Minesite article on POM & FRA
Noting that
Franconia is only about 18 to 24 months behind PolyMet in its progress...
https://www.minesite.com/nc/minews/singlenews/article/capital-costs-are-key-for-franconia-minerals-as-it-follows-in-the-footsteps-of-polymet-mining-toward/1.html
September 03, 2008
Capital Costs Are Key for Franconia Minerals As It Follows In The Footsteps Of PolyMet Mining Towards Production
By Our Canadian Correspondent
The Duluth Complex in northeastern Minnesota has long been known to host extensive resources of copper, nickel and platinum and its associated metals, but the cost of extracting them has in the past proved prohibitive. This is the reason that Brian Gavin and his team at Canadian-listed Franconia Minerals are initially looking at the economics of selling concentrate from the company’s Birch Lake deposit directly to the market before they’ll consider building an expensive hydrometallurgical facility.
Back in 2006, Franconia considered developing the Birch Lake deposit in tandem with the Maturi deposit some five kilometers away, as well as building a hydrometallurgical facility for processing. Capital costs were set at around US$616 million, including US$150 million for the hydrometallurgical plant. At the time, the scoping study pegged the pre-tax net present value using a 7.5 per cent discount at US$365 million using US$450 gold, US$1.50 copper, US$10.00 for cobalt, US$6.00 for nickel, with US$800 per ounce for platinum and US$300 per ounce for palladium.
Fast forward to 2008. With more robust metal prices and armed with two more years of drill data, Franconia has doubled its resource estimate for the Main zone at the Birch Lake deposit to 108 million indicated tonnes grading 0.53% copper, 0.16% nickel, 0.01% cobalt, 0.6 grams palladium, 0.28 grams platinum and 0.13 grams gold. On top of that is 87 million inferred tonnes grading 0.54% copper, 0.17% nickel, 0.01% cobalt, 0.48 grams palladium, 0.23 grams platinum and 0.11 grams gold. From the metallurgical perspective, the drilling also enabled the company to collect enough material for bulk testing. So far the bench-scale tests using 200kg samples have all been favourable.
Looking to cash in on high metal prices, a new scoping study is underway that will focus on developing a mine at Birch Lake alone, while evaluating the economics of building a hydrometallurgical facility against those of selling concentrate directly to market. Selling the concentrate would not only allow Franconia to avoid the capital costs of building a hydrometallurgical plant, but would also let it take advantage of today's metal prices by allowing it to get into production sooner. It would also simplify the permitting process because much of the Maturi deposit is on federal land, and permitting it would be a much more time consuming process than it will beat Birch Lake, which generally lies on land with private surface rights and state mineral rights. Assuming the results of the scoping study are positive, and all indications are that it should be, Franconia would look to have a feasibility study in hand by 2009.
Franconia also has the benefit of following in the foot steps of PolyMet Mining and its advanced NorthMet projects along strike from Birch Lake. Here, PolyMet is eyeing a 30,000 tonnes per day open pit mine. Already at the permitting stage for production, the NorthMet project has a measured and indicated resource of 579 million tonnes grading 0.27% copper, 0.08% nickel, and 0.007% cobalt, plus another 228 million tonnes grading 0.28% copper, 0.08% nickel and 0.006% cobalt in the inferred category. Like Franconia, PolyMet has a revised capital and operating cost plan that allows for the sale of concentrate during the construction and commissioning of new metallurgical facilities, which all-in-all ought to reduce capital costs by some US$78 million prior to first revenues coming in. PolyMet and state regulators are currently hammering through the permitting process, so many of the stumbling blocks on this front will have been worked out by the time Franconia goes to the table. In this regard, the State of Minnesota has committed to completing the PolyMet draft Environmental Impact Statement by the end of September.
So while PolyMet may be first off the production block, Franconia gets to benefit from advanced warning about any shortcomings at Birch Lake from a thorough scrutiny of how production at NorthMet gets up and running.
Other players looking to move towards production in the area are Duluth Metals, which owns the Nokomis deposit, and Teck Cominco, which has an equity stake in Franconia, and which also owns the largest resource of the lot in the shape of the Mesaba deposit. Nokomis hosts an indicated resource of 347 million tonnes grading 0.62% copper, 0.2% nickel, 0.01% cobalt, 0.31 grams palladium, 0.14 grams platinum, and 0.08 grams gold, plus an inferred resource of 108 million tonnes running 0.65% copper, 0.18% nickel, 0.01% cobalt, 0.41 grams palladium, 0.19 grams platinum and 0.1 grams gold per tonne. Mesaba has a 2002 resource estimate of one billion tonnes at grades of 0.43% copper and 0.09% nickel.
PolyMet currently has a market capitalization of C$438 million, while Duluth Metals boasts a C$125 million valuation. Franconia trails the lot with a C$48 million market value. Investors are clearly willing to pay up for a more advanced project but it is worth noting that Franconia is only about 18 to 24 months behind PolyMet in its progress. Rest assured shareholders are hoping that Brian and his team will not only be able to benefit from PolyMet paving the way to production but also to garner the same sort of share price valuation.