North America’s Next Vertically Integrated Cobalt Chemicals Supplier
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Fortune Minerals Limited (TSX:FT; OTCQB:FTMDF) is developing its 100% owned, vertically integrated, NICO primary cobalt project in Canada to produce cobalt chemicals for the rapidly expanding lithium-ion battery industry, together with gold, bismuth and copper by-products. NICO is comprised of a planned mine and concentrator in the Northwest Territories and refinery in Saskatchewan where concentrates from the mine will be processed to energy- and eco-metals for the growing green economy, with a significant (>1 million ounce) gold component that is liquid and countercyclical. As a planned Canadian producer, NICO will be able to demonstrate supply chain transparency and custody control of ethically produced cobalt from ores through to the production of value-added chemicals, and reduce geographic concentration of supply from the Congo and China, and production primarily as a by-product of copper and nickel mining, which are risks to the global supply chain.
- Building a reliable vertically integrated North American project to produce cobalt chemicals for the rapidly expanding lithium-ion battery industry
- Approximately 2,000 tonnes of annual cobalt production in each of the first 5 years of production (1,850 tonnes life of mine annual production)
- More than 1 million ounces of gold and 12% of global bismuth reserves as by-products
- One of the few advanced stage cobalt projects outside of the Congo
- Primary cobalt production that is independent of nickel and copper mining
- Positive Feasibility Studies, test mining and pilot plants validation of the deposit and process technology, and environmental assessment for the mine site already completed
- Updated feasibility study underway assessing a 30% expanded mill throughput rate of 6,000 tonnes of ore per day
- High concentration ratio using simple flotation to capture the valuable metals in sulphide concentrates at the mine site representing only ~4% of the original ore for low cost transportation and downstream processing
- Strong relationships with Indigenous and local communities
- Federal, Northwest Territories and Tlicho governments support for the $213 million Tlicho All-Season Road expected to commence construction in Q3 2019 and be completed in 2022 in time for mine operations
- Pursuing strategic partnerships and off-take with globally recognized firms
- Value added processing at the proposed refinery
- Potential for additional business at the Saskatchewan refinery from toll processing of concentrates from other mines and diversification into the metals recycling business
De-risking the NICO Project
Fortune Minerals has expended approximately $130 million to date preparing technical, environmental and social information to support development of the NICO cobalt-gold-bismuth-copper project. Environmental assessment approval and the major mine permits have been received for the facilities in the Northwest Territories.
A positive Feasibility Study was completed in 2014 identifying Mineral Reserves of 33.1 million tonnes containing 82.3 million pounds (37,341 tonnes) of cobalt, 1.1 million ounces of gold, 102.1 million pounds (46,325 tonnes) of bismuth and 27.2 million pounds (12,296 tonnes) of copper to support a 21-year mine life at a production rate of 4,650 tonnes of ore per day (see details below). Although NICO is planned to be mined primarily by open pit methods, underground test mining was carried out to verify the deposit geometry, grades and mining conditions, and collect large samples of ore for pilot plant testing, validating the process flow sheet, metal recoveries, and producing samples of cobalt sulphate heptahydrate that meets the specifications required by lithium-ion battery producers.
The Feasibility Study is being updated by Hatch Ltd., Micon International Limited and P&E Mining Consultants Inc. to assess project economics at current costs, updated commodity price and exchange rate assumptions, and a 30% expanded mill throughput rate of 6,000 tonnes of ore per day to produce approximately 2,000 metric tonnes of cobalt units per year in a sulphate product during each of the first 5 years of the mine life (average of 1,850 tonnes per year over 18 years). The study is also assessing a variety of development scenarios, including a lower capital cost option of producing metal concentrates and gold doré at the mine site to defer the downstream refinery.
NICO is being re-engineered at a higher production rate because of the strong demand for cobalt and concerns about the current supply from geographic concentration of mine supply in the politically unstable Congo and refinery supply in China where there is policy risk. The Company has received feedback from potential international strategic partners interested in securing a supply of cobalt from Canada. Fortune Minerals is working to arrange the Project Financing for the construction of the NICO Project through a combination of strategic partnerships, debt and equity and has executed confidentiality agreements with a number of financial institutions and potential partners.
The cobalt market
The cobalt market has had more than 20-year, 6% compounded annual growth (CAGR) and consumption is now more than 115,000 tonnes of refined cobalt units per year. The cobalt market is expected to transition into deficit in the early 2020’s as current producers, primarily in the Congo, cannot meet future projected demand. Most of the growth is projected from demand in cathodes of lithium ion rechargeable batteries used in portable electronic devices, electric vehicle (EV’s) and stationary storage cells to make electricity use more efficient. Batteries are responsible for more than 50% of global cobalt demand, up from 1 percent of a much smaller market in the mid-1990’s. Cobalt is also used in superalloys for the aerospace industry, cemented carbides, cutting tools, permanent magnets, surgical implants, catalysts, pigments and agricultural products. The 20-year inflation adjusted price of cobalt is approximately US$25 per pound.
Demand for cobalt is expected to accelerate, particularly after 2020 from the proliferation of EV adoption and growing use of stationary cells for electrical grids to store energy during off-peak charging enabling greater use of renewable energy generation from wind and solar. More than 70 battery megafactories (production >1 GWh) are announced or under construction including a 50-100 GWh facility in China by CATL that is estimated to require up to 23,000 tonnes of cobalt per year. With EV adoption accelerating and penetration forecast at between 12% and 25% by 2025, analysts project that cobalt production will need to more than double. Benchmark Mineral Intelligence estimates that cobalt mine production will need to increase to ~400,000 tonnes per year by 2030, up from the 128,000 tonne level in 2018. A number of countries, particularly in Europe, have announced future bans on cars with internal combustion engines. In 2018 EV adoption in China (the largest car market in the world and EV leader) was 4.8% and growing while global adoption was estimated to be 2.2%.
Other battery raw materials have numerous potential new deposits identified, whereas cobalt is generally considered to be the bottleneck with supply chain concerns about future sources of supply. There are also significant risks associated with the current supply because approximately 69% of mine production is sourced from the politically unstable Democratic Republic of the Congo (Congo), and 62% of refinery production is produced in China where there are policy risks. About 98% of non-artisanal cobalt supply is produced as a by-product of nickel and/or copper mining where the primary metals dictate production criteria. Responsible sourcing has also become an issue related to some Congo mine production due to child labour, conflict mineral issues, poor environmental practices, and supply chain transparency that contravene U.S. Dodd-Frank and European Union Conflict Mineral legislation. There is also increasing pressure from the Responsible Business Alliance (RBA), which most of the major electronics companies in the world are members and have concerns about ethical raw material procurement and damage to their brands.
NICO will be a reliable Canadian vertically integrated producer of cobalt sulphate to the rapidly expanding lithium-ion battery industry, with supply chain transparency and custody control of metal from ores through to the production of cobalt chemicals. NICO is also a primary cobalt deposit with approximately 60% of project revenues from cobalt, 30% from gold, and 10% from bismuth at recent metal prices. NICO will be a supply of cobalt that is independent of the Congo, China and copper and nickel mining, and will be an ethical supply of cobalt to mitigate electronics and auto company concerns about unsustainable raw material procurement.
Excellent infrastructure in place and under development
The NICO cobalt-gold-bismuth-copper deposit is an IOCG or Olympic-Dam type deposit situated on 5,140 hectares of mining leases located 160 kilometers northwest of the city of Yellowknife in Canada’s Northwest Territories. The proposed mine is 85 kilometers north of the highway to Edmonton, Alberta, 50 kilometers from the community of Whati and 25 kilometers from the Snare Hydro Complex and electrical grid servicing Yellowknife.
The Northwest Territories and Tlicho (Indigenous) governments are collaborating on the construction of the $213 million Tlicho Road to the community of Whati, located 50 km south of NICO. The Canadian Government is funding 25% of this cost. The Government of the Northwest Territories is funding the remaining 75% cost of the road using a private public partnership (P3) structure with Kiewit Construction, Hatch and Thurber Engineering. This consortium will design, finance, build, operate and maintain the Tlicho Road over a 28-year contract and will be repaid with interest. Construction of this road is expected to begin in Q3 2019 for completion in 2022 in time for NICO operations.
Fortune already has environmental assessment approval to build a 50 km spur road from Whati to the mine site and is included as part of the 2014 Feasibility Study and Environmental Assessment for the project. Fortune plans to construct the NICO mine and concentrator facilities using the existing winter ice roads and align the production schedule with the availability of the all-weather road enabling trucking of metal concentrates to the railhead at Hay River, Northwest Territories and rail transport to the refinery in Saskatchewan or ports for export.
Large, well-defined polymetallic deposit
NICO is an IOCG (iron oxide copper-gold)-type deposit which include world class analogues including Olympic Dam in Australia, Salobo and Sossego in Brazil and Candelaria in Chile. NICO hosts open pit and underground Proven and Probable Minerals Reserves totaling 33.1 million tonnes, containing 82.3 million pounds (37,341 tonnes) of cobalt, 1.1 million ounces of gold, 102.1 million pounds (46,325 tonnes) of bismuth and 27.2 million pounds (12,296 tonnes) of copper to support a 21-year mine life at a production rate of 4,650 tonnes of ore per day. The reserve estimate is based on a robust database that includes 327 drill holes and surface trenches and the deposit geometry and grades have been validated by underground test mining in 2006 and 2007. The company believes there is significant exploration potential to extend the orebody through additional drilling, and also identify new deposits on the property and surrounding area. The Company already owns the nearby 9 million tonne Sue-Dianne Copper-Silver-Gold deposit and there is attractive geology and geophysical anomalies in the area to identify additional satellite deposits.
De-risked project with positive bankable Feasibility Study and updated Feasibility underway
Fortune Minerals has spent approximately $130 million advancing the NICO project and de-risking the development since it was an in-house discovery in 1996. Work has included exploration and delineation drilling, geotechnical studies, metallurgical test work, front-end engineering and design (FEED) and Feasibility Studies, underground test mining, and several pilot plants to verify the process methods, plant recoveries and to produce samples of the products the Company will produce. Approximately $20 million was spent conducting underground test mining and pre-production development work already completed includes 2 kilometers of comprised of a decline ramp, ventilation raise and crosscuts through the orebdy on two levels. This work can be leveraged in the event the Company pursues underground operations during the first two years of the mine life. Most of the deposit is planned to be mined using open pit methods.
Metallurgical test work and pilot plant tests have verified the NICO process methods and has produced samples of cobalt sulphate and other products that meet the specifications of the lithium-ion rechargeable battery industry. One of the most important economic attributes of the NICO project is a high concentration ratio that allows the of ores to be reduced to less than 4% of their original mass by simple flotation to produce bulk and selective sulphide concentrates containing the recoverable metals. Reducing the amount of material for downstream processing significantly reduces transportation and treatment costs to and at the Saskatchewan refinery, respectively.. This is a significant advantage over nickel-cobalt laterite deposits that need to process whole ores using similar process technology.
Feasibility Study Highlights
Fortune Minerals is updating the 2014 Feasibility Study with a new study by Hatch Ltd., P&E Mining Consultants Inc. and Micon International Limited. This updated study will assess project economics at current costs, updated commodity prices and currency exchange rates and a 30% expanded mill throughput rate of 6,000 tonnes of ore per day. This would produce approximately 2,000 tonnes of cobalt units per year in sulphate in each of the first five years of the approximate18 year mine life. The updated Feasibility Study and related engineering is being done to support Project Finance activities and to update the 2014 Feasibility Study that is now more than four years old and out of date.
Highlights from the previous 2014 Feasibility Study are as follows:
*The 2014 Feasibility Study reflected in the Micon Technical Report uses Base Case Price assumptions are US$1,350/troy ounce (“oz”) for gold, US$16/pound (“lb”) for cobalt (US$19.04/lb in sulphate), US$10.50/lb for bismuth (US$12.64/lb bismuth in average production of ingot, needles and oxide), and US$2.38/lb for copper at an exchange rate of C$1=US$0.88; Cycle price sensitivity analysis uses US$1200 to US$1900/oz gold, US$ 12-30/lb cobalt, US$ 7-19/lb bismuth & US$3-4.50/lb copper
Early in 2016 Fortune Minerals announced that SGS Canada Inc. had produced a premium battery-grade high purity cobalt sulphate heptahydrate from material produced in its earlier pilot plant. The sample exceeded the chemical specifications received from several large manufacturers of lithium-ion batteries, and samples were provided to a potential off-take customer for testing.
Well-positioned to become a reliable North American source of critical metals
The NICO project includes a proposed refinery in Saskatchewan. The province of Saskatchewan has low cost electricity and introduced attractive tax legislation to encourage companies to build and operate processing facilities in the Province. The refinery is also located close to sources of reagents and other services as well as a skilled pool of chemical plant workers and engineers.
At the planned refinery, NICO concentrates will be processed to value-added metals and chemicals. The bismuth concentrate will be leached in acid to recover bismuth from the bismuth concentrate as a metal precipitate, which is then smelted in a rotary furnace to remove the remaining impurities and pour bismuth metal into ingots, or calcined to an oxide. The bismuth leach residue will be blended with the cobalt concentrate for processing by High Pressure Acid Leach (HPAL) in an autoclave, and then precipitation of a high-quality cobalt sulphate heptahydrate after copper and other impurities are removed by sequential neutralization and ion exchange. Copper is recovered by cementation onto iron and then sold to smelters for refining. Gold is recovered by cyanidation of the combined autoclave leach residue, precipitation by Merrill-Crowe methods, and then smelted in a furnace to pur doré bars.
Fortune believes there are also future revenue-generating opportunities at the refinery with custom processing of materials sourced from other mines as well as diversification into the battery and metals recycling business.
Permits granted and refinery sites identified
The mine and processing plant have already received its environmental assessment approval. The company has also received its Land Use Permit and Class A Water License approvals. The 2014 feasibility study had estimated capital costs for the entire project to be $589 million but this is being updated in the new report that is expected to be completed in the second quarter of 2019.
Fortune has completed an environmental assessment for the lands that it owns in the Rural Municipality of Corman Park, Saskatchewan. However, the municipality recently rejected this zoning change application that is required to build and operate the refinery at this location. The Company has an option to purchase another site in Saskatchewan and is also looking at alternative sites in other jurisdictions where it could build the proposed refinery. Because the Company has already completed an environmental assessment in Saskatchewan, the new site is expected to navigate the environmental assessment process much faster with only site specific criteria having to be evaluated. Fortune is also looking at a lower capital cost start-up option of selling metal concentrates and gold doré directly from the proposed mine in order to defer construction of a refinery.
NICO Project Construction
Fortune is working to secure a strategic project equity partner(s) tied to off-take to finance the NICO development. Construction is anticipated to take approximately 2 to 3 years to complete.
Fortune Minerals has a management team with proven records of exploring, developing constructing and operating mines around the world and in the Northwest Territories.
Robin E. Goad, M.Sc., P.Geo.—President, CEO and Director
Robin Goad is a professional geologist with more than 30 years of experience in the mining and exploration industries in Canada and internationally, and has a particular expertise of working in Canada’s far north. Mr. Goad led the team responsible for discovery of the NICO deposit and managed the work programs transitioning the project to the development phase. Prior to founding Fortune in 1988, Goad worked for large companies including Noranda and Teck, and as a consultant to the resource industry. He is a director of the NWT & Nunavut Chamber of Mines and has served as President and director of other TSX listed mineral exploration and development companies.
David Massola, B.Sc. (Acc.)—Vice President Finance and CFO
Dave Massola is an executive with three decades of international mining experience in a broad range of financial and business aspects, including strategic planning, mergers and acquisitions, capital raising, taxation, treasury and risk management. This includes 20 years with BHP-Billiton at the Escondida Copper Mine in Chile, the Island Copper Mine in British Columbia and the Ekati Diamond Mine in the NWT. As Vice President and CFO of De Beers Canada, he contributed to the development of two diamond mines in northern Canada. Subsequently as Senior Vice President of Finance and CFO of GlobeStar Mining, he was a key employee in the financing, construction and operations of GlobeStar’s Cerro de Maimón Mine in the Dominican Republic and negotiated its subsequent sale. He was also the President and CEO of Continental Nickel Ltd., while it was developing a mine in Tanzania, and led negotiations for its subsequent takeover.
Glen Koropchuk, B.Sc., M.Sc., Calgary, Alberta—Technical Director and COO
Glen is a mining engineer with ~30 years of global, multiple commodity, operations, project development and corporate social investment experience predominantly with Anglo American… & De Beers. Prior to his retirement from De Beers Canada in 2016, Mr. Koropchuk was COO and responsible for delivering safe, operational excellence from the Snap Lake and Victor diamond mines in Canada’s north. Notably, he also led the permitting, Aboriginal engagement, and project management for the Gahcho Kue diamond mine in the Northwest Territories that was finished on budget, on time, and was recognized as the world’s largest new diamond mine at its opening ceremony in 2016.
David A. Knight, B.A., LL.B., Oakville, Ontario.—Corporate Secretary
David is a partner with Weir Foulds LLP, a Canadian legal practice with extensive expertise in the resource sector. David specializes in securities law, including public and private financings, mergers and acquisitions, stock exchange listings and regulatory compliance and acts for investment dealers and issuers. David is a member of the Law Society of Upper Canada.
Richard Schryer, Ph.D.—Vice President of Regulatory and Environmental Affairs
Rick Schryer is an aquatic scientist with more than 25 years of experience in mine permitting, environmental assessments, environmental studies and monitoring. Prior to Fortune, he worked with Golder Associates and was involved with the permitting and environmental assessments for the Diavik and Snap Lake diamond mines in the Northwest Territories as well as projects in southern Canada
Dustin Reinders, B.Sc., P.Eng.—Projects Engineer
Dustin Reinders is a mining engineer with more than 7 years of experience in the mining industry and earthworks construction performing engineering and management roles. He has previously worked for Northgate Minerals at the Kemess South mine and with North American Construction Group at various mine sites in Fort McMurray. Reindeers is a graduate of the University of Alberta with a Bachelor of Science degree in 2010 in Mining Engineering.
David Ramsay, B.A., Yellowknife, Northwest Territories—Director
David Ramsay has extensive elected public office experience in the Northwest Territories, which has included prominent cabinet positions in the Legislative Assembly. Prior to November 2015, he was Minister of Industry, Tourism and Investment that includes the preeminent mining portfolio. Mr. Ramsay has also served as Minister of Justice, Attorney General, Minister of Transportation and the Minister Responsible for the Public Utilities Board for the Government of the Northwest Territories. In addition to serving in Cabinet, David was Vice President of the Pacific Northwest Economic Region (PNWER) from 2011 to 2014, and President between 2014 and 2015. The PNWER is a statutory public / private partnership of Alaska, Idaho, Oregon, Montana, Washington, British Columbia, Alberta, Saskatchewan, Yukon and the Northwest Territories whose mandate is to increase the economic well-being and quality of life for all citizens of the region. As a long-term resident of the Northwest Territories, David has been involved with numerous businesses. He was first elected to public office in 1997 and served five years as a Yellowknife City Councillor before his election to the Legislative Assembly.
Ed Yurkowski served as CEO of Procon which, in addition to the resource company, is a full mining provider through Procon Mining & Tunnelling Ltd until he retired from that position in 2014. Ed Yurkowski has been involved in the mining and civil contracting industries since 1966, including ownership and management of two large mining construction contracting companies. He received his Bachelor of Science in Civil Engineering in 1971 from the University of Saskatchewan and currently serves as a director of a number of other TSX and TSX Venture Exchange listed companies, including Imperial Metals Corp., Golden Band Resources Inc., BC Moly Ltd. and Copper Lake Resources Ltd.
Carl L. Clouter, Gander, Newfoundland—Director
Carl Clouter is a commercial pilot and former owner of a charter airline in the Northwest Territories. He has been active in mineral exploration in conjunction with more than 35 years of flying in Canada. He previously served as a Sentencing Justice of the Peace and on the board for the mineral development assistance program for the Government of the Northwest Territories.
John McVey , M.A.Sc., P.Eng, ICD.D, Burnaby, British Columbia – Director
John is the CEO and an Executive Director of the Procon Group of Companies. His engineering and construction industry career spans more than 35 years in the mining, energy and power industries in Canada as well as internationally. John joined Procon as CEO in 2015 and is leading the growth and diversification of this experienced full-service mine development and civil infrastructure contractor across Canada and select international locations. Prior to Procon, John held executive and senior management positions with Bechtel, SNC-Lavalin and Kilborn Engineering. John has B.A.Sc. and M.A.Sc. degrees in Chemical Engineering from the University of Waterloo and is a licensed professional engineer in Ontario and Alberta. He has completed the Queen’s Executive Development Program and the Institute of Corporate Directors, Directors Education Program, obtaining the ICD.D designation from the Institute.
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