Mr. Benoit Gascon reports
MASON GRAPHITE ANNOUNCES ROBUST PRELIMINARY ECONOMIC ASSESSMENT RESULTS, FEATURING 22 YEARS OF PRODUCTION AT 27.4% CGR AND AN IRR OF 33.7%
Mason Graphite Inc. has released the results of a preliminary
economic assessment study for the development of its 100-per-cent-owned
Lac Gueret graphite project in northeastern Quebec.
Financial highlights
- Initial direct capital costs of $89.9-million;
-
Production costs of $390 per tonne of finished product;
- $364-million pretax net present value (8-per-cent discount);
- $283-million pretax NPV (10-per-cent discount);
- 33.7-per-cent pretax internal rate of return;
- Payback period of 2.5 years;
- 22-year mine life;
- Average sales price of $1,525 per tonne.
Operational highlights
-
Annual production of 50,000 tonnes of graphite concentrate;
- 27.4 per cent average life-of-mine graphite content in the mineralization;
- Graphite recovery above 96 per cent;
- Up to 96.4 per cent Cg of finished product purity;
- Stripping ratio of 0.76 to 1.
Cautionary note
A PEA is preliminary in nature and includes inferred
mineral resources, which are considered too geologically speculative to
have mining and economic considerations applied to them that would
enable them to be categorized as mineral reserves. Mineral resources
that are not mineral reserves do not have demonstrated economic
viability. There is no certainty that the reserves development,
production and economic forecasts on which the PEA is based will be
realized.
Benoit Gascon, chief executive officer of Mason Graphite, commented: "We are very pleased
with the excellent results of the PEA, which demonstrates a low-cost
project with robust economics. Our senior management team has decades
of cumulative experience producing and selling graphite, and with our
partners, we have delivered a technically sound, realistic and highly
profitable project. The completion of the PEA is a significant
milestone for the project and demonstrates that the Lac Gueret mine has
the potential of becoming a reliable and long-term global supplier of
high-quality graphite. We now intend to proceed with the next phase of
development in order to bring this exceptional asset one step closer to
production."
The PEA was prepared by Met-Chem Canada Inc. (Montreal, Que.), with
contributions from SGS Minerals Services (Lakefield, Ont.)
for the process development; both are independent leading firms in the
mineral-processing industry.
Mineral resources -- excellent mineral growth potential expected
The PEA was prepared using data from the July, 2012, mineral resource
estimate, which consists of 300,000 tonnes at 24.4 per cent graphite (Cg) in the
measured category, 7.3 million tonnes at 20.2 per cent Cg in the indicated
category and 2.8 million tonnes at 17.3 per cent Cg in the inferred category
(see technical report dated July 3, 2012, for details). This mineral
resource is hosted on a small portion of the GC zone.
JULY, 2012, MINERAL RESOURCE ESTIMATE
Categories Tonnes Cg grade
(%)
Measured
Unit 1 (4% to 10% Cg) 31,200 7.82
Unit 2 (10% to 27% Cg) 122,800 14.85
Unit 3 (>27% Cg) 144,900 36.72
All units 298,900 24.39
Indicated
Unit 1 (4% to 10% Cg) 2,672,500 8.09
Unit 2 (10% to 27% Cg) 2,089,200 16.83
Unit 3 (>27% Cg) 2,535,300 36.2
All units 7,297,000 20.24
M+I
Unit 1 (4% to 10% Cg) 2,703,700 8.67
Unit 2 (10% to 27% Cg) 2,212,000 18.30
Unit 3 (>27% Cg) 2,680,200 36.96
All units 7,595,900 20.40
Inferred
Unit 1 (4% to 10% Cg) 1,272,600 7.56
Unit 2 (10% to 27% Cg) 714,200 17.54
Unit 3 (>27% Cg) 771,500 33.1
All units 2,758,300 17.29
Since the completion of the July, 2012, mineral resource, the company has
completed 26,500 metres of additional drilling. This program consisted
of 145 drill holes around the resource envelope in the GC zone and 18
drill holes in the GR zone to test for continuity of mineralization
(see Nov. 21, 2012, Feb. 28, 2013, and April 3, 2013, press releases).
The program successfully identified mineralization with similar grades
in both zones.
After the 22-year mine life proposed in the PEA, 5.6 million tonnes of
mineralization grading 13.1 per cent of graphite will still remain as part of
the 2012 mineral resource envelope. An updated mineral resource is
currently under way by Roche Ltd. Consulting Group, which will include
145 new drill holes from the GC zone; the company expects that the
addition of the latest GC zone results in the upcoming mineral resource
will significantly increase this quantity and grade, and, consequently,
will further increase the mine life beyond the one contemplated in the
PEA.
Commercial sales and revenues -- 50,000 tonnes of saleable graphite annually; $76.2-million in annual
revenues
The Lac Gueret mine will produce an average of 50,000 tonnes of saleable
graphite annually. At an average sale price of $1,525 per tonne, this
represents $76.2-million in annual revenue. The flake size distribution
and associated prices are summarized in the table.
GRAPHITE FLAKE DISTRIBUTION AND PRICE ASSUMPTIONS
Product category Tonnes of product Price per tonne Annual revenue
+50 mesh 9,200 $2,200 $20,240,000
+80 mesh 6,095 $2,000 $12,190,000
+150 mesh 7,136 $1,500 $10,703,000
-150 mesh 27,569 $1,200 $33,083,000
Total 50,000 $1,525 $76,217,000
The sale price assumptions used in the PEA were based on the 24-month
average graphite prices published by Industrial Minerals magazine
(IM). Applying Mason's product distribution to IM's 24-month
averages, the average selling price would become $1,974/tonne. In
comparison with the industry's market prices, the graphite prices used in
the PEA are deemed by the company to be conservative.
Luc Veilleux, chief financial officer of Mason Graphite, commented: "The conservative price
assumptions used in the PEA could represent a potential opportunity for
improved economics. Integrating the 24-month average IM price of
$1,974/tonne in the financial model could yield a potential improvement
with a pretax NPV (8-per-cent discount) of $558-million and an IRR of 44.7 per cent."
The commercial scenario used in the PEA considers realistic assumptions
that are based on Mason Graphite's established relationships with
existing markets. Graphite is not an openly traded mineral, therefore
prices are negotiated between end-users and producers in annual or
multiyear contracts. The company will continue to build close and
continuous relationships with its potential customers in order to
tailor the finished product to meet their exact needs. The Lac Gueret
project does not rely on yet-to-come technologies and demands; however,
it will be well positioned to work with new applications, technologies,
markets and customers.
Mining
MINING HIGHLIGHTS
Mining costs $36/tonne of finished product; $6/tonne mined
Average graphite grade 27.4% Cg
Stripping ratio 0.76:1
Average graphite material mined per year 176,000 tonnes
Average waste mined per year 134,000 tonnes
Total material moved per year 310,000 tonnes
The Lac Gueret graphite deposit outcrops on surface, therefore mining
will be carried out using conventional open-pit mining. Due to the hard
nature of the mineralization, drilling and blasting will be required.
The high-grade graphite in the mineralization and the low waste
stripping ratio will result in a very low amount of total material
movement. Throughout the life of the mine, only about six tonnes of
material will have to be mined for the production of one tonne of
finished graphite concentrate.
The processing plant and waste dump will be located less than 1,500
metres from the mine to ensure short cycle times and low production
costs.
Processing and recovery
-- proven process resulting in exceptionally high graphite recoveries above
96 per cent
PROCESSING AND RECOVERY HIGHLIGHTS
Processing costs $221/tonne of finished product; $63/tonne of material processed
Annual average processing rate 176,000 tonnes
Annual average production 50,000 tonnes of graphite concentrate
Average graphite recovery Above 96%
Finished product purity Up to 96.4% Cg
The graphite recovery process at Lac Gueret consists of crushing,
followed by multiple steps of grinding and flotation separation
circuits. The processing plant is based on a flow sheet developed by
SGS, using proven technologies to create a very efficient process
resulting in remarkably high graphite recoveries. Lock-cycle tests were
performed by SGS and have demonstrated the robustness of the flow
sheet.
Using standard product specifications of the industry, commercial
distribution was calculated based on the mineral deposit's
metallurgical distribution. See the company's press release dated
Feb. 22, 2013, for further detail on the Lac Gueret metallurgical
results.
The processing plant was designed to allow for capacity increases to
satisfy the market demand.
FLAKE SIZE DISTRIBUTION FOR ANNUAL PRODUCTION
Flake size Distribution Tonnes of product
(%)
+50 mesh 18.4 9,200
+80 mesh 12.2 6,095
+150 mesh 14.3 7,136
-150 mesh 55.1 27,569
Total 100.0 50,000
Additional development work is planned with the goal of further
optimizing the flake size distribution as well as the purity of the
final concentrate. These tests will also be conducted on samples
obtained from other areas of the mineral deposit.
Capital and operating costs
LOW CAPITAL INTENSITY AND CASH OPERATING COSTS
Capital cost breakdown
Mining $8,026,000
Plant $55,264,000
Tailings and water management $4,271,000
Infrastructure and services $17,074,000
Total direct costs $89,935,000
Contingency (20% of direct costs) $17,987,000
$107,922,000
Indirect costs $21,768,000
Sustaining capital $6,281,000
Mine closure and rehabilitation $4,493,000
Cash operating cost breakdown
(per tonne of finished product)
Mining $36/tonne
Plant $221/tonne
Support and infrastructure $133/tonne
Total $390/tonne
Project location and infrastructure
-- excellent accessibility in a stable and mining-friendly jurisdiction
The Lac Gueret property covers approximately 11,630 hectares (116 square kilometres) in northeastern Quebec and is located about 300 km north of the main
service centre of Baie-Comeau. The mine site is accessible from the
main public highway, Highway 389, via approximately 80 km of good-quality
logging roads throughout the property. The company plans to build a
mining and operations camp that will consist of accommodations for the
personnel, offices and a fully equipped maintenance facility for the
fleet of vehicles. Power for the project will be produced on-site using
diesel generators.
The technical report will be posted on Mason Graphite's website and on SEDAR within 45 days following this news release.
Quality assurance/quality control
Mary-Jean Buchanan, Eng, MEnv, of Met-Chem Canada, independent
qualified person as defined by National Instrument 43-101 for the
purposes of the PEA, has reviewed the technical content of this press
release. Jean L'Heureux, Eng, senior director of process development
for Mason Graphite, qualified person for Mason Graphite, has read
and approved this press release.
We seek Safe Harbor.
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