Essential Power…Infinite Possibilities

Technical Reports

2015 PEA Summary

The PEA was commissioned in January 2015 with Samuel Engineering Inc. (“SE”) to re-evaluate the ICP to produce cobalt chemicals in response to improving financial markets and the projected bullish long-term demand for cobalt. The April 29, 2015 PEA’s economic model uses a 35% corporate tax rate and an 8.5% discount rate, resulting in an after tax NPV of $113 million and an IRR of 24.07%. A pro forma cash flow was developed using conventional methodology utilizing the base case 8.5% discount rate, before and after tax determination of project economics, annual cash flows discounted on an end of year basis with costs estimated in first quarter 2015 U.S. Dollars. A summary of the Life of Mine (“LOM”) economic results are shown in the following table. Note that all monetary values used in the economics results of the PEA are in US$.

Pre-Tax NPV8.5%: $148 million, IRR 27.7%
Post-Tax NPV8.5%: $113 million, IRR 24.07%
Initial Capital Costs: $147 million
Life of Mine (LOM): 12.5 years post preproduction
EBITDA: $515 million
LOM Gross Revenue: $983 million
LOM Total Net After Tax Cash Flow $258 million
LOM Average Net Cash Cobalt Production Cost:
(net of gold, copper and magnesium credits)
$4.94 per pound
Pre-Tax Initial Capital Payback:
3.7 years
LOM Cobalt Production: 35,356,415 pounds
LOM Copper Production: 57,384,700 pounds
LOM Gold Production:
(including ounces in copper con and doré)
46,858 ounces

The total LOM capital cost is estimated at $201.41 million, including $146.76 million for initial capital, and $54.65 million in sustaining capital and mine development capital during production over the LOM. These estimates do not include past costs totalling $65.31 million.

The total LOM cash production cost is estimated at $468.73 million or $13.26/lb of processed cobalt contained in cobalt sulfate heptahydrate and $175.58 million or $4.94/lb of processed cobalt sulfate heptahydrate net of by-product credits.

The PEA is based on an underground mine with a target production rate of 800 tons per day with a weighted average annual production of 2,771,000 lbs of cobalt, 4,533,000 lbs of copper and 3,600 oz of gold over a 12.5 year mine life with an estimated pre-production period of 21 months utilizing a 0.25% cobalt cut-off. The PEA utilizes an updated resource, mine model and mine schedule with intentions to produce cobalt and copper sulfate chemicals and gold at the CPF.

The PEA reported overall recoveries to products (copper concentrate, sulfate crystals and gold loaded carbon) with respect to mill feed and internal recoveries at the CPF are 90.99% for cobalt, 92.76% for copper and 78.46% for gold. Overall recoveries for copper and gold includes metals contained in the copper concentrate as well as leached products. All magnesium that is input as MgO is recovered in the MgSO4 product in the current model for this study.

Earlier in 2015, Mine Developments and Associates (“MDA”) updated the ICP’s Ram deposit estimate of cobalt, copper, and gold resources into a three-dimensional block model to be used for mine planning, design, and scheduling forms part of the PEA with an effective date of March 10, 2015. MDA had previously estimated the resources for the Ram deposit. Cobalt, copper, and gold reported resources are shown in the table below. The stated resource is diluted throughout the entire 6 feet by 2 feet by 5 feet blocks that are equal to or above the cut-off grade of 0.2% cobalt. There is approximately 15% dilution in the stope designs. The copper and gold resources are those resources carried within the blocks which attain the cobalt cut-off grade. No metal value is given to the copper or gold in determining the Co resource cut-off. No metal recoveries are applied, as this is an in-situ resource.

Note: Inferred mineral resources are considered too speculative geologically to have technical and economic considerations applied to them outside the scope of a PEA. The current basis of project information is not sufficient to convert the mineral resources to mineral reserves, and mineral resources that are not mineral reserves do not have demonstrated economic viability. 

Conclusions from SE and MDA are that the ICP contains a viable cobalt and base metal resource that can be successfully mined by underground methods and recovered with conventional processing. Using the assumptions contained in the PEA, SE and MDA reports that the project is economic and should proceed to the bankable feasibility stage.

The Company cautions that this PEA is preliminary in nature, and is based on technical and economic assumptions which are currently being evaluated in further feasibility level studies. The PEA is based on the current (as at March 10, 2015) ICP estimated resource model, which consists of material in both the measured/indicated and inferred classifications. Inferred mineral resources are considered too speculative geologically to have technical and economic considerations applied to them outside the scope of a PEA. The current basis of project information is not sufficient to convert the mineral resources to mineral reserves, and mineral resources that are not mineral reserves do not have demonstrated economic viability. Accordingly, there can be no certainty that the results estimated in the PEA will be realized.

Metallurgical Test Work Summary

On March 3, 2016 the Company announced metallurgical test work results on bench test production of cobalt sulfate heptahydrate crystals produced from ore samples from the ICP. SE was the Company’s lead engineer coordinating the metallurgical test work. SE previously reported that based on the extensive metallurgical test work results to date, successful modifications to the Mill and CPF flowsheets and, the recent successful results and commitments from Cytec Industries Inc. (“Cytec”) and General Electric’s Water and Process Technologies Group (“GE”), it is expected that the final end product will meet the quality standards for high purity cobalt sulfate chemicals.

The development of the modified flow sheets outlines a critical path forward for the Company. SE has previously recommended that the project development activities be advanced to support and produce a BFS. The finalization of the modified flow sheets allows for such advancement.

Bankable Feasibility Study in Progress

On June 21, 2016, the Company announced that it has signed an agreement with Micon International Limited (Micon) for technical services to conduct a BFS on the ICP. Micon will be subcontracting aspects of the study concerning the processing, infrastructural engineering, risk assessment, project scheduling, and cost estimating to SNC-Lavalin. The BFS is expected to be completed before the end of Q1- 2017.