TORONTO, ONTARIO--(Marketwired - Nov 14, 2013) - MagIndustries Corp. ("MagIndustries" or the "Company") (MAA.TO) is pleased to report that it has received an updated National Instrument 43-101 Technical Report entitled Update of the NI 43-101 Technical Report for MagMineral's Mengo Permit Area, Kouilou Region, Republic of Congo (the "Technical Report") in respect of the property owned by its 90% owned subsidiary MagMinerals Potasses Congo SA. ("MPC"). Specifically, the Technical Report relates to the geology and development of the Company's proposed 1.2 million tonnes K60 product per annum Mengo Potash Project in the Republic of Congo (the "Project"). The Technical Report updates the National Instrument 43-101 Technical Report filed on June 11, 2009 (see the Company's press release dated June 11, 2009). The authors of the Technical Report are EurGeol Dr. Henry Rauche, EurGeol Dr. Sebastiaan van der Klauw, and EUR ING Ralf Linsenbarth of ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH (collectively "ERCOSPLAN").
The Mengo Permit Area
The Mengo Exploitation Permit area (the "Mengo Permit Area") is located about 500 km west of Brazzaville, Republic of Congo (RoC), and about 15 km northeast of the port city Pointe Noire. The Mengo Permit lies in the Kouilou province and its boundaries are given by the following coordinates:
|11° 55' 40" E||4° 37' 37" S|
|12° 01' 01" E||4° 37' 37" S|
|12° 01' 03" E||4° 45' 00" S|
|11° 55' 40" E||4° 45' 00" S|
Within the 136 km² Mengo Permit Area the Company's exploration efforts have been concentrated on an area of approximately 25 km² (the "Mengo Mine Area") near the village of Mengo, where the brine field for the Project will be located. The study area represents approximately 18% of the Mengo Permit Area. MPC retains exclusive rights to a further approximately 1,111 km² of potentially developable area through the Makola Exploration Permit as outlined in the map below:
To view Figure 1, please visit the following link: http://media3.marketwire.com/docs/maa1114fig1.pdf.
The Basis of the Updated Technical Report
The updated Technical Report has been produced because significant changes have been made to the development plan for the Project from the 2008 Feasibility Study for the Project authored by SNC Lavalin International Inc. (the "FS") and additional geological information has become available as a result of the drilling of the first production wells. The basis for the description of mining, brine processing, product transportation as well as supplementary infrastructure for the operation as set forth in the Technical Report is based on the Preliminary Design (PD) by the Changsha Design and Research Institute of Ministry of Chemical Industry (CDI), which also supercedes the information in the FS.
As disclosed by the Company in its Press Release of April 4, 2012, and its subsequent Annual Information Form, the Company entered an engineering and design contract with CDI. This contract is for the full design, engineering services and procurement assistance associated with the construction of the Mengo Project, including brine extraction, transportation, processing plant, waste brine transportation, brine effluent handling, thermal power station, offices and housing, public utility interfaces, auxiliary engineering and the external transportation, external engineering work (including supply of water, natural gas, electricity supply and access roads) and the water supply and pumping. (The geographic layout of key elements in the PD is illustrated in Figure 2.)
In addition to the PD, the information in the Technical Report is based upon exploration, drilling and design studies which include:
- Data collected and processed from a 2D seismic survey run and 2 VSP surveys specifically for the Project,
- Geological and geophysical evaluation, with sampling and assaying of potash sections from 12 exploration drill holes and 1 production hole, geophysical evaluation of 22 production holes,
- Dissolution test work on core samples selected from different deposit horizons of 2 drill holes,
- Rock mechanical strength and creep property tests on core material from 2 drill holes,
- Bench scale test work on crystallization of Carnallite, Sylvite and Halite using brine obtained from dissolution test work.
To view Figure 2, please visit the following link: http://media3.marketwire.com/docs/maa1114fig2.pdf.
Geology and Mineralization
The potash deposits occur in the form of carnallitite rock which underlies most of the Makola Exploration Permit area. Carnallite is a magnesium-potassium-chloride mineral or a double-salt with the chemical formula KMgCl3-6H2O. The carnallitite rock occurs in multiple, horizontal horizons ranging in thickness from 0.5 meters ("m") to 25 m with an average content of about 70% Carnallite.
In the Mengo area, four potentially economic extractable carnallitite horizons have been identified in depths between 500 and 1,000 m below the surface. Thickness and grade of these horizons are:
|Horizon 1 Carnallitite: 19.1 m thick at 17.0% KCl present as Carnallite;|
|Horizon 2 Carnallitite: 12.5 m thick at 11.7% KCl present as Carnallite;|
|Horizon 3 Carnallitite: 9.6 m thick at 23.9% KCl present as Carnallite;|
|Horizon 4 Carnallitite: 25.1 m thick at 17.9% KCl present as Carnallite.|
Four carnallitite horizons are considered to have economic potential for solution mining of carnallitite. In descending order they are Horizon 1 carnallitite, Horizon 2 carnallitite, Horizon 3 carnallitite and Horizon 4 carnallitite. Horizon 1 carnallitite has potential for solution mining, but preliminary rock mechanical modeling has shown that a connection between caverns and groundwater bearing strata cannot be excluded and therefore this horizon is only considered part of the inferred mineral resources. Horizons 2, 3 and 4 have mineral resources categorized depending on the distance from the 12 new drill holes and 1 cored and assayed production hole.
The mineral resources have been categorized based on the distance surrounding the recent drill holes that have complete geophysical logs and spot cores in the horizons of interest. This is the best available practice in the potash industry. The distances from the wells for inclusion in the inferred, indicated and measured mineral resources are as follows:
- measured: 750 m radius if a correlation is possible on 2 sides to other drill holes with a comparable potash section, otherwise a 250 m radius is used,
- indicated: 1,500 m radius if a correlation is possible on 2 sides to other drill hole with a comparable potash section, otherwise a 500 m radius is used, minus the area of measured mineral resources,
- inferred: 3,000 m radius is used minus the area of measured and indicated mineral resources.
On the basis of the diameters discussed above, polygons were constructed around the drill holes. The measured and indicated mineral resources were calculated for each polygon, reducing the area by taking into account the presence of geological (faults) and technical exclusion zones (steep slopes and villages, from the updated Land Use and Occupation Survey. For the inferred mineral resources an overall 35% area reduction for these factors was used. Furthermore, mining losses due to safety pillars around caverns and non perfect cavern recovery were accounted for in the mineral resource estimate. This mineral resource estimate does not take into account any of the several relatively thin (<5 m) and high grade carnallitite horizons, which together have a combined thickness in the order of 20 m within the investigated evaporite section, as they are only marginally mineable by solution mining. The estimated mineral resources for each category are given in the following table.
These mineral resources can be solution mined and the resulting brine can be economically processed to a saleable product (see next section). Therefore the Measured and Indicated Mineral Resources can be transformed to Proven and Probable Mineral Reserves. Units of Measurement in the Table below are millions of tonnes.
|Horizon 1||Horizon 2||Horizon 3||Horizon 4|
|Measured Mineral Resources|
|Millions of Tonnes of Mineralized Material||46.9||33.3||95.5|
|Average KCl Grade (%)||11.9||24.1||17.8|
|Indicated Mineral Resources|
|Millions of Tonnes of Mineralized Material||11.1||8.0||25.8|
|Average KCl Grade (%)||12.0||23.8||18.1|
|Inferred Mineral Resources|
|Millions of Tonnes of Mineralized Material||406.2||235.2||169.4||494.8|
|Average KCl Grade (%)||17.0||11.6||23.9||17.9|
The Measured and Indicated Mineral Resources for the Horizons 2 to 4 have been transformed to Proven and Probable Mineral Reserves by superimposing a brine field layout showing positions of the single caverns on the areas within the Measured and Indicated Mineral Resources. Mineral Reserves are estimated to be as follows:
Proven Mineral Reserves:
- Horizon 2: 39.1 million tonnes of carnallitite at 11.9% KCl
- Horizon 3: 27.1 million tonnes of carnallitite at 24.0% KCl
- Horizon 4: 82.6 million tonnes of carnallitite at 17.8% KCl
Probable Mineral Reserves:
- Horizon 2: 10.8 million tonnes of carnallitite at 12.0% KCl
- Horizon 3: 7.8 million tonnes of carnallitite at 23.8% KCl
- Horizon 4: 26.3 million tonnes of carnallitite at 18.1% KCl
From the Probable and Proven Mineral Reserves, the following amounts of KCl can be mined: 25.88 Mt (proven) and 7.89 Mt (probable) totalling 33.77 Mt, which compares well with the Mineral Reserve estimate from 2009, which stated a 33.23 Mt of KCl can be mined from the Probable and Proven Mineral Reserves. The amount of Carnallite amounts accordingly to 96.46 Mt (proven) and 29.42 Mt (probable) totalling 125.88 Mt, compared to 123.80 Mt of Carnallite from the 2009 report. Based on the design work done by CDI and the brine field layout presented in the ERCOSPLAN estimates that about 31.7 million tonnes of muriate of potash product can be generated from Proven and Probable Mineral Reserves in the Mengo Permit Area. With a planned capacity of 1.2 mtpy and a ramp up over two years with annual production of 480,000 and 960,000 tpy, the Project lifetime is 27.2 years.
ERCOSPLAN noted in the Technical Report various 2D and 3D seismic surveys and rock mechanical work that could have the effect of increasing or re-categorizing mineral resources and mineral reserves within the study area.
It is proposed that this mineral reserve will be mined using hot leaching in double well caverns. The brine produced will be processed at the proposed potash facility located nearby. The processing concept will continually add Carnallite (produced during a later stage) to the incoming brine, which will result in the precipitation of Halite and Sylvite. The solid slurry will be separated from the brine and processed using hot leaching and KCl crystallisation to produce a K60 product. The K60 product is to be transported as slurry to the port site, where it will be dried and compacted to a marketable K60 material. The brine from the Carnallite decomposition will be evaporated to produce Carnallite, which will be recycled to the Carnallite decomposition stage. Remaining MgCl2 brine and solid NaCl will be disposed of in the sea or mined out caverns.
The proposed process has a conservative estimated recovery of 89.2% of KCl from the incoming brine, transformed to product.
Potash (muriate of potash or MOP) is commonly marketed as K60, which is defined as potash with 60% K2O content. Pure KCl contains 63% K2O (or K63). To be sold as K60, MOP must have KCl content equal to or greater than 95%. The remaining 5% content of K60 is NaCl and other impurities. Potash mineral resources can be specified as tonnes KCl or tonnes K60. To convert tonnes KCl to tonnes K60, multiply by 1.0526. To convert from any K2O content to %KCl, divide by 0.6317.
Estimated Project Capital Expenditure and Operating Expenditures
Cost estimates in the PD are based on CDI's database, experience with other potash projects and from quotations received from suppliers of key equipment, materials and services. CDI has not explicitly stated the accuracy of the cost estimation in the PD but looking at the amount of engineering done for the Project and the detail of the equipment list and price calculations ERCOSPLAN concluded that the accuracy of cost estimates is in the range of ± 15% and is at least on the level of a feasibility study.
For the 1.2 mtpy Project, the initial capital expenditure (CAPEX) is estimated at US$1.270 billion and includes costs for the brine field, evaporation and crystallisation plant including all related utilities and infrastructure, gas and water supply, product transportation to the port site, drying and compaction, product storage and a ship loading facility on a dedicated jetty.
The annual operating expenditures ("OPEX") for full production have been estimated at US$131.8 million annually for the production of 1.2 mtpy of a K60 product. These operating costs include estimates for labour, maintenance power generation, consumables, diesel, product transport and electricity. In addition, sustaining CAPEX has been estimated for the operation at US$4.6 million. Combined OPEX and sustaining CAPEX equate to approximately US$114/tonne of KCl.
Assuming a nominal discount rate of 10%, the economic analysis calculated a Net Present Value (NPV) of US$1.263 billion before tax and US$1.002 billion after tax. The Internal Rate of Return (IRR) is 21.6% before tax and 20.6% after tax. Payback is achieved within Year 10 of the Project (or Year 8 of production) considering discounted cash flows. Relative to the net cash flows from operations in 2018, assumed for the purposes of the Technical Report to be the first full year of production at 1.2 million tpy after a two year ramp up period, payback is approximately four years (CAPEX/Cash Flow from Operations at Full Production).
The results of the design study by CDI provide a reasonable basis to support a decision by MagIndustries' board of directors to proceed with the development of the Project.
The Project schedule in CDI's design calls for early site works to begin mid 2013. The construction period is approximately 36 months and onset of production is planned to commence in the second quarter of 2016. Production will ramp up to 1.2 mtpy over a period of 3 years with an estimated 480,000 tonnes of production in Year 1, 960,000 tonnes of production in Year 2 and full production reached in Year 3. The Proven and Probable Mineral Reserves would on that basis be depleted in Year 28 of production with 275,000 tpy production in the last year.
The design study for a solution mine on the Mengo Permit Area resulted in a significant advancement of the level of definition of the Project. The Project is financially robust and the path forward for developing the mine is well understood.
The authors of the Technical Report, EurGeol Dr. Henry Rauche, EurGeol Dr. Sebastiaan van der Klauw and EUR ING Ralf Linsenbarth of ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH ("ERCOSPLAN") are the Qualified Persons with respect to the Technical Report and have reviewed and approved the contents of this press release.
About MagIndustries Corp.
MagIndustries is a Canadian company whose common shares are listed on the TSX and trade in Canadian currency under the symbol "MAA". The Company has 755,942,674 common shares outstanding. MagIndustries is focused on the development of its potash assets in the Republic of Congo. More information on the Company is available on its website, www.magindustries.com.
Except for historical information, this press release contains forward-looking statements, which reflect the Company's current expectation regarding future events. These forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from those statements. Those risks and uncertainties include, but are not limited to, country policy and political risks, currency exchange risk, changing market conditions, force majeure events, and other risks detailed from time-to-time in the Company's ongoing filings. The "Update of the NI 43-101 Technical Report for MagMineral's Mengo Permit Area, Kouilou Region, Republic of Congo" referred to in this press release includes certain statements and information that contain forward-looking information within the meaning of applicable Canadian securities laws. All statements, other than statements of historical facts, including the requirements and potential output of the Project, the likelihood of commercial mining, the likelihood of securing a strategic partner and the ability to fund future mine development are forward-looking statements and include forward-looking information. Such forward-looking statements and forward-looking information specifically include, but are not limited to, statements concerning: Company plans at the Project; Company ability to fund the Project; the timing of granting of key permits; approval of the Environmental Impact Statement (EIS); the estimated potash production and the timing thereto; economic analyses; capital and operating costs; mine development programs; future potash prices; cash flow estimates; and economic indicators derived from the foregoing.
Forward-looking statements are based on the opinions and estimates set out in the Technical Report as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including: the receipt of all necessary approvals; the ability to conclude a transaction; uncertainty of future production; capital expenditures and other costs; financing and additional capital requirements; the receipt in a timely fashion of any further permitting for the Project; legislative, political, social or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; and the risks normally involved in the exploration, development and mining business.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under the Company's continuous disclosure obligations. In light of these risks, uncertainties and assumptions, the forward-looking events in this press release might not occur.
Cusip: 55917T 102