Magnetic Resources delivers positive NPV in Jubuk Magnetite Conceptual Mining Study

Magnetic Resources' (ASX: MAU) has released a Conceptual Mining Study for the Jubuk Magnetite Project, which delivered a positive NPV, with the company already looking to enhance the project economics by reducing capital expenditure and additional regional exploration targets under review.

The study, completed by Engenium Pty Ltd, indicates a Net Present Value (NPV) of A$40 million, a capital cost of A$153 million, operating costs of A$106/tonne, an IRR of 18% and a nominal payback period of 4 years.

The capital cost of the base case study assumed new Australian-sourced equipment and applied a short term exchange rate of 1.0 US$/A$ reducing to 0.8 US$/A$ in Year 6.

The study investigated the scenario of a potential development of Jubuk producing 0.5Mtpa of magnetite concentrate, road freighted to the Kwinana port in containers, and also modelled a combined road and rail transport scenario which resulted in an increased capital cost of A$170 million, an NPV of A$35 million and an IRR of 16%.

A maiden JORC is still pending for Magnetic, which is why the study is not a Scoping Study.

The Jubuk tenements host the Jubuk coarse grained magnetite deposit with an exploration target range of 50-200 million tonnes of magnetite banded iron formation.


A reduction in cost targeted

Magnetic Resources is already investigating options to further reduce the capital costs, as the study identified that additional mineralisation with low overburden strip ratios will strongly enhance the project economics.

Importantly, exploration targets within a 30 kilometre radius of Jubuk remain untested, and are therefore being prioritised and investigated in preparation for further drilling.


Development options

The study reviewed a range of development options and concluded that a modest scale operation would be appropriate with a resultant reduction in capital costs by maximising local employment and minimising mine camp requirements for personnel, compared to larger tonnage options.

Likewise the reduced power and water requirements were deemed achievable with minor upgrades to existing infrastructure.

The capital costs of rail loading/unloading facilities and rail upgrades were eliminated by using road haulage directly to Kwinana in purpose built containers and discharge into ships using a container tipper mounted on existing container cranes or ships cranes.

Magnetic said that the smaller scale of operation is reflected in higher operating costs.


Conceptual Mining Study assumptions

· Mining rate of 2.0-2.4 Mtpa, producing 500,000-600,000tpa of magnetite concentrate;
· A Life of Mine of 14 years based on 29Mt of mineralisation;
· Long term iron ore price of US$ $1.77/dmtu (including 10% premium for quality
  product) and a long term exchange rate of 0.8 US$/A$;
· Strip ratio increasing from 1.4:1 to 3.6:1 over the Life of Mine;
· Mass recovery of 25%;
· Concentrate iron content of 67%;
· Royalty rate 5%;
· Tax rate 30%;
· Discount rate of 10%;
· Financial model over a project life of 14 years;
· No terminal value added to the NPV, (which would reflect any extension to the plant
  and/or mine life)
· Sustaining capital at 10% of direct capital from Year 4 onwards.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/20186/magnetic-resources-delivers-positive-npv-in-jubuk-magnetite-conceptual-mining-study-20186.html