project has a NPV of C$579 million and a 12.8% IRR, assuming aggregate statutory rate for federal, provincial and BC Mineral Tax of 39%.
The initial capital cost is estimated at C$1,384 million, with a payback of 6.4 years. Sustaining capital over the life-of-mine is a further C$763 million.
Under the terms of the Decar Project Option Agreement between Cliffs and First Point, Tetra Tech's full and final NI 43-101 compliant PEA will be delivered to First Point on, or before April 11, 2013, and will be filed on SEDAR by First Point no later than April 26, 2013.
While the results of the Tetra Tech PEA are promising, the study, by definition, is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There can be no certainty that the PEA will be realized. It is important to note that mineral resources are not mineral reserves and do not have demonstrated economic viability.
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