Positive Preliminary Economic Assessment Achieved for the Lac Dore Vanadium Project, Chibougamau, Quebec After-Tax NPV of CDN $814M and After-Tax IRR of 15.42%
Positive Preliminary Economic Assessment Achieved for the Lac Dore Vanadium
Project, Chibougamau, Quebec After-Tax NPV of CDN $814M and After-Tax IRR of
15.42%
TSX-V: "VRB"
VANCOUVER, Nov. 15, 2017 /CNW/ - VanadiumCorp Resource Inc. (TSX-V: "VRB") (the "Company") is
pleased to announce the positive findings of an independent Preliminary Economic Assessment ('PEA')
for its 100%-owned Lac Dore Vanadium Project situated 30 kilometers southeast of Chibougamau,
Quebec. The project is to produce vanadiferous titanomagnetite (VTM, magnetite) concentrate from the
Lac Doré deposit, which will either be processed using the Company's VanadiumCorp-Electrochem
technology or marketed to third parties. Highlights of the PEA base case include:
After-tax Net Present Value (NPV) of CDN$814M, post inflation but not discounted
After-tax Internal Rate of Return (IRR) of 15.42%
Pre-tax NPV of CDN $1.057 Billion
Pre-tax IRR of 17.46%
Nominal VTM production rate of 864,000 tons per year at a nominal price of US$100 per ton
Average mining head grade of 26.6% VTM
LOM adjusted to 20 years, requiring 64% of the presently known inferred resources
After-tax payback period of 6 years after start-up
LOM operating margin of 25% including inflation
Vanadiumcorp Resource Inc. engaged IOS Services Geoscientifiques Inc. ('IOS') for the purpose of
compiling the PEA. IOS is a thoroughly independent consulting firm and one of the largest independent
consulting firms in geology in the Province of Quebec, having been involved with more than 1,400
projects. IOS collaborated with the development of the Lac Doré project for more than 20 years, as the
contracted developer and project manager for its previous owner. IOS utilized its extensive knowledge
and data pertaining to the significant mineralization present on VanadiumCorp's Lac Dore project.
The Lac Dore 2017 PEA is preliminary in nature and includes exclusively 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. There is no certainty that the PEA will be
realized.
Adriaan Bakker, VanadiumCorp's President and Chief Executive Officer commented, "We are very
pleased with the results of this Preliminary Economic Assessment, which clearly establishes Lac Dore as
one of the premier undeveloped vanadium resources, located in a favorable jurisdiction for mining
development. The PEA illustrates robust economics and marks a significant milestone for VanadiumCorp
to continue to advance Lac Dore towards production. The base case shows that Lac Dore could generate
more than CDN $1.4 Billion in pre-tax net cash flows and deliver life-of-mine, after-tax net present value
of CDN$ 814 million. Thanks to the experience of IOS with Lac Dore and vanadium expertise, we have
based our economic base case on a conservative magnetite concentrate production model that
demonstrates a positive cash flow scenario for Lac Dore and provides ideal feedstock for VanadiumCorp-
Electrochem Process Technology. VanadiumCorp-Electrochem Process Technology, tested on
vanadiferous titanomagnetite from Lac Doré, is achieving excellent recoveries and scaling toward 1
tonne/month nameplate capacity. With the support of all our stakeholders, including our shareholders,
employees, local entrepreneurs, Chibougamau regional communities and the Canadian government, we
are looking forward to advancing this outstanding vanadium project to the next stage of development."
ECONOMIC MODEL
Inputs and assumptions used in the study are shown in the following tables. All prices are stated in
Canadian dollars, and tons as metric measure.
Capital and Operating
Costs
Capital cost
(C$M)
Operating cost LOM
(CDN$M)
Operating cost
Per ton VTM
Site preparation 4.2 M$ 0 M$ n/a
Mine 0 M$ 526 M$ 23.50 $/t
Mill 114.6 M$ 540 M$ 27.16 $/t
Buildings 15.3 M$ 0.8 M$ 0.05 $/t
Tailing and waste pads 6.7 M$ 36.9 M$ 2.18 $/t
Roadworks 7.0 M$ 1.0M$ 0.05 $/t
Power line 17.0 M$ 0$ 0 $/t
Trucking and handling 3.1 M$ 62.1 M$ 3.67 $/t
Ancillary Facilities 34.2 M$ 6.6 M$ 0.29 $/t
Pre-construction and EPCM 83,7 M$ 0 $ n/a
Working capital 20.2 M$ (year 24) 0$ n/a
Closure Costs 5 M$ 0 $ n/a
Contingency 15% 30.5 M$ 0$ n/a
Total Capital Costs 321.2 M$ 1 073.8 M$ 56.9 $/t
The average LOM operating expense is estimated at CDN$56.89 per tonne of VTM, or 42% of selling
price.
Inferred Resource: 99,104,000 tons at 26.3% VTM at 1.08% V2O5
VTM Resource: 26,067,000 tons VTM
Required resource for PEA: 63,663,000 tons at 26.6% VTM, or 64%
Average Pit ratio: 1.34 tons of waste per ton of ore.
VTM Production rate: 100 tons per hour, 24 hours/day, 360 days/year
Currency exchange rate: 0.75 US$ / CDN$
VTM price: USD$100/ton, FOB at Chibougamau
Inflation: 2% yearly
Discount rate: 0%
Depreciation rate: 15%
Equity-debt ratio: 100% equity
Total investment: 343,299,705$
Overall operating cost: $57.95 / ton VTM
A series of yearly cash-flows are calculated over a mining life of 20 years, plus 4 pre-production years.
The model incorporates the effect of 2% inflation, a working capital allocation, a 15% depreciation on
equipment, a progressive buy-back of the power-line by Hydro-Québec, 30% fiscal depreciation,
processing allocation (applicable only if metallurgical extraction is made in Québec) plus the following
taxes:
Environment taxes on tailing, effluents, dusts, and water.
Municipal and school taxes on non-production related investments.
Québec's mining tax, which is progressive (1% to 4%) and based on head-frame revenues
Québec's income tax, which is progressive (16% to 28%) according to profit margin after allocations
Federal income tax (15%) after allocations.
No royalties are attached to the project. All pre-construction costs were included in the economic studies,
including operating cash flows for the Company, resource definition costs, metallurgical testing,
engineering and provisions for environmental rehabilitation. The NPV and IRR calculations include the
four pre-production years and are summarized in the table below.
Discount Rate
(above 2% inflation) Pre-Tax NPV (CDN$M) After-Tax NPV (CDN$M)
0% $1.057 Billion $814 Million
5% $498 million $369 Million
7.5% $333 Million $237 Million
10% $212 Million $139 Million
IRR 17.46% 15.42%
Multivariate sensitivity analysis has been conducted by fluctuating capital expenditures (-30%/+50%),
mine and mill operating cost (-30%/+30%), VTM grade (20%-35%), pit ratio (0.8-1.67), currency
exchange (0.60$/1.00$ US/CND), VTM pricing (50US$/ton-150US $/ton), scale (17-300tph VTM), interest
rate (5%-25%) and equity/debt ratio (0%-90%). The economics are quite robust, maintaining positive
cashflows even over protracted and extremely unfavorable conditions. The most sensitive parameter
remains the VTM selling price, which will be dictated by the contract with a non arms-length processing
metallurgical facility. The decision to dissociate VTM production at the mine site from vanadium extraction
of the VTM is based on the premise that the contemplated process is currently being developed and its
economic outcome is currently too speculative to the included in the current study.
Mr. Bakker added: "We were intentionally very careful in our selection of base case input parameters. The
positive base case economics are based on conservative, industry standard assumptions for all key
inputs. Including all reasonable, potential and future outcomes, the sensitivity analysis demonstrates
robust project economics. For example, if the Canadian dollar was to reach par with the US dollar, or if
magnetite price was to drop to USD$80 per ton, the project still has post-tax Internal Rates of Return of
7.9% and 8.85% respectively. Although less attractive, such unfavorable economic conditions will still
maintain the project profitability"
Intensive smelting of VTM currently accounts for 73% of the world vanadium production, with vanadium
being only a by-product of smelting. Consequently, most steel and vanadium smelting plants outside of
China and Russia are currently troubled or shut down. Difficulties with this process reside in the elevated
cost of steel production compared to conventional blast furnaces, which cannot be compensated by the
credits from the slag. Similarly, the conventional salt roasting process, used by every primary vanadium
producer, has been demonstrated as not economically robust in the current stringent environmental
regulation and harsh climatic conditions, and disregarded.
Since late December 2016, VanadiumCorp initiated a partnership with Electrochem Technologies and
Material Inc. (Montreal, Québec) "Electrochem" to assess the metallurgical and chemical processing of
the vanadiferous magnetite from Lac Dore at Electrochem's facilities located in Bourcherville, Québec.
Testing of the VanadiumCorp-Electrochem digestion process on Lac Doré VTM successfully produced
pure vanadium chemicals, copperas and titanium dioxide. Then, copperas can be converted using
vertically integrated Electrochem's patented electrochemical technology (Canadian Patent CA 2,717,887
C) to produce 99.9% pure electrolytic iron and to regenerate acid.. The novel patent pending chemical
technology (US Provisional Patent Application US 62/463,411) is jointly owned by VanadiumCorp
Resources (50%) and Electrochem Technologies & Materials Inc. (50%).
"Vanadium electrolyte remains in short supply globally as the most critical component of vanadium redox
flow batteries (VRFBs) and VTM remains the only abundant primary source of it. Direct processing of
magnetite concentrate would help address the industry need to stabilize the variable nature of vanadium
market which is largely a function of outdated smelting and roasting methods of production in use today"
adds Mr. Bakker, president and CEO of VanadiumCorp. "Our decision to produce magnetite concentrate
dedicated to our proprietary process, rather than takes the conventional route, is a conservative base
case that decreases sensitivity to specific commodity pricing and provides ideal feedstock for our low
carbon footprint process technology. Direct transformation of all three products (vanadium chemicals, iron
and titanium dioxide) provides a distinct advantage in the fastest-growing segment of all the vanadium
compounds known as vanadium electrolyte. Vanadium electrolyte is a critical battery material that can be
re-used indefinitely and has far reaching benefits for a sustainable future"
The chemical and electrochemical processes invented and currently tested by Dr. Francois Cardarelli
President of Electrochem Technologies and Materials Inc. would be the cleanest process for the
production of vanadium chemical as well as for production of pure iron for the steel or manufacturing
industry. As the process does not involve carbon-based pyrometallurgy, it will generate a minimum
amount of greenhouse gases emission as well as very little residues. Its power consumption is estimated
at about half of that involved in smelting or roasting processes.
About 120 workers will be required to support the mine operation, which can all be drawn from local
communities. Chibougamau being a former mining town, the population is acquainted to mining activity
and anticipated to be supportive of the project.
The results of the current PEA will be used to justify systematic drilling to upgrade the resource, as well
as to test VanadiumCorp-Electrochem chemical technology and Electrochem's electrochemical
technology at a pilot plant scale. The PEA further aims to evaluate the economics of developing the
project for the production of vanadiferous titanomagnetite (VTM) concentrate, to be used or sold for its
processing.
VanadiumCorp will be filing a National Instrument (NI) 43-101 Technical Report on the Lac Dore 2017
PEA within 45 days of this news release.
Cautionary Statement
Readers are cautioned that the Lac Dore 2017 PEA is preliminary in nature and is based on 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. There is no certainty that
the PEA will be realized. There is no certainty that the Inferred Resources will be converted to the
Indicated or Measured categories, or that the potential Indicated or Measured Resources would be
converted to the Proven or Probable Mineral Reserve categories. Mineral Resources that are not Mineral
Reserves do not have demonstrated economic viability. The estimates of Mineral Resources in the PEA
and the Mineral Resource statement may be materially affected by environmental, permitting, legal, title,
taxation, socio-political, marketing, or other relevant issues. The Lac Dore 2017 PEA recommends that
the Lac Dore Project be advanced to a pre-feasibility study level in order to increase confidence in the
estimates.
Qualified Persons
The Lac Dore 2017 PEA was prepared by IOS and is based on a Mineral Resource estimate for the Lac
Dore Vanadium Project published as a NI 43-101 Technical Report with an effective date of May 21,
2015. The following Qualified Persons have participated in the development of the PEA or are
responsible for specific inputs into the PEA.
Qualified Person Company Responsibility
Rejean Girard, P. Geo IOS Geoscientifiques Inc. Project Management, Economic Analysis, Costs, Infrastructure,
Logistics
Christian D'Amours,
P.Eng
Géopointcom Inc Resource Estimations
Jonathan Lapointe, P.Ing MetChib Services Métallurgiques
Inc
Crushing, milling and beneficiation circuit design
Éric Larouche, P. Ing IOS Geoscientifiques Inc Infrastructure design
This release was approved by Rejean Girard, P.Geo., and independent consultant to
VanadiumCorp. Mr. Girard is a qualified person as defined by National Instrument 43-101. Portions
related to the resource estimation have also been approved by Christian D'Amours, P. Geo,
independent consultant to VanadiumCorp. and a qualified person as defined by National
Instrument 43-101.
Adriaan Bakker,
President and Chief Executive Officer
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release
SOURCE VanadiumCorp Resource Inc.
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http://www.newswire.ca/en/releases/archive/November2017/15/c3482.html
%SEDAR: 00005245E
For further information: contact Vanadiumcorp: Adriaan Bakker, President, CEO, By phone: 604-
385-4489, By email: [email protected], Website: www.vanadiumcorp.com
CO: VanadiumCorp Resource Inc.
CNW 16:18e 15-NOV-17