Cradle (AX:CXX) has today announced the results of the DFS on the Panda Hill Niobium Project. Cradle’s 50% share of NPV10 equates to US$1.50/share, ie Cradle’s shares are currently trading at just 13.5% of the value of its share in the project. Assuming that its share of initial capex (US$102.2m including working capital) is 50:50 debt:equity funded, it will therefore need to raise just US$51.1m (A$65.7m) in equity finance to advance it. As such, Panda Hill is poised to become the world’s first new niobium mine in 40 years, accounting for c 6% of global production.
Results of definitive feasibility study (DFS)
Compiled by MDM in collaboration with Coffey, AX:SRK, SGS, AX:SLR and Roskill (inter alia), the DFS envisages a 1.3Mtpa open pit operation, expanding by 100% from year four, mining an average 0.68% Nb2O5 grade in years 1-10 (and 0.54% over the 30-year life of mine) to produce an average 8,200t of ferro-niobium pa at an average stripping ratio of 1.5:1 and metallurgical recovery of 61%. Initial capex is estimated to be US$196m, with a further US$93m (to be funded from project cash flows) in year four. Average life-of-mine EBITDA is estimated to be US$112m pa (US$0.83/share undiluted) and the payback period 4.75 years. Ultimately, the DFS calculates a pre-tax project IRR of 32% and a post-tax NPV10 of US$404m at an initial product price of US$37.65/kg Nb and average unit operating costs of US$48.04/t ore processed or US$21.34/kg Nb produced.
Metallurgy similar to existing operations
The Panda Hill carbonatite is a near-circular, volcanic intrusion into the surrounding rock with a diameter of c 1.5km. It is steeply dipping, which renders it amenable to a conventional open pit mine incorporating six push-backs. To date, only 40% of the carbonatite area has been drill tested. Significantly, the ore’s metallurgical characteristics result in a process flowsheet in which 1) the flotation function is similar to Magris Resources’ Niobec project (which has a similar geology and mineralogy to Panda Hill); 2) the leaching function is similar to Anglo American’s Catalao; and 3) the converter function is similar to CBMM’s (the world’s dominant producer)final conversion stage, such that the ultimate product is high-quality Fe-Nb buttons.
Milestones
Cradle is actively involved in funding discussions, while its partner (Tremont) is engaged in well-advanced offtake and debt financing negotiations. A final development decision is expected in H216, leading to construction and commissioning in mid-2018.
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