Mr. Andre Gauthier reports
MATAMEC ANNOUNCES RESULTS OF POSITIVE FEASIBILITY STUDY FOR KIPAWA JV HEAVY RARE EARTH PROJECT
Matamec Explorations Inc. has released the results of the feasibility study for the Kipawa joint venture heavy-rare-earth-elements project (HREE). The FS was prepared by Roche Ltd. and GENIVAR Inc., and supported by SGS Geostat and Golder Associates Ltd. FS results show that the project is technically and economically feasible. An analyst's conference call will be held today at 10 a.m. ET.
The goal of the Kipawa JV is to supply Toyota Tsusho Corp. (TTC) with heavy rare earths, such as dysprosium, which is indispensable for hybrid and electric vehicles. The JV partners are presently in discussions and evaluating next steps to advance the project.
KIPAWA HREE PROJECT -- FS FINANCIAL MODEL HIGHLIGHTS
Net present value (NPV10%) (pretax) $260-million
Internal rate of return (IRR) (pretax) 21.6%
Revenue $2.55-billion
EBITDA $1.37-billion
Capex (initial) $374-million
Opex (annual) $78.5-million
Payback period (pretax) 3.9 years
Life of mine (LOM) 15.2 years
Concentrate production (annual avg.) 3,653 tonnes
The company is committed to bringing the IRR above 25 per cent by
continuing to reduce the required capital expenditures and
operating expenditures, while optimizing the overall recovery
rate.
"Matamec has achieved a major milestone today in its 16-year history as the feasibility study shows that the Kipawa project is technically and economically feasible," said Andre Gauthier, president and chief executive officer of Matamec. "The company has strategically developed a solid business plan which includes a moderate capex and a manageable scale of annual tonnage while ensuring the required environmental standards are met. With the completion of the feasibility study results, we will continue to work with the citizens of the Temiscamingue area to present the economic benefits this project will create for the region. Matamec is committed to building a sustainable organization with a particular focus on green energy applications."
ECONOMIC SUMMARY OF 2012 PEA VERSUS 2013 FEASIBILITY STUDY RESULTS
PEA FS
quantity quantity
March, August,
Metric 2012 2013 Unit
Total mine revenue 2.822 2.548 $ billion
EBITDA 1.68 1.37 $ billion
Preproduction capital expenditures (initial) 315.8 374.4 $ million
Sustaining capital expenditures (incl. rehab.) 38.2 37.7 $ million
Additional working capital requirement 9.9 11.2 $ million
Mine rehabilitation costs 7.5 23.1 $ million
Total operating costs 1.142 1.181 $ billion
Total pretax cash flow 1.335 960 $ million
Total basket price after discount 42.08 50.12 $/kg
HREO(i) basket price -- concentrate - 39.79 $/kg
LREO(ii) basket price -- concentrate - 10.33 $/kg
Economics (pretax)
IRR 36.9 21.6 %
NPV @ (PEA 5%) (FS 6%) 811 450 $ million
NPV @ 8% 606 344 $ million
NPV @ 10% 500 260 $ million
NPV @ 12% - 191 $ million
Payback period 2.4 3.88 years
Economics (after tax)
IRR - 16.8 %
NPV @ (PEA 5%) (FS 6%) - 257 $ million
NPV @ 8% - 185 $ million
NPV @ 10% - 128 $ million
NPV @ 12% - 81 $ million
Payback period - 4.12 years
Mining
Mineral reserves 19.00 19.77 Mt
Production rate (ore) 4,110 3,650 tpd
Life of mine 12.9 15.2 years
Total capex (based on 3,653 tpa) 86.50 102.57 $/kg (+18%)
Total opex (based on 3,653 tpa) 24.44 21.53 $/kg (-13%)
Total operating costs 24.44 21.53 $/kg
General and administration 8.84 11.6 $ million
per year
Mining 16.61 18.1 $ million
per year
Process 58.35 48.7 $ million
per year
Total recovery rate(iii) 81 70 %
Heavy average - 74 %
Light average - 65 %
(i) HREO -- Heavy-rare-earth oxide (Sm, Eu, Gd, Er, Tb, Dy, Ho, Yb, Tm, Lu
and Y).
(ii) LREO -- Light-rare-earth oxide (Ce, La, Nd and Pr).
(iii) Samples used for PEA represent only the western part of the deposit,
whereas FS samples represent the whole deposit.
Kipawa JV feasibility study results highlights
- Environmental and permitting process:
A complete environmental baseline study will be finalized by fall 2013;
the environmental and social impact assessment is subjected to the Canadian
Environmental Assessment Agency, which will be available first quarter 2014. The
project notice to begin the federal environmental permitting process was
submitted before the end of first quarter 2013 and the official application for the
certificate of authorization to the provincial Ministere du Developpement
durable, de l'Environnement, de la Faune et des Parcs (MDDEFP) is planned
to be submitted by winter 2014.
- Social acceptability:
Since 2009, Matamec has been committed to engaging the Temiscamingue
communities to include and take into consideration their concerns in the
development of the project.
- Mineral resource estimates:
The total measured and indicated resource now stands at 23,857,000 tonnes at
0.407 per cent total-rare-earth oxide (TREO) representing 88 per cent of total resource.
- Mineral reserve:
Total projected ore tonnage is 19.8 million tonnes with a TREO
diluted grade of 0.4105 per cent.
-
Mining:
Kipawa is projected to produce an average of 1.33 million tonnes of ore per year (3,650
tonnes per day) and average stripping ratio of 0.94 with a 15.2-year mine life
(excluding preproduction period).
- Metallurgical plant site:
The final products of the process plant will be a chloride concentrate of
HREE and a concentrate of LREO. FS results show a lower recovery compared with the PEA study, but it also shows that the process is working for the entire
orebody and highlights where the process has to be optimized in order to
improve the recovery. From the previous results, a new master composite of
ore is ready for further piloting planned for fall 2013 to improve the
process.
PROJECT DEVELOPMENT -- PLANNED NEXT STEPS
Milestone Timeline
Second pilot plant Fall 2013
Environmental and social impact study Q1 2014
Environmental process -- federal and provincial Now to Q1 2015
Development of off-take agreement 2014
Financing capex process 2014
Detailed engineering 2014 to mid-2015
Construction of mine Q1 2015 to Q4 2016
Start-up of mining operation Q4 2016
Mr. Gauthier commented: "The company will work with government authorities to ensure that all required areas are covered to receive environmental permits. We have assembled a highly qualified team who are focused on identifying every risk possible to ensure the environment is given the utmost respect and protected for future generations. The company will continue its outreach efforts with the community which we have been developing over the past four years to create greater comprehension and visibility for the project. We welcome and value the concerns of the citizens of the Temiscamingue region and look forward to working together in building a sustainable plan."
Additional upside opportunities for the Kipawa mine project
Matamec has identified a number of opportunities that have the potential to add additional value to the project.
- The second metallurgical pilot plant testwork should be conducted in
addition to the bench scale and first pilot plant testwork conducted up
to now. This second pilot plant testwork will be important to confirm,
prior to detailed engineering, final sizing of some process equipment.
For the time being overcapacities have been built into the design, but
it could be reduced during the detailed engineering, pending the pilot
plant results. The second pilot plant will also help to confirm
improvements in regard of recovery rates since conservative numbers
were used for the FS.
- It would be significant to consider some testworks to separate
individual rare earths (RE) to increase the value of the project.
- Depending on the RE market conditions, it will be important to continue
the evaluation of other LREE concentrates and HREE concentrates
production scenarios in order to optimize the internal rate of return before detailed
engineering.
- In the future and when the project is well in progress, testwork can be
performed to evaluate the possibility to recovering zirconium and other
minor metal byproducts in the RE mineralized zones and in the syenite
body.
- Mineral resources on the Kipawa deposit can be increased by verification
of lateral and downdip extensions by drilling.
- From the last results in the FS, it is known that there is the potential
room for improvement in the open-pit design when entering the detailed
engineering phase.
Considering the above-mentioned points, the company strongly believes it can achieve greater success with bringing the IRR above 25 per cent by only slightly reducing the capital expenditures and operating expenditures while improving the recovery.
Review of the FS project development model
The FS covers all aspects of project development, including mining, mineral concentration, hydrometallurgical processing, and separation of heavy and light rare earth as well as all related infrastructure. Roche developed its capital and operating cost estimates from first principle capital quotations, estimates from suppliers, manufacturers, contractors and experience based on comparable operations in Canada and abroad. The capital and operating cost estimates were completed to a level consistent with an intended level of accuracy of plus or minus 15 per cent.
Project location
The Kipawa deposit is located on the Zeus property, 50 kilometres east of the town of Temiscaming and 140 km south of Rouyn-Noranda, Que. All claims are in good standing. Resources are not subject to any third party royalties.
General project infrastructure description
About 50 km of the Maniwaki road will be used to access the Kipawa project, and share with public and other logging companies. Then a four km road will be built from the Maniwaki road to reach the process plant site.
The Kipawa mining site will consist of the open-pit mine, a waste dump, a low-grade stockpile and a high-grade truck-loading facility. The mine equipment maintenance facility will also be located at the mine site.
The metallurgical process plant site will be located south of the mine site and south of the Kipawa River, and a 10 km haul road will be built to link the two sites. The metallurgical site will consist of the ore process plant which will combine the crushing, grinding, magnetic separation and hydrometallurgical circuits. At this site, there will also be the administration and service building, a warehouse, and the assay laboratory.
There will be two dewatered tailing storage facilities; one storage facility will be for the rejects of the magnetic separation process located just by the process plant and one other storage facility for the hydrometallurgical tailing located about four km south of the process plant.
The employee's parking and the main electrical substation will be located near the town of Temiscaming. In the present study it is planned to build a 44-kilovolt power line along the Maniwaki logging road to provide power to the mining and processing facilities.
Geology, mineralogy and mineralization
The ore deposit is defined by three enriched horizons within the syenite complex, which contains the 15 rare-earths elements present. The Kipawa alkaline intrusive complex consists of peralkaline syenite and granite on average less than 200 metres thick. It is an elongated, V-shaped body folded around a major southeast-plunging anticline. The west limb of this fold includes the Kipawa deposit, which is entirely included within the lower syenite layer of the complex. This mineralized syenite layer is a concordant sheet 50 metres to 80 m thick that gently dips 20 to 30 degrees to the southwest. The deposit outcrops over 1.4 km along strike with an additional outcrop discovered 220 m to the northwest during the summer 2011 exploration campaign.
Rare earth-yttrium-zirconium mineralization at the Kipawa deposit is contained in medium-grained silicate minerals. Grains are distinct and generally well crystallized. Three minerals are presently considered economical in the Kipawa deposit, namely eudialyte (a sodic silicate), yttro-titanite/mosandrite (titanite silicate), and britholite (calsic silico-phosphate) for the rare-earth and yttrium, with minor amounts of apatite also present. Vlasovite/gittensite (sodic silicates) and eudialyte (sodic silicate) are also considered for a potential zirconium byproduct.
Three vertically stacked mineralized zones have been defined based on their spatial characteristics: the Eudialyte (60 per cent of existing rare earth-yttrium resources), Mosandrite (25 per cent of existing rare earth-yttrium resources) and Britholite (15 per cent of existing rare earth-yttrium resources) zones. Despite their name, the different zones contain a mix of the potentially economic minerals. The name simply indicates the dominant REE mineral present in that zone. The main Eudialyte zone, for example, consists of intermixed eudialyte (51 per cent) and mosandrite/yttro-titanite (39 per cent) with trace britholite (10 per cent). It sits near the top of the syenite body and is not associated with any large calco-silicate horizon. Note that all zones outcrop at surface.
The Kipawa deposit contains very low levels of uranium and thorium in the main REE-zirconium mineralization. Average values of thorium (193 parts per million, or 0.019 per cent) and especially uranium (22 ppm, or 0.002 per cent), though higher than in the surrounding rocks, remain very low in the mineralized syenite portion of the Kipawa deposit. Initial results suggest that most of the thorium is contained in coarse-grained urano-thorite and ekanite crystals, while the uranium is disseminated within said urano-thorite and rare-earth minerals.
Mineral resources
The Kipawa deposit resource is 10,478,000 tonnes at 0.46 per cent TREO in the measured category, 13,379,000 tonnes at 0.36 per cent TREO in the indicated category and 3,268,000 tonnes at 0.31 per cent TREO in the inferred category. The total of measured and indicated resource now stands at 23,857,000 tonnes at 0.41 per cent TREO representing 88 per cent of the total resource. These results are at a 0.2-per-cent TREO cut-off and are not limited by an open pit. The overall total tonnage is about 10 per cent greater than the last resource calculation (see press releases dated June 30 and July 7, 2011).
The Kipawa deposit's mineral resource estimates were updated by SGS Geostat. The drilling done since the 2011 PEA (see press release dated Jan. 30, 2011), totalling 14,293 metres, was included and permitted to outline some measured resources for the first time in the history of the project. The database now totals 293 drill holes totalling 24,571 m and 13 trenches totalling 631 m. Historical Unocal holes are not in the count and were not used for the estimates. The mineralized zones were interpreted on vertical sections and meshed into volumes as per industry standards. Ordinary kriging was used to estimate the block model with block size set at 10 m by five m by five m. The measured and indicated resources required drill grids of 25 m and 50 m, respectively. Resources extrapolated beyond 30 m of those drill grids are considered inferred.
Mineral reserves
By using SGS Geostat model, the mineral reserve for this FS was prepared, estimated and supervised by Roche using a cut-off value of $48.96/tonne with 5-per-cent dilution and a mining recovery of 95.2 per cent. The Kipawa open-pit design utilized a marginal (or milling) cut-off value of $48.96/t and a break-even cut-off value of $60.70/t. Included in the reserves are 632,000 tonnes of low-grade material lying between these two cut-off values. This material will be sent to a low-grade stockpile, close to the mine site and will be processed at the end of operation after mine depletion.
IN-PIT MINERAL RESERVES
Tonnes
Proven (51.7% of the deposit) 10,219,000
Probable (48.3% of the deposit) 9,550,000
Total 19,769,000
Total grade %
Cerium (Ce2O3) 0.1195
Lanthanum (La2O3) 0.0588
Praseodymium (Pr6O11) 0.0146
Neodymium (Nd2O3) 0.0550
Samarium (Sm2O3) 0.0123
Europium (Eu2O3) 0.0015
Gadolinium (Gd2O3) 0.0119
Terbium (Tb4O7) 0.0022
Dysprosium (Dy2O3) 0.0147
Holmium (Ho2O3) 0.0032
Erbium (Er2O3) 0.0101
Thulium (Tm2O3) 0.0016
Ytterbium (Yb2O3) 0.0096
Lutetium (Lu2O3) 0.0013
Yttrium (Y2O3) 0.0943
TREO 0.4105
Design basis
The total-rare-earth oxides (TREO) diluted grade is 0.4105 per cent, including a dysprosium (Dy2O3) diluted grade of 0.0147 per cent. The calculation is using a dilution grade of 0.093 per cent TREO. The recoveries for each element vary from 65 per cent to 74 per cent for a TREO average of 70 per cent for the 10 main REO which are (La2O3, Ce2O3, Pr6O11, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3 and Y2O3). A total production of TREO is expected to be 55,529 tonnes over the mine life. When the mine will be in full production (year two to 15) an average of 3,760 tonnes per year of TREO will be produced.
Mining
The mine will produce an average of 1,332,250 tonnes of ore per year (3,650 tonnes per day) and has an average stripping ratio (waste to ore -- without the overburden) of 0.94 with a mine life of 15.2 years. A standard 55-tonne mining truck and shovel operation will bring the drilled and blasted material out of the mine to its respective destinations (waste dump, low-grade stockpile or high-grade loading facility). Then the ore is transported by 40-tonne HD dump trucks to the metallurgical plant site.
Processing
Once at the metallurgical plant site, the ore will be dumped into a crusher dump hopper feeding a two-stage crushing circuit. The crushed ore will then be stored into a silo. The crushed ore will feed the process plant at the rate of 3,650 tpd in a single stage grinding circuit. A magnetic separation circuit will recover the rare earth as a first concentrate. The reject from the mag-sep circuit will be pumped to the dewatering circuit and transported by truck to the mag-sep rejects storage facility located outside and nearby the process plant. The magnetic rare-earth concentrate will be sent into the regrind mill followed by a thickening circuit and then to the hydrometallurgical process (acid leaching, neutralization, impurities removal and the final precipitation) which will then produce the rare-earth carbonate concentrates. This hydromet concentrate will then be processed through a purification circuit which will remove the last impurities and also separate the heavies from the lights. The final products of the process plant are a concentrate of heavy rare earth and a concentrate of light rare earth.
The tailings produced from the hydrometallurgical process will be pumped to a thickening facility located by the hydromet tailings storage facility (TSF). The solids will be dewatered in few steps using different technologies and then transported by truck and disposed mechanically into the TSF. This TSF is thus believed to be subject to progressive restoration throughout the mine life. Then the final section is to be restored at the end of the mine life as well as the other sites with varying infrastructures. The hydromet tailing storage facility will require further investigation and design work as the project advances into the next stages.
A total of 10 megawatts will be needed to power both the mine site and the metallurgical site, and will be provided by a new power line to be connected to the Hydro-Quebec network.
In 2010, testwork at SGS Canada Inc. in Lakefield, Ont., was directed toward examining a recovery process employing aggressive conditions for extraction of rare earth elements (acid-baked leaching). By early 2011, it had become evident that much less aggressive conditions than anticipated were possible for the extraction of the particular minerals present in the Kipawa ore (room temperature leaching); this allowed a substantial improvement in simplifying the projected process plant design.
The present study is based on metallurgical testwork results dating prior to June 1, 2013. A pilot plant was performed during the summer of 2012 with a composite of ore taken from a bulk sample coming from surface trenches. Then a series of variability samples were taken from trenches and core samples from 18 large-calibre drill holes in order to make eight composites and also a global composite in order to verify if the process was valid for the entire ore deposit. Results showed lower recovery compared with the PEA study but also showed that the process works for the entire orebody, and also where the process needs to be optimized in order to improve the recovery.
From these previous results, a new master composite representing the orebody is ready for further piloting which is planned for the fall of 2013, to further improve the ore processing plant.
ANNUAL OPERATING SUMMARY
Year 2
to 15
Production Unit Year -1 Year 1 (avg.) Year 15.2
Reserve mined Mt 0.022 0.870 1.348 0.000
Waste mined Mt 0.468 0.928 1.233 0.000
Strip ratio (waste:ore) 1.1 0.9
Tonnes processed Mt 0.000 0.884 1.332 0.232
Overburden Mt 1.328 0.000 0.000 0.000
Mixed REE concentrate t 0 2,657 3,759 250
Mixed LREE concentrate t 0 1,507 2,203 146
Mixed HREE concentrate t 0 1,150 1,556 104
ANNUAL PRODUCTION REE LIGHT AND HEAVY CONCENTRATES
(tonnes)
Year 2-15 Year 1-15.2
REO Year 1 (avg.) Year 15.2 (avg.)
Light concentrate
Cerium (Ce2O3) 727 1,049 69 1,018
Lanthanum (La2O3) 337 541 36 523
Praseodymium (Pr6O11) 94 131 9 127
Neodymium (Nd2O3) 349 482 33 469
Heavy concentrate
Samarium (Sm2O3) 83 113 8 110
Europium (Eu2O3) 11 15 1 14
Gadolinium (Gd2O3) 83 115 7 112
Terbium (Tb4O7) 16 22 1 21
Dysprosium (Dy2O3) 106 144 9 141
Holmium (Ho2O3) 24 32 2 31
Erbium (Er2O3) 73 97 7 95
Thulium (Tm2O3) 11 14 1 14
Ytterbium (Yb2O3) 62 81 7 79
Lutetium (Lu2O3) 7 9 1 9
Yttrium (Y2O3) 674 913 60 890
Capital cost expenditures (capex)
The capital cost estimate covers the development of the mine, ore processing facilities and infrastructure required for the Kipawa HREE project based on the application of standard methods of achieving a feasibility study with an accuracy of plus or minus 15 per cent. The capital costs have been estimated at $374.4-million, of which $257.99-million are direct costs, and $67.56-million are indirect costs such as engineering, procurement, construction management, owner's costs and an overall 15-per-cent contingency cost of $48.83-million as outlined in the table.
CAPITAL COST ESTIMATE
Cost
Capital cost items (M$)
Off-site installation near Temiscaming town
Main substation/Hydro-Quebec power/parking 9.76
Intersite services
Power line 44 kV/communications/part of access road 13.35
Mine site
Mining equipment/preproduction/roads/shop/other 41.92
Processing plant site
Support infrastructures 23.27
Process plant 137.21
Fresh water supply 4.79
Tailing storage facilities/pipelines/effluent treatment 27.69
Plant site subtotal 192.96
Total direct costs 257.99
Total indirect and owner's costs 67.56
Overall contingency (15%) 48.83
Total costs 374.4
Operating cost expenditures (opex)
The operating cost estimate was made for each step and compiled by Roche. The operating cost for the Matamec Kipawa operation covers mining, ore transportation, ore processing, tailings and water management, general and administration fees, as well as infrastructure and services. The project operating cost estimate is based on the following main parameters:
- Tonnes of mineralized rock and waste mined per year: 2.5 million;
- Tonnes of mineralized rock milled per year: 1.3 million;
- Tonnes of mixed HRE concentrate: 1,516 tonnes per annum;
- Tonnes of mixed LRE concentrate: 2,137 tpa;
- Total manpower required for operation: 229 employees.
The overall operating cost for the project is estimated at $78.5-million per year or $21.53/kilogram mixed TREO concentrate. A summary of the operating costs for the project is shown in the table.
OPERATING COST ESTIMATE
Unit Average
Net metal return (NMR)(i) $/kg TREO 46.97
Mining $/kg TREO 4.97
Processing(ii) $/kg TREO 13.35
G&A $/kg TREO 3.18
Cash costs $/kg TREO 21.53
Production of mixed contained total-rare-
earths concentrate tpa 3,653
(i) NMR equals grade times recovery times revenue.
(ii) Processing includes tailings management costs.
Market study
The rare-earth elements (REEs) are typically defined as the 15 lanthanide elements including yttrium and scandium; they form a group of technology enabling materials that are critical inputs for a wide range of everyday consumer products as well as a large number of cutting-edge technologies. Strong magnetic, optical, electronic and catalytic properties have made certain rare-earth compounds indispensable to a substantial portion of global industry, including but not limited to the automotive, consumer electronics, medical equipment and green technology sectors.
The demand for heavy-rare-earth materials is expected to benefit from strong growth, particularly in the case of dysprosium, terbium and yttrium, which are likely to realize swiftly expanding consumption from both the permanent magnet and phosphor powder sectors. The permanent magnet sector (neodymium and dysprosium, and to a lesser degree terbium) is generally forecasted to realize strong gains in annual consumption through the entirety of the next seven years. The combination of tightening Chinese supply along with growing demand suggests terbium, dysprosium and several other HREEs will see appreciating price levels, though demand for yttrium is expected to expand.
The rare-earth-oxide prices used for the economic evaluation are based on a contracted market survey by Asian Metals (one of world's largest metallurgical information providers) in conjunction with discussions with key industrial end-users which were important in defining the forecasted final prices of each rare-earth oxide. Other sources consulted for review of the historical pricing data were websites and reports from Metal Pages, Roskill Information Service Ltd. and Industrial Minerals.
REO PRICES -- 2016 FORECAST
FS market REO price(i)
price ex-works ex-works mine Quantity sold
mine site Refining site LOM (est.)
Rare-earth oxides (US$/kg REO) cost (%) (US$/kg REO) (t REO)
Cerium Ce $5.90 30 $4.13 15,479
Lanthanum La $5.95 30 $4.17 7,952
Praseodymium Pr $75.40 30 $52.78 1,930
Neodymium Nd $75.00 30 $52.50 7,132
Samarium Sm $6.85 30 $4.80 1,679
Europium Eu $1,100.00 30 $770.00 215
Gadolinium Gd $59.40 30 $41.58 1,696
Terbium Tb $1,076.00 30 $753.20 321
Dysprosium Dy $713.00 30 $499.10 2,137
Holmium Ho $53.60 40 $32.16 474
Erbium Er $63.60 40 $38.16 1,063
Thulium Tm $1,200.00 40 $720.00 32
Ytterbium Yb $56.70 40 $34.02 555
Lutetium Lu $1,400.00 40 $840.00 55
Yttrium Y $29.40 30 $20.58 13,522
(i) REO price after deduction of refining and transport -- ex-works Matamec
plant site.
Furthermore, the refining cost to reach 99.9 per cent oxides or even higher purity levels was not evaluated within the FS since refining was not considered in the scope of the FS. It was decided that since the forecasted prices are for 99.9 per cent pure, individual oxides, Matamec will be producing two mixed rare-earths concentrates: a mixed light-rare-earth concentrate that will contain Ce, La, Nd and Pr; and a mixed heavy-rare-earth concentrate that will contain Sm, Eu, Gd, Er, Tb, Dy, Ho, Yb, Tm, Lu and Y. The projected selling prices for the concentrates will be based on their contained oxide pricing and will be reduced by a refining factor of 30 per cent for the majority of the rare earths, but 40 per cent for the REEs Ho, Er, Yb, Tm and Lu. The higher discount was applied considering that these materials would require more costs associated to process them due to the higher degree of purity that is required by their associated end-uses. It is considered that the respective discounts will cover all logistical costs for the material to be shipped to their intended point of separation.
The project is subject to a joint venture agreement (JVA) between Matamec and Toyotsu Rare Earth Canada Inc. (TRECan), a subsidiary of TTC (see press release dated July 12, 2012, for more details on the JV and the JVA). As at the date hereof, Matamec holds a 51-per-cent interest and TRECan a 49-per-cent interest in the project (see press release dated Aug. 8, 2013). The JVA contains a provision under which TTC shall become the off-taker of the production from the project, under the terms and conditions set out in the JVA, and in the off-take agreement to be negotiated and executed by the parties. Negotiations to convert the agreement into contractual volumes will follow the completion of the FS. TRECan is a well-recognized strategic partner that has financed $16.0-million to Matamec to complete the FS.
ECONOMIC ASSUMPTIONS
PEA market FS market
price price Quantity
forecast forecast sold per Est.
(FOB China (ex-works year (avg. revenue
2016 US$/kg mine site est.) LOM(ii)
Rare-earth oxides REO) US$/kg REO) (t REO) (000)
Cerium (Ce2O3) $5.00 $5.90 1,018.4 $63,926
Lanthanum (La2O3) $10.00 $5.95 523.2 $33,120
Neodymium (Nd2O3) $75.00 $75.00 469.2 $374,453
Praseodymium (Pr6O11) $75.00 $75.40 127.0 $101,886
Samarium (Sm2O3) $9.00 $6.85 110.5 $8,049
Europium (Eu2O3) $500.00 $1,100.00 14.1 $165,486
Gadolinium (Gd2O3) $30.00 $59.40 111.6 $70,521
Terbium (Tb4O7) $1,500.00 $1,076.00 21.1 $241,636
Dysprosium (Dy2O3) $750.00 $713.00 140.6 $1,066,608
Holmium (Ho2O3) $65.00 $53.60 31.2 $15,246
Erbium (Er2O3) $40.00 $63.60 70.0 $40,565
Thulium (Tm2O3)(i) - $1,200.00 2.1 $22,824
Ytterbium (Yb2O3)(i) - $56.70 36.5 $18,870
Lutetium (Lu2O3) $320.00 $1,400.00 3.6 $46,496
Yttrium (Y2O3) $20.00 $29.40 889.6 $278,292
Exchange rate ($/US$) - 1.0/1.0
Discount rate (%) 8% 10%
(i) At PEA, no value was attributed to Tm and Yb because no prices were
available at date of publication.
(ii) Estimated revenue LOM is calculated from the price after refining times
quantity sold LOM. Quantity sold is rounded to nearest tonne.
Economic analysis
An economic/financial analysis of the project has been carried out using a cash flow model. The model is constructed using annual cash flow in constant money terms (second quarter 2013). No provision is made for the effects of inflation. As required in the financial assessment of investment projects, the evaluation is carried out on a so called 100-per-cent-equity basis, that is the debt and equity sources of capital funds are ignored.
TECHNICAL ASSUMPTIONS
Item Base case value Unit
Total ore mined 19.77 M tonnes
Processing rate 1.332 M tonnes/year
Life of mine 15.2 years
Average combined process recovery 70 %
Average mining cost 7.03 ($/tonne mined)
Average processing cost 36.57 ($/tonne milled)
Average general and administration costs 8.71 ($/tonne milled)
Financial model and results
A capital cost breakdown by item provides a preliminary capital spending schedule over a two-year preproduction period. The total preproduction capital expenditures are evaluated at $374.4-million, excluding the working capital. The total sustaining capital requirement is evaluated at $37.7-million, which includes rehabilitation expenditures. A working capital equivalent of three months of total annual operating costs is maintained throughout the production period. Apart from the first fills and spare parts included in the preproduction capital expenditures, an additional working capital outlay of $11.2-million is required. The total operating costs are estimated at $1,181-million for the life of the mine, or an average of $58.9/tonne milled. The financial results indicate a positive pretax net present value of $260-million at a discount rate of 10 per cent, a pretax IRR of 21.6 per cent and a payback period of 3.88 years.
REVENUES AND EXPENDITURES
Item Base case Unit
Total mine revenue 2.548 billions $
Preproduction capital expenditures 374.4 millions $
Sustaining capital expenditures (incl. rehab.) 37.7 millions $
Additional working capital requirement 11.2 millions $
Mine rehabilitation costs 23.1 millions $
Total operating cost 1.181 billions $
Total pretax cash flow 960 millions $
Pretax NPV @ 10% 260 millions $
Pretax NPV @ 8% 344 millions $
Pretax NPV @ 6% 450 millions $
Pretax IRR 21.6 %
Pretax payback period 3.88 years
Total aftertax cash flow 602 millions $
Aftertax NPV @ 10% 128 millions $
Aftertax NPV @ 8% 185 millions $
Aftertax NPV @ 6% 257 millions $
Aftertax IRR 16.8 %
Aftertax payback period 4.12 years
Sensitivity analysis
A sensitivity analysis has been carried out on the base-case scenario described above to assess the impact of changes in REE market prices, total preproduction capital costs and operating costs on the project's NPV at 10 per cent, and IRR. Each variable was examined independently. An interval of plus or minus 30 per cent with increments of 10 per cent was used for all three variables. The project's pretax viability is not significantly vulnerable to the underestimation of capital and operating costs, taken independently. The net present value is more sensitive to variations in operating expenses. As expected, the NPV is most sensitive to variations in REE prices, followed by operating costs and by capital costs.
Environment, permitting and social acceptability
Environment and permitting
Matamec has always been pro-active and has respected the rules outlined by the different government authorities.
After the first drilling campaign outlined a good quality deposit (2009), Matamec decided to begin a baseline study of the territory around the deposit. Envireo Conseil, an independent firm from Rouyn-Noranda, Que., was hired to perform the study of water, fish, aquatic plants and mud samples which were taken from five sites, instead of the three recommended by regulation.
Then in spring 2012, Matamec hired the firm Golder Associates Ltd. to complete the baseline study that was started two years before, and also to perform an environmental and social impact assessment, which is planned to be completed by first quarter 2014.
A comprehensive program of geochemical characterization has been conducted during the last year in order to classify all the varying rock types to be mined, the ore, the overburden, and also all the different waste and residue to be generated by the mine and process operation. The waste rock, ore and magsep tailings are classified as non-acid generating. The hydromet tailings sample analyzed is classified as acid generating based on its high sulphur content, but all sulphur occurs as sulphate, which is already oxidized and therefore not expected to generate acidity in the future.
Further radiological analyses of leachates were carried out for safety purpose and as required under Directive 019 of the MDDEFP to evaluate the level of risk associated with possible leaching of radiogenic parameters from mine wastes, magnetic separation rejects and hydrometallurgical tailings. None of the samples analyzed are classified as high-risk waste based on radionuclide analyses in leachate. Analyses were also done on the solids themselves and so far the hydrometallurgical tailings are classified as potentially radiogenic, but manageable. The implementation of proper management programs in regard to radioactive elements will ensure the safety of the workers and of the population during operation and after the mine closure. Furthermore, additional geochemical analysis will be conducted before detailed engineering in order to determine all the final classification and design parameters for the infrastructures related to the tailings management.
Hydrological and hydrogeological studies were carried out as well. From the collected information, a water management plan has been put together and will be optimized at further stages in the project. A site-wide water quality evaluation study is under way to determine future water treatment needs at the mine site and hydrometallurgical waste storage sites.
From all the information collected during the FS, it was decided to proceed with dewatered tailings even if it is much more expensive in operating costs in order to minimize environmental risks related to the tailings management. It will also allow the operator to consider progressive site restoration during mine operation.
The mining lease was filed before the end of March, 2012. The project notice to begin the federal environmental permitting process was submitted before the end of first quarter 2013. The restoration plan and environmental impact study commenced at the beginning of May, 2012, and are still continuing but are well advanced. The official application for the certificate of authorization to the MDDEFP is planned to be submitted by winter 2014.
Social acceptability
Since 2009, the Matamec team is making social acceptability a priority for the Kipawa project, as well, the company is committed to being visible to the people in the region as a socially responsible neighbour.
In March, 2012, the company's regional office was opened in downtown Temiscaming, creating visibility and allowing easy accessibility to information for people in the region. Regular meetings and discussions are held with the first nations communities, with the signature of a memorandum of agreement with them. Under this agreement, the first nations communities completed their own cultural impact assessment study describing the past and current traditions and resources used in the project area. They also completed their socio-economic baseline report for the project. These studies will contribute to the preparation of the environmental effects assessment of the Kipawa project.
There is an open and constant communication between the Matamec team and the citizens. Public information meetings are held throughout the region, highlighting the company's commitment to dialogue and opportunities for questions about the project.
The company strives to understand all stakeholders concerns and maintain its strategy of transparency executed through active and consistent communication.
National Instrument 43-101 disclosure
The technical information in this news release has been prepared in accordance with Canadian regulatory requirements by or under the supervision of the persons shown in the table, all of whom are independent qualified persons as set out in National Instrument 43-101.
NATIONAL INSTRUMENT 43-101 DISCLOSURE
Qualified person Consulting firm Contribution
Guy Saucier, Eng Roche Ltd. Project supervisor
Yann Camus, Eng SGS Geostat Mineral resource
Pierre Casgrain, Eng Roche Ltd. Mining
Al Hayden, PEng EHA Engineering Ltd. Metallurgy
Eric Poirier, Eng GENIVAR Inc. Infrastructure
Michel Mailloux, Eng Golder Associates Environment
Marc Rougier, Eng Golder Associates Geotechnical
Mayana Kissiova, Eng Golder Associates Tailings and water management
Valerie Bertrand, PGeo Golder Associates Geochemistry
Gaston Gagnon, Eng SGS Geostat Marketing
Michel Bilodeau, Eng Roche Ltd. Financial model
The mineral resource and mineral reserve estimates set out in this news release were classified according to the CIM definition standards (as adopted by CIM council in November, 2010).
Readers are advised that mineral resources not included in mineral reserves do not demonstrate economic viability. Mineral resource estimates do not account for minability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.
Technical information in this press release was reviewed and adopted by Bertho Caron, vice-president of project development and construction (Eng), and Aline Leclerc, vice-president of exploration (Geo), Matamec's qualified persons for this press release.
The full feasibility study, prepared in accordance to the NI 43-101-compliant technical report, will be filed under Matamec's profile on SEDAR within 45 days.
Conference call
Matamec will be hosting an analyst conference call on Wednesday, Sept. 4, 2013, at 10 a.m. ET. Participants may join the call by dialling toll-free 1-800-381-7839 or 1-416-981-9000. A live webcast of the call will be available through the company's website. A copy of the presentation will be available on the website one hour prior to the webcast.
A taped replay of the conference call will be available starting that same day at 12 p.m. ET by dialling 1-800-558-5253 or 416-626-4100 and entering passcode 21667794 followed by the pound key until Sept. 18 at 12 a.m.
We seek Safe Harbor.
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