$2/share Net Present Value 17 centsN.A. Tungsten's MacTung has pretax NPV of $277-million
2009-02-23 09:49 ET - News Release
Mr. Stephen Leahy reports
NORTH AMERICAN TUNGSTEN ANNOUNCES POSITIVE RESULTS FROM MACTUNG FEASIBILITY STUDY
North American Tungsten Corp. Ltd. has released positive results of the recently completed bankable feasibility study for its 100-per-cent-owned MacTung project in the Yukon Territory. Wardrop Engineering Inc. provided the principal engineering services for the project design and the capital and operating cost estimates. Geotechnical and environmental input was provided by EBA Engineering Consultants Ltd.
MacTung is one of the the world's largest known undeveloped high-grade tungsten-skarn deposit, providing significant long-term future growth for North American Tungsten.
Total indicated resources for the mineral deposit are 33 million tonnes grading 0.88 per cent WO3 (tungsten trioxide) with an additional 11.8 million tonnes grading 0.78 per cent WO3 in the inferred resource category. (For further details, please refer to the company's April 27, 2007, news in Stockwatch.) Underground indicated mineral reserves have been calculated to be 8.2 million tonnes grading 1.09 per cent WO3. The project is based on an 11.2-year underground mine with the potential to expand the mine life by another 17 years with open-pit exploitation of the near-surface, lower-grade mineral resources. This additional potential mine life would further enhance the project economics but it has not been included in the current BFS.
The MacTung project is forecast to run at 2,000 tonnes per day from an underground operation using conventional long-hole plus cut-and-fill mining methods. An underground primary crusher and conveyor will supply ore to the surface facility where the ore will be processed into both a premium gravity concentrate (67 per cent WO3) and a flotation concentrate (55 per cent WO3). Recovery of WO3 is expected to average 81.7 per cent and the mine will average 752,000 metric tonne units of WO3 in concentrates during its first five years of operation.
The marketing study for tungsten concentrates to support the economics of the project was completed by Goodall Business and Resources Management Pty. Ltd. (GBRM). The global market for tungsten is forecast to remain strong over the next five years and beyond. While China continues to dominate global tungsten mining, the availability of tungsten raw materials to non-Chinese markets will continue to decline due to the strong growth of internal Chinese tungsten consumption. A strong escalation in prices has already occurred over the past three years. However, with producers struggling to meet demand, global mining costs continuing to escalate, mining grades continuing to drop, and the Chinese government likely to impose tighter production quotas and higher export tariffs to maintain reserves, further global price escalation appears likely. Forecast ammonium paratungstate (APT) prices are projected at $300 (U.S.) per metric tonne unit in 2013 when the MacTung project is due to reach full production.
Key parameters that form the basis of the economic evaluation of the MacTung project are as follows:
Underground mineral reserve: 8.2 million tonnes
Annual throughput: 730,000 tonnes per year
Recovery first five years: 81.7 per cent
Average annual production first five years: 752,000 metric tonne units
Operating cash cost first five years: $104 per metric tonne unit of WO3
Capex including contingency: $402.1-million
APT pricing: $300 (U.S.) per metric tonne unit of WO3
Exchange rate U.S. dollar/Canadian dollar: 0.88
The capital expenditure estimate comprises a project capital cost of $356.5-million plus a contingency of $45.6-million. The capital cost also includes $39.6-million for underground mine equipment and development. In December, the company commenced the process of project review by the Yukon Environmental and Socio-economic Assessment Board (YESAB); a decision document by YESAB is expected to take between 12 and 15 months. Basic and detailed engineering will proceed concurrently with the project permitting process. The company is projecting that construction will start in the second quarter of 2010 and require 27 months to complete. Pursuant to this schedule, the plant will be commissioned during the fourth quarter of 2012.
Based on an 11.2-year mine life and the base case parameters, the project's pretax net present value is calculated as attached.
Discount rate Pretax net present value8 per cent $276,800,0006 per cent $346,400,000
The pretax internal rate of return for the project is 23.5 per cent. Payback of invested capital is anticipated to occur within 2.9 years after production starts.
On the financing side, the company has initiated discussions and negotiations with several financial institutions and potential industry partners.
The MacTung feasibility study was prepared by Wardrop and EBA under the direction of Nory Narcisco, PEng -- a qualified person as the term is defined under National Instrument 43-101. Mr. Narcisco has reviewed and approved the contents of this press release. Nigel Goodall, principal of GBRM, who is a qualified person as defined under National Instrument 43-101, has reviewed and approved the contents of this press release regarding the marketing study information presented.