Graphite - Vohitsara Project - Madagascar
Flow sheet for the 6,000 tonne per year Pilot Plant - ready to be built
Maiden - Resource Report
Alberta - Polymetallic Deposit
PEA- Buckton Deposit
Note: Some of the mining claims mentioned in the above reports have been surrendered on order to make way for a new provincial park in Alberta
DNI METALS INC.
FOR RELEASE – April 9, 2014
DNI ASSESSES POTENTIAL FOR 200 TONNES ANNUAL SCANDIUM OXIDE CO-PRODUCT FROM ITS BUCKTON DEPOSIT, ALBERTA
DNI Metals Inc. announces that it has concluded an initial evaluation of recovering Scandium as a co-product of the polymetallic mining operations contemplated for its Buckton Deposit, Alberta, outlined in the Preliminary Economic Assessment for the Deposit announced on December 5, 2013 (the “Buckton PEA”). Scandium was provisionally omitted from the Buckton PEA.
DNI’s recent evaluation concludes that upward to 200,000 kilograms per year of co-product Scandium oxide (Sc2O3) could be recovered by the incorporation of a Scandium separation circuit into the contemplated metal processing flowsheets outlined in the Buckton PEA. This has the potential to contribute considerable additional revenues to the Buckton economic model.
Hatch Ltd. was retained to investigate the feasibility of incorporating a Scandium recovery circuit into the metals recovery hydrometallurgical flowsheets contemplated by the PEA, to recover co-product Scandium from the leaching solution once it has been extracted from the Buckton shales. Hatch formulated conceptual process engineering design criteria and a flow sheet, and prepared estimates for related capital and operating costs. Processing flowsheets presented in the PEA were also previously formulated by Hatch.
Hatch’s work concludes that a solvent extraction Scandium circuit can conceptually be incorporated into the Buckton metals recovery flowsheets at a capital cost of US$117 million (incl US$39 million contingency) for the production of approximately 200,000 kilograms per year of 99%+ purity Sc2O3 at an operating cost of US$500 per kilogram of final Sc2O3 product produced. The study also concludes that after allowing for assumed entrainment and processing circuit losses, an estimated 74% of the Sc2O3 leached from the Buckton shales may be ultimately recovered as a final product. The estimated capital and operating costs would be incremental to costs estimated in the PEA, as would be the incremental revenues generated from sale of the Scandium oxide final product.
The Buckton PEA outlined a conceptual mining and metals recovery scenario relying on the Updated and Expanded Buckton Mineral Resource announced on August 27, 2013 (the “Buckton Resource Study”), for the production of Ni- U-Zn-Cu-Co and Rare Earth Elements (REE) including Yttrium from the Deposit which is hosted in black shales. The contemplated Buckton mining operations entail open pit mining of 4.5 billion tonnes over a 64 year mine life at 72 million tonnes per year and extracting metals therefrom by bioheapleaching. The PEA also provided for a hydrometallurgical facility to recover the various metal products from the leach solution, and a separation plant to further refine the mixed Rare Earth Element oxide recovered into individual saleable final products. Scandium is incidentally leached during the contemplated leaching process as demonstrated by DNI’s benchscale testwork, and could be added to the final saleable products contemplated by the PEA provided it is recovered from the leaching solution.
The Buckton Resource Study estimated that the 4.7 billion tonne resource contains some 18.7 million kilograms of recoverable Sc2O3 from an average raw grade of 16.5 ppm at a 24% leaching recovery. The foregoing resource consists of the aggregate of Inferred and Indicated resources but, for the purposes of the PEA and this announcement, the mineral resource is deemed to consist entirely of an Inferred resource considering that 94% of it consists of an Inferred class resource. Considering that the Buckton PEA concluded that 95%+ of the mineral resource is potentially mineable, the resource study provides a reasonable first order estimate of the Scandium content of the Buckton Deposit. In addition, to the extent that Scandium is leached from the Buckton shales as a co- product of leaching the other metals of interest, cost of its separation from the leaching solution represents the only incremental cost for its recovery.
The Buckton Resource Study is based on a Sc2O3 price of US$4,195/kg (trailing two-year average to May/2013) although Sc2O3 price was quoted at $7,000/kg as recently as March 2014. The resource study estimated that Sc2O3 contained in the shale represents US$16.6 of gross recoverable value per tonne of shale resource. This value is equivalent to approximately US$10.8 of net operating revenues per tonne of shale resource after providing for processing circuit losses and refining/separation costs presented above (CDN$11.4 per tonne at exchange rate of
US$1=CDN$1.05). The foregoing figures represent additional potential revenues previously omitted from the Buckton PEA and are predicated on sale of the entire projected annual Sc2O3 production of 200,000 kilograms. The foregoing figures would be proportionately lower in the event only a portion of the annual Sc2O3 production is saleable, as would also be the capital cost of the smaller Scandium separation circuit required.
The above figures represent incremental potential revenues which can have a significant affect on the economics of the Buckton Deposit, especially if Scandium markets continue to expand sufficiently enough to absorb bulk of the projected annual Scandium production. As an initial guide, sensitivity of NPV, IRR and Payback to changes in incremental recoverable value per tonne of shale mined/processed from the Buckton Deposit is shown below for incremental revenues ranging $1 to $3 per tonne of shale mined/processed (table reiterated from the Buckton PEA). Considering the 72 million tonnes per year mining/processing rate contemplated by the Buckton PEA, capturing full value of the entire projected annual Scandium production would have a significant and material positive impact on economics of the Deposit.
Notes: NPV on pre-tax basis; IRR on pre-tax basis and assumes 100% equity financing; $ are CDN$; Table reiterated from Buckton PEA previously announced on December 5, 2013.
Scandium is one of the seventeen Rare Earth Elements and is typically used in solid oxide fuel cells and to alloy aluminum to strengthen it for applications in aircraft, automotive and frames requiring structural strength and light weight. Consumption in the foregoing sectors is fast expanding offering an expanding demand for Scandium though it is generally accepted that Scandium consumption is constrained by unreliable and scarce supply. Current global supply is estimated to range 10,000-20,000 kilograms a year with capacity for growth toward an unfulfilled demand estimated to be upward to 100,000 kilograms a year. There are no primary sources for Scandium and current supplies are a byproduct from other mining operations which are augmented by dwindling historic stockpiles.
DNI’s recent evaluation demonstrates that the Buckton Deposit represents a significant future source of Scandium, and that even if only a portion of the projected annual production is saleable it can have a significant impact on the economics of the Deposit. Scandium was provisionally omitted from the Buckton PEA considering that its markets are not sufficiently transparent to definitively capture its potential value in the cash flow models of the Buckton PEA. A more rigorous analysis of the economic impact of recovering co-product Scandium from the Buckton Deposit will be incorporated into a future update of the Buckton PEA.
DNI continues to make progress toward identifying other incremental enhancements to the economics of the Buckton Deposit previously announced in the Buckton PEA. These will be announced as review of recent supporting underlying testwork data is concluded.
DNI’s Qualified Person in respect of its Alberta polymetallic black shale projects, and this announcement, is Mr. Shahé F.Sabag P.Geo.