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. The zoning plan and environmental permits were granted in April 2015 and the Prefeasibility Study (PFS) was published in October 2017.
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.
Following the publication of the PFS, an additional drilling program was carried out at Engebø in January and February of 2018 with the aim to increase the knowledge of the ore body and to verify geotechnical parameters for the open pit mining methods.
The drilling program resulted in an increase of the estimated mineral resources in the measured and indicated categories (JORC Code 2012) by around 5%, to approximately 98 million tonnes, based on a cut-off of 3% TiO2. The average grade of rutile and garnet in the measured and indicated categories is 3.87% and 44.4%, respectively.
The tables below provide an overview of the updated resource estimates at 2% and 3% TiO2 cut-off grade, respectively, as presented by Competent Person Adam Wheeler, in June 2018. The ongoing definitive feasibility (DFS) work is based on the 2018 resource model and estimates.
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 due to:
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 USD 207 million. The estimate of the deferred capital for underground mine after 15 years of open pit operation is USD 17 million.
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 equivalent to 19.8% of the estimated initial project capital cost has been included which provides a confidence level of 80%.
The total average operating cost over the Life of Mine is USD 16.28/RoM t and USD 86.92/product t (rutile and garnet combined).
The NPV of USD 332 million 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 time required to recover the cost of the initial capital invested. The Life of Mine is the number of operating years for the reserve (as per the JORC Code). The Profitability Index is the ratio of the present value of the cash generated from operations divided by the present value of the capital invested (discounted by 8%).
Post-tax key financials were calculated using a post-tax WACC of 6.8%. Assuming 60% debt financing, post-tax NPV was estimated to USD 305 million and post-tax IRR was estimated to 20.8%.
In addition, there are upside potentials in the business case related to, inter alia:
In the PFS, it was estimated that the above initiatives may increase the pre-tax NPV to USD 465 million, an improvement of 40%.
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. TZMI used the preliminary product specifications generated during the PFS test-work campaign as a basis for assessing the Engebø rutile product quality. The preliminary quality of the rutile compares favourably to most other competing products and it is expected that the planned output of approximately 30 ktpa from Engebø will be easily absorbed by the market.
Based on product quality and particle size distribution from the PFS, the Engebø rutile will be a suitable feedstock for chloride pigment and titanium metal applications. In January 2019, Nordic Mining has signed a Heads of Agreement with a Japanese trading house for long term offtake for rutile and participation in the construction financing for the Engebø project.
The primary markets for garnet are in abrasive blasting and waterjet cutting. As the first producing mine of garnet in Europe and direct access to the North Sea and major European waterways, the Engebø project will benefit from lower transport costs and reduced time to market relative to the key global producers in India, Australia and China.
In 2017, Nordic Mining 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.
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 were carried out between 2008 and 2015, which has resulted in the development of 44 environmental and social responsibility studies/reports for the Project.
A key matter 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 four active sea-deposits for tailings in Norway. Experience with fjord deposition in Norway is, for the most part, positive. Advanced systems for continuous monitoring exist and as well as best practise guidelines for tailings deposition to limit the environmental footprint.