FPX Nickel Announces Positive Preliminary Economic Assessment for Baptiste Project with US$1.7 Billion After-Tax NPV, 35-Year Mine Life, 4-Year Payback and C1 Operating Costs of US$2.74/lb Nickel
Suite 620 – 1155 West Pender Street
Vancouver, BC Canada V6E 2P4
Tel: 604.681.8600
e-mail: [email protected]
FPX Nickel Announces Positive Preliminary Economic Assessment
for Baptiste Project with US$1.7 Billion After-Tax NPV, 35-Year
Mine Life, 4-Year Payback and C1 Operating Costs of US$2.74/lb
Nickel
Vancouver, September 9, 2020 – FPX Nickel Corp. (FPX-TSX.V) (“FPX Nickel” or the “Company”)
is pleased to announce it has received positive results from the 2020 Preliminary Economic Assessment
(“PEA”) for the Baptiste Project (“Baptiste” or the “Project”) at its wholly-owned Decar Nickel District
in central British Columbia. The PEA was prepared in accordance with National Instrument 43-101
Standards of Disclosure for Mineral Projects (“NI 43-101”) by BBA Inc. of Montreal, Canada with work
on mine planning and tailings by Stantec Inc. of Vancouver, Canada.
Production and Economic Highlights
● Mine life of 35 years and after-tax payback of 4.0 years
● After-tax net present value (“NPV”) (8%) of US$1.72 billion and internal rate of return (“IRR”)
of 18.3%
● Average nickel production of 99 million lbs. per year
● Average C1 operating costs of US$2.74/lb nickel and all-in sustaining costs (“AISC”) of
US$3.12/lb nickel
● Average US$481 million of annual earnings before royalties, taxes and depreciation
Cautionary Statement: The PEA is preliminary in nature and includes inferred mineral resources that are
considered too speculative geologically to have the economic considerations applied to them that would
enable them to be categorized as mineral reserves. Mineral resources are not mineral reserves and do
not have demonstrated economic viability. There is no certainty that the conclusions or results as
reported in the PEA will be realized.
“This PEA establishes Baptiste as a premier large-scale nickel project,” commented FPX Nickel’s
President and CEO, Martin Turenne. “The Project has the potential to be a significant global nickel
operation, with a multi-generational operating life and average annual production of 99 million pounds of
contained nickel. Baptiste’s enormous scale, combined with low C1 operating costs of US$2.74/lb, has
the potential to deliver robust operating margins throughout the nickel price cycle, generating average
earnings (before royalties, taxes and depreciation) of US$481 million per year and an after-tax NPV of
US$1.7 billion. With its proximity to zero-carbon hydroelectric power, the fact that its nickel product can
bypass smelters for direct sale to end users, and the carbon-absorbing properties of Baptiste host rock, the
Project is well positioned to address the growing market demand for environmentally sustainable nickel
production.”
The Company has also identified a number of optimization opportunities to be investigated in the next
phase of project development, including but not limited to:
• Potential suitability of Baptiste nickel products for the electric vehicle battery market
• Sale of by-product iron ore concentrate or pellets
• Additional drilling to expand the Baptiste Deposit, which remains open with strong grades at
depth over the entire mineralized footprint
• Potential discovery of additional large-scale nickel deposits within the 245 square kilometre
Decar Nickel District on three known targets, most notably at the Van target
• Ongoing research in collaboration with the University of British Columbia on the ability of
Baptiste waste rock and tailings to naturally sequester atmospheric carbon dioxide (“CO2”)
With its lengthy mine life and rapid payback, Baptiste ranks favourably among global development-stage
nickel projects, providing potential exposure to multiple cycles in the nickel market while efficiently
repaying upfront capital. Figure 1 demonstrates the strategic value of Baptiste in comparison to other pre-
production nickel projects, as expressed by its high ratio of projected mine life (35 years) to after-tax
payback period (4 years).
Figure 1 – Comparison of Global Nickel Projects
Source: Company economic studies; see Table 11 below.
Overview of PEA Results and Assumptions
The Baptiste PEA demonstrates the potential for establishing a greenfield open-pit mine and an on-site
magnetic separation and flotation processing plant, using conventional technology and equipment. At a
throughput rate of 120,000 tonnes per day (or 43.8 million tonnes per year), annual production is
projected to average 99 million pounds nickel contained in ferronickel (“FeNi”) briquettes at C1
operating costs of US$2.74 per pound of nickel. It is anticipated that the Baptiste FeNi briquette will be
8.8
6.7
5.8
5.1
5.0
4.9
4.3
3.8
3.7
3.5
3.0
- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Baptiste, Canada, FPX Nickel
Araguaia, Brazil, Horizonte Minerals
Sunrise, Australia, Clean TeQ Holdings
Eagle's Nest, Canada, Noront
Kun-Manie, Russia, Amur Minerals
Goongarrie, Australia, Ardea
West Musgrave, Australia, Oz Min.
Dumont, Canada, Waterton
Turnagain, Canada, GIGA Metals
Sconi, Australia, Australian Mines
Tamarack, USA, Talon Metals
Ratio of Mine Life to Payback (After-Tax) for Selected Nickel Projects
sold directly to stainless steel producers and garner 98% of the London Metal Exchange (“LME”) nickel
price, in line with payabilities earned by standard FeNi products in the global marketplace.
All amounts are in United States dollars unless otherwise specified; table totals may not sum due to
rounding.
Table 1 – Baptiste Project PEA Results and Assumptions (all in US$)
Results
Pre-tax NPV (8% discount rate) $2.93 billion
Pre-tax IRR 22.5%
Payback period (pre-tax) 3.5 years
After-tax NPV (8% discount rate) $1.72 billion
After-tax IRR 18.3%
Payback period (after-tax) 4.0 years
Net cash flows (after-tax, undiscounted) $8.73 billion
C1 operating costs 1 $2.74/lb nickel
AISC costs 2 $3.12/lb nickel
Assumptions
Processing throughput 120,000 tonnes per day
Mine life 35 years
Life-of-mine stripping ratio (tonnes:tonnes) 0.40:1
Life-of-mine average annual nickel production 99 million lbs.
Nickel price 3 $7.75/lb
Baptiste product payability (% of nickel price) 98%
Pre-production capital expenditures $1.67 billion
Sustaining capital expenditures $1.11 billion
Exchange rate 0.76 US$/C$
1. C1 operating costs are the costs of mining, milling and concentrating, on-site administration and
general expenses, metal product treatment charges, and freight and marketing costs less the net
value of by-product credits, if any. These are expressed on the basis of per unit nickel content of
the sold product.
2. AISC of all-in sustaining costs comprise the sum of C1 costs, sustaining capital, royalties and
closure expenses. These are expressed on the basis of per unit nickel content of the sold product.
3. Nickel price based on the average of six long-term analyst forecast prices.
Capital Costs
The total pre-production capital costs, including direct costs, indirect costs and contingency was estimated
at $1.67 billion. This represents the pre-production capital expenditure required to support start-up of
operations in year 1. The capital cost related to the implementation of in-pit tailings deposition in year 22
was estimated at $103 million. This is the capital expenditure specifically required to allow for finer
primary grinding (resulting in improved nickel recovery) and for pumping tailings to the mined-out pits
for in-pit deposition, and other associated costs (see further discussion under Metallurgy and Mineral
Processing and Tailings Management below). Sustaining capital costs (which excludes the capital cost
related to the implementation of finer primary grinding and in-pit deposition) were estimated at $1.01
billion. These costs include items such as mine equipment fleet additions and replacements, facilities
additions and improvements and costs relating to tailings storage facility and surface water management
which are incurred over the life-of-mine (“LOM”).
Table 2 – Capital Costs
Category
Pre-
Production
US$ million
In-Pit
Tailings
Deposition
(Year 21)
US$ million
Sustaining
US$ million
Total LOM
US$ million
Direct Costs
Mobile Equipment $155 - $354 $509
Tailings $138 $15 $534 $687
Mine and tailings site preparation $96 - $90 $186
Mineral processing $610 $88 $18 $717
Off-site infrastructure $64 - - $64
On-site infrastructure $66 - $7 $73
Total direct costs $1,129 $103 $1,003 $2,235
Indirect costs $292 - $8 $300
Contingency $254 - - $254
Total project capital costs $1,675 $103 $1,012 $2,789
Operating Costs
Table 3 presents a summary of the estimated average operating costs for the initial Phase 1 (Years 1
to 21), Phase 2 (Years 22 to 35, during which period the Project will adopt finer primary grinding and in-
pit tailings deposition) and for the life-of-mine, expressed in US$/tonne of dry material processed
(milled).
Table 3 – Total Estimated Phase and Average LOM Operating Costs (US$/t milled)
Estimated average LOM operating costs Phase 1
(Years 1-21)
Phase 2
(Years 22-35)
Average
(LOM)
Mining $2.28 $2.66 $2.43
Mineral processing $2.71 $2.91 $2.79
Product transport $0.19 $0.18 $0.19
Rail terminal and access road $0.05 $0.05 $0.05
General site services $0.62 $0.62 $0.62
General and administration $0.25 $0.25 $0.25
Total operating costs $6.09 $6.66 $6.32
Table 4 presents estimated phase and average LOM operating costs stated on a per unit of nickel
production basis.
Table 4 – C1 costs and AISC costs (US$/lb nickel)
Phase 1
(Years 1-21)
Phase 2
(Years 22-35)
Average
(LOM)
C1 costs $2.61 $2.94 $2.74
AISC costs $3.13 $3.11 $3.12
Mineral Resource Estimate
The PEA incorporates an updated 2020 resource estimate for the Baptiste Deposit including all data from
the 83 surface drillholes completed since 2010 and 2,053 samples from a re-sampling program of
2010/2011 drill core that was carried out in 2012. The estimate is geologically constrained within four
mineralized domains and is reasonably comparable among different estimation methods (i.e., ordinary
kriging, inverse distance squared weighting, nearest neighbour).
The 2020 resource model comprises a large, delta shaped volume that measures approximately 3.0 km in
length and 150 to 1,080 m in width and extends to a depth of 540 m below the surface. The Baptiste
Deposit remains open at depth over the entire system and is covered by an average of 12 metres of
overburden.
Table 5: 2020 Baptiste Deposit Pit-Constrained Mineral Resource Estimate *
Category Tonnes (000’s)
Davis Tube Recoverable (“DTR”) Nickel Content
% Ni Tonnes Ni Pounds Ni (000’s)
Indicated 1,995,873 0.122 2,434,965 5,368,173
Inferred 592,890 0.114 675,895 1,490,092
* See Notes for Tables 5 and 6 below.
Table 6: 2020 Baptiste Deposit Block Model Tonnage and Grades Reported at a Range of Cut-off
Grades (Base Case 0.06% DTR Ni) *
Cut-off Grade
(DTR Ni %)
Indicated Inferred
Tonnes (000’s) DTR Ni Grade (%) Tonnes (000’s) DTR Ni Grade (%)
0.02 2,076,969 0.119 750,633 0.098
0.04 2,055,578 0.120 659,900 0.107
0.06 1,995,873 0.122 592,890 0.114
0.08 1,871,412 0.126 499,993 0.122
0.10 1,617,364 0.131 399,801 0.130
* Notes for Tables 5 and 6:
1. Updated mineral resource estimate prepared by GeoSim Services Inc. using ordinary kriging with
an effective date of September 9, 2020.
2. Davis Tube magnetically-recovered (“DTR”) nickel is the nickel content recovered by magnetic
separation using a Davis Tube, followed by fusion XRF to determine the nickel content of the
magnetic fraction; in effect a mini-scale metallurgical test. The Davis tube method is the global,
industry standard metallurgical testing apparatus for recovery of magnetic minerals.
3. Indicated mineral resources are drilled on approximate 200 x 200 metre drill spacing and
confined to mineralized lithologic domains. Inferred mineral resources are drilled on
approximate 300 x 300 metre drill spacing.
4. An optimized pit shell was generated using the following assumptions: US$6.35 per pound nickel
price; a 45° pit slope; assumed mining recovery of 97% DTR Ni and process recovery of 85%
DTR Ni, an exchange rate of $1.00 CAN = $0.76 US; and mining costs of US$2.75 per tonne,
processing costs of US$4.00 per tonne. A US$1.00 per tonne minimum profit was also imposed to
exclude material close to the break-even cut-off.
5. A base case cut-off grade of 0.06% DTR Ni represents an in-situ metal value of approximately
US$7.00 per tonne which is believed to provide a reasonable margin over operating and
sustaining costs for open-pit mining and processing.
6. Totals may not sum due to rounding.
7. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
Mining
The PEA mine plan is based on the mineral resource estimate and its underlying geological block model.
The mine plan envisions a three-phased open pit mine development, with the Phase 1 pit covering the first
21 years of mine life. During this phase, tailings will be deposited in an external tailings storage facility
(“TSF”). The Phase 2 and 3 pits expand laterally towards the northwest and northeast from the Phase 1
pit, providing mill feed for years 22 to 35, allowing tailings to be placed in the mined-out Phase 1 pit. A
pit rim dam will be constructed in year 25 to allow access from the phase 3 pit to the plant and to
accommodate the additional tailings that will be stored in the Phase 1 and Phase 2 pits after they are
mined out.
Mining will be conducted using conventional truck and shovel methods. Large-scale open pit mining will
provide the mineral processing plant feed at a rate of 120,000 tonnes per day, or 43.8 million tonnes per
annum. Annual mine production of mill feed and waste will peak at 80.1 Mt/a with a life-of-mine
stripping ratio of 0.40:1 including preproduction (0.32 during the first 10 years of operation, and 0.22
over the first 16 years of operation). Ultimate pit quantities with corresponding DTR nickel grades are
shown in Table 7.
Table 7 – Ultimate Design Pit Quantities
Material Classification Tonnage (Mt) Grade (% DTR Ni)
Indicated 1,326 0.124%
Inferred 177 0.102%
Total for processing 1,503 0.121%
Waste rock 540
Overburden 55
Total waste 596
Total material mined 2,098
Stripping ratio (LOM) 0.40 :1
Note: Mineral resources are not mineral reserves and do not have demonstrated economic viability
Pit phasing (Phases 1 through 3) was developed to maximize grade early in the mine life, with a starter pit
being developed at the beginning of Phase 1 to target a shallow higher-grade zone of nickel
mineralization. A production schedule showing tonnage and grade by mining phase is presented in Table
8.
Table 8 – Mining Schedule by Phase
Material Classification Tonnage (Mt) Grade (% DTR Ni)
Phase 1 (Years 1-21)
Indicated 803 0.128%
Inferred 42 0.114%
Total for processing – Phase 1 845 0.127%
Phases 2 and 3 (Years 22-35)
Indicated 523 0.117%
Inferred 135 0.099%
Total for processing – Phases 2 and 3 658 0.113%
Total for processing – LOM 1,503 0.121%
Note: Mineral resources are not mineral reserves and do not have demonstrated economic viability
Metallurgy and Mineral Processing
The metallurgical testwork for t he PEA was performed at ALS in Kamloops, British Columbia and was
focused on the following:
• Magnetic separation tests at a range of primary grind sizes (P80 from 57 µm to 360 µm);
• Magnetic cleaning tests to 25 µm final regrind size;
• Flotation testwork on the magnetic cleaner concentrate under various conditions and reagent
additions;
• Mineralogical assessment of the head sample and some products generated in the testwork.
A conceptual mineral processing flowsheet was developed as the basis for the PEA. The process
flowsheet is based on traditional grinding, magnetic separation and flotation processes. Unit operations in
this flowsheet include crushing and grinding, magnetic separation, magnetic concentrate re-grinding to 25
microns (P80), further magnetic cleaning stages, followed by rougher and cleaner flotation stages to
produce a final nickel concentrate grading 63% nickel.
The metallurgical testwork results indicated that at a primary grind of 300 µm, it is possible to produce a
63% nickel concentrate with a nickel recovery of 85% of the DTR nickel feed grade. In Year 22, when
in-pit tailings deposition is implemented, a finer primary grind of 170 µm can be achieved through the
addition of a third ball mill resulting in a DTR nickel recovery of 90%.
Subsequent to the flotation process, the 63% nickel concentrate is dewatered, filtered to a filter cake and
briquetted into a final saleable ferronickel product. The flotation process also produces a magnetite-rich
tailings stream which has the potential to be sold or further valorized as a saleable iron ore product. For
the PEA, no by-product revenues have been recognized for the potential sale of this magnetite-rich
product.
Product Marketing
Metallurgical testwork performed for the PEA Study has shown that the Baptiste Project can produce a
clean, high-grade, ferronickel concentrate through a conventional mineral processing flowsheet. The
FeNi concentrate, agglomerated in briquette form, constitutes the final saleable product generated by the
Project for consumption by stainless steel producers. The projected product specification for the Baptiste
briquettes is presented in Table 9.
Table 9: Projected Product Specification for Baptiste FeNi Briquettes
Elements and Minerals Content
Ni 60-65%
Fe (total) 30-32%
Awaruite (Ni3Fe alloy) 77-83%
Metallic Fe in awaruite 19-21%
Magnetite (Fe3O4) 13-18%
Co 1% typical
Cu 0.7% typical
P 0.02% typical
S 0.6% typical
MgO 1% typical
SiO2 1.5% typical
Cr2O3 0.4% typical
The selling price to be obtained from the sale of the Baptiste FeNi briquettes to stainless steel producers
will generally be a function of two variables: (1) the LME nickel price and (2) a discount or premium to
the LME nickel price, based on the market positioning of the Baptiste FeNi briquettes in relation to
competing sources of nickel feedstock to stainless producers, including stainless steel scrap, nickel pig
iron, standard FeNi and Class 1 nickel briquettes or cathode. The selling price determined by the analysis
of these two components is the price used for the economic analysis performed for the PEA.
A long-term LME base nickel price assumption of $7.75 per pound is assumed in the PEA which is
consistent with the average long-term nickel price of forecasts provided by six base metals analysts. In
order to assess the potential payability for the Baptiste product, stated as a percentage of the LME base
price, the following sources of information were considered:
• The results of the Company’s preliminary product market testing undertaken with stainless steel
and ferronickel producers;
• Preliminary market feedback based on informal discussions with nickel consumers and traders,
including an independent consultant to the Company and representatives of large international
trading houses specializing in nickel products;
• Benchmarking with typical specifications for standard FeNi and nickel pig iron (“NPI”) products
from various producers;
• Historic premium / discount data for standard FeNi.
The analysis, in consideration of the aforementioned information sources, concluded that a discount of
2% applied to the LME nickel price provides a reasonable assumption for determining the selling price to
be used for the PEA.