MONTREAL, Feb. 4 /CNW Telbec/ - Canadian Royalties Inc. (TSX: CZZ) announces the completion of a Preliminary Economic Assessment (PEA) for its Mequillon deposit. The author of this study, P&E Mining Consultants Inc., concluded that this deposit can be developed as a viable mining project with the following highlights:
- The deposit has the potential to extend the life of the Nunavik Nickel
project by an additional 9 years beyond the original plan to mine the
Mesamax, Expo and Ivakkak deposits, as proposed in the Bankable
Feasibility Study (BFS).
- The deposit has a 33% IRR and a $53 million NPV in its base case
($8.00 Nickel & $2.00 Copper) and a 107% IRR and a $260 million NPV in
the optimistic case scenario with elevated commodity prices
($10.00 Nickel and $2.50 Copper).
Mr. Richard Faucher, President and CEO comments on these results: "The
Preliminary Economic Assessment on the viability of developing Mequillon is
highly positive and supports our near-term goals of doubling the project mine
life and improving project economics. Coupled with high-grade resources
building at Allammaq, we are confident that the company's objective of
becoming the premier mid-tier Nickel producer will be met".
This PEA was based on the Mequillon deposit being developed using
conventional open pit and underground mining methods at the completion of
mining operations as proposed in the BFS for the Nunavik Nickel Project
(Technical Report filed on SEDAR). As such, the proposed Mequillon mining
operation would utilize the Expo concentrator and infrastructure as described
in the BFS.
The study assumed a production rate of 1 million tonnes per year, which
would be trucked for processing at the Expo concentrator and was based on the
latest resource model that was disclosed on September 11th, 2007. Forecasts by
banks and analysts now support a long-term Nickel price in the range of
$8.00/lb, a figure that was used in the present Mequillon PEA.
For the purpose of this assessment, the near-surface portion of the
deposit would be mined by open pit. It is estimated that this pit would
produce 1.95 million tonnes at an average grade of 0.63% Ni and 0.90% Cu, and
have an overall stripping ratio of 7.7 to 1. A ramp would be driven to access,
develop and mine six (6) underground stope blocks where mining would be
performed using longhole methods and backfill.
The mineral resource estimate for the Mequillon deposit as of
September 7th, 2007, electronically filed on SEDAR on October 25th, 2007,
includes an indicated resource of 5,374,000 tonnes grading 0.74% Ni and 1.07%
Cu, and an inferred resource of 3,085,000 tonnes grading 0.82% Ni and 1.12%
Cu. The payable metal prices for nickel, copper, platinum and palladium and
the exchange rate used to estimate the metal's contribution to gross mine
income as part of the NSR (net smelter return) in the current PEA are
presented in the following table:
Table 1 - Payable Metal Prices and Currency Exchange Rate Used to
Estimate Net Smelter Return
-------------------------------------------------------------------------
BFS (i) Mineral PEA (ii)
Resource
Estimate (i)
-------------------------------------------------------------------------
Nickel Price US$ 6.00/lb US$ 5.50/lb US$ 8.00/lb
-------------------------------------------------------------------------
Copper Price US$ 1.50/lb US$ 1.50/lb US$ 2.00/lb
-------------------------------------------------------------------------
Platinum Price US$ 1000/oz US$ 900/oz US$ 1100/oz
-------------------------------------------------------------------------
Palladium Price US$ 300/oz US$ 300/oz US$ 300/oz
-------------------------------------------------------------------------
$US-$CDN Exchange
Exchange Rate 0.89 0.80 0.90
-------------------------------------------------------------------------
(i) Technical Reports filed on SEDAR
(ii) Internal company document
The Mequillon open pit and underground mining operation would together
produce 9.2 million tonnes over a 9.2 year production period, at an average
estimated grade of 0.68% Ni, 0.96% Cu, 0.6 g/t Pt and 2.3 g/t Pd. This
Preliminary Economic Assessment includes the use of inferred mineral
resources. Readers are reminded that resources in the Inferred category have
not been demonstrated as economic and cannot, by definition, be used in a
feasibility study.
The results of the base-case PEA ($8.00/lb Nickel) for the Mequillon
project indicate:
- A project payback period of 2.8 years assuming $69 million in up-front
capital; $15 million in sustaining capital and that the concentrator,
port and all other major infrastructure are already in place and
capitalized.
- An internal rate of return (pre-tax IRR) of 33%.
- A net present value at the start of pre-production development
(NPV @ 8%) of $53 million. It is assumed that commercial production
will commence after a one year pre-production period concurrent with
the final year of mining activities as described in the BFS.
A sensitivity analysis was conducted by varying Nickel and Copper prices
in order to determine their impact on project economics. The following table
presents the results of this exercise:
Table 2 - PEA Sensitivity Analyses
-------------------------------------------------------------------------
Nickel Copper Pre-tax NPV
IRR
-------------------------------------------------------------------------
Base Case US$ 8.00 US$ 2.00 33% US$ 53M
-------------------------------------------------------------------------
+25% Case US$ 10.00 US$ 2.50 107% US$ 260M
-------------------------------------------------------------------------
The independent qualified person for the Preliminary Economic Assessment is David Orava, P.Eng. of P&E Mining Consultants Inc. and the corporate qualified person for Canadian Royalties Inc. is W. Grant Arnold, P.Geo., Vice President of Exploration.
About Canadian Royalties and the Nunavik Nickel Project
Canadian Royalties has initiated the development of an independent, stand-alone nickel-copper mine on its Nunavik Nickel Project, located 20 kilometres south of Xstrata Nickel's Raglan Mine in northern Quebec. Canadian Royalties is proceeding with permitting applications, as well as exploration for additional resources.
Canadian Royalties currently holds a 100% interest in the Ivakkak deposit, subject to a net smelter royalty ("NSR", refer to news release dated September 21, 2005). Additionally, Canadian Royalties has vested in a 70% interest in the Expo-Ungava property (which hosts the Mesamax, Mequillon and Expo deposits), where its interest shall be increased to 80% simultaneously with the creation of the joint venture. Further, Canadian Royalties holds an underlying 2% NSR on the Expo-Ungava Property.
Forward-looking Statement
This news release contains certain forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. Such risks and uncertainties are disclosed under the heading "Risk Factors" in the Company's Amended and Restated Annual Information Form dated July 10, 2007 for the year ended December 31, 2006. Accordingly, readers should not place undue reliance on forward-looking statements.