The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Continental Precious Minerals Inc.: Preliminary Economic Assessment Estimates Viken Project NPV at $1 Billion

Monday, September 13, 2010

Continental Precious Minerals Inc.: Preliminary Economic Assessment Estimates Viken Project NPV at $1 Billion10:07 EDT Monday, September 13, 2010TORONTO, ONTARIO--(Marketwire - Sept. 13, 2010) - Continental Precious Minerals Inc. (the "Company" or "Continental") (TSX:CZQ) is pleased to announce positive results from the preliminary economic assessment ("PEA") (also called a scoping study) on its MMS Viken Licence and surrounding licences in Sweden. The PEA was completed by P&E Mining Consultants Inc.("P&E"), with EHA Engineering Ltd. ("EHA") having completed the metallurgical component of the study. All currency amounts in this news release are in United States dollars unless otherwise indicated."This is a significant milestone for our company," said Ed Godin, President and CEO. "The PEA ascribes an estimated pre-tax net present value to the MMS Viken Project of $1.039 billion, we have only 51 million shares outstanding and a solid cash position. We have been very selective in how we have spent our capital in the last five years since we first acquired our exploration licences in Sweden, and with an expenditure of approximately C$15 million, and minimal dilution to our shareholders, we have delineated a significant mineral resource. We will continue to look for ways to advance the MMS Viken Project and to increase value for our shareholders."Conclusions and RecommendationsP&E concludes that the MMS Viken Project has economic potential as an open pit mine for uranium, vanadium and molybdenum. The base case contemplates an average life-of-mine waste to mineralized shale strip ratio of 0.5:1, a 40,000 tonnes per day mill feed rate and a 16 year mine life. Pre-production capital expenditures, including contingencies, are estimated to be $3.847 billion. The MMS Viken Project has an estimated pre-tax net present value of $1.039 billion (at 6.5% discount rate) and an internal rate of return of 10.3% using base case metal prices of $65.3/pound U3O8, $15/pound vanadium and $15/pound molybdenum. Only nine million Indicated and 214 million Inferred tonnes of the diluted and recovered potentially mineable portion of the MMS Viken licence resource above an NSR cut off grade of $60 per tonne were used in the base case. The recovered and potentially mineable portion of the resource used for the mine plan is located on the MMS Viken Licence. The mine life average resource grades including mine dilution and losses are as follows: --------------------------------------------------------------------------- Average Diluted and Mine Recovered Resource(i) Grades --------------------------------------------------------------------------- Uranium Vanadium Molybdenum --------------------------------------------------------------------------- ppm 155 2,003 270 --------------------------------------------------------------------------- % 0.016% 0.200% 0.027% --------------------------------------------------------------------------- lb/ton 0.32 4.00 0.54 --------------------------------------------------------------------------- (i) The 223 million tonnes of diluted and mine recovered resources utilized for this PEA are comprised of nine million Indicated tonnes and 214 million Inferred tonnes, both at similar grades The utilized resource tonnage represents only a small portion of the total resource reported by P&E and G.A. Harron & Associates Inc. as of December 31, 2008 of 24 million Indicated and 2.831 billion Inferred tonnes at an NSR cut off grade of $7.50 per tonne. While the 223 million tonnes selected for the mine plan encompass drill holes with the highest grades, there are other smaller areas on the MMS Viken Licence and surrounding licences with grades that are similar to the grades found in the 223 million tonnes. Moreover, several other potentially economic minerals are also found in the Alum Shale deposit at MMS Viken and surrounding licences. The PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. P&E recommends that the Company advance the project with extended and advanced technical studies in metallurgical, geotechnical and environmental matters with the intention to advance the project to a pre-feasibility stage.Economic Analysis The economic analysis uses a simple pre-tax cash flow model where annual non-discounted revenues during the 16 year mine life are projected to be relatively constant due to the availability of consistent grades in the tonnage to be mined and the assumption of fixed metal prices during this period. The mine would produce three product streams: a U3O8, a V2O5 and a molybdenum product at standard industry grades. Highlights of the economic analysis are shown in the following table: -------------------------------------------------------------------------- Viken Economic Indicators (dollar amounts in millions except $/tonne) -------------------------------------------------------------------------- Net present value -------------------------------------------------------------------------- - Undiscounted $4,618 -------------------------------------------------------------------------- - 5.0% discount $1,611 -------------------------------------------------------------------------- - 6.5% discount (base case) $1,039 -------------------------------------------------------------------------- - 10.0% discount $64 -------------------------------------------------------------------------- Internal Rate of Return 10.3% -------------------------------------------------------------------------- Project Payback Period From Start of Production (years) 7.1 -------------------------------------------------------------------------- Total Pre-Production Capital $3,847 -------------------------------------------------------------------------- Total Sustaining Capital $221 -------------------------------------------------------------------------- Life of Mine Average NSR Value ($/tonne) $89.57 -------------------------------------------------------------------------- Life of Mine Average Operating Cost ($/tonne) $50.64 -------------------------------------------------------------------------- Mining The PEA is based on mining of the shale resource from two adjacent open pit operations less than one kilometre apart, a larger southern pit and a smaller northern pit. Mining is based on a conventional drill and blast operation with truck and shovel loading for the waste rock and an excavating without blasting approach with a large hydraulic excavator for the shale mining. Bench heights of 10 metres have been assumed. A maximum of eight 177 tonne haul trucks and two large hydraulic excavators as well as a large wheel loader are contemplated for this operation, with annual material movements as high as 26 million tonnes of mineralized shale and waste rock combined.The mine plan contemplates transporting the shale resource by truck to a processing plant following primary crushing and that a portion of the waste rock will be used to construct the dykes of the tailings management facility ("TMF"). The remainder of the waste rock will be deposited in a rock storage pile. Mill tailings will be deposited in the TMF for the first 10 years of mine extraction operation. The mine plan also contemplates that tailings will be deposited in the south pit after completion of mining in that pit.Following the completion of the mining operation, estimated closure and TMF rehabilitation costs have been included. During operation, health and safety and environmental protection costs, including effluent treatment, have been estimated. Due to the preliminary nature of this evaluation, the local socio-political factors for the project area and cost for land acquisition have not been included. Further technical, environmental and socio-economic studies may result in minor adjustments to the pit design and land usage.Metallurgy Metallurgical test work was carried out by Process Research Ortech ("PRO") under the direction of EHA Engineering Ltd. following exploratory testwork by PRO that indicated that high uranium and molybdenum extractions could be obtained in an alkaline environment. Relatively high extractions of uranium and molybdenum under conventional conditions were confirmed. Vanadium proved resistant to direct leaching and roasting has been incorporated in the selected flowsheet to render this metal soluble in an alkaline solution. The roasting stage also allows the recovery of much of the energy content of the shale and for the purposes of this study a credit is assumed for electricity production. Based on the testwork, predicted extractions of uranium and molybdenum are considered to be reasonably assured. Because of limitations of scale with respect to roasting tests, the predicted vanadium extraction requires confirmation on a larger scale. Reagent consumptions (principally soda ash) are high and should also be addressed in ongoing process development efforts.Qualified Persons and Report The PEA study was completed under the supervision of Eugene Puritch, P. Eng. of P&E. Mr. Puritch was also responsible for mine design, production scheduling and overall financial analysis. Alexander Partsch, P.Eng., also of P&E, was responsible for capital and operating costs and cash flow modelling.Alfred Hayden, P. Eng. of EHA was responsible for metallurgical testing review, mineral processing and process capital and operating costs. Gerald A. Harron, P. Eng of G.A. Harron & Associates Inc. and Fred Brown CPG, PrSciNat of P&E are responsible for the resource estimate on which the PEA is based. Each of the individuals named above is a qualified person, as defined in National Instrument 43-101, is independent of the Company and is responsible for the technical disclosure contained in this news release. The PEA technical report, which will be prepared in compliance with National Instrument 43-101, will be filed with the regulators and made available on SEDAR at www.sedar.com within 45 days of this news release. About Continental Precious MineralsContinental Precious Minerals Inc. is a multi-mineral exploration company with multiple interests and exploration licences in Sweden. Since March 2005, Continental's primary goal has been to advance its Swedish assets. The Company is also evaluating other opportunities as they emerge in current market conditions. Cautionary Statement Regarding Forward-Looking StatementsThis news release contains forward-looking statements including statements relating to mineral resource estimates, capital and operating cost estimates, production and economic return estimates. The PEA, and the estimates contained therein, are preliminary in nature and there is no assurance that the Company will be successful in extracting metals from the Company's mineral exploration licences in Sweden on a commercial scale owing to a number of factors. The PEA is based on a number of assumptions, any one of which, if incorrect, could materially change the projected outcome. Factors that could affect the outcome include, without limitation, uncertainty of production and cost estimates, permitting to construct and operate a mine (which permits have not been obtained or applied for, and are not assured), environmental, social and political factors, as well as metal prices and unanticipated technical difficulties, and the other risk factors described in the Company's annual information form for the year ended May 31, 2010 available on SEDAR. The forward-looking statements contained in this news release represent the Company's views and expectations as of the date of this release and should not be relied upon as representing its views and expectations at any subsequent date.FOR FURTHER INFORMATION PLEASE CONTACT: Continental Precious Minerals Inc. Ed Godin President and CEO (416) 805-3036 (905) 276-4862(FAX) godine@rogers.com or Colin Languedoc Investor Relations Consultant (416) 367-5000 x225 (416) 367-5390(FAX) clanguedoc@barnesmcinerney.com