(NGC.V) Feb. 8, 2019 – Northern Graphite Corporation has announced that as part of its ongoing review of the economics of the Bissett Creek graphite project, G Mining Services Inc. has completed an analysis which indicates that increasing annual concentrate production by at least 20 percent can be achieved with a relatively modest six percent increase in capital costs for the first phase of development.
Higher production would also reduce unit operating costs and is expected to have a positive effect on the project’s net present value (NPV) and internal rate of return (IRR). Accordingly, the company intends to integrate an initial production rate of approximately 25,000 tonnes per year into its development plans.
“The Bissett Creek project already has attractive economics at current prices, and they will be further enhanced by the higher production level,” said Northern Graphite CEO Gregory Bowes. “We do not believe this will significantly increase the risk associated with introducing new supply into the market. Most graphite deposits contain large resources but production must be ‘right-sized’ for target markets as some large, low-margin segments are currently unattractive to western producers. Northern’s strategy is to focus on higher-value industrial markets, mainly in the U.S. and Europe. Many require large and XL flake graphite and the company is fortunate to have a deposit with a very high percentage of these grades when demand is growing, Chinese production is declining, and the only North American source is near the end of its life.”
The first phase of development, for which a NI 43-101 feasibility study had previously been filed, contemplated producing 20,800 tonnes of graphite concentrate per year with a capital cost of $101.6 million. Phase 2 involves a future doubling of production, based on measured and indicated resources only, to meet the expected growth in graphite demand. A preliminary economic assessment (PEA) encompassing both Phase 1 and 2 is available on SEDAR and is the current NI 43-101 report on the project.
The company’s press release dated Dec. 12, 2018 provided a sensitivity analysis on project economics in the PEA based on estimates of current capital and operating costs, exchange rates and commodity prices. The sensitivity analysis estimated a pre-tax IRR of 30.1 percent (25 percent after tax) and a pre-tax NPV of $304.9 million ($198.2 million after tax) using an eight percent discount rate. The company anticipates that the higher production level and lower unit costs contemplated in the latest analysis will result in a meaningful increase in the project’s NPV and IRR for both Phase 1 and Phase 2.
The disclosure relating to project economics is supported only by the sensitivity analysis within the PEA and does not reflect the PEA base-case economic analysis. The PEA is based on measured and indicated resources only. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature and there is no certainty that the results of the preliminary economic assessment will be realized.
A comprehensive metallurgical test program is currently underway at SGS Lakefield to confirm graphite recoveries, concentrate purity and flake size yield under a new simplified flow sheet and to bring testing up to feasibility level standards. Once these results are available, the company will determine if it is necessary or beneficial to prepare and file a new NI 43-101 report.
The company has also received approval from the TSX Venture Exchange to extend the expiry date of 3,909,166 warrants which are exercisable to purchase common shares of the company at an exercise price of $0.40 and which were issued under a private placement that was completed on Mar. 24, 2017. The expiry date for the warrants has been extended from Mar. 24, 2019 to Mar. 24, 2021. All other terms and conditions of the warrants remain unchanged. The company will not issue replacement warrant certificates, and warrant holders will be required to present the original certificates in order to exercise their warrants on or before the new expiry date.
Northern Graphite is a Canadian development company with a 100 percent interest in the Bissett Creek graphite deposit which is located in the southern part of Canada, with ready access to labour, supplies, equipment and concentrate transportation. The company has completed a full feasibility study, a PEA which includes a Phase 2 expansion, and has secured its major mining permit. Northern intends to start production at a realistic level to minimize capital costs and the risk associated with introducing a new source of supply into the market. Production will then be expanded as the market grows. The percentage of large/XL flake graphite in the Bissett Creek deposit is one of the highest in the industry, which will enable the company to focus on high margin and value-added industrial markets, mainly in the U.S. and Europe.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.