LOL, when i look at the company's homepage Frequently Asked Questions
(October 06, 2012)
1. How many other junior mining companies in the Canadian iron ore space have completed a feasibility study and how does the Company’s report compare?
Our feasibility study is the most recent and current in the industry and compares favourably well with a highly competitive OPEX of $49.13 per tonne and a CAPEX of $1.37 billion (including contingency). Three noteworthy comparisons which have completed feasibility studies include (1) the Baffinland Mary River Direct Ship Ore Project on Baffin Island (2), the New Millenium Direct Ship Ore Project in the Labrador Trough and (3) Northland Resources’ magnetite projects in Sweden and Finland where a concentrate production is also planned. The feasibility conducted for this project listed OPEX of $58.80 million per tonne concentrate and CAPEX of $890 million.
Our initial phase considers a 5.5 million tonne per annum production estimate and represents what we believe is a conservative yet very positive base case scenario. Unlike our other competitors who have projected iron ore per tonne sale prices of $115.00 to $120.00 per tonne our feasibility study uses $104.00 per tonne and remains highly competitive.
The Company believes there are significant opportunities to lower the Project’s OPEX by implementing the use of Liquefied Natural Gas for its power consumption needs, and estimates a potential reduction in OPEX between $4.00 to $8.00 per tonne. As a result, the payback of CAPEX, CAPEX to production and potential to expand the mine with new resource delineation are positive growth opportunities for the Company and drivers for shareholder value.
2. Why is the mine life in the feasibility study only 15 years and the IRR considerably low compared to other Canadian iron projects?
The economics established for the Roche Bay Project are based on an indicated resource for the C Zone alone of 501 million tonnes at 26.3% iron and a 20% iron cut-off. The Company’s A/B Zone, D Zone, E Zone and F Zone were not included in the feasibility study as to do so required NI 43-101 requirements of “measured” and “indicated” categories. As a result, the Company believes that further drilling and resource delineation could significantly increase the life of mine for the Roche Bay Project and increase its IRR. Extending the mine life to just 20 years with an 8 million tonne per year production and adjusting the iron ore price to $115/ tonne concentrate to deliver comparable numbers could change our current assumed IRR of 16% to approximately 23%.
Despite the Roche Bay Project having a historic resource of 1.1 billion tonnes, these inferred and historic resources could not be considered in the study. As such, the initial start up operation of C Zone represents a mere 10% of the entire banded iron formation along the coast of the Melville Peninsula which AEI controls. However, our plans going forward will focus on the expansion of the resource base (through drilling) to support a 20-25 year mine life and an 8 million tonne per year operation. The limitations of the feasibility report do not reflect the reality of a much larger operation.
The most immediate upward effect on IRR can be achieved by undertaking additional drilling such to expand the resource, and in turn, extend the mine life of the Project to represent a multi-generation mine. Increasing the mine life immediately increases the economic estimates for NPV and IRR. The economics can also be substantially improved by:
Optimizing the production rate of the mine to a minimum 8-10 Mtpa operation which leverages both operating and capital costs;
Considering the higher iron grade (68-69% Fe) for concentrate product that will be produced at Roche Bay (based on the positive results of the most recent metallurgical test work);
Lowering the Operating Cost through alternative power sources such as LNG which the Company is actively pursuing;
Further CAPEX reductions through modularization and further vendor engagement and commitments;
Finalizing commercial terms on pricing and shipping
3. Now that the feasibility study is complete on the Roche Bay C-Zone project what are the Company’s financing plans for that project?
Management is considering all options available to it and its partners and stakeholders in ensuring the financing required to achieve operations is in place. Currently the Company has had allot of interest surrounding its Tuktu DSO find which led to a second agreement with XinXing Ductile Iron Pipes Co., Ltd (Ticker: 000778, Shenzhen Stock Exchange), to earn an interest in 1 of the 15 Tuktu claims. This additional option with XDIP provides the potential for a much greater opportunity with a view to managing the Melville Peninsula’s iron ore projects as one. Execution of such a vision would certainly enhance the Company's financing options. The decision on expansion of the Roche Bay JV to include one regional project will likely be delayed until the resource potential at Tuktu is better understood and assumes mutually agreeable terms can be reached. Within these ongoing discussions with XDIP the formation of the contemplated joint venture on the Roche Bay project, recognized as being potentially a globally competitive, low cost iron ore producer, remains at the forefront of discussions. Ongoing updates will be provided as milestones in the JV/Financing process are achieved.
4. What is the projected timeline to get the project into production?
The current project milestones assume a mining start-up (pre-stripping) in 2015 and the first iron ore shipment to leave Roche Bay in 2017. Notwithstanding the project timelines set out in the feasibility study, AEI believes that substantial opportunities exist to accelerate the timeframe to production and potentially shipping a year earlier in 2016. AEI is currently assessing opportunities for a faster schedule through modularization and procurement out of China. As a result, we expect to be in production ahead of the majority of other Canadian iron ore projects.
5. Where is the Company in the permitting process?
Since taking over the management and operation of the Roche Bay Project in 2007, the Company has completed 6 years of environmental baseline studies and established an ongoing dialogue with the local Inuit communities. The baseline studies have been compiled in support of the drafting of the Environmental Impact Statement (EIS). With completion of the Feasibility Study (FS), both the Project Description Report (PDR) and the EIS can be completed and submitted. As a direct result of these efforts, AEI expects the permitting process to conclude by December 2014 with the issuance of a mining permit. These activities are in line with the overall project roll out as described in the FS. The project is in an excellent position to move forward, in light of the ongoing discussions with community stakeholders and the government.
The Company’s primary focus over the next 6-12 months is to develop the EIS and progress all required permitting processes, however, some important elements concerning the Company’s current Tuktu project may directly impact the timelines associated with completing these studies or the consultation process with stakeholders (i.e. governments and local communities).