Reports Grant of Restricted Share Units
Toronto, Ontario--(Newsfile Corp. - March 31, 2021) - Labrador Iron Mines Holdings Limited (OTC Pink: LBRMF) ("LIMH" or the "Company") reports that it has filed on SEDAR a Technical Report in accordance with National Instrument 43-101 ("NI 43-101"), with an Issue Date of February 26, 2021 and an Effective Date of December 31, 2020, prepared by Roscoe Postle Associates Inc. ("RPA"), now part of SLR Consulting Ltd., disclosing the results of an independent Preliminary Economic Assessment ("PEA") on its Houston Project.
There are no changes to the results of the PEA previously announced on March 9, 2021. (See LIMH News Release March 9, 2021). All currency references in this News Release are in Canadian dollars, unless otherwise noted.
The PEA of the Houston Project estimates an undiscounted pre-tax cash flow of $240 million ($234 million after- tax) and a pre-tax net present value of $113 million ($109 million after-tax), at an 8% discount rate ("NPV8%"), with an internal rate of return ("IRR") of 39%, under the base case assumed long term iron ore price of US$90/dmt (62% Fe Sinter Fines CFR China basis).
RPA is a world-leading mining advisory business with teams in Toronto, Quebec, Vancouver, Denver, and London, and includes geological, mining and metallurgical consultants who have provided expertise and advice on every continent to clients in the mining industry for more than 35 years. RPA was uniquely qualified to carry out this work as it has extensive relevant iron ore experience on many projects in Canada (including Schefferville and Labrador) and in other parts of the world.
The strong results of this independent PEA support LIM's plan to resume iron ore production from its next phase Houston Project, with low re-start capital and demonstrated robust economics.
PEA Strong Financial Results
The PEA uses an assumed long term iron ore price of US$90/dmt, reflecting the current 3-year trailing average, as the base case in the financial analysis, which is about 45% below the current iron ore market price.
Pre-production capital expenditures are estimated at $86.8 million, including an 18% contingency, and sustaining capital is estimated at $67.7 million.
The project economic results are most sensitive to the iron ore price and less sensitive to operating and capital costs. The initial capital cost at US$65 million, and the initial capital intensity at only US$33 per tonne of annual production, are considered low by industry standards.
The PEA economic model assumes a planned point-of-sale of product from the Houston Project at the Houston rail siding FOB (Free on Board). Using a current spot price of US$160/dmt, adjusted for an assumed price participation by an offtake partner of 50/50 above the base case iron ore price of US$90/dmt, would increase the after-tax NPV8% to $459 million and the after-tax IRR to 209%.
Using a current spot price of US$160/dmt, not adjusted for an assumed price participation by an offtake partner, would increase the Project after-tax NPV8%to $778 million and the after-tax IRR to 514%.
The economic results of the PEA are based, in part, on Inferred Resources, and are preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves. There is no certainty that economic forecasts on which this PEA is based will be realized.
Houston Project
The Houston Project is an open pit, direct shipping, iron ore project located in the Labrador Trough region in eastern Canada, near the town of Schefferville, Quebec. The Houston Project is owned 100% by Labrador Iron Mines Limited ("LIM") and its wholly-owned subsidiary Schefferville Mines Inc. ("SMI"). LIMH owns 52% of LIM.
The Houston Project consists of the Houston 1, Houston 2 and Houston 3 deposits located in Labrador and the adjacent Malcolm deposit located just over the provincial border in Quebec. The Houston 1 and Houston 2 deposits have been permitted and are considered ready for construction. The Houston 3 deposit and Malcolm deposit are planned to come on stream in the second half of the 12-year projected mine life, following permitting.
The Houston Project is planned as an initial 12-year mine life with production of 2 million dry metric tonnes ("dmt") of direct shipping iron ore ("DSO") per year for total production of 23.4m dmt of product at 62.2% Fe over the life of the mine. The product is expected to be comprised of 30% lump DSO and 70% sinter DSO at an average Fe grade of 62.2% and an average silica content of 7.4%. The PEA assumes a premium of US$10/dmt will be received over the benchmark price for lump product and a penalty of US$1.50/dmt will be charged for every 1.0% of silica content above 4.0%.
The production profile of 23.4 million dmt is based on an updated, current NI 43-101 Mineral Resource estimate of 20.5 mt (62.7% Fe) in the Measured and Indicated categories and 14.3 million mt (59.4% Fe) in the Inferred category. Planned production for the Houston 1 and 2 deposits is based primarily on Measured and Indicated resources. Subject to further drilling and analysis, excellent additional exploration potential exists along strike and between the Houston and Malcolm deposit, which could possibly expand the project's resource base and extend the mine life.
The Houston Project is considered ready for construction as the first stage deposits have already undergone extensive regulatory review and permitting approval. With an 18-month construction period, the Houston Project has very low technical risk, with only a short gravel road and rail siding as the principal construction components.