Executive Summary SEPTEMBER Mount Peake Feasibility Study

Transcription

1 Executive Summary Mount Peake Feasibility Study SEPTEMBER 2015 COPYRIGHT: The concepts and information contained in this document are the property of TNG Limited. Use or copying of this document in whole or in part without the written permission of TNG constitutes an infringement of copyright.

2 MOUNT PEAKE FEASIBILITY STUDY Executive Summary 2015

3 TNG would like to acknowledge the following consultants: Mineral Resource, Ore Reserve, Mining Studies, Cashflow Analysis and Feasibility Study compilation: Metallurgical testwork and flowsheet design: Environmental, Hydrology and Environmental Impact Statement: Engineering, mine plant design: Mine and Infrastructure: 1

4 TABLE OF CONTENTS Executive Summary 4 1 Introduction 4 2 Geology Regional geology Mineralisation Mineral Resource estimate 12 3 Geotechnical study 13 4 Mining 13 5 Ore Reserve estimate 15 6 Mount Peake Concentrator Process description 16 7 Tailings storage facility 17 8 Mount Peake project mine site infrastructure Water supply Power supply Gas supply Diesel supply Area roads and transport routes Rail transport Accommodation village Aerodrome 20 9 Darwin refinery Process description Refinery infrastructure Products Market and sales strategy Vanadium pentoxide Pig iron Titanium pigment Environmental impact study Financial results Capital and operating costs Capital expenditure Operating expenditure Foreign exchange Market sales of products Royalties Sensitivity analyses Risks and opportunities 31 MOUNT PEAKE FEASIBILITY STUDY Executive Summary

5 Figures Figure 1 Location map 5 Figure 2 Tenement map 6 Figure 3 General arrangement of the mine site 7 Figure 4 Overall site layout 8 Figure 5 Global flowsheet 9 Figure 6 Mining site layout 14 Figure 7 Proposed transport corridor 19 Figure 8 Location of the Darwin refinery 21 Tables Table 1 Key production parameters production 10 Table 2 Key production parameters beneficiation factors 10 Table 3 Key production parameters refinery recovery to final product 10 Table 4 Key production parameters final product 10 Table 5 November 2013 Mount Peake Mineral Resource (whole rock grades) at 0.1% V 2 O 5 cut-off 12 Table 6 Division of responsibilities 15 Table 7 Mount Peake Ore Reserve estimate 15 Table 8 Financial statistics 27 Table 9 Key performance indicators 27 Table 10 Capital cost summary 28 Table 11 Royalties 29 Table 12 Headline values for a change to the forex 30 Table 13 Headline values for a change to the discount rate 30 Photo Index Photo 1 Site visit 4 Photo 2 Geotechnical drilling 11 Photo 3 Mount Peake drilling 13 3

6 EXECUTIVE SUMMARY This document presents the results of a Feasibility Study (FS) carried out for TNG Limited s (TNG s) 100% owned Mount Peake project. This Executive Summary has been compiled by TNG from the information provided by the various contributors of the study. 1 INTRODUCTION Mount Peake is a vanadium-titanium-iron deposit located on EL29578, approximately 235 km north-northwest of Alice Springs in the Northern Territory on Stirling Station. Figure 1 presents a location map of the project in Northern Territory and Figure 2 presents a tenement map showing the location of the Mount Peake deposit. Photo 1 Site visit MOUNT PEAKE FEASIBILITY STUDY Executive Summary

7 EXECUTIVE SUMMARY (CONTINUED) Figure 1 Location map 5

8 EXECUTIVE SUMMARY (CONTINUED) Figure 2 Tenement map The objective of the Mount Peake project is to mine a polymetallic orebody and by using the TIVAN and other processes produce vanadium, iron and titanium products. The TIVAN refinery (the refinery) will be situated in Darwin and will receive a vanadium-bearing titano-magnetite concentrate by rail from the Mount Peake mine site. The concentrate will be treated using the TIVAN hydrometallurgical process to recover vanadium pentoxide (V 2 O 5 ). The outputs from the TIVAN process will be fed through dedicated titanium pigment and pig iron plants. The general arrangement of the Mount Peake mine site area and the overall site layout are presented in Figure 3 and Figure 4. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

9 EXECUTIVE SUMMARY (CONTINUED) Figure 3 General arrangement of the mine site 7

10 EXECUTIVE SUMMARY (CONTINUED) Figure 4 Overall site layout The scope of this FS assumed that mining and beneficiation occur on the mine site while the refinery was located in Darwin. The Darwin location offered economic and logistical benefits to the project. Plant throughput also increased to 3 million tonnes per annum (Mtpa) for Stage 1 and 6 Mtpa for Stage 2 in Production Year 5. The magnetite concentrate would be transported from the mine site by truck and rail to the Darwin refinery location. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

11 EXECUTIVE SUMMARY (CONTINUED) The high level global flowsheet is shown in Figure 5. Figure 5 Global flowsheet The FS assumed considerable value could be gained by upgrading the titanium slag and hematite products from the TIVAN process to titanium pigment and pig iron. This production requires the installation of a Titanium Pigment Plant and a Pig Iron Plant in proximity to the Darwin refinery. Both pricing and marketability for these final products is considerably more attractive than the titanium slag and hematite. TiVAN Reagents Mount Peake Open Pit Regenerated Solutions 1 ROM Darwin Refinery Waste Regeneration Plant Water V 2 O 5 Product 5 TiO 2 Product Waste Iron Oxide Product Mount Peake Crushing, Grinding and Beneficiation Plant Magnetic Concentrate 2 Tailings 3 Mt Peake Tailings Management Facility 11 TiO 2 Pigment Plant TiO 2 Pigment Reagents TiO 2 Pigment Product Waste 10 Waste Smelting Reagents Pig Iron Plant Pig Iron Product Iron Powder Train Loadout 4 Waste Stockpile Magnetic Concentrate Train Loadout V 2 O 5, TiO 2 Pigment, Pig Iron Products East Arm Port 9

12 EXECUTIVE SUMMARY (CONTINUED) Key production parameters for the Mount Peake Project are listed in Table 1 to Table 4. Table 1 Key production parameters production Production Unit Total Preproduction period years 2 Production life years 16 Average concentrator plant throughput (Production Years 1 to 4) Average concentrator plant throughput (Production Year 5 onwards) Mtpa 2.8 Mtpa 5.5 ROM feed processed Mt 77.8 Refinery process life (including Titanium Pigment Plant and Pig Iron Plant) years 40+ Table 2 Key production parameters beneficiation factors Beneficiation factors (for ROM feed through the Concentrator) Unit Oxide Transition Fresh Overall Average mass pull % V 2 O 5 recovery % TiO 2 recovery % Fe recovery % Table 3 Key production parameters refinery recovery to final product Refinery recovery to final product (from magnetite concentrate) Unit Total V 2 O 5 recovery % 96.5 TiO 2 recovery % 92.4 Fe recovery % 85.3 Table 4 Key production parameters final product Final product Unit V 2 O 5 TiO 2 pigment Pig iron Total product over life of mine (LOM) Average annual product (Production Years 1 to 4) Average annual product (Production Year 5 onwards) kt 265 3,750 9,629 kt kt The products have assumed to be sold on an export basis. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

13 2 GEOLOGY The Mount Peake site is located within the Arunta province, which has long been considered prospective for nickel-copper and platinum group minerals. However, in 2008 TNG discovered a substantial ferrous metals deposit at Mount Peake which has subsequently emerged as a potentially world-class vanadium-titanium-iron resource. 2.1 Regional geology On a regional scale the Mount Peake gabbro body is located within outliers of Neoproterozoic sediments of the Georgina Basin. The Neoproterozoic sediments rest unconformably on metasediments and granites of the Aileron Province within the Lower Proterozoic Arunta Region. The mineralised Mount Peake gabbros are part of a 10 km x 20 km northwest trending sill or sill complex comprising gabbros, olivine gabbros, and leucogabbros with magnetite rich olivine gabbros near the top of the sill. 2.2 Mineralisation The Mount Peake orebody is hosted by a differentiated basic sill with minor ultrabasic layers. The predominant rock type is olivine gabbro. Four units of basic/ultrabasic rock types have been identified based on diamond and reverse circulation (RC) drilling. The majority of the titanium and vanadium is hosted by Ti-V magnetite and in ilmentite. The magnetite also contains minor Al2O3 and MgO and trace amounts of Cr, Mn and Ni. Most of the iron is hosted by Ti-magnetite but substantial amounts are also present in clinopyroxene and olivine. The mineralised zone is a thick homogeneous elongated trough-shaped concordant body within the layered thinning on the eastern, southern and northern margins. To the west the mineralised zone terminates against a west dipping fault. Photo 2 Geotechnical drilling 11

14 2 GEOLOGY (CONTINUED) 2.3 Mineral Resource estimate The information presented here is extracted from the ASX report entitled Additional Information on the Mount Peake resource released on 26 March 2013 and is available on the website The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competnet Person s findings are presented have not been materially modified from the original market announcement. Table 5 November 2013 Mount Peake Mineral Resource (whole rock grades) at 0.1% V 2 O 5 cut-off Category (JORC, 2012) Tonnes (Mt) V 2 O 5 (%) TiO 2 (%) Fe (%) Al 2 O 3 (%) SiO 2 (%) Measured Indicated Inferred Total Notes: Mineral Resources are inclusive of Mineral Reserves. Tonnes and grade have been rounded and this may have resulted in minor discrepancies. Snowden Mining Industry Consultants (Snowden) generated a Mineral Resource in November 2013 for the Mount Peake deposit that included available drilling results. The Mount Peake resource estimate has been classified as a Measured, Indicated and Inferred Resource and reported in accordance with the JORC Code (2012) and associated guidelines, and is based on the data supplied by TNG. Table 5 presents the November 2013 Mineral Resource estimate above a 0.1% V 2 O 5 whole rock assay grade cut-off. The mineralisation envelope used for the Mineral Resource estimate was generated using a nominal cut-off grade of 0.1% V 2 O 5. Snowden has based the resource classification upon a number of criteria, including the integrity of the data, the spatial continuity of the mineralisation as demonstrated by variography, and the quality of the estimation. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

15 3 GEOTECHNICAL STUDY In December 2014, Snowden began a full geotechnical feasibility review of the Mount Peake project, including a geotechnical diamond drilling program. The geotechnical drilling program was undertaken during March 2015 and April MINING The Mount Peake deposit is flat, shallow and amenable to open pit mining. The rock is generally hard, the ore-waste boundary is clearly defined and a production rate (about 12 Mtpa total movement) favours a truck and shovel mining. The mining site layout is shown in Figure 3. The pit is approximately 1.7 km long south to north (Figure 6) and is mined in five stages, commencing in the central and southern end. The depth of the pit is approximately 100 m. All dumps and stockpiles are placed on the west of the pit to keep them away from Murray Creek. Stockpiles contain lower grade material to support higher cash flows earlier in the project and the stockpile reaches approximately 12 Mt at its largest. The stockpile nearest the run of mine (ROM) (STK1) is used to manage variations in mining and processing of mill feed grade. Photo 3 Mount Peake drilling 13

16 4 MINING (CONTINUED) Figure 6 Mining site layout The total life of mine ROM feed inventory within the final pit shell is 77.8 Mt, based on a 15% Fe cut-off grade, the limit of the metallurgical testwork range. Mining commences midway through Project Year 2, with approximately six months of pre-strip to expose first ROM feed and provide waste for construction. Production ramps up over six months to 3 Mtpa ROM feed beneficiated. In Project Year 7 the capacity is increased to 6 Mtpa ROM feed. The input grades are relatively constant over the first 12 years of processing in order to balance the capacity of the concentrator and the refinery. The total cost of mining (and reclaim from stockpiles) is estimated by Snowden to be $3.91/t mined and this was supported by contractor quotations. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

17 5 ORE RESERVE ESTIMATE The information presented here is extracted from the ASX report entitled Mount Peake Feasibility Results released on 31 July 2015 and is available on the website The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competnet Person s findings are presented have not been materially modified from the original market announcement. Table 7 Mount Peake Ore Reserve estimate Mount Peake Project Ore Reserve Cut-off grade (15% Fe) Ore (Mt) V 2 O 5 (%) TiO 2 (%) Fe (%) Proved Probable Total The Ore Reserve has been classified as Proved and Probable, based on the July 2015 FS update (Table 7) with a cut-off grade of 15% Fe used for the estimate. A 15% Fe cut-off grade was chosen because the titanium and vanadium reports to the magnetic fraction of the beneficiation plant. 15% Fe also defines the lower limit of metallurgical testwork completed to date. 15

18 6 MOUNT PEAKE CONCENTRATOR METS provided Como Engineers with the criteria for the design of the on-site Concentrator Plant. METS oversaw all DTR and metallurgical testwork and passed this information onto Como Engineers. The engineering scope of works involves defining the key process parameters which will form the basis of the design criteria necessary to establish a capital cost estimate for the design and construction of the treatment plant and associated infrastructure. The estimate is to include all the treatment plant facilities, project site buildings, and all related services. 6.1 Process description The process design criteria and equipment sizing are based on a two-staged project development route with Stage 1 having a nominal feed rate of 3 Mtpa and mechanical availability of 90%. This results in a design feed rate of 381 tonnes per hour (t/hr) for Stage 1 and an output of 894,000 tonnes per annum (tpa) of magnetite concentrate. The feed grade of the material to the processing plant is based on the mine production schedule. The plant throughput increases a further 3 Mtpa after four years operation, which results in a nominal feed rate of 6 Mtpa or design feed rate of 760 t/hr for Stage 2, to produce 1,788,000 tpa of magnetite concentrate product. Crushing equipment will be capable of achieving the plant availability of 70% required to meet production requirements. The ore treatment plant will encompass a primary jaw crusher, a double deck banana screen in closed circuit with a secondary cone crusher to produce a P80 = 30 mm product followed by high pressure grinding rolls (HPGRs). The plant design relies on the recovery of magnetite using magnetic separation. Ore is delivered by truck from the mining operation to a ROM storage pad. A front-end loader transfers ore from the ROM pad stockpile to the two-stage crushing plant. A conveyor delivers crushed ore to the coarse ore stockpile. Crushed ore reclaimed from the ore stockpile is fed to the HPGR crusher operating in closed circuit with the HPGR screen. Slurry discharging from the primary ball mill combines with the HPGR screen undersize in the mill pump hopper. The slurry is pumped back to the primary cyclones. The cyclone overflow slurry gravitates to the magnetic separation circuit while cyclone underflow stream returns to the primary mill for further grinding. Cyclone overflow slurry is treated on the magnetic separation circuit. Tailings generated from the magnetic separation circuit are pumped to the tailings thickener for dewatering and disposal in a dedicated tailings storage facility (TSF). MOUNT PEAKE FEASIBILITY STUDY Executive Summary

19 7 TAILINGS STORAGE FACILITY Tailings at Mount Peake will be produced during the magnetic separation of the crushed and screened ore and will consist of non-magnetic silts and sands. Tailings will be disposed of in the form of paste, using a central thickened discharge method. Tailings deposition using this method comprises the following steps: Thickening of tailings Discharge of tailings into the TSF Deposition of tailings from the elevated centre of the TSF to form a cone shaped beach. The initial mine throughput of 3 Mtpa will be doubled to 6 Mtpa from Year 5. The tailings thickener and the tailings discharge system will be duplicated in Year 5 in line with the duplication of the process plant trains. The TSF was designed to be progressively developed in stages to minimise capex and to distribute the opex throughout the mine life. This progressive development will allow for the tailings deposition rate to double in Year 5 without the need for significant additional works. Similarly the tailings recovery water system was designed to suit both the initial and the ultimate tailings deposition rates. The Cone Tailings Dispensing (CTD) system was adopted as most suitable for the Mount Peake operation. The selected TSF area is generally flat with negligible slope, which favours this deposition method. The TSF will be located west-northwest of the processing plant. It will have a maximum footprint area of 357 hectares (ha) and will have a maximum storage capacity of Mt (38.13 Mm3). The CTD cone will reach a maximum height of 32 m with a diameter of 2,134 m. Given that the tailings do not contain contaminants, the TSF design did not include floor lining. Potential subsurface seepage will be intercepted by a perimeter seepage collection system. The recovery water pond was designed to be lined to maximise recovery of the tailings water to be returned to the process plant. Groundwater monitoring bores will be drilled along the perimeter of the TSF to monitor TSF performance. These bores were designed to accommodate pumps and thus to be used as recovery bores if needed. 17

20 8 MOUNT PEAKE PROJECT MINE SITE INFRASTRUCTURE 8.1 Water supply A water supply is required for the proposed Mount Peake mining operations. The supply is needed for the life of the mine for ore processing, dust suppression and camp supply. The preliminary water balance was developed for the two stages of mining, and the borefield design indicated the following requirements for groundwater pumping: Stage 1: Six active production bores fitted with pumps with a capacity of 8.5 litres per second (L/s), i.e. a total of supply of 51 L/s Stage 2: 10 active production bores fitted with pumps with a capacity of 8.5 L/s, i.e. a total supply of 85 L/s. The water balance indicated the main demand for water comes from the processing plant. This requires a total raw water input of 106 m3/hr and 212 m3/hr for Stage 1 and Stage 2 respectively. This accounts for up to 88% of the project s annual water demand, with the remaining demand required for potable water supply (requiring water treatment) and dust suppression. The total raw water supply required is 1.6 gigalitres (GL) per annum for Stage 1, increasing to 2.6 GL per annum for Stage 2. Groundwater drilling undertaken at various locations along the Hanson River in March 2015 identified that the alluvial aquifer has the potential to provide significant groundwater supply volumes. A single test production bore and four monitoring wells were established and pump testing undertaken. 8.2 Power supply A 16MW gas power station will be constructed at the mine site and owned and operated by a contractor. Stage 2 expansion will require the power station to be expanded to 28 MW. Discussions have been undertaken with potential suppliers for this facility. 8.3 Gas supply Gas is needed for powering the generators at the Mount Peake mine site. Natural gas supplies for the site will be sourced from the Amadeus to Darwin Natural Gas Pipeline (within 30 km of the Mount Peake mine site) via a hot tap. Road train tankers will commute between the pipeline and the mine site. Monitoring, supply and management of the gas will come under a contract with the nominated provider. Discussions have been undertaken with potential suppliers for this facility. 8.4 Diesel supply Diesel will be needed for all Mount Peake mining equipment, light vehicles and the trucks moving concentrate. TNG has held preliminary discussions with IOR confirming their ability to supply the project. IOR can provide storage, metering and dispensing facilities on a lease arrangement for the project. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

21 8 MOUNT PEAKE PROJECT MINE SITE INFRASTRUCTURE (CONTINUED) 8.5 Area roads and transport routes The main access road is to the east of Mount Peake, intersecting with the Stuart Highway and carrying on to the new rail siding. This access road will provide for site access from the Stuart Highway and for the heavy haulage of product to the new rail siding. Figure 7 shows the proposed transport corridor between the mine site and the rail heading and the crossing of Stuart Highway. A local network of access roads will be established in and around the site to accommodate plant traffic requirements, e.g. between the aerodrome, village, site and mine. The following options would be adopted for the FS access road design: Underpass beneath the Stuart Highway Unsealed access road Floodway crossing across the Hanson River Floodway crossing across the Murray Creek Mechanical protection of the APA Darwin to Alice Springs Gas Pipeline crossing. Figure 7 Proposed transport corridor 19

22 8 MOUNT PEAKE PROJECT MINE SITE INFRASTRUCTURE (CONTINUED) 8.6 Rail transport The Adelaide Darwin rail line is located approximately 100 km east of the project and will be used to transport product to Darwin for export. TNG will be required to install an inter-modal rail siding and install or contribute to a small number of passing loops subject to negotiated agreement with the rail system operators. Discussions have been held with the rail line operators Genesee and Wyoming Australia (GWA) regarding the project. GWA has advised that the use of the rail line is feasible and has provided indicative costs to facilitate movement of the magnetite concentrate from the rail siding to the unloading facility at the Darwin refinery. 8.7 Accommodation village During the construction phase of the Mount Peake project, a temporary 225-man Fly Camp will be constructed and utilised for a period of 18 months. This will form the basis of the permanent camp facilities. A permanent camp facility has been included in the Mount Peake project planning with a maximum capacity for 120 permanent fly-in/fly-out and drive-in/drive-out personnel during Stage 1 of operations. The capacity of the camp will increase to 160 for Stage 2 of operations. The camp setup, capital and operational cost expectations have taken into consideration expected power and water usage, sustainable remote power supply, waste treatment, recreational facilities and future growth potential to comfortably sustain the anticipated number of personnel residing within the camp at any one time. 8.8 Aerodrome In addition to utilising labour from the local area, the Mount Peake project will operate a fly-in/fly-out workforce. Mount Peake will utilise the existing aerodrome at Ti Tree, located approximately 70 km from the Mount Peake mine site. The existing Ti Tree aerodrome is a Code 2 non-registered aerodrome. The aerodrome is 1,320 m long and 30 m wide. TNG proposes to upgrade the current facility and build a basic terminal facility at Ti Tree aerodrome to accommodate both construction and operational personnel on a fly-in/fly-out basis from either Darwin or Alice Springs. The terminal would include necessary seating capacity and include check-in desks, baggage collection, amenities, car-parking facilities, undercover seated areas and baggage collection area. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

23 9 DARWIN REFINERY The refinery is planned to be located in Darwin, Northern Territory, Australia, on the Middle Arm inlet on the Elizabeth River, approximately 22 km by rail or road from the East Arm port and approximately 1,480 km north-northwest of the mine and concentrate load-out facility at Alice Springs (Figure 8). The approximate coordinates for the proposed refinery land area are S and E. Figure 8 Location of the Darwin refinery The Darwin refinery process plant and adjunct pig iron plant and titanium pigment plants are designed to produce three saleable products, being 99% vanadium pentoxide (V 2 O 5 ) flake, 95% iron in pig iron ingots and 99% titanium dioxide (TiO 2 ) pigment. The Darwin refinery project requires access to communications, electrical power, fuel and natural gas, waste disposal, water, roads and rail facility access. A communal corridor is proposed to link these services to the refinery site from established utilities, routes and locations. 21

24 9 DARWIN REFINERY (CONTINUED) 9.1 Process description The TIVAN Refinery will have a design feed capacity of 900,000 tonnes of magnetite concentrate per year and is proposed to expand to a maximum capacity of 1,800,000 tonnes in production year 5. The TIVAN Refinery consists of feed preparation, leaching, solvent extraction and regeneration. The Refinery will produce vanadium pentoxide, pigment grade titanium dioxide and pig iron. The plant layout has been designed with expansion capability should throughput be increased. The Regeneration Plant (RP) is an integral part of the Refinery. For the FS the RP will fall under a Build-Own-Operate-Transfer (BOOT) model. As this plant serves an internal purpose (recycling) and does not produce any of the final products, the Company considers it is prudent and commercially sensible to outsource it. It is important to note that the TIVAN Refinery is expected to be designed for an operational life of approximately 40 years and will therefore be expected to run longer than the current life-of-mine for the Mount Peake project. Drilling results have indicated the potential to find additional ore in the Mount Peake area, where other vanadium and titanium bearing magnetite-bearing intrusives have already been identified. The location of the TIVAN Refinery near Darwin Port also allows the potential for other concentrates to be shipped to the Refinery for processing. The potential for the additional long-life revenue streams from the Refinery have not been incorporated into the FS. 9.2 Refinery infrastructure Regeneration plant The regeneration plant section of the refinery will be constructed and operated under a BOOT facility. Independent consultants have provided the costings for this infrastructure. Water A water balance has been performed on the liquid flows in and out of the Darwin refinery. It shows that the plant is in a water surplus due to excess water being brought into the process with the large amount of liquid reagents. Where possible, water has been recycled around the plant using the process water dam as storage; however as process water is expected to contain chemicals, there are areas that require fresh raw water (i.e. reagent dilution, safety shower/eye wash water). In these instances, water will be sourced from the scheme water supply. All tailings from the Darwin refinery process plant are in a slurry form so will be thickened and filtered to produce a cake. The tailings water will be recycled as process water. The Palmerston zone pipeline connects the East Arm to the water mains and runs close to the proposed plant location, along Channel Island Road. This provides easy access to freshwater. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

25 9 DARWIN REFINERY (CONTINUED) 9.2 Refinery infrastructure (continued) Power The Darwin refinery requires electricity for the operation of the process plant and to a lesser extent for the offices and other miscellaneous requirements. The power requirement has been approximated to be 41 MW for the Stage 1 throughput scenario of 894,000 tpa of concentrate. This value is based on preliminary motor sizing and is subject to modification at the next study phase. Power will be sourced from mains power in Darwin. There are two local power stations close to the proposed site: Channel Island and Weddell. Channel Island and Weddell are approximately 13.5 km and 3 km away from the proposed site location, respectively. Gas The Darwin refinery plant requires gas to fuel for the refinery, the pig iron plant, the titanium pigment plant and the BOOT regeneration plant. The natural gas requirement for the entire refinery, including the adjunct pig iron plant, titanium pigment plant, and the BOOT regeneration plant, is 11,420,754 gigajoules (GJ) per annum for the 3 Mtpa initial ramp up phase. The gas will be sourced from the Amadeus Gas Pipeline located adjacent to the main water pipeline along Channel Road. Rail spur and unloading station The magnetite concentrate will be delivered from Mount Peake to the refinery by rail. A spur line running from the existing rail line will be located adjacent to the refinery. This spur line will be approximately 3.8 km to 4 km long to allow for the full length of the train (1.8 km) on either side of the unloading station which will be located midway along the spur. This is required to ensure that the train will have sufficient space on the spur line to unload all hopper wagons without interrupting the regular flow of traffic on the main rail; given the train unloading time is estimated to be nine hours. Concentrate will be discharged from the hopper wagons into hoppers located in a tunnel beneath the rail, which feed a stockpile conveyor. This spur line will also allow for the vanadium, titanium and iron products to be shipped to the Darwin port. Rail transport to Darwin port The final V 2 O 5, pig iron and titanium pigments products will be transported to the Darwin port unloading and ship-loading facilities by rail. TNG has begun discussions with both GWA for rail handling and Darwin Port Authority for ship loading and potentially storage capability. Capital and operating costs have been estimated on the basis of quotes provided by these groups. 23

26 9 DARWIN REFINERY (CONTINUED) 9.3 Products Vanadium pentoxide The vanadium pentoxide (V 2 O 5 ) product will be converted to flake. Product specification is based on the Pilot Plant results of V 2 O 5 being approximately 99% purity. The main impurity is iron, at a content of 0.66 wt%. Further work is presently being undertaken with the expectation that the final product grade will be a higher than 99%. Pig iron ingots To improve the saleability of the regeneration iron oxide by-product, a reduction and smelting facility (Pig Iron Plant) was included in the flowsheet. It has been estimated that this plant will produce pig iron ingots containing 95% iron, with the remaining impurities consisting of carbon, as well as minor amounts of entrained trace elements (such as aluminium and magnesium), which report to the iron oxide by-product from the regeneration process. This has been estimated based on typical pig iron plant figures with similar feeds and additionally upon the chemistry, which is anticipated to occur. Titanium dioxide pigment The titanium product, being the residue from the TIVAN leaching, would be used as feed material for the production of pigment grade TiO 2. The TiO 2 purities obtained by the proven, industry-standard Chloride process reach 84% to 99%, depending on the TiO 2 particle surface treatment process. The extent of the reduction in TiO 2 purity via the addition of surface treatment compounds is highly market driven. A detailed TiO 2 specification shall be provided as soon as final optimization and test work (currently ongoing) has been completed. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

27 10 MARKET AND SALES STRATEGY There are markets for all three products (V 2 O 5 flake/powder, pig iron and titanium pigment) Vanadium pentoxide Vanadium is largely used in structural steel and in high-end technology devices. Roskill expects the demand for vanadium to grow at a Compound Annual Growth Rate (CAGR) of 2.9% to Most of the growth in demand will come from steel driven both by increased intensity of use of vanadium in steel as well as increases in steel output. Mount Peake will be producing a high quality flake/powder product (99.1%) that may attract a premium of 5%. Vanadium pentoxide is sold by arrangement between the producer (or agent or trader) and the consumer. Vanadium products are most commonly priced in transactions through reference to the spot price that is published weekly, twice-weekly or on a month-end basis Pig iron Through the course of the FS process, TNG identified that the market and pricing for hematite produced through the TIVAN process would create a limited revenue stream. Subsequently, it was envisaged that the hematite could be upgraded to a pig iron product following installation of a Pig Iron Plant at the Darwin refinery. The market for pig iron was not explored in this FS; however it is understood that adequate demand exists for a high quality product such as that produced from Mount Peake. Pig iron is most commonly priced in US dollar per ton on Free on Board (FOB) (at port of origin) basis. It is a commodity product with standard specifications across producers and little price differentiation. The benchmark price for pig iron is Metal Bulletin s CIS export pig iron Baltic Sea. This index reflects the standard price for pig iron and is updated on a weekly basis Titanium pigment Through the course of the FS process, TNG identified that the market and pricing for the titanium dioxide product originally planned to be produced may have limited marketing and revenue value. It was subsequently envisaged that a high quality titanium pigment product can be manufactured from the TiO 2 slag product after processing through an onsite Titanium Pigment Plant. TIO 2 pigment is a specialty chemical sold in many different grades, in commodity volumes. Global TiO 2 pigment capacity was 7.56 Mt in 2014 and the total market is worth around US$18 billion per year. Outside China there are just 18 producers of titanium pigment worldwide accounting for approximately 40% of production. The main drivers behind the industries are widespread and include consumer goods, infrastructure and construction. Roskill identified that global demand has grown steadily at an average growth rate to 1.3% per year between 2007 and 2014; however in China this figure has been 8.1% per year over the same period. The growth in TiO 2 consumption in China is anticipated to continue at the slightly slower rate of 6.8% between 2015 and Overall global demand is forecast to increase by 4% per year to reach 7.31 Mt by

28 11 ENVIRONMENTAL IMPACT STUDY The Mount Peake project (mine site) was referred to the Department of the Environment ( DotE ) on 14 October 2013 due to the potential for the action to have a significant impact on a Matter of National Environmental Significance (MNES). On 13 November 2013, DotE determined that the proposed action was a controlled action and required assessment under the Environment Protection and Biodiversity Conservation Act (EPBC Act) before it could proceed. The controlling provision was listed threatened species and communities (sections 18 and 18A). The DotE also determined that the project will be assessed by accredited assessment under the Northern Territory Environmental Assessment Act (EA Act). In June 2013, a Notice of Intent for the Mount Peake project was submitted to the NT Environment Protection Authority (NT EPA). On 13 November 2013, the NT EPA determined that the Mount Peake project required assessment under the NT EA Act at the level of an Environmental Impact Statement (EIS). Terms of Reference for the Draft EIS were issued on 7 March On 9 March 2015, the NT EPA was notified that changes had been made to the Mount Peake project. The changes removed the hydrometallurgical processing plant and a gas/slurry pipeline infrastructure corridor linking the mine site with a rail siding at Adnera, and confirmed that trucking will be used to transport magnetite concentrate to the rail head. In accordance with clause 14A of the Environmental Assessment Administrative Procedures, the NT EPA decided that the changes did not alter the environmental significance of the project, that the project would continue to be assessed at the level of an EIS, and that the Terms of Reference issued on 7 March 2014 would not be amended. On 11 March 2015, a request to vary the action under section 156B of the EPBC Act was submitted to the DotE. The variation was consistent with the notification of change to the NT EPA described above. On 8 April 2015, the DotE confirmed acceptance of the variation and that the originally identified controlling provision would still apply. Once submitted to the NT EPA, the Draft EIS will be advertised for public comment and circulated to relevant government advisory bodies for review for a minimum of 28 days. Submitted comments will be forwarded by the NT EPA to TNG. TNG will be required to prepare a Supplement to the Draft EIS addressing these comments. Assuming no further information is requested, an Assessment Report based on the Draft EIS and the Supplement is prepared by NT EPA for the Responsible Minister within 35 days of receiving the Supplement. The draft EIS will be submitted late 2015 with approval expected mid The NT EPA also provides a copy of the Assessment Report to the Commonwealth Minister for the Environment for a decision under the EPBC Act on MNES. The approval process for the Darwin refinery has commenced. A notice of intent to the NT EPA and a referral to the Commonwealth DotE are currently being prepared and are expected to be submitted later in Studies have commenced to support the Darwin refinery approvals process. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

29 12 FINANCIAL RESULTS The financial evaluation has been completed using the Mineral Resource described in the mining inventory production target which is of inclusive of the stated Ore Reserve. Cash flow modelling and financial analysis of the project produced the results presented in Table 8 and Table 9. Table 8 Financial statistics Parameter Units NPV 8% A$ M 4,928 Net cash flow A$ M 11,572 Revenue A$ M 27,304 Cash outflow A$ M 15,732 Maximum working capital A$ M 989 Operating cash flow A$ M 13,592 Internal rate of return % 41 Table 9 Key performance indicators Description Unit Value Value of metal A$/t ore Total cost A$/t ore Cash cost A$/t ore

30 13 CAPITAL AND OPERATING COSTS, FINANCIAL ANALYSIS 13.1 Capital expenditure The FS assumes an overall Capital Expenditure (Capex) cost for Stage One of AUD $970 million, which includes an EPCM charge of 8% and 5% contingency. This figure includes all infrastructure, access/haul roads, mining, rail works, camp, water supply, concentrator, tailing dam, and the Darwin Refinery and port handling costs. Table 10 Capital cost summary Capital Expenditure Stage 1 $AUD Million Stage 2 $AUD Million *Total Mining and Infrastructure Capex $208 $67.1 **Total Refinery Capex $647 $631 TOTAL CAPEX $856 $698 EPCM (8%) $68.4 $55.9 CONTINGENCY (5%) $46.2 $37.7 ***TOTAL $970 $792 *Includes: Camp, roads and rail infrastructure, water supply, concentrator and tailings facility. **Includes: TIVAN refinery, Pig Iron and Titanium plants and port handling facilities. *** Small differences in totals are due to rounding Stage Two is planned to occur in production years 4-5, where mine production is projected to increase from 3Mtpa to 6Mtpa, and the capacity of both the concentrator and Refinery double. It is assumed that Stage 2 Capex costs of AUD $793 million are to be paid out of operating revenue Opex expenditure Overall Operating Expenditure (Opex) costs have been estimated based on life-of-mine tonnage and grade information, processing costs for the beneficiation plant, Refinery costs, output tonnages, and sales revenues, with an overall Life of Mine estimated Opex of $167/tonne of ore mined Foreign exchange TNG requested that a foreign exchange rate of the Australian dollar to the United States dollar be applied at US$1 purchases A$1.33 (reciprocal $0.75). TNG requested that a sensitivity of the headline values be provided at $0.70 and $0.80. At the time of preparing this report, the rate was $0.71. The foreign exchange rate was only applied to product prices as all other capex and opex prices were provided in A$. MOUNT PEAKE FEASIBILITY STUDY Executive Summary

31 13 CAPITAL AND OPERATING COSTS (CONTINUED) 13.4 Commodity Pricing Independent pricing forecasts for each commodity were commissioned by TNG. These included forecasts for vanadium (supplied by Roskills, London), titanium dioxide (supplied by Roskills, London) and pig iron (supplied by commodity traders, Shanghai). Mount Peake is planned to commence production at a time when vanadium prices are forecast to have recovered from recent price lows, while titanium pigment and pig iron prices are expected to remain strong. Forward estimate Real and Nominal prices for all commodities were provided by the consultants and are commercial in confidence. The methodology used by the consultants in the commodity forecasts was based on the following: Current market reviews of suppliers, consumers, reviews of global consumption, new markets, trends, Strengths Weaknesses Opportunities Threats (SWOT) analysis, historical and future trends of supply and demand in Real and Nominal prices. Only real commodity pricing was used for financial analysis in the FS Royalties Royalties were included in the financial analysis as being distributed to the Northern Territory government at the rate of 2.5% of the paid value of the three products (Table 11). Table 11 Royalties Product Royalties (A$ M) V 2 O TiO 2 pigment 425 Pig iron 138 Total royalties

32 13 CAPITAL AND OPERATING COSTS (CONTINUED) 13.6 Sensitivity analyses The sensitivity analysis completed on the foreign exchange rate is presented in Table 12. Table 12 Headline values for a change to the forex Parameter Units $0.70 $0.75 base $0.80 NPV 8% A$ M 5,850 4,928 4,122 Net cash flow A$ M ,572 9,908 Revenue A$ M 29,255 27,304 25,598 Cash outflow A$ M 15,781 15,732 15,690 Operating cash flow A$ M 15,494 13,592 11,928 Internal rate of return % 46% 41% 37% The sensitivity analysis completed on the discount rate used to calculate the net present value is presented in Table 13. Table 13 Headline values for a change to the discount rate NPV 6% NPV 7% NPV 8% base NPV 9% NPV 10% 6,055 5,460 4,928 4,452 4,025 MOUNT PEAKE FEASIBILITY STUDY Executive Summary

33 14 RISKS AND OPPORTUNITIES A Risk Workshop was carried out on 3 September Representatives from all contributors to the FS sections were present. Risks and opportunities for the project were identified and classified according to the likelihood and consequence of their occurrence. Risk mitigation strategies were outlined and TNG has commenced planning the actions required to implement the strategies which are presently underway where appropriate. FOR MORE INFORMATION AND DETAIL ON THE FESIBILITY STUDY PLEASE CONTACT TNG S MANAGING DIRECTOR PAUL BURTON peb@tngltd.com.au PHONE: +(61)

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