Enhanced economics from updated pilot plant results, metal prices and
currency exchange rates
Issued Capital: 50,100,107
LONDON, ON, May 8 /CNW/ - Fortune Minerals Limited (TSX-FT) is pleased to
announce improved economics for its 100% owned NICO cobalt-gold-bismuth
deposit in the Northwest Territories pursuant to a report prepared by Micon
International Limited (Micon) that provides an update to their 2007 full
feasibility study (see Fortune News Release, dated January 16, 2007). Fortune
retained Micon to prepare the updated report to reflect the improved flotation
metallurgical recoveries achieved in the Company's $4.3 million pilot plant
that is still in progress at SGS Lakefield Research (SGS Lakefield) (see News
Release, dated February 5, 2008) and more recent metal prices and currency
exchange rate sensitivities.
Micon's 2008 updated report indicates a base case, using predicted
long-term metal prices, pre-tax internal rate of return (IRR) of 32.3% and an
8% discounted net present value (NPV) of C$360.7 million for the NICO deposit
development, and a 97.2% pre-tax IRR and 8% discounted NPV of C$1.5 billion at
recent metal prices. These updated economics are based on the operating and
capital cost estimates from the 2007 feasibility study and have not been
adjusted for inflation or recent cost escalations prevalent in the industry.
The operating and capital costs will be re-assessed after completion of the
hydrometallurgical part of the pilot plant nearing completion at SGS
Lakefield, and the front-end engineering work for the development currently
being conducted by Aker Metals, a division of Aker Solutions Canada Inc. (Aker
Solutions).2008 Updated NICO Base Case economics using new flotation
metallurgical recoveries, US$20/lb cobalt, US$750/oz gold
and US$10/lb bismuth and C$0.97/US$1.00
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Update 2008
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Total Metal Recovery Unit Yrs 1-2 Yrs 3-15 LOM Ave.
Gold (Au) % 67.90 56.41 59.54
Cobalt (Co) % 84.58 85.50 85.37
Bismuth (Bi) % 69.60 69.66 69.65
Annual Production Yrs 1-2 Yrs 3-15 LOM Ave.
Gold ozs 70,280 24,074 30,258
Cobalt lbs 3,622,069 3,434,539 3,459,637
Bismuth lbs 3,383,777 3,627,101 3,594,535
Cash Operating Costs LOM Ave.
Cobalt Cash Cost
(gross) US$/lb Co 16.17
Au, Bi credits US$/lb Co (14.76)
Cobalt Cash Cost
(net) US$/lb Co 1.41
Annual Revenue C$ 000's 156,379 118,434 123,493
Annual Operating
Costs C$ 000's 79,782 53,811 57,274
Annual Operating
Cash Flow
(Pre-Tax)(*) C$ 000's 71,815 63,723 64,802
Annual Operating
Cash Flow
(After Tax) C$ 000's 71,427 46,096 49,474
Net Present Value C$ 000's Discount Pre-Tax After Tax
5% 475,696 322,559
8% 360,702 238,217
10% 299,833 193,478
Internal Rate of Return 32.3% 26.7%
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LOM = Life of Mine; Ave. = average
(*) Operating Cash Flow = Revenue - Operating Costs - Capital
Costs
2008 updated Net Present Value and Internal Rate of Return
sensitivities for select metal price and currency exchange
rate scenarios
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Sensitivity FX rate Au Price Co Price Bi Price Pre-Tax 8% Pre-Tax
Scenario US$/C$ US$/oz US$/lb US$/lb NPV C$ IRR
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2007
Feasibility
Base Case 0.84 525.00 16.50 4.50 143.7 million 18.3%
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Low Metal
Prices 0.97 750.00 12.00 8.00 57.2 million 12.6%
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Low Co Price 0.97 750.00 16.50 10.00 253.4 million 25.8%
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2008 Updated
Base Case 0.97 750.00 20.00 10.00 360.7 million 32.3%
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Moderate Co
Price 0.97 750.00 25.00 10.00 514.0 million 41.2%
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High Co Price 0.97 750.00 30.00 10.00 667.3 million 49.9%
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High Co Price,
Higher (15%
Op. Costs /
$50 million
Cap.) 0.97 750.00 30.00 10.00 535.6 million 35.7%
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Recent Metal
Prices 0.97 900.00 50.00 16.00 1,499.7 million 97.2%
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Op. Costs = Operating Costs, Cap. = Initial Capital
2008 Updated Net Present Value sensitivities by unit change
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NPV
Sensitivity Unit Change impact C$
-------------------------------------------------------------------------
Gold price US$/oz 25.00 5,407,000
Cobalt price $US/lb 1.00 21,827,000
Bismuth price $US/lb 1.00 20,611,000
Exchange Rate US cents 1.00 7,666,000
Initial Capital Cost US$ million 25 16,969,000
Operating Cost % 10% 36,785,000
-------------------------------------------------------------------------The 2007 Micon feasibility study established mineral reserves for the
NICO deposit of 21.8 million tonnes within a larger mineral resource. These
reserves, which support a minimum 15-year mine life at a production rate of
4,000 tonnes per day, include underground Proven and Probable Mineral Reserves
of 1,204,000 tonnes, grading 5.07 g/t gold, 0.14% cobalt and 0.19% bismuth and
open pit Proven and Probable Mineral Reserves of 20,613,000 tonnes, grading
0.85 g/t gold, 0.13% cobalt and 0.16% bismuth. Mr. B. Terrence Hennessey,
P.Geo. of Micon and Mr. Eugene Puritch, P.Eng. of P&E Mining Consultants Inc.
are the qualified persons responsible for the mineral reserve estimate in
accordance with National Instrument 43-101. Further information regarding the
NICO mineral reserves can be found in the Company's AIF and other documents
filed on the SEDAR website (www.sedar.com). The principal qualified person for
the 2008 economic update for NICO as well as the 2007 full feasibility study
is Ian Ward, P.Eng. of Micon.
The NICO cobalt-gold-bismuth deposit is located 160 km northwest of the
City of Yellowknife, 22 km west of the Snare hydro complex and 80 km north of
the Tlicho community of Behchoko and the highway to Edmonton. NICO has been
engineered primarily as an open pit mine, although higher grade underground
ores sourced from deeper parts of the deposit will supplement mine production
during the first two years of the mine's life. A plant will be constructed at
the site to produce cobalt cathode, gold dore and bismuth cement or metal
using hydrometallurgical process technologies that have been verified from
metallurgical test work and two pilot plant tests at SGS Lakefield. Fortune
has already purchased the Golden Giant Mine buildings, equipment and spare
parts inventory that is being dismantled for relocation to NICO (see News
Releases, dated November 5, 2007 and August 31, 2006). Fortune has submitted
its "land use" and "water license" applications to the Wek' èezhi' Land and
Water Board to permit the proposed mine and is also continuing to consult with
local communities and the Tlicho Government to secure their support for the
development and enter into impacts and benefits agreements.
"While the previous report showed the excellent value inherent in this
unique NICO deposit, Micon's updated analysis clearly demonstrates the even
greater economics generated by our improved recoveries and stronger commodity
markets," said Robin Goad, Fortune's President and CEO. "This represents
another extremely important milestone on our road to bringing NICO into
production to the benefit of all of the project's stakeholders."
About Fortune Minerals
Fortune Minerals is a diversified natural resource company with several
mineral deposits and a number of exploration projects, all located in Canada.
They include the Mount Klappan anthracite coal deposits in British Columbia,
and the NICO cobalt-gold-bismuth deposit, the Sue-Dianne copper-silver deposit
and other base and precious metals exploration projects in the Northwest
Territories. Fortune Minerals is focussed on outstanding performance and
growth of shareholder value through assembly and development of high quality
mineral resource projects.
This press release contains forward-looking information. This
forward-looking information includes, or may be based upon, estimates,
forecasts, and statements as to management's expectations with respect to,
among other things, the size and quality of the Company's mineral resources,
progress in development of mineral properties, demand and market outlook for
metals and future metal prices. Forward-looking information is based on the
opinions and estimates of management at the date the information is given, and
is subject to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from those projected
in the forward-looking information. These factors include the inherent risks
involved in the exploration and development of mineral properties,
uncertainties with respect to the receipt or timing of required permits and
regulatory approvals, the uncertainties involved in interpreting drilling
results and other geological data, fluctuating metal prices, the possibility
of project cost overruns or unanticipated costs and expenses, uncertainties
relating to the availability and costs of financing needed in the future and
other factors. Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Inferred mineral resources are considered too
speculative geologically to have economic considerations applied to them that
would enable them to be categorized as mineral reserves. There is no certainty
that mineral resources will be converted into mineral reserves. The
forward-looking information contained herein is given as of the date hereof
and the Company assumes no responsibility to update or revise such information
to reflect new events or circumstances, except as required by law.
For further information: Fortune Minerals Limited, Robin Goad,
President, Tel.: (519) 858-8188, Fax: (519) 858-8155,
info@fortuneminerals.com, www.fortuneminerals.com; Greg Taylor, Investor &
Public Relations, Tel: (905) 337-7673, Cell: (416) 605-5120, Fax: (905)
844-6532, gtaylor@fortuneminerals.com
