Oceanic Announces Results of a PEA Study Capex Estimate Results IN Reduction of Initial Capital Cost BY 58% to USD $1.19 Billion Post Tax NPV8 of USD $1.4 Billion Maintains Robust Post Tax IRR of 17% Consistent with 2012 PFS
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3083 – 595 Burrard Street
Vancouver B.C.
V7X 1L3
December 19, 2019 TSX Venture Exchange: FEO
All figures in U.S. Dollars Unless Otherwise Noted
PRESS RELEASE
OCEANIC ANNOUNCES RESULTS OF A PEA STUDY
CAPEX ESTIMATE RESULTS IN REDUCTION OF INITIAL CAPITAL COST BY 58% TO USD $1.19 BILLION
POST TAX NPV8 OF USD $1.4 BILLION
MAINTAINS ROBUST POST TAX IRR OF 17% CONSISTENT WITH 2012 PFS
LOW NPV / INITIAL CAPEX RATIO OF 1.18 FOR A LONG LIFE BULK COMMODITY PROJECT
MAINTAINED LOW OPERATING COSTS AT USD $30.70/TONNE
LOW STRIP RATIO OF 0.81 : 1 OVER A 28 YEAR MINE LIFE
POTENTIAL FOR EXTENSION OF THE MINE LIFE BEYOND 28 YEARS
HIGH QUALITY CONCENTRATE GRADING 66.6% Fe AT AN INITIAL RATE OF 5 MTPA (EXPANSION TO 10
MTPA)
Vancouver BC - Oceanic Iron Ore Corp. (“Oceanic”, or the “Company”) is pleased to announce the results
of a National Instrument 43-101 (“NI 43-101”) Preliminary Economic Assessment (the “Study”) prepared
by BBA Engineering Ltd. (“BBA”) in respect of the Company’s Hopes Advance Project (the “Project”).
A Pre-Feasibility Study was completed on the Project in 2012 (“2012 PFS”). The Company is not treating
the economic results of the 2012 PFS or the related Mineral Reserve estimates as current. However, some
of the scientific and technical information generated during the 2012 PFS is used as a basis for the Study.
The objective of the PEA was to rescope the Project profile and production scale using Measured and
Indicated Mineral Resources estimated within three of the 10 defined deposits in order to reduce the up-
front capital required to bring the Project to commercial production. Mineral Resources that are not
Mineral Reserves do not have demonstrated economic viability.
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Key differences in this Study compared to the 2012 PFS include the following:
• Significantly lower initial capital expenditure
• Reduced production scale to accommodate the aforementioned lower capital expenditure
• Seasonal shipping of concentrate versus year-round shipping in the 2012 PFS, reducing Port
infrastructure capital costs and eliminating winter shipping risks
• Construction of a more cost-effective module based barge-mounted power plant versus a land
based plant and reliance on Hydro Quebec connections in the 2012 PFS. Although the Company is
not reliant on third party infrastructure, there exists the potential for future power operating cost
savings in the event a transmission line connection is established with Hydro Québec
• Base case FOB selling price of USD $82/t, versus US $100/t in the 2012 PFS
• The assumed exchange rate used in the current Study was US $0.75 = CAD$1.00, versus a US $1.00
= CAD $1.00 exchange rate in the 2012 PFS
Table 1 – Summary Results of the Study
Description Base Case Spot Case 2012 PFS
Mine Life (years) 28 28 31
LoM Concentrate Production (mt) 262 262 507
Concentrate Fe Grade 66.6% 66.6% 66.5%
Weight Recovery 38% 38% 38%
FOB Selling Price/t (USD) 82.14 $ 88.83 $ 100 $
Key Financial Metrics (US $)
Opex/t 30.70 $ 30.70 $ 30.18 $
Initial Capex ($ million) 1,193 $ 1,193 $ 2,854 $
Expansion Capex ($ million) 690 $ 690 $ 1,608 $
Sustaining Capex ($ million) 632 $ 632 $ 767 $
LoM Capex ($ million) 2,515 $ 2,515 $ 5,229 $
Pre-Tax Economics
NPV8 ($ million) 2,377 $ 2,919 $ 5,632 $
IRR 21% 23% 21%
NPV / Initial Capex 1.99 2.45 1.97
NPV / Initial & Expansion Capex 1.26 1.55 1.26
Post-Tax Economics
NPV8 ($ million) 1,405 1,744 3,152
IRR 17% 19% 17%
NPV / Initial Capex 1.18 1.46 1.10
NPV / Initial & Expansion Capex 0.75 0.93 0.71
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* Numbers may not add up due to rounding.
The results of the Study attribute significant value to the Project and present a significant reduction in
initial capital expenditure requirements, all while achieving the same post tax IRR as the 2012 PFS.
Importantly, the Project achieves an NPV / Initial Capex Ratio of 1.18, which is rare for bulk/base metal
projects where capital requirements are typically very high.
Additional Attributes of the Project:
• Project implementation and development schedule independent of third-party infrastructure,
including extension to the Hydro Québec grid north to the Project
o Construction and operations to utilize barge-mounted self-generated power;
• Low operating cost per tonne resulting from “no rail” advantage, simple metallurgy and low strip
ratio (0.81:1 over life of mine)
• Pilot plant metallurgical test work conducted as part of the 2012 PFS, confirms product quality
suitable for pellet or sinter feed
o 66.6% Fe grade concentrate with low deleterious elements and silica content ≤ 4.5%
o High weight and Fe recoveries using a relatively simple flow sheet
• Construction of a marine facility in Hopes Advance Bay at Pointe Breakwater
Steven Dean, Executive Chairman of Oceanic said: “The challenge with bulk commodity development
projects is that the initial capex to get the project to commercial production is typically very high. The
objective of this study was to outline a path forward for Hopes Advance that envisions a significantly
reduced initial capex by reducing start up scale while retaining optionality on future expansion funded
from future cash flows. A simplified energy efficient process flow sheet, seasonal shipping, combined with
lower port and power capex amongst other things has managed to achieve a reduction of initial capex
from the 2012 PFS of 60% while maintaining a low cash cost per tonne and similar IRRs. As a result, we
believe this makes Hopes Advance a more financeable, and therefore an attractive project in today’s
market.”
The Study
The Study was led by the Montreal office of BBA, a Canadian consulting engineering firm with over 900
employees, who have extensive experience with iron ore projects, particularly in the Labrador Trough.
Working alongside BBA was Wood (formerly, AMEC Foster Wheeler), who worked with the Company on
Port related infrastructure in the Company’s previous studies.
The Company presents two cases as part of the Study with the only variable between the cases being the
FOB selling price. The Base Case assumes an FOB selling price of approximately USD $82/t (approximately
US $105/t CFR). The alternate case presents the economics of the Project using a spot price of
approximately USD $89/t FOB (November 22nd 2019).
In both cases, the Study is based on initial production of approximately 5 million tonnes per annum of dry
concentrate followed by an expansion in year 5 to approximately 10 million tonnes per annum. The
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financial analysis for the Study is limited to a 28-year mine life and considers only 3 of the 10 deposits for
which mineral resources have been estimated. The Company believes that the remaining resources could
support continued operations well beyond 28 years. The 28-year mine plan for the Study is based on
mining the Castle Mountain, Iron Valley and Bay Zone F deposits whereas the 2012 PFS considered mining
all 10 of the Hopes Advance deposits at an initial concentrate production rate of 10 Mtpa with an
expansion to 20 Mtpa in year 11 over a 30 year mine life. For both initial and expansion phases of the
Study, power is self-generated using diesel fuel. Concentrate is filtered at the concentrator site and
transported year-round by truck to a port stockpile where it is shipped only during summer months (under
the 2012 PFS, concentrate in a slurry state was pumped to the port and re-dried. The rescoped approach
eliminates costs related to regrinding and drying the concentrate at the port). Such seasonal shipping
results in reduced port installation costs and the avoidance of having to use higher cost ice class vessels
during the winter. For the Study, BBA is proposing a modified process flowsheet which is more energy
efficient, aimed at reducing power requirements (and fuel storage) and expected to improve the Project’s
carbon footprint compared to the initial phase in the 2012 PFS which required significantly more electric
power which was generated using heavy fuel oil.
Updated Value in Use Study Reaffirms Product Desirability of Hopes Advance Product
In 2013, the Company commissioned and received a Product Value in Use Marketing Study (“2013 VIU
Study”) from Vulcantech Technologies. The 2013 VIU Study concluded that, in addition to the iron unit
premium for the high grade Hopes Advance product at 66.6% Fe measured against the 62% Fe benchmark,
the low impurities associated with the Hopes Advance product could attract an additional quality
premium for steel producers in China, Korea, Japan, and Taiwan.
In 2019, the Company commissioned Vulcantech Technologies to update its VIU study (the “2019 VIU
Study”) in order to obtain current market data as to the potential pricing and demand for Hopes Advance
Iron Ore.
The 2019 VIU Study concludes that:
• Recent environmental restrictions placed by Chinese Central and Provincial Governments are likely
to lead to more support for higher grade iron ores as steel mills try to maximize steel production
and minimize pollution, driven by chemical inputs used in removing deleterious elements from iron
ore
• 65% Fe index ores are expected to obtain a 15-30% premium per Fe unit over the 62% Fe benchmark
prices
• The quality premium over and above the 65% Fe index ores has been reduced to approximately 5%
• Due to the above, improved pricing compared to the base case pricing used for the Study would be
expected given the low phosphorus and alumina content of the Hopes Advance material
• While the 2019 VIU Study focuses on Chinese demand, steel producers in China, Korea, Japan,
Taiwan and Europe could still benefit considerably from the product’s low impurity chemistry.
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Hopes Advance’s Competitive Cost Profile Compared to Industry Producers*
The Base Case FOB Price of US $82.14 and shipping costs of US $22.83/t (to Qingdao, China), results in a
CFR price of US $104.97/t. In comparing the Hopes Advance product economics to that of producers, it is
important to factor in the premium applied in the pricing of the Hopes Advance product to other iron ore
products. By way of example, by using the implied premium of the Hopes Advance product to product
from the Pilbara region of Australia as a reduction or credit to the operating cost at Hopes Advance, a
more meaningful and appropriate operating cost comparison per tonne of product shipped is achieved.
As per Table 2 below, the net effective operating costs at Hopes Advance are arguably very competitive
to Pilbara blends, the largest source of seaborne iron ore.
Table 2 – Calculation of Net Effective Operating Cost at Hopes Advance versus the Pilbara Fines
Estimated CFR Price per tonne of concentrate $104.97
CFR Forward Price - Pilbara Fines 61.5 ($87.05)**
Implied Premium for grade and quality of Hopes Advance concentrate vs Pilbara Fines $17.92
Life of Mine operating cost per tonne – Hopes Advance $30.70
Less: Implied Premium of Hopes Advance concentrate vs Pilbara Fines ($17.92)
Net Effective Comparative Operating Cost per tonne – Hopes Advance $12.78
*This section is based on analysis by the Company and is not contained in the technical report for the Study
**Source – BAIINFO Iron Ore Daily, Issue 19-227, December 4, 2019
Metallurgical Testwork and Process Flowsheet
No new metallurgical testwork has been performed on the Project since the 2012 PFS. As such, the current
PEA relies on previous testwork. This testwork consisted of bench scale tests as well as a pilot test
program. Generally, the results of the testwork indicated the following characteristics for the mineralized
material tested:
• It is relatively soft
• It can be processed with a simple and conventional flow sheet
• A concentrate with low SiO2 and low deleterious elements can be produced
The conceptual flowsheet and plant design proposed in the Study are based on the following:
• Testwork performed during the 2012 PFS.
• A comminution circuit based on HPGR grinding technology.
• The use of a three-stage spiral circuit for gravity concentration, as in the 2012 PFS.
• A scaled version of the magnetic concentrator plant from the 2012 PFS, substituting the Ball Mill
with more energy efficient Verti-Mills.
• Flowsheet improvements, plant design and general layouts based on BBA ’s experience on other
similar projects.
• Concentrate trucking to the port removing the requirement of regrinding the hematite
concentrate and construction of a pipeline.
A simplified mineral processing flowsheet is shown in Figures 1 and 2.
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Figure 1: Simplified flowsheet for comminution and spiral circuits
Figure 2: Simplified flowsheet for magnetic separation, regrind and dewatering circuits
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A description of the proposed process is set out below:
• Run of mine mill feed material is crushed in two stages prior to being stockpiled;
• Crushed mill feed material will be is reclaimed and undergoes a size reduction to a P80 of 140µm
via HPGR and ball milling;
• The material is then pumped to a gravity recovery circuit which produce s a final hematite
concentrate and a gravity tail;
• The gravity tails are pumped to magnetic sepa ration wherein the magnetic portion is recovered
and sent to filtration along with the hematite concentrate;
• The tailings from magnetic separation are thickened and pumped to a tailings pond;
• The filtered concentrate is stockpiled to be loaded year -round into trucks which transport the
concentrate to a stock yard where a stacker-reclaimer system will place the material into a storage
stockpile to be shipped during the summer season;
Mineral Resource Estimate
The Hopes Advance iron deposits comprise a total of 10 mineral deposits. These deposits are a typical
stratigraphic iron deposit similar to other Labrador Trough iron deposits of Lake Superior -type iron
formations, located at the northern end of the Labrador Trough.
The Hopes Advance iron formations are thick Sokoman Iron Formation , with magnetite, magnetite and
hematite units that strike east -west to northeast and have gentle dips to the south and southeast. The
iron formations are typically 40–70 m thick, and often crop out at surface. The three largest deposits are
the Castle Mountain, Bay Zone F and Iron Valley deposits.
Mineral Resources that were estimated assuming open pit mining methods in 2012 were reviewed in 2019
to determine if they were still current. These reviews included checks on the confidence classification
assignments based on changes to defined terms betw een the 2010 and 2014 editions of the Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and
Mineral Reserves, inputs into the Whittle optimisation shells that constrain the estimate, and commodity
price assumptions as a result of the 2019 VIU Study. Eddy Canova, P. Geo, a consultant to the Company
concluded that the estimates remain current, and have an effective date of 20 November, 2019, which is
the date the reviews were completed.
Mineral Resources were estimated for the Bay Zone B, C, D, E, F, Castle Mountain, Iron Valley, West Zone
2, West Zone 4 and West Macdonald deposits, and are totalled in Table 3.
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Table 3 –Mineral Resource Estimate Hopes Advance (25% Fe Cut-off)
Notes:
1. The Qualified Person responsible for the estimates (including the current Mineral Resource estimates) is Mr. Eddy Canova, P. Geo, a
consultant to the Company.
2. Mineral Resources are reported assuming open pit mining methods. Mineral Resources were initially reported with an effective date
of 19 September 2012, on a block model that had an effective date of 2 April 2012. A review was undertaken in 2019, which concluded
that the estimate and its inputs were current, and the effective date for the reviewed estimate is 20 November, 2019. The Mineral
Resource is now current as at November 20, 2019
3. Mineral Resources are classified using the 2014 CIM Definition Standards. Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability.
4. The Mineral Resources were estimated using a block model with parent blocks of 50 m by 50 m by 15 m sub-blocked to a minimum size
of 25 m by 25 m by 1m and using inverse distance weighting to the third power ( ID3) methods for grade estimation. A total of 10
individual mineralized domains were identified and each estimated into a separate block model. Given the continuity of the iron assay
values, no top cuts were applied. All resources are reported using an iron cut-off grade of 25% within conceptual Whittle pit shells and
a mining recovery of 100%. The Whittle shells used the following input parameters: commodity price of USD $115/dmt of concentrate;
C$:US$ exchange rate of 0.97; assumed overall pit slope angle of 50º; 1% royalty; mining cost of CAD $2.00/t material moved; process
cost of CAD $16.22/t of concentrate; port costs of CAD $1.45/t of concentrate; and general and administrative costs of CAD $3.38/t of
concentrate.
5. Estimates have been rounded and may result in summation differences.
Mine Plan
The proposed mining method selected for the Project consists of a conventional open pit, truck and
shovel, drill and blast operation. The mineralized material and waste rock will be mined with 10 m high
benches, drilled, blasted and loaded into a fleet of 292 t capacity haul trucks with diesel hydraulic shovels.
The mineralized material will be hauled to the primary crushing facility and the waste rock will be hauled
to either the waste rock piles or to the tailings facility to be used as construction material.
Even though the Hopes Advance Bay Mineral Resources are contained within ten (10) distinct deposits,
the Study is limited to the Castle Mountain, Iron Valley, and Bay Zone F deposits. These three deposits
provide sufficient material to sustain the first 28 years of operation at the production rate considered in
the Study. Each of these deposits has favorable economics (higher grade and lower strip ratios than the
other deposits) and they are also the three largest resource bases of the ten deposits. Only mineral
resources classified as Measured and Indicated are considered in the mine plan as potential mill feed.
Table 4 below presents the subset of the Mineral Resources that are contained within the open pit designs
that were used to develop the life of mine plan for the Study. The resource subset is reported above a
Concentrate
Tonnes Fe Tonnes
Classification (t 000) (%) (t 000)
Measured 774,241 32.2 288,971
Indicated 613,796 32.0 226,901
Measured & Indicated 1,388,037 32.1 515,872
Inferred 222,188 32.5 82,475