Engebø Rutile and Garnet
The realization of the Engebø project will establish Nordic Mining as a long term supplier of high grade rutile and garnet products.
Nordic Mining acquired the rights to the Engebø deposit in 2006. A complete zoning plan and environmental permits were granted in April 2015. On 31th of October 2017 the Prefeasibility Study (PFS) was published for the Engebø project.
The full PFS report is available here.
The Engebø deposit is one of the world’s highest-grade rutile deposits and is unique due to its substantial content of garnet. The main titanium bearing mineral is rutile. Only 5% of the titanium is found as ilmenite, and the presence of titanite/sphene is negligible. In general, the eclogite contains 40% to 50% almandine type garnet.
With negligible contents of radioactive elements and heavy metals, the deposit is a clean source of high-grade and high-quality titanium and garnet minerals. Unlike most rutile deposits, the Engebø rutile is contained in a hard-rock ore, a massive body of eclogite.
The deposit forms a 2.5 km long east-west trending lens that runs parallel with the Førde Fjord and the Engebø ridge.
A mineral resource estimate for Engebø was made in 2016, following a comprehensive drilling and surface sampling campaign. The estimate substantially improved and increased classifications and enabled a qualified quantification of the garnet. The 2016 resource estimate for a 3% TiO2 Cut-off, is shown in the table below
The resource remains open to the east, west and at depth, with potential to convert Inferred resources to Measured and Indicated Resources.
In June 2018 revised resource estimates for the Engebø deposit were presented. Please see stock exchange release dated 8th June 2018.
Norway is renowned for its hard rock mining, both open pit and underground. From a mining perspective, the deposit supports a low-cost production operation:
The optimised business case comprises an open pit mine at 1.5 Mtpa for 16 years followed by underground operations for a further 13 years. The figure below shows the open pit and underground mine design.
A key feature is the use of a glory hole inside the pit. The effect is reduced ore haulage requirements since most benches are close enough to dump ore directly into the raise-bored hole. Ore is then crushed and transferred to underground silos before being conveyed directly to the process plant.
The initial capital estimate for open pit mine facilities and process plant is US$ 207 M. The estimate of the deferred capital for underground mine after 15 years of open pit operation is US$ 17 M.
The contingency allowances in the above capital estimates has been calculated by means of a quantitative risk analysis (QRA) to determine the Project’s capital risk profile. Contingency at an 80% confidence level has been allowed for, equating to 19.8% of the initial project capital cost.
The total average operating cost over the Life of Mine is US$ 16.28/RoM t and US$ 86.92/product t (rutile and garnet combined).
The NPV of US$ 332 M is a real pre-tax value discounted by 8%, which is the assumed Weighted Average Cost of Capital (WACC). The IRR of 23.8% is real with no escalations applied. The payback period is the number of periods once operations start that generate positive cashflow equal to the capital invested. The Life of Mine is the number of operating years for the reserve derived in line with the guidelines of the JORC Code. The profitability index is a ratio of the NPV divided by the capital discounted to a present value using a WACC value of 8%.
Post-tax key financials have been calculated using a post-tax WACC of 6.8%. A post-tax NPV of US$ 305 M and an IRR of 20.8% are estimated assuming a 60% debt financing of the Project and general implementation of accounting standards for depreciation and tax calculation.
There are upside potentials in the business case related to, inter alia:
• Expanding the Run of Mine throughput to enable increased product sales
• Extending the Life of Mine through increased ore reserves from Inferred Resources
• Selling surplus garnet produced in the first years of production.
The above initiatives may offer a 40% improvement in the NPV to US$ 465 M.
TZMI, a leading global technical and marketing consultant, considers that the longer-term outlook for rutile production indicates that a significant supply deficit will develop if no new projects are commissioned. The global supply of rutile is set to decline considerably during the period 2017 to 2025, with output in 2025 expected to be 50% lower than 2016 levels.
Global demand for rutile for pigment and titanium metal end-use is estimated to reach 540 k TiO2 units by 2020 and 710 k TiO2 units by 2025. The planned output of approximately 30 ktpa from Engebø should easily be absorbed by the market by the time the Project comes on stream.
TZMI has used the preliminary product specifications generated during the PFS testwork campaign as a basis for assessing the Engebø rutile product quality. The preliminary quality of the rutile compares favourably to most other competing products. Based on product quality and particle size distribution, the Engebø rutile is considered being a suitable feedstock for chloride pigment and titanium metal applications.
The primary markets for garnet are in abrasive blasting and waterjet cutting, although for some coarse grades there is also a market in water filtration. There is also a market in abrasive resistant materials such as in flooring, but this market is primarily restricted to China at the current time. The three garnet products which Engebø will target are 80 mesh waterjet, 100 mesh waterjet and 30/60 mesh blast market.
The current world production of garnet is estimated at 1.4 Mtpa; India is the largest producer (estimated production is 450 ktpa to 500 ktpa); with Australia being the next largest producer at an estimated 280 ktpa production level. China is the third significant producer at an estimated 200 ktpa to 300 ktpa output.
Engebø is very well placed with its direct access to the North Sea and, thereafter, major European waterways, resulting in lower transport costs and reduced time to market relative to the key global producers in India, Australia and China.
Nordic Mining has signed a Heads of Agreement with the Barton Group (www.barton.com) , the global leader of high quality garnet abrasives. The parties intend to establish long-term cooperation within development, production, sales, marketing and distribution of garnet products from Engebø. This will include an off-take agreement, joint marketing, and sales and distribution arrangements for garnet products to the international markets.
A high-level Definitive Feasibility Study (DFS) schedule has been developed based on start in November 2017 with a duration of approximately 12 months. Thereafter, it is likely that the Project will proceed directly into a FEED (Front End Engineering Design) phase, where critical path engineering and procurement work will be continued to expedite the start of construction.
Once the DFS has been completed in Q4 2018, the following preliminary and indicative milestones apply:
Start of FEED – Q4 2018
Completion of FEED – Q2 2019
Start of construction – Q2 2019
End of construction – Q2 2021
Start of commissioning and production ramp-up – Q2 2021
End of commissioning – Q3 2021
End of production ramp-up – Q4 2021.
Nordic Mining’s overarching principle when operating the Engebø deposit is to adopt a good citizen approach and demonstrate that it can plan, build and operate Engebø in a manner that:
The regulatory setting for the Project is driven by two key legislative requirements for Nordic Mining to establish a mining and processing operation at Engebø, namely the discharge permit and the zoning plan (planning permit). Both requirements have been fully met and the initiative is compliant with Norwegian environmental legislation.
The zoning plan was adopted by the local municipalities in 2011 and finally approved by the Ministry of Local Government and Modernisation on 17 April 2015.
A comprehensive Environmental Impact Assessment (EIA) program with numerous environmental studies have been carried out between 2008 and 2015. Forty-four environmental and social responsibility studies/reports have been developed to date over the life of the Project.
A major topic for the EIA was the deposition of tailings. The permitted solution is a sea disposal system for transporting tailings through a pipeline down to the seafloor of the Førde Fjord, at a depth of 320 m. The fjord basin is a sedimentation environment confined by thresholds to the inner part of the fjord and by a glaciation sill to open sea. A 4.4 km2 area of the fjord seafloor has been regulated for tailings deposition.
Detailed baseline studies were carried out to map the biodiversity in the fjord; this included test fishing, grab sampling and remotely operated vehicle (ROV) investigations. Currents, salinity, turbidity and temperature were measured in the fjord throughout a 12- month period to document the fjord environment.
The main conclusions regarding the fjord disposal solution from the EIA studies were:
Norway has long-term experience with sea disposal of tailings. Currently there are five active tailings deposits in Norway and two (including Engebø) have recently been permitted. Experience with fjord deposition in Norway is, for the most part, positive. Advanced systems for continuous monitoring exist and there are established best practise guidelines for tailings deposition to limit the environmental footprint.