NICO - NICO Gold-Cobalt-Bismuth-Copper Deposit

The NICO deposit in Canada’s Northwest Territories was discovered by Fortune Minerals in 1996. NICO is a fully vertically integrated project that will include mining and concentrating ores in the Northwest Territories, and transportation of the metal concentrate to Saskatchewan for further processing to high value products at our proposed Saskatchewan Metals Processing Plant (“SMPP”). Fortune Minerals plans to become a reliable Canadian-based supplier of cobalt and bismuth with strong leverage to gold and minor by-product copper.

More than $100 million of work has already been conducted for the NICO project to delineate and engineer the deposit and reduce risks associated with its development. This includes $20 million in underground test mining verifying the geometry and grade of the deposit, plus more than $12 million in metallurgical test work and pilot plants to confirm the process flow sheet, verify production of products, and improve metal recoveries.

The NICO deposit contains open pit and underground Proven and Probable Minerals Reserves totalling 33 million tonnes containing 1,085,000 ounces of gold, 82 million pounds of cobalt, 102 million pounds of bismuth, and 27 million pounds of copper. At the planned mill throughput rate of 4,650 tonnes of ore per day, the mineral reserves will sustain operations for 19.8 years.

Hauling a load of ore during test mining at NICO

Location:

The NICO deposit is located 160 km northwest of the city of Yellowknife and 50 km northeast of the community of Whati. The proposed mine is 85 km north of the highway to Edmonton, Alberta and will be accessed by a proposed all-weather road also servicing nearby Tlicho aboriginal communities. CN operates a railway that terminates at Hay River on the south shore of Great Slave Lake, 450 road kilometres south of NICO and provides a rail link for haulage of concentrate to the proposed refinery near Saskatoon. The SMPP lands straddle the CN railway between the towns of Langham and Dalmeny, Saskatchewan – about 1 km north of the Trans-Canada Highway, close to power, water, natural gas, reagents as well as a skilled labour pool.

NICO and SMPP location

Mineral Reserves:

NICO is an Iron Oxide Copper-Gold (“IOCG”) class deposit, also commonly referred to as Olympic Dam-type after the dominant “Super Giant” deposit in South Australia that defines this class. Ore is hosted in three, 40-50 degree dipping stratabound lenses of brecciated ironstone up to 1.3 km in length, 550 metres in width and with individual lenses up to 70 metres in true thickness. The recoverable metals are associated with the approximate 5% sulphide fraction consisting primarily of cobaltian arsenopyrite, cobaltite, bismuthinite, chalcopyrite, pyrite and pyrrhotite, as well as native gold and native bismuth.

Underground Mineral Reserves

Open Pit Mineral Reserves

Underground and Open Pit Combined Mineral Reserves

Economic Analysis:

NICO Economics

The following table shows the projected average annual metal production for each of NICO’s component commodities.

Average Metal Production

The cash cost net of by-product credits for gold, cobalt and bismuth were determined for several of the metal price cases and are shown in the table below. Notably, the cash costs per pound of cobalt and bismuth net of by-product credits are negative, except for the 3-Year Trailing Average Metal Price case for cobalt, which has a very low $US 1.98/lb cash cost net of by-product credits. This demonstrates that NICO has very low operating costs for all metals net of by-product credits and that after capital has been repaid, operations can be sustained during periods of very low metal prices and volatility.

Operating Cash Costs

The capital costs for the NICO project were determined by the engineering companies that were responsible for their respective components of the study and totals $441 million for the first 2 years of the project, including all direct and indirect costs and contingencies. The underground mining fleet is assumed to be provided by contracted service and the cost of the equipment is built into the operating costs for the underground part of the mine. The open pit mine fleet is planned to be sourced under a lease purchase from the supplier and therefore only the deposit is included in project capital, whereas most of the cost of this equipment is built into the open pit mining costs. Payback of capital is 6.3 years for the Base Case cobalt sulphate option.

Summary of Capital Costs

The life of mine (“LOM”) average operating costs for the NICO project are shown in the table below.

Summary of Operating Costs

Click here to view the NI 43-101 Technical Report

Mining:

NICO is planned to be mined primarily by open pit methods with underground ores contributing 22% of the mill feed during the second year of operations. The open pit part of the mine will be a conventional truck and shovel / loader operation, accomplished in four phases at an average waste to ore strip ratio of 3.0:1. The underground portion of the mine will be mined by retreat blasthole open stoping using a contractor and provides access to gold-rich, higher grade ores. Notably, most of the underground pre-production development work for the underground part of the mine has previously been constructed from the test mining programs that were conducted in 2006 and 2007 at a total cost of approximately $20 million.

Reinforcing the collar for NICO ventilation shaft

Processing:

The NICO ore will be processed in two stages at the NICO site and SMPP, respectively. At the NICO site, 4,650 dry tonnes per day (average) of ore will be processed in a crushing, grinding and flotation concentrator to produce approximately 180 tonnes of wet bulk concentrate per day. The high concentration ratio (low mass pull) of NICO ores is a significant economic attribute to the deposit, which allows the Company to transport a high-value concentrate to southern Canada where significant process cost savings can be achieved. Some of the crushing, grinding and other equipment that will be required at NICO has already been purchased by Fortune from its acquisition of the Golden Giant Mine mill at Hemlo, Ontario that has already been dismantled and is in storage awaiting relocation. This equipment is treated as a sunk cost in the capital cost estimate.

The NICO bulk concentrate will be bagged and transported by truck to Hay River, NT for transfer to rail and delivery to the Company’s proposed SMPP on the CN main line near Saskatoon. At the SMPP, the bulk concentrate will undergo additional grinding and flotation to produce separate gold-bearing cobalt and bismuth concentrates. The cobalt concentrate will be processed by pressure acid leach in an autoclave to dissolve the metals. The pregnant solution that is produced will then be treated with lime sequential neutralization to remove impurities and then sodium carbonate to precipitate cobalt carbonate. This carbonate is re-leached in sulphuric acid to produce cobalt sulphate solution, which is then purified further by ion exchange and the cobalt precipitated using electro-winning to cobalt cathode that is 99.8% purity. Alternatively, the cobalt that is present as a sulphate in solution can be processed further by solvent extraction to remove metal impurities followed by crystallization to generate 20.9% cobalt sulphate heptahydrate crystals. Copper that is removed from the cobalt solution during neutralization is re-leached in acid and is then precipitated onto iron fines as a copper metal precipitate or “cement”. The bismuth concentrate is treated by atmospheric acid leach, followed by electro-winning to produce 99.5% bismuth cathode, which is then melted and poured to make 99.99% bismuth ingots. The bismuth leach residue is fed into the autoclave together with the cobalt concentrate and gold is recovered from the combined leach residue using cyanide and then precipitated by Merrill Crowe process followed by melting to pour gold doré bars. The process flow sheet, production of high value metal products and metal recoveries have all been verified in three pilot plants as well as laboratory scale test work that was carried out at SGS Lakefield in Lakefield, Ontario between 1997 and 2012.

Commodities:

Gold is a dense, soft, malleable and ductile metal that conducts electricity and does not tarnish. Gold is best known as a store of wealth and for its use in jewellery. Consumption of gold for jewellery is currently greater than annual mine production. Gold also has important industrial uses in the manufacture of electronics, primarily to make low voltage electrical connections that could otherwise be interrupted by corrosion at the contact points. Gold is a highly efficient conductor that can carry these tiny currents, and small amounts are used in almost every sophisticated electronic device. Notably, one billion cellular telephones are produced each year and most of them contain about fifty cents worth of gold that is not typically recycled. Gold is also commonly used in dentistry because it is inert and easy to work with.

Cobalt is a high strength magnetic metal used to make steel alloys and chemicals. Metallic uses include superalloys for the aerospace industry to make power and jet engine turbines, cutting tools and cemented carbides used to machine steel, and electromechanical devices such as magnets, electric motors, generators, transformers and magnetic storage tape and hard disks. The most important factor contributing to the growth in demand for cobalt is its use in chemicals, and particularly for the manufacture of high performance lithium-ion and nickel-metal hydride rechargeable batteries used in portable electronic devices such as cellular telephones and computers and in plug-in and hybrid-electric cars. Cobalt sulphate heptaydrate is preferred by many battery manufacturers for this purpose and sells for an approximate 22% premium over 99.8% specification high grade cobalt metal cathodes. Cobalt chemicals are also used to make catalysts for petroleum refining and to manufacture plastics. They are also used as pigments and as the source of Vitamin B12. The cobalt market is approximately 82,000 tonnes per year and has had average annual growth of approximately 8% per year over the past 10 years. More than 50% of the current cobalt supply is mined in the Democratic Republic of the Congo and 12% from Zambia. Significant cobalt is also mined from nickel-cobalt laterite deposits, which have much higher capital and processing costs relative to sulphide deposits such as NICO.

Bismuth is a soft metal with very high density and low melting temperature, and is scientifically recognized as one of the safest elements for human consumption. This, together with antibacterial properties, is why bismuth is used in pharmaceuticals and medicines, including Pepto-bismol®, bandage dressings, cosmetics, and some medical devices. The physical properties of bismuth are otherwise similar to lead, but unlike lead, bismuth is not toxic and is therefore used to replace lead in paint pigments, free-machining steel, galvanizing alloys, ceramic glazes, radiation shielding, ammunition, greases, plumbing solders and brasses, and electronics solders. Many of these new applications result from legislation that has banned the use of lead, particularly in potable water plumbing sources in developed countries as well as electronics in the European Union. Bismuth is also one of the few elements that expand when cooled making it important in the manufacture of dimensionally stable alloys and compounds, including metal castings and coatings that could crack from shrinkage during cooling such as automotive anti-corrosion alloys electro-plated on premium automobiles and galvanizing. Bismuth is also used for frit coatings on automotive glass to protect windshield seals from degradation from exposure to ultraviolet radiation and changing temperatures. Some super conductors, fire sprinkler systems, fire retardants, compact discs, and heat transfer alloys used to generate electricity all use bismuth. The bismuth market is between 15,000 and 20,000 tonnes, with 70% of the supply currently sourced from China. Demand is growing primarily due to concerns for the environment and lead-toxicity and also to take advantage of bismuth’s unique physical properties.