Noront Resources Ltd V.NOT announced September 5 the results of a 43-101 feasibility study of its Eagle’s Nest nickel-copper-PGM mine at McFaulds Lake in the Ring of Fire, northern Ontario. Based on metals prices of $9.43 per pound copper, $3.60 per pound copper, $1,600 per ounce platinum, $599 per ounce palladium and $1,415 per ounce gold, the study forecasts an aftertax net present value (NPV) of $543 million (at an 8% discount rate), a 28% aftertax internal rate of return (IRR), a $609-million initial CAPEX, plus a $160-million life-of-mine sustaining CAPEX and a three-year payback period.
Eagle’s Nest contains proven and probable resources of 11.1 million tonnes grading 1.68% nickel, 0.87% copper, 0.89 grams per tonne platinum and 3.09 g/t palladium. The mine is forecast to produce one million tonnes per year, producing 150,000 tonnes of nickel-copper concentrate annually over 11 years, at $97 per tonne or $2.34 per pound of nickel equivalent.
Noront President/CEO Wes Hanson spoke to Kevin Michael Grace September 5, 2012.
RW: What’s your path to production?
WH: In addition to the technical and social risks associated with building any mining project, on top of it for the juniors you always have a challenge of how you’re going to finance construction. We are fortunate enough that the capital costs aren’t overly onerous. We’re only looking at a range of $600 million. We’re looking at a number of different alternatives, from joint-venture possibilities to traditional debt-bank financing, metal-streaming deals, and so we’re trying to assemble the financial plan that will go with the positive feasibility study. Then, hopefully, demonstrate to the marketplace that we have the capability to build the project. If we can do that before year end, then we’re probably looking at starting construction next year and being in commercial production by 2016 or 2017.
RW: Talk about the importance of this new North-South Road Corridor.
WH: What’s key in our mind is the fact that you have a commitment by the Ontario government for one and also by Cliffs [Natural Resources], which is a major multinational mining company. We always said it didn’t matter to us which route infrastructure in the Ring of Fire takes, but we’re always in a position where we’re looking for some sort of support from some other parties, whether it be government or private industry. What has been promised to us is that the road will be a shared-use road. Other companies, not just Noront, but other companies in the Ring of Fire that have been fortunate enough to make mineral discoveries will have access to that same road network. The payment of the road will be based on a proportional-use model.
In other words, if you look at us, we’re considering a project right now that will produce about 150,000 tonnes of concentrate on an annual basis, and Cliffs is considering a project that is in the three-million tonne range on an annual basis. Our shipment export out of the project site represents less than 10% of the total volume on the road. So the model they are proposing that the government and Cliffs is working towards proportional-use model. This means we would pay somewhere in the range of 10% to use that road, which is very fair and strategically beneficial to our shareholders. In other words, we don’t have to pay 100% of the cost to build that road.
RW: This road would bring about an infrastructural revolution for the Ring of Fire, wouldn’t it?
WH: The big challenge we faced since we made the original discovery in the Ring of Fire is our exploration costs are extremely high. I mean when we first joined the company they were in the range of $1,000 a meter for exploration drilling costs, and that’s all in. We since then have whittled it down to the $500- to $600-per-metre range. That is still like five times more than we’re paying by a roadside in Timmins or northern British Columbia. So building this infrastructure will open up the region to other exploration. We believe it will lead to additional discoveries. It’s very similar to the whole Plan Nord situation where the government invested in infrastructure in northern Quebec, and a number of mining companies moved into the region, and that led to additional discoveries which eventually became mines. Those mines are now producing and paying benefits to Quebec.
RW: Do you intend to further explore this property?
WH: We have no plans immediately to do any further exploration. We were fortunate enough to have not one but two development projects in addition to the nickel-sulphide feasibility study that we released today. We also have a high-value chromite discovery of our own. Cliffs is not the only company in the Ring of Fire with chromite. We have a chromite discovery that is equal in almost every way to the deposits that Cliffs is looking to exploit, and we think that can be a valuable business opportunity for us for the future for our shareholders.
But our immediate focus is on Eagle’s Nest, which is nickel-sulphide. We see a greater return on value in terms of the profitability of Eagle’s Nest, because the value of the ore is so much higher than the value of chromite ore, and so that’s why we focused on that. So short-term exploration will be limited, and our hope would be to get up and into commercial production and then reinvest profits from the mining operation into regional exploration, which will lead to additional discoveries which will increase the value to our shareholders.
RW: With the platinum and palladium there is a precious metals aspect to this project. How important is it overall?
WH: You’re looking at, on average, about one gram per tonne of platinum and 3 to 3.5 grams per tonne of palladium, so it’s a fairly high-grade system. It would be quite profitable in its own little right, if it were beside a road somewhere in Canada.
For the rest of this interview, please go to the Resourceswire.com website: http://resourceswire.com/2012/09/opening-up-the-ring-of-fire/