FORTUNE EXAMINES HIGHER PRODUCTION RATE IN NICO FEASIBILITY Accelerating cobalt demand in lithium-ion batteries for electric vehicles is driving decision to examine the feasibility of expanding production by 20 to 30% to produce more cobalt units
November 9, 2017 Issued Capital: 302,085,257
NEWS RELEASE
FORTUNE EXAMINES HIGHER PRODUCTION RATE IN NICO FEASIBILITY
Accelerating cobalt demand in lithium-ion batteries for electric vehicles is driving decision to
examine the feasibility of expanding production by 20 to 30% to produce more cobalt units
LONDON, ONTARIO, Fortune Minerals Limited (TSX: FT) (OTCQX: FTMDF) (“Fortune” or the
“Company”) (www.fortuneminerals.com) is pleased to announce a change in scope for the updated
Feasibility Study in progress for its 100% owned NICO Cobalt-Gold-Bismuth-Copper Project in
Canada (“NICO Project”). Responding to positive feedback from potential strategic partners, Fortune
is examining the feasibility of a 20 to 30% increase in the planned NICO production rate over the
4,650 metric tonnes (“ t”) of ore per day used in the previous 2014 Feasibility Study and produce
between 1,700 and 2,000 t of cobalt units per year in a battery grade cobalt sulphate heptahydrate.
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Robin Goad, President and CEO of Fortune commented, “Transformative electrification of the
automotive industry is accelerating as cost parity with internal combustion engines is being reached
and as more governments announce future bans on gasoline and diesel-powered vehicles. Forecasts
of electric vehicle adoption are increasing with estimates of up to 25% penetration of global vehicle
sales by the mid 2020’s. Fortune is increasing its planned cobalt production to in response to the
growing cobalt supply chain bottleneck”.
The NICO Project consists of a planned mine, mill and concentrator in the Northwest Territories and
refinery near Saskatoon where concentrates will be pr ocessed to cobalt sulphate, gold, bismuth, and
copper. NICO has already been assessed in a positive Feasibility Study in 2014, which is being
updated by Hatch Ltd. (“ Hatch”), P&E Mining Consultants Inc. (" P&E") and Micon International
Limited (“Micon”) using updated costs, commodity price and exchange rate estimates, and recent
project improvements, including the examinat ion of the proposed expanded production rate. NICO
has received environmental assessment (“EA”) approval and the major mine permits for the facilities
in the Northwest Territories and EA approval for the refinery in Saskatchewan. NICO is attracting
attention from potential partners that need reliable supplies of ethically procured cobalt with
preference for a Canadian primary producer with supply chain transparency and custody control of
metal from a vertically integrated project. Fortune has engaged PricewaterhouseCoopers Corporate
Finance Inc. (“PwC”) to arrange the project financing for the construction and operation of the project
through a combination of strategic partnerships, debt and equity.
Highlights of Items Being Examined in the Updated Feasibility Study:
- Accelerating demand for lithium-ion batteries in electric vehicles and stationary storage;
- Examining a response to market demand with a 20 to 30% increase in the planned
production rate and annual cobalt production of between 1,700 and 2,000 t per annum;
- Mineral Reserves being updated using higher cobalt prices and greater economies of scale
from a higher production rate;
- Mine plan and schedule optimization to increase cobalt and gold production in early years
of the mine life;
- Grade control and stockpiling strategy to better align bismuth output with market
conditions as they evolve within a growing green economy;
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- Additional metallurgical testwork completed to improve process for manganese removal
from cobalt sulphate and indicating a potential cobalt recovery improvement;
- Improved copper cementation process;
- Design engineering and cost estimation proceeding for expanded production rate;
- Project Execution Plan being refined to construct the Northwest Territories facilities using
existing winter roads and align mine operations with the timeline for availability of the
government road to Whati;
Cobalt Market
Cobalt is an essential commodity used in the manufacturing of cathodes in lithium-ion batteries to
store energy in portable electronic devices, electric vehicles (“ EV’s”) and stationary cells for the
electrical grid. Battery demand has driven cumulati ve annual growth in the market of approximately
6% over the last 20 years and production of refi ned cobalt is now approximately 110,000 t per year.
Adoption rate forecasts for EV’s are accelerating and between 12 and 25% of all vehicles sold by
2025 are projected to be electric according to analysts, major automotive manufacturers and parts
suppliers. Exane BNP Paribas has indicated that it anticipates cobalt demand to triple during this
period to 300,000 t as the world moves to a less carbon intensive green economy. Current worldwide
government policy shifts aimed at reducing gree nhouse gas emissions are being imposed to mitigate
the impacts of climate change with intensifying po licies to increase EV’s and renewable energy from
wind and solar generation and off-peak charging of the electrical grid. Cobalt is also used in
superalloys for aerospace applications, high strength alloys for cutting tools and cemented carbides,
permanent magnets, surgical implants, pigments, ca talysts, and additives in food and agricultural
products.
As the demand for cobalt grows there are also concerns about limitations on current supply due to
geographic concentration of mine and refinery production in countries with political instability and/or
policy risks. Ethical sourcing of raw materials has also become an issue that can damage the brands
of major automotive, electronics and technology companies from suppliers with poor labour and
environmental practices. With 98% of non-artisanal cobalt supply currently produced as a by-product
of copper and nickel mining there are concerns about producers being able to respond to demand
growth when production criteria are focused on the primary metals. The cobalt market has
transitioned into deficit and shortages of supply are expected to persist for the foreseeable future with
few new deposits in the development stream. The cu rrent price of cobalt metal is approximately
US$30 per pound, well above the US$16 per pound used in Fortune’s 2014 Feasibility Study and
more in line with the US$25 per pound, 20-year inflation adjusted average price reported by
Commodities Research Unit (“CRU”). New cobalt deposits are required as the market enters its most
significant demand pull in history.
The existing NICO Mineral Reserves also contain 1.1 million ounces of gold and approximately 12%
of global bismuth reserves. Bismuth is an Eco-metal used in the automotive and pharmaceutical
industries and as a non-toxic environmentally safe replacement for lead in solder, steel, brass and
aluminum alloys needed in a growing green economy.
Mineral Reserves
The Proven and Probable Mineral Reserves for the NI CO deposit were determined for the Company’s
2014 Feasibility Study and are 33.1 million t containing 82.3 million pounds of cobalt (37k t), 1.11
million ounces of gold, 102.1 million pounds of bismut h (46k t) and 27.2 million pounds of copper (12k
t) (see Fortune’s news release dated April 2, 2014 for details). The Mineral Reserves were sufficient
to support a 21-year mine life at the 4,650 t of ore processed per day in the 2014 Feasibility Study.
Several million tonnes of marginally sub-economic mineralized material were also identified in 2014
that would be stockpiled for processing during periods of higher metal prices. Mineralized material
was also identified beneath the open pit design, but was insufficient to warrant a push back of the pit
high wall and deepening of the pit or the additional development work required to mine it from
underground at that time. At today’s higher cobalt prices and greater economies of scale through an
increased production rate, Fortune expects to be able to apply a mine cut-off net smelter return
(“NSR”) value that may make some of this higher grade mineralized material economic to process.
Accordingly, the Mineral Reserves are being updated by P&E for the updated Feasibility Study.
Mine Plan and Schedule
The Mine Plan and Schedule for the updated Feasibility Study will examine the feasibility of a 20 to
30% increase in production rate and economies of scale from a larger mining and processing rate.
The Mine Schedule is also being optimized to target cobalt-rich parts of the deposit in earlier years of
the mine life to increase revenues, accelerate payback, and maximize cobalt production to address
market demand and the needs of potential strategic partners. The pit design is not expected to
change significantly because any additional mill f eed will likely be generated from lower grade
mineralized material within the pit shell that may become economic in the updated Mineral Reserve
statement.
A grade control and stockpiling strategy will also be pursued to schedule ores through the process
plant that are better aligned with metal market conditions. Specifically, lower grade ores will be
stockpiled to defer processing until later in the mine life and align processing of bismuth-rich ores with
market demand as it evolves in a growing green economy focused on environmentally safe metals
and its unique physical properties.
Metallurgical Testwork
The processing of NICO ores has already been verified by pilot plant tests validating the flowsheet,
metal recoveries and producing a high quality cobalt sulphate heptahydrate meeting the specifications
of lithium ion battery manufacturers. Two metallurgi cal testwork programs were recently conducted at
SGS Lakefield Research Limited to address gaps identified in the previous 2014 Feasibility Study.
This testing indicates that the sequencing for manganese removal prior to cobalt sulphate
heptahydrate crystallization can be changed without impac ting cobalt recovery, and there is potential
for a cobalt recovery improvement, subject to c onfirmation from METSIM modelling now in progress
by Hatch. The results are also providing the information needed for equipment sizing, detailed
engineering, and costing. An improved copper cementation flowsheet was also tested and confirmed
for the updated Feasibility Study.
All-Season Road
Earlier this year, the Canadian, Northwest Territories and Tlicho governments announced conditional
approval of federal funding for 25% of the construction costs for an all-weather road to the community
of Whati through the P3 Canada Fund (See Fortune’s January 12, 2017 News Release). In
September, the Government of the Northwest Territories announced that it had completed the
Request for Qualification phase for Private-Public-Partnership (“ P3”) funding for the remaining 75%
cost of the road. Three consortiums of Canadian and International firms were short-listed to
participate in the Request for Proposal stage commencing in December and submit bids to design,
build, finance, operate and maintain this road and be repaid over time with interest by the Northwest
Territories Government (see Fortune’s September 19, 2017 News Release). Fortune has already
received EA approval to build a 50km spur road from Whati to the mine site and the cost for the
construction of this spur was included in the 2014 Feasibility Study. Fortune is now planning to
construct the NICO mine, mill and concentrator from the existing winter ice road in order to align mine
operations with the timeline for availability of the government road and mitigate schedule uncertainty.
Feasibility Study Update
The scope of the updated Feasibility Study was initially based on a simple re-statement of economics
of the 2014 Feasibility Study based on current costs and updated commodity price and exchange rate
estimates. No significant new engineering was required for this scope because the requisite
engineering had already been largely completed in the Company’s 2012 Front-End Engineering and
Design (“FEED”) and 2014 Feasibility studies. With the new plan to examine increasing production by
20 to 30% over the previously contemplated 4,6 50 t of ore processed per day, additional engineering
will now be required to support the economic analysis and produce engineered designs to support
project financing efforts and strategic partner due-diligence. Although it is expected that the higher
production rate will increase capital costs for the development of the NICO Project, sensitivities
prepared for the Company to assess the impact of such costs against the economies of scale of a
larger project and an optimized mine plan schedule, indicate that this change may be warranted. The
higher cobalt production target is also responding to the feedback received from a number of potential
strategic partners interested in participating in the development. While these scope changes will delay
completion of the updated Feasibility Study, they are not anticipated to impact the construction
timeline for the project, which will be primarily subject to receipt of Project Financing.
About NICO
NICO is a planned Canadian, vertically integrated, primary producer of cobalt with supply chain
transparency and uninterrupted custody of metal from ore through to the production of battery
chemicals, gold, bismuth and copper. The existing 2014 feasibility study proposes that the NICO
deposit will be mined primarily by conventional truck and shovel open pit methods. In the 2014
Feasibility Study, approximately one eighth of the process feed during the first two years of operations
was planned to be mined using underground blast hole open stoping to process higher margin ores
from deeper in the deposit in early years of the mi ne life. Most of the pre-production development for
the underground portion of the mine has already been established from previous test mining
operations.
Processing of ores in the proposed NICO mill and concentrator will be by simple flotation to produce a
bulk concentrate containing the recoverable metals. The concentrate will be filtered, bagged and
trucked to the rail head at Hay River for delivery by train to the Company’s planned refinery straddling
the Canadian National Railway near Saskatoon. The refinery will recover metals from the concentrate
using a combination of secondary flotation, followed by pressure and atmospheric acid leaching,
electro-winning and precipitation of value-add metals and chemicals. Should the proposed 20 to 30%
increase in production rate prove feasible, cobalt production would target 1,700 to 2,000 t of units per
year in a cobalt sulphate heptahydrate.
The disclosure of scientific and technical informatio n contained in this news release has been approved by
Robin Goad, M.Sc., P.Geo., President and Chief Executive Officer of Fortune, who is a "Qualified Person" under
National Instrument 43-101. The Technical Report on the Feasibility Study referred to above, entitled "Technical
Report on the Feasibility Study for the NICO-Gold-Cobalt-Bismuth-Copper Project, Northwes t Territories,
Canada", dated April 2, 2014 and prepared by Micon, from which certain information in this press release has
been extracted, has been filed on SEDAR and is available under the Company's profile at www.sedar.com.
About Hatch
Hatch has over six decades of business and technical experience in the mining, energy, and
infrastructure sectors. The firm has 9,000 staff with experience in over 150 countries and is well
known for the design and construction of mineral beneficiation process plants and supporting
infrastructure, including projects in remote and cold climate regions and Arctic regions of Canada.
About P&E
P&E provides geological and mine engineering consul ting, Mineral Resource Estimate Technical
Reports, Preliminary Economic Assessments and Pre-Feasibility Studies and is affiliated with major
Toronto based consulting firms for the purposes of joint venturing on Feasibility Studies. P&E’s team
has experience in geological interpretation, 3D geol ogic modeling, Technical Report writing, Mineral
Resource and Mineral Reserve Estimates, property evaluations, mine design, production scheduling,
operating and capital cost estimates and metallurgical engineering.
About Micon
Micon is a mining consultancy providing independent professional advice to mining companies and
their providers of capital, law firms and government agencies worldwide. Micon is staffed by senior
mineral industry consultants with extensive internat ional experience in the fields of geology, mining
engineering, metallurgy, processing, environmental management, market analysis and mineral
economics.
About Fortune Minerals
Fortune is a Canadian mining company focused on developing the vertically integrated NICO cobalt-
gold-bismuth-copper project in the Northwest Territories and a related refinery the Company plans to
construct in Saskatchewan. Fortune also owns the Sue-Dianne copper-silver-gold deposit located 25
km north of NICO and a potential future source of incremental mill feed to potentially extend the life of
the NICO mill.
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For further information please contact:
Fortune Minerals Limited
Troy Nazarewicz
Investor Relations Manager
Tel.: (519) 858-8188
www.fortuneminerals.com
This press release contains forward-looking informat ion and forward-looking statements within the meaning of
applicable securities legislation. This forward-looking information includes statements with respect to, among
other things, the Company’s plans to develop the NICO Project (including the Company’s plans to secure project
financing to start construction), the updated feasibility study for the NICO Project, the estimated capital costs for
the construction of the NICO Project, estimated future production, anticipated growth in the demand for cobalt,
anticipated constraints on the supply of cobalt and plans for the construction of an all-season road needed for
operations at the NICO Project. Forward-looking information is based on the opinions and estimates of
management as well as certain assumptions at the date the information is given (including, in respect of the
forward-looking information contained in this press re lease, assumptions regarding the Company’s ability to
arrange the necessary financing to continue operation s and develop the NICO Project, assumptions regarding
the results of the updated Feas ibility Study, growth in the demand for coba lt, restrictions on the supply of cobalt
and the proposed construction of the all-season road, the economic environment in which the Company will
operate in the future, including the price of gold, c obalt and other by-product metals, anticipated costs and the
volumes of metals to be produced at the NICO Project). Ho wever, such forward-looking information is subject to
a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially
from those projected in the forward-looking information. These factors include the risks that the Company may
not be able to finance and develop NICO on favourable te rms or at all, the updated Feasibility Study may take
longer than anticipated, the results of the updated feasibility study may not be as anticipated, the all-season
road may not be built within the anticipated time frame, the market for rechargeable batteries and the use of
stationary storage cells may not grow to the extent anticipated, the future supply of cobalt may not be as limited
as anticipated, the Company’s production of cobalt and other metals may be less than anticipated and other
operational and development risks, market risks and regulatory risks. Readers are cautioned to not place undue
reliance on forward-looking information because it is po ssible that predictions, forecasts, projections and other
forms of forward-looking informati on will not be achieved by the Compan y. The forward-looking information
contained herein is made as of the date hereof and th e Company assumes no responsibility to update or revise
it to reflect new events or circumstances, except as required by law.