Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to note the announcement today from Macarthur Minerals (TSX-V: MMS) (“Macarthur”) regarding the results of the Preliminary Economic Assessment (“PEA”) undertaken by independent consultants Engenium Pty Ltd (“Engenium”) for its 100% owned Lake Giles Iron Ore Project (“the Project”) in Western Australia.
The PEA was completed for a 2.5 to 3.4 Mtpa operation incorporating the Moonshine Magnetite and Ularring Hematite Mineral Resources to produce a high-grade blended concentrate in excess of 65% Fe. The technical and financial evaluation in the PEA indicates the Project is potentially economically viable and further project development is justified.
The independent technical report, entitled “NI43-101 Technical Report, Macarthur Minerals Limited, Preliminary Economic Assessment Lake Giles Iron Project, Western Australia, (the “2019 Technical Report”) with an issue date of June 13, 2019, was prepared in accordance with the requirements of National Instrument 43-101 (“NI 43-101”). The 2019 Technical Report is filed under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com (filing date: June 17, 2019) and on the Company’s website at www.macarthurminerals.com.
Cadence holds approximately 9.8% of the issued equity interest in Macarthur, which is an Australian mining exploration company focused primarily on iron ore, nickel, lithium and gold in Western Australia. It also has a lithium project in Nevada, USA.
Macarthur Announcement. PEA Highlights
The key financial outcomes are summarised below:
- Project after-tax real Net Present Value (“NPV”) of US$375 million at an 8% discount rate, based on a discounted cash flow model with:
- a project life of 31 years with saleable product of 2.5 to 3.4 million tonnes per annum (“Mtpa”)
- total sales of 83 million tonnes; and
- Total Life of Mine (“LOM”) free cash flow of US$1,465m.
- Total direct operating costs (excluding royalties) are estimated at US$3.1 billion (rounded).
- Total project costs (direct and indirect operating costs, capital spend including contingency, rehabilitation and sustaining capital) are estimated at US$4.5 billion (rounded).
- The project is potentially highly profitable with a discounted payback (based on NPV) in 3 years.
- Average operating costs of US$37.62 including US$31.30/t Free on Board (“FOB”) for hematite and US$37.43/t FOB for magnetite.
- Total revenue estimated at US$6.8 billion (rounded).
- Total capital cost estimated at US$326 million including contingency of US$44 million.
- Rehabilitation costs of US$38 million and sustaining capital expense over LOM of US$54 million.
Note: The outcomes of the economic assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realised.
Revised Project Strategy
In February 2011, Macarthur released its Preliminary Economic Assessment (“2011 PEA”) for the Moonshine Magnetite Project for the production of 10 Mtpa of high-grade magnetite concentrate (press release dated February 7, 2011). The 2011 PEA outlined several logistical and port scenarios including slurry transport 110 km to a dewatering plant and rail siding south of the town of Menzies.
Similarly, in September 2012, Macarthur released its Prefeasibility Study (“2012 PFS”) (press release dated August 16, 20122) for the Ularring Hematite Project, which focused on mining 2 million tonnes per annum (“Mtpa”) of hematite/goethite iron ore. The 2012 PFS outlined a wet beneficiation process that would produce a +60% Fe sinter fines product.
Since the release of those studies, the iron ore market has undergone a dramatic shift where low grade iron ore <60% Fe is currently heavily discounted while the high-grade market, including magnetite concentrate, is attracting premium pricing.
In response, Macarthur has revised its strategy to align the Projects with the robust current and forecast market conditions, capital markets and available capacity of regional infrastructure. The major impediment to development of the Moonshine Magnetite Project envisaged by the 2011 PEA, was the substantial capital cost and access to export capacity at the Port of Esperance. The revised project strategy targets an initial production rate of 3 Mtpa of high grade, low impurity concentrate, along with streamlined project infrastructure, significantly reducing capital cost.
The revised Projects will see a combined hematite and magnetite operation where the product will be a high grade, blended magnetite and hematite concentrate. This strategy allows low grade hematite (~56% Fe) to be blended with a high-grade magnetite concentrate (~68%) in a ratio to achieve a final concentrate grading 65% Fe.
Operating and Capital Costs
The operating strategy for the Lake Giles Project is to export high-grade (+65% Fe) magnetite concentrate via the existing Port of Esperance (“Port”) owned and operated by the Western Australian Government. Magnetite concentrate will be processed on site, road hauled 90km to the existing open access rail network operated by Arc Infrastructure and then railed to the Port of Esperance.
As reported on April 8, 2019, access to the existing rail network has been confirmed and Macarthur has entered into an Exclusive Negotiation Agreement with Aurizon for rail haulage services. The Company is in advanced discussions with the Western Australian Government for access to the Port and the capital estimate includes infrastructure upgrades at the Port.
The full release can be found at: https://web.tmxmoney.com/article.php?newsid=7834524061311745&qm_symbol=MMS
Cadence Minerals CEO Kiran Morzaria commented: “The PEA undertaken by Macarthur on the Lake Giles Iron Ore project confirms quality, potential profitability and long term revenue potential for the Lake Giles iron Ore project, driven, as the company points out, by a dramatic shift in high grade magnetite concentrate pricing.”
“As shareholders, Cadence are delighted to continue to support Cameron McCall and the Macarthur Minerals team.”
This news release is not for distribution to United States Services or for Dissemination in the United States.
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For further information:
|Cadence Minerals plc||+44 (0) 207 440 0647|
|WH Ireland Limited (NOMAD & Broker)||+44 (0) 207 220 1666|
|Novum Securities Limited (Joint Broker)||+44 (0) 207 399 9400|
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.
Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identiﬁed by their use of terms and phrases such as ‘‘believe’’ ‘‘could’’ “should” ‘‘envisage’’ ‘‘estimate’’ ‘‘intend’’ ‘‘may’’ ‘‘plan’’ ‘‘will’’ or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reﬂect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.