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Tuesday, 26 March 2013
Century Iron Mines pleased with low capex requirements of Joyce Lake DSO project, sees pre-tax IRR of 35%
Century Iron Mines (TSE:FER) has taken another step toward de-risking one of its iron ore assets in Canada by releasing a preliminary economic assessment report for its Joyce Lake direct shipping ore (DSO) project, just days after announcing a similar report for its Duncan Lake property.
The latest NI 43-101 compliant report, based on 100 percent ownership, shows a pre-tax net present value of $94.5 million at an 8 percent discount rate for Joyce Lake, which is located in the province of Newfoundland and Labrador, near Schefferville, Quebec.
The internal rate of return was pegged at 35 percent pre-tax, with initial project capex estimated at $96.6 million including contingency, and a projected payback period of just under three years from production start-up.
Earlier this month, the iron ore developer released a maiden resource estimate for the Joyce Lake DSO deposit, which is part of the Attikamagen project in which Century has joint ventures with Wuhan Iron & Steel Company (WISCO), the fourth-largest steel producer in China, and Champion Iron Mines (TSE:CHM).
Century and WISCO hold a 56 percent stake in Attikamagen through a joint venture company called Labec Century Iron Ore, with Champion holding the remainder.
Direct shipping ore refers to iron ore that can be shipped directly to a steel furnace. DSO mines are typically rarer than the magnetite-bearing banded iron formations, but are considerably cheaper to mine and process as they require less beneficiation due to the higher iron content.
The mine life for Joyce Lake was estimated at 4 years, generating 2 million tonnes per year of lump and sinter fines, with average total operating costs seen at $62.80 per tonne of product.
"We are very pleased with the PEA of Century's Joyce Lake DSO project. It shows a pre-tax IRR of 35% on a capital expenditure of less than $100 million and a payback period of less than 3 years, based on conservative price assumptions compared with the current long-term forecasts," said Century Iron in a statement late Monday, citing president and CEO Sandy Chim.
"We continue to advance our exploration of Joyce Lake beyond its current resource boundaries, as well as other DSO targets on Century's properties, to expand our DSO resource base with the objective of sustaining and growing the operation."
The company's strategy is to build value initially by low-capital expenditure DSO projects to generate early cash flow, positioning Century for the "much larger" magnetite/taconite projects - like its Rainy Lake property in Quebec - which require higher capex and financing.
The preliminary economics report released for Joyce Lake is based on production of 1 million tonnes per year for the first year, and 2 million tonnes per year of product for the remaining years. Mining will be year-round, with mineralized rock to be hauled across Iron Arm Bay by an ice bridge during the winter.
Metallurgical testwork at the project has shown that it can produce lump and sinter feed concentrate from average 62 percent iron feed grade, with 100 percent recovery, and no tailings generation.
The company's Attikamagen project consists of 1,022 claims spread over 34,348 hectares, straddling the boundary between the provinces of Québec and Newfoundland and Labrador, and consists of the Hayot Lake property in Quebec, along with Joyce Lake.
According to a resource estimate prepared by SGS Canada Inc., Joyce Lake holds 10 million tonnes of measured and indicated mineral resources at an average grade of 59.45 per cent total Iron (TFe) plus an additional 5.6 million tonnes of inferred mineral resources, at a cutoff grade of 50 per cent TFe.
The company, which is aiming to become a major iron ore producer, is one of the largest iron ore companies in Canada, in terms of number of claims by area. It has 6,493 claims and titles, covering some 198,779 hectares in the provinces of Québec and Newfoundland & Labrador. It has interests in four iron ore projects, none of which yet generate revenue.
At the end of last week, it unveiled the results of a preliminary economic assessment for its Duncan Lake joint venture project in northern Quebec, projecting a 20.1 percent internal rate of return (IRR) pre-tax. The preliminary economics report, done by Met-Chem Canada, concluded that based on 100 percent ownership of the project, the net present value is estimated at $4.1 billion pre-tax for a project with a mine life of 20 years.