|
Wardrop completes
independent Preliminary Assessment report based on
concept, pre-feasibility and feasibility-level study programs
completed by Pebble Partnership and Northern Dynasty
Preliminary
Assessment describes and assigns potential economic
value to three mine
development cases comprising 25, 45 and 78 years
of open pit mining and a
nominal processing rate of 200,000 tons per day
For the Pebble Project, the 45-year Reference Case yields a
14.2% pre-tax IRR, a
6.2-year payback on initial capital investment of
$4.7 billion and a $6.1 billion pre-tax NPV at a 7% discount
rate and long-term
metal prices. At current prevailing metal prices,
the 45-year Reference
Case yields a 23.2% pre-tax IRR, a
3.2-year payback on initial capital investment and a
$15.7 billion pre-tax NPV at a 7% discount rate
For Northern Dynasty's 50% share of the project, the 45-year
Reference Case yields an 18% pre-tax and 15.4% post-tax IRR,
a 4.7-year pre-tax
and 5.3-year post-tax payback on initial capital
investment and a
$3.6 billion pre-tax and $2.4 billion post-tax NPV
at a 7% discount rate and long-term metal prices.
At current prevailing
metal prices, the 45-year Reference Case yields
a 30.2% pre-tax and 25.1% post-tax IRR, a 2.6-year pre-tax
and 3.1-year post-tax payback on initial capital investment
and an $8.3 billion pre-tax and $5.6 billion post-tax NPV at
a 7% discount rate for Northern Dynasty's 50% interest
The 45-year
Reference Case produces 31 B lb copper, 30 M oz gold,
1.4 B lb molybdenum, 140 M
oz silver, 1.2 M kg rhenium and 907,000 oz
palladium while mining only 32% of the mineral resource
For the 45-year Reference Case, cash costs per payable lb
of copper after by-product credits total -$0.11
>>
VANCOUVER,
Feb. 23 /CNW/ - A National
Instrument 43-101-compliant Technical Report on a Preliminary Assessment of
the Pebble Copper-Gold-Molybdenum Project (the "Pebble Project") in
southwest Alaska, completed for Northern Dynasty Minerals Ltd. (TSX: NDM;
NYSE Amex: NAK) by Wardrop, a Tetra Tech Company ("Wardrop"),
confirms that Pebble is an economically robust project with the potential to
become one of the most important metal producers of the 21st century. The
Preliminary Assessment updates and substantially revises project economic
analysis last done by Northern Dynasty in 2004, and so constitutes a material
change for which a material change report containing the full executive
summary will be shortly filed at www.sedar.com and at www.northerndynasty.com, along
with a complete copy of the Technical Report.
The
Preliminary Assessment is based on Wardrop's comprehensive review of recent
engineering and technical studies undertaken principally by the Pebble
Limited Partnership (the "Pebble Partnership") and by Northern
Dynasty. The economic assessments and other opinions expressed in the
Preliminary Assessment are strictly those of Northern Dynasty and Wardrop,
and do not reflect the views of any other stakeholder in the project. The
Pebble Partnership continues to separately undertake detailed engineering
studies toward the completion of a Prefeasibility Report for the Pebble
Project as contemplated by the 2007 Limited Partnership Agreement, including
ongoing programs to engage project stakeholders in the planning process. As
such, any project which is ultimately put forward by the Pebble Partnership
for permitting under the National Environmental Policy Act (NEPA) may differ
from those mine models presented in the Preliminary Assessment.
"The
Pebble Project is among a handful of mineral projects around the world with
the potential to meaningfully enhance global production of copper, gold and
molybdenum at a time when worldwide demand is increasingly outstripping
supply," said Northern Dynasty President & CEO Ron
Thiessen.
"After many years of exhaustive geological, environmental and
socioeconomic study, as well as intensive engineering effort, this
Preliminary Assessment confirms Pebble's potential as a modern, world-class
mine that provides decades of benefits to shareholders, to the people and
communities of Alaska, and to the U.S. and global economies."
The
Preliminary Assessment describes and assigns potential economic value for
three successive development cases:
<<
1. An Investment Decision Case ("IDC
Case"), which describes an initial
25-year open pit mine life upon which a decision to initiate mine
permitting, construction and operations may be based;
2. A Reference Case, which is based on 45
years of open pit mine
production; and
3. A Resource Case, which is based on 78
years of open pit mine
production
and seeks to assess the longer-term value of the project
in
current dollars.
>>
The
25-year IDC Case is the only scenario for which a tailings storage facility
has been comprehensively engineered, although preliminary engineering studies
have identified a number of suitable sites nearby to receive tailings after
25 years. Ongoing investigations undertaken during the first 25 years of
mining, including construction of an early access shaft, would determine the
optimal mining method and plan for subsequent phases of development.
For
the purposes of its Preliminary Assessment, Wardrop has selected the 45-year
Reference Case as its base case. All currency values are in US dollars.
Production rates are stated in imperial tons.
A
Preliminary Assessment is preliminary in nature, and includes Inferred
mineral resources that 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 assurance that the Preliminary
Assessment will be realized.
Preliminary
Assessment Key Findings
<<
- At a 0.30% CuEQ(1) cutoff, the
Pebble mineral resource comprises:
- 5.94 billion tonnes of
Measured and Indicated resources grading
0.78%
CuEQ(2), and containing 55 billion pounds of copper,
67 million ounces of gold, and 3.3 billion pounds of
molybdenum; and
- 4.84 billion tonnes of
Inferred resources grading 0.53% CuEQ,
and containing 25.6 billion pounds of copper, 40.4 million
ounces of gold, and 2.3 billion pounds of molybdenum.
- The Pebble deposit supports open
pit mining utilizing conventional
drill, blast and truck-haul methods, with an initial mine life of 25
years and potential for mine extensions to 78 years and beyond.
- The potential exists for
underground block cave development at a
mining rate of 150,000 tons per day to emerge as the preferred mining
method for phases of development beyond 25 years.
- The process plant employs
conventional crush-grind-float technology
and equipment with a nominal throughput of 200,000 tons per day, as
well as secondary gold recovery. Average mill throughput for the
first 25 years would be 219,000 tons per day, rising to 229,000 tons
per day for the 45-year and 78-year cases.
- Other project facilities and
infrastructure include: a 378 megawatt
natural
gas-fired turbine plant at the mine site; an 86-mile
transportation corridor to Cook Inlet for road and pipeline
rights-of-way; and a new deep-water port on Cook Inlet.
- Construction of the Pebble
Project would take four years, and
employ a peak labour force of 2,080. The operations workforce
averages 1,120 over the first 25 years of mining.
- The 45-year Reference Case
processes 3.8 billion tons of material
with a strip ratio of 2.1:1 and average grades of 0.46% copper,
0.011 oz gold per ton and 214 ppm molybdenum.
- The 45-year Reference Case
produces 31 billion lb copper,
30
million oz gold, 1.4 billion lb molybdenum, 140 million oz
silver, 1.2 million kg rhenium and 907,000 oz palladium, while
mining 32% of the total Pebble mineral resource.
- Economic valuations are
expressed in US dollars in real terms
utilizing long-term metal prices of $2.50/lb copper, $1,050/oz
gold, $13.50/lb molybdenum, $15/oz silver, $3,000/kg rhenium and
$490/oz palladium.
- Annual cash flows are calculated
and subsequently discounted at a
rate of 7%. Market convention generally uses a discount rate of 8%
for copper and other base metal projects and 5% for gold and other
precious metal projects. Given the large contribution of gold to
total revenues at Pebble, a 7% blended discount rate has been
selected.
- For the Pebble Project, the
45-year Reference Case yields a 14.2%
pre-tax Internal Rate of Return (IRR), a 6.2-year payback on
initial capital investment and a $6.1 billion pre-tax Net Present
Value (NPV) at long-term metal prices and a 7% discount rate. At
current prevailing metal prices, the 45-year Reference Case yields a
23.2% pre-tax IRR, a 3.2-year payback on initial capital investment
and a $15.7 billion pre-tax NPV at a 7% discount rate.
- For Northern Dynasty's 50%
interest in the Pebble Project, the
45-year Reference Case yields an 18% pre-tax and 15.4% post-tax
IRR, a 4.7-year pre-tax and 5.3-year post-tax payback on initial
capital investment, and a $3.6 billion pre-tax and $2.4 billion
post-tax NPV at a 7% discount rate at long-term metal prices. At
current prevailing metal prices, Northern Dynasty's 50% interest
in
the Pebble Project yields an 30.2% pre-tax and 25.1% post-tax
IRR, a 2.6-year pre-tax and 3.1-year post-tax payback on initial
capital investment and an $8.3 billion pre-tax and $5.6 billion
post-tax NPV at a 7% discount rate.
- Initial capital expenditures for
all three development cases are
estimated at $4.7 billion, excluding capital costs associated with
outsourced power, road and port infrastructure. Sustaining capital
requirements for the 45-year Reference Case are estimated to be
$6.14 billion.
- Operating costs for the 45-year
Reference Case average
$966 million per year and total $43.5 billion over the life of the
mine. Operating costs per ton milled average $11.55 for the 45-
year
Reference Case, while cash costs per payable pound of copper,
after by-product credits, are -$0.11.
- Net Smelter Return (NSR) for the
45-year Reference Case averages
$2.67 billion per year and totals $120.2 billion over the life of
mine. NSR per ton milled for the 45-year Reference Case averages
$31.91.
- For the 45-year Reference Case,
56% of NSR would be derived from
copper, 24% from gold, 16% from molybdenum and 4% from other
metals (silver, rhenium and palladium).
--------------------------------
(1) The Preliminary
Assessment is based on mineral resources announced by
Northern Dynasty in a news release dated February 1, 2010. The
mineral resources fall within a volume or shell defined by long-term
metal price estimates of $2.50/lb copper, $900/oz gold and $25/lb
molybdenum. Mineral resources that are not mineral reserves do not
have demonstrated economic viability.
Copper equivalent calculations for this resource estimate used metal
prices of $1.85/lb for copper, $902/oz for gold and $12.50/lb for
molybdenum, and metallurgical recoveries of 85% for copper 69.6% for
gold, and 77.8% for molybdenum in the Pebble West area and 89.3% for
copper, 76.8% for gold, 83.7% for molybdenum in the Pebble East area.
Recovery values reflect average results of metallurgical testwork
completed to the date of the February 1, 2010 estimate and are
subject to revision pending ongoing
metallurgical studies. Revenue is
calculated for each metal based on grades, recoveries and selected
metal prices; accumulated revenues are then divided by the revenue at
1%
copper. Recoveries for gold and molybdenum are normalized to the
copper recovery as shown below:
CuEq (Pebble West) = Cu % + (Au g/t x
69.6%/85% x
29.00/40.79) + (Mo % x 77.8%/85% x 75.58/40.79)
CuEq (Pebble East) = Cu% + (Au g/t x 76.8%/89.3% x
29.00/40.79)+ (Mo % x
83.7%/89.3% x 5.58/40.79)
(2) Individual grades for
each metal, as well as estimates for Measured
and Indicated resources, are shown in the Mineral Resources section
below.
>>
Pebble
Project Development Overview
Mine
Site Development
As
described in the Preliminary Assessment, the Pebble deposit supports an open
pit mine utilizing conventional drill, blast and truck-haul methods, with an
initial life of 25 years and potential for mine extensions to 78 years and
beyond. Phases of mine development beyond 25 years would require separate
permitting and development decisions to be made in the future, based on
prevailing conditions at the time and the accumulated experience gained from
developing and operating the initial phase of the Pebble Project.
Near-surface mineral resources in the western portion of the deposit are most
efficiently developed through open pit methods, but the potential exists for
underground mining (in particular block caving) to emerge as the preferred
mining method for subsequent phases of development. Given its size, structure
and polymetallic nature, the Pebble deposit presents a great deal of
flexibility in near-term and long-term development options.
Of
the three development cases, the 25-year IDC Case is the most comprehensively
engineered. It seeks to mine near-surface resources for rapid payback,
primarily in Measured and Indicated categories but also including a small
proportion (16%) of Inferred material. This initial phase of mining processes
about two billion tons of material or less than 20% of the total Pebble
mineral resource. As such, it is not considered to be ideal for assessing the
potential long-term economic value of the Pebble Project.
The
level of engineering applied to the 45-year Reference Case is similar to that
in the 25-year IDC Case, with the exception of detailed engineering
associated with tailings storage after year 25. This extended phase of mining
processes some 3.8 billion tons of material (or 32% of the total Pebble
mineral resource), primarily in Measured and Indicated categories in the
western portion of the deposit. Inferred resources comprise 28% of the total
volume mined. Wardrop selected the 45-year Reference Case as the base case
for its Preliminary Assessment due to the enhanced level of development of
the Pebble mineral resource within a timeframe that makes a significant
contribution to the project's NPV. However, the 45-year Reference Case in
itself is not an optimized mine plan.
The
78-year Resource Case is based on a continuation of mining methods, costs and
assumptions that inform the 25-year IDC Case and the 45-year Reference Case.
By developing some 55% of the Pebble mineral resource over eight decades, it
is intended to demonstrate the longer-term value of the Pebble Project. The
78-year Resource Case processes some 6.5 billion tons of material, primarily
in Measured and Indicated categories from both the western and eastern
portions of the Pebble deposit. Inferred resources comprise 33% of the total
volume mined.
While
the economic valuation of all three development cases is based on open pit
mining only, a detailed description of underground block cave mine design,
operations, costs and production at a mining rate of 150,000 tons per day is
also provided in the Preliminary Assessment.
The
Pebble process plant, as described in the Preliminary Assessment, employs
conventional crush-grind-float technology and equipment, as well as secondary
gold recovery, with a nominal throughput of 200,000 tons per day and the
potential to process up to 275,000 tons per day in certain years. Annual
throughput averages 219,000 tons per day for the 25-year IDC Case, and
229,000 tons per day for the 45-year Reference Case and 78-year Resource
Case.
The
grinding circuit comprises two 40 ft x 25 ft @ 29 megawatt semi-autogenous
grinding (SAG) mills and four 26 ft x 40 ft @ 16.4 megawatt ball mills. The
concentrator produces a copper-gold concentrate containing 26% copper and 18
grams gold per dry tonne, as well as a 52% molybdenum concentrate and gold
doré. It is anticipated that the Pebble Partnership would construct a
molybdenum autoclave plant offshore to treat the molybdenum concentrate,
thereby realizing enhanced value through improved pricing for rhenium and additional
copper recovery.
Mine
schedules have been developed for the life of mine in each development case,
setting out volumes of mineralized and non-mineralized material, densities,
tons, dilution, grades of contained metals (copper, gold, molybdenum) and
material hardness. A key aspect of these schedules is the annual plant
throughput tonnage, which is defined by the grindability of the mineralized
material. The rate of production in any given year is derived by that tonnage
which utilizes all available energy for which the plant has been designed
(909 GWh/a). The production limit of 275,000 tons per day is therefore
determined by the SAG mill hydraulic limit. Accordingly, the annual
processing rate fluctuates over the mine life as the hardness of the mill
feed varies.
Other
mine-site facilities and installations include tailings storage, rock
storage, a 378 megawatt combined-cycle natural gas-fired turbine plant, as
well as shop, office and camp buildings. A map showing the proposed mine-site
layout for the 25-year IDC Case can be found at http://www.northerndynastyminerals.com/ndm/Prelim_A.asp.
Copper-gold
concentrate produced at Pebble is transported via a slurry pipeline to a new
deep-water port on Cook Inlet. There it is de-watered and bulk shipped to
offshore smelters. Other products of the process plant are gold doré,
which would be flown to market from an existing aviation facility at Iliamna,
and molybdenum concentrate, which would be bagged and trucked to the port for
shipment.
Process
tailings are stored behind purpose-built embankments during mining, and
thereafter in the pit. A mine life extension beyond 25 years would require a
second tailings storage facility (TSF) to be developed; topographical and
land status conditions in the project area present a number of nearby siting
opportunities. Engineering has been undertaken to a preliminary level for TSF
sites with sufficient capacity to receive mine tailings after 25 years.
The
TSF option selected for the 25-year IDC Case is Site G, located approximately
three miles west of the open pit. The TSF impoundment would be created by
three embankments. The north embankment is constructed initially to a height
of approximately 200 feet and raised each year, while the south and east
embankments would be built later in the mine life as the impoundment fills.
The ultimate height of the north embankment is approximately 685 feet, while
ultimate heights for the south and east embankments are approximately 450
feet and 100 feet, respectively.
A
site-wide water surplus is forecast at the Pebble Project over the life of
the mine. All surplus water would be treated to meet prevailing regulatory
standards for water quality and the protection of aquatic life, and released
to optimize downstream flow conditions for fish and aquatic habitat.
Infrastructure
Development
As
described in the Preliminary Assessment, an 86-mile transportation corridor
would be developed to link the Pebble mine site to a new deep-water port on
Cook Inlet, 66 miles to the east, as shown on the local infrastructure map at
http://www.northerndynastyminerals.com/ndm/Prelim_A.asp.
The transportation corridor includes a two-lane, all-weather permanent access
road, whose primary purpose is to transport freight by conventional highway
tractors and trailers. The transportation corridor also includes four buried,
parallel pipelines, including:
<<
- a copper-gold concentrate slurry
pipeline from the mine site to the
port;
- a return water pipeline from the
port site to the mine;
- a natural gas pipeline from the
port site to the mine to fuel a
natural gas-fired generating plant at the mine site; and
- a diesel fuel pipeline from the
port site to the mine.
>>
A
new, permanent deep-water port developed at the entrance to Iniskin Bay on
Cook Inlet would serve as a product load-out facility, and facilitate
in-bound fuel, equipment and supply shipments. Facilities at the port include
a barge dock, deep-sea ship dock, container storage and a handling area for
containers. Infrastructure components at the port site include a power
generation plant, accommodation and maintenance facilities, offices, fuel
storage and transfer facilities. On an annual basis, the port would accommodate
shipping of 1.1 million tons of concentrate in Handymax vessels of
approximately 50,000 tons, as well as diesel fuel and container barges of
equipment and supplies.
Project
planning assumes that the nearby Cook Inlet gasfield does not currently have
adequate natural gas supplies to meet project needs. Natural gas would be
sourced from other regions of Alaska and transported by pipeline from the
Kenai Peninsula across Cook Inlet via a sea-bottom line to the port site and
along the transportation corridor to the mine site. An alternative is the
importation of liquefied natural gas (LNG) directly to the port site. Diesel
fuel would be transported via pipeline from the port fuel storage facility to
the mine site. In addition to fuelling mobile mining equipment and other
rolling stock, emergency electrical generators also operate on diesel fuel.
Project
Workforce
Construction
of the Pebble Project is projected to take four years, with a peak labour
force of 2,080. The operations workforce is projected to average 1,120 over
the initial 25-year life of the mine, with longer-term labour requirements to
be determined by the mine development alternatives selected. Both
construction and operations workforces would be accommodated in project camps
at the mine site and the port site, and work on a rotational basis. The
Pebble Partnership has stated its intention to maximize local and Alaskan
hire at the Pebble Project, and is developing a workforce development plan to
accomplish this goal.
Production
Profiles
The
45-year Reference Case processes 3.8 billion tons of mineralized material,
with a strip ratio of 2.1:1 and average grades of 0.46% copper, 0.011 oz gold
per ton and 214 ppm molybdenum. Metallurgical recoveries average 87.9% for
copper, 71.3% for gold and 87.9% for molybdenum. Over the life of mine, the
45-year Reference Case produces 30.5 billion lb of copper, 30.3 million oz of
gold and 1.4 billion lb of molybdenum, as well as 140 million oz of silver,
1.2 million kg of rhenium and 907,000 oz of palladium.
Production
results for all three development cases are presented in the table below:
<<
-------------------------------------------------------------------------
Item
Unit
IDC
Reference
Resource
Case
Case
Case
-------------------------------------------------------------------------
Mine Life
years
25
45
78
-------------------------------------------------------------------------
Mining Method
Open Pit
Open Pit
Open Pit
-------------------------------------------------------------------------
Strip Ratio
waste : ore 1.5
2.1
2.6
-------------------------------------------------------------------------
Processing Rate M
ton / yr 80
84
84
-------------------------------------------------------------------------
Total Processed M
ton
1,990
3,767
6,528
-------------------------------------------------------------------------
% of M+I+I Resource
%
17
32
55
-------------------------------------------------------------------------
Copper Eq. Grade
%
0.72
0.83
0.84
-------------------------------------------------------------------------
Copper Grade
%
0.38
0.46
0.46
-------------------------------------------------------------------------
Gold Grade
oz / ton
0.012
0.011
0.011
-------------------------------------------------------------------------
Molybdenum Grade ppm
182
214
243
-------------------------------------------------------------------------
Copper Recovery
%
86.6
87.9
88.4
-------------------------------------------------------------------------
Gold Recovery
%
71.5
71.3
71.2
-------------------------------------------------------------------------
Molybdenum Recovery
%
84.8
87.9
89.4
-------------------------------------------------------------------------
Copper Eq. Recovered M lb
24,483
54,129 96,357
-------------------------------------------------------------------------
Copper Recovered
M lb
12,944
30,494 53,437
-------------------------------------------------------------------------
Gold Recovered
000 oz 16,391
30,307 50,133
-------------------------------------------------------------------------
Molybdenum Recovered M lb
616
1,420
2,835
-------------------------------------------------------------------------
Peak Annual Copper
Recovered
M lb
822
1,157
1,096
-------------------------------------------------------------------------
Peak Annual Gold
Recovered
000 oz
1,038
1,127
1,088
-------------------------------------------------------------------------
Peak Annual
Molybdenum
Recovered M
lb
43
56
62
-------------------------------------------------------------------------
Avg Annual Copper
Recovered
M lb
518 678
685
-------------------------------------------------------------------------
Avg Annual Gold
Recovered
000 oz
656
673
643
-------------------------------------------------------------------------
Avg Annual
Molybdenum
Recovered M
lb
25
32
36
-------------------------------------------------------------------------
26% Cu-Au Concentrate
Produced
000's dmt
22,582
53,200 93,225
-------------------------------------------------------------------------
52% Mo Concentrate
Produced
000's dmt
537
1,239
2,473
-------------------------------------------------------------------------
>>
Financial
Valuation
Pebble
Project
Economic
valuations for all three development cases presented in the Preliminary
Assessment are expressed in US dollars in real terms. The valuation date for
NPV, IRR and other financial results is at the commencement of project
construction.
Long-term
and current prevailing metal prices applied to the financial model for each
of the development cases are outlined in the table below:
<<
-----------------------------------------------
Metal Type Unit Long Term Current
Metal Prices
Prevailing
Metal Prices
-----------------------------------------------
Copper
$/lb
2.50
4.00
-----------------------------------------------
Gold
$/oz
1,050
1,350
-----------------------------------------------
Molybdenum $/lb 13.50
15.00
-----------------------------------------------
Silver
$/oz
15.00
28.00
-----------------------------------------------
Rhenium $/kg 3,000
3,000
-----------------------------------------------
Palladium $/oz
490
490
-----------------------------------------------
>>
Net
Smelter Return (NSR) statistics at long-term metal prices for all three
development cases are provided in the table below:
<<
-------------------------------------------------------------------------
Description
Unit IDC
Case Reference
Case Resource Case
25 years 45
years 78
years
-------------------------------------------------------------------------
NSR LOM
$ M
54,637
120,197
213,970
-------------------------------------------------------------------------
NSR Annual Average $ M
2,185
2,671
2,743
-------------------------------------------------------------------------
Copper
%
52
55
55
-------------------------------------------------------------------------
Gold
%
29
24
22
-------------------------------------------------------------------------
Molybdenum
%
15
16
18
-------------------------------------------------------------------------
Other
%
4
5
5
-------------------------------------------------------------------------
NSR per ton milled $ / ton 27.45
31.91
32.78
-------------------------------------------------------------------------
>>
Annual
cash flows are calculated and subsequently discounted at a rate of 7%. Market
convention generally uses a discount rate of 8% for copper and other base
metal projects and 5% for gold and other precious metal projects. Given the
large contribution of gold to total revenues at the Pebble Project, a 7%
blended discount rate has been selected. Financial results for all three
development cases are summarized below:
<<
-------------------------------------------------------------------------
Item
Unit IDC
Case Reference
Case Resource Case
-------------------------------------------------------------------------
Mine Life
years
25
45
78
-------------------------------------------------------------------------
Initial Capital $ M
4,695
4,695
4,695
-------------------------------------------------------------------------
LOM Sustaining
Capital
$ M 3,204
6,140
11,727
-------------------------------------------------------------------------
LOM NSR
$ M
54,637
120,197
213,970
-------------------------------------------------------------------------
NSR Per Ton $ / ton 27.45
31.91
32.78
-------------------------------------------------------------------------
LOM Operating
Cost
$ M 22,208
43,489
96,063
-------------------------------------------------------------------------
Operating Cost
Per Ton
$ / ton
11.16
11.55
14.72
-------------------------------------------------------------------------
C1 Copper Cost $ / lb
-0.10
-0.11
0.21
-------------------------------------------------------------------------
LOM Pre-Tax Net
Cash Flow
$ M
20,123
55,278
87,329
-------------------------------------------------------------------------
Long-term Metal
Prices
-------------------------------------------------------------------------
Pre-Tax NPV at
7%
$ M
3,837
6,129
6,812
-------------------------------------------------------------------------
Pre-Tax IRR
%
13.4%
14.2%
14.5%
-------------------------------------------------------------------------
Pre-Tax Payback years
6.5
6.2
6.1
-------------------------------------------------------------------------
Current
Prevailing
Metal Prices
-------------------------------------------------------------------------
Pre-Tax NPV at
7%
$ M
11,410
15,709
16,864
-------------------------------------------------------------------------
Pre-Tax IRR %
22.6%
23.2%
23.3%
-------------------------------------------------------------------------
Pre-Tax Payback years
3.2
3.2
3.2
-------------------------------------------------------------------------
Pre-tax results are before
income taxes but after net profits interest
(NPI) royalty and local
production taxes.
C1 Copper Cost is the cash
cost per payable pound of copper (including
operating costs and
realization charges) after by-product credits
>>
A
graphic representation of annual pre-tax cash flows for the 45-year Reference
Case can be found at http://www.northerndynastyminerals.com/ndm/Prelim_A.asp.
Northern
Dynasty's 50% Interest
Under
the terms of the Pebble Limited Partnership Agreement, Anglo American is
required to elect to commit $1.425 to $1.5 billion
in staged investments in order to retain its 50% interest in the Pebble
Project. If a feasibility study for the project is completed after 2011,
Anglo American's overall funding requirement increases from $1.425
billion to $1.5 billion. A significant proportion of Anglo
American's financial contribution is expected to be applied to initial
capital costs to construct the mine, thereby reducing Northern Dynasty's
capital requirements.
In
order to calculate an NPV and IRR estimate for Northern Dynasty's 50%
interest in the Pebble Project under this scenario, it is necessary to adjust
Northern Dynasty's share of initial capital costs. For the purpose of this
calculation, it is assumed that $1 billion
of Anglo American's funding requirement would be applied to the Pebble
Project's capital cost for construction. To the end of 2010, Anglo American
has invested some $325 million to advance the Pebble
Project.
Inasmuch
as Northern Dynasty is in a position to calculate taxes payable for its portion
of profits associated with development of the Pebble Project, financial
results for Northern Dynasty's 50% interest in the project have been
presented on a pre-tax and post-tax basis, and at long-term and current
prevailing metal prices, in the table below:
<<
-------------------------------------------------------------------------
Item
Unit IDC
Case Reference
Case Resource Case
-------------------------------------------------------------------------
Long-term Metal
Prices
-------------------------------------------------------------------------
Pre-Tax NPV at
7%
$ M
2,403
3,550
3,891
-------------------------------------------------------------------------
Pre-Tax IRR
%
17.3
18.0
18.4
-------------------------------------------------------------------------
Pre-Tax Payback years
4.9
4.7
4.6
-------------------------------------------------------------------------
Current
Prevailing
Metal Prices
-------------------------------------------------------------------------
Pre-Tax NPV at
7%
$ M
6,190
8,339 8,917
-------------------------------------------------------------------------
Pre-Tax IRR
%
29.5
30.2
30.4
-------------------------------------------------------------------------
Pre-Tax Payback years
2.7
2.6
2.6
-------------------------------------------------------------------------
Long-term Metal
Prices
-------------------------------------------------------------------------
Post-Tax NPV at
7%
$ M
1,559
2,358
2,650
-------------------------------------------------------------------------
Post-Tax IRR %
14.6
15.4
15.8
-------------------------------------------------------------------------
Post-Tax Payback years
5.6
5.3
5.3
-------------------------------------------------------------------------
Current
Prevailing Metal
Prices
-------------------------------------------------------------------------
Post-Tax NPV at
7%
$ M
4,141
5,561
6,002
-------------------------------------------------------------------------
Post-Tax IRR %
24.5
25.1
25.4
-------------------------------------------------------------------------
Post-Tax Payback years
3.1
3.1
3.0
-------------------------------------------------------------------------
Pre-tax results are before
income taxes but after NPI royalty and local
production taxes.
>>
The
impact of various discount rates on Northern Dynasty's 50% share of the Pebble
Project's pre-tax NPV(7), and its sensitivity to a range of copper and gold
prices (both individually and combined with other metal prices held constant)
is presented in the table below. Life of Mine cash flow for Northern
Dynasty's 50% is $7,535 million for the 25-year IDC
Case, $19,818 million for the 45-year
Reference Case and $31,583 million for the 78-year
Resource Case.
<<
-------------------------------------------------------------------------
Item
Unit IDC Case Reference Case Resource Case
-------------------------------------------------------------------------
Discount Rate
-------------------------------------------------------------------------
NPV at 5%
$M
2,491 4,164
4,877
-------------------------------------------------------------------------
NPV at 7%
$M
1,559
2,358
2,650
-------------------------------------------------------------------------
NPV at 8%
$M
1,213
1,774
1,975
-------------------------------------------------------------------------
NPV at 10%
$M
689
976
1,087
-------------------------------------------------------------------------
Copper Price (Gold $1050/oz, Mo $13.50/lb)
-------------------------------------------------------------------------
2.50
$M
1,559
2,358
2,650
-------------------------------------------------------------------------
2.75
$M
1,893
2,776
3,089
-------------------------------------------------------------------------
3.00
$M
2,226 3,192
3,525
-------------------------------------------------------------------------
3.25
$M
2,557
3,605
3,955
-------------------------------------------------------------------------
3.50
$M
2,874
4,006
4,375
-------------------------------------------------------------------------
3.75
$M
3,188
4,404
4,792
-------------------------------------------------------------------------
4.00
$M
3,499
4,796
5,201
-------------------------------------------------------------------------
4.25
$M
3,802
5,181 5,605
-------------------------------------------------------------------------
Gold Price (Copper $2.50/lb, Mo $13.50/lb)
-------------------------------------------------------------------------
1050
$M
1,559 2,358
2,650
-------------------------------------------------------------------------
1100
$M
1,646
2,459
2,755
-------------------------------------------------------------------------
1150
$M
1,733
2,560
2,860
-------------------------------------------------------------------------
1200
$M
1,820
2,660
2,964
-------------------------------------------------------------------------
1250
$M
1,906
2,760
3,068
-------------------------------------------------------------------------
1300
$M
1,993
2,861 3,172
-------------------------------------------------------------------------
1350
$M
2,079
2,961
3,276
-------------------------------------------------------------------------
1400 $M
2,166
3,061
3,380
-------------------------------------------------------------------------
Combined Copper and Gold
Price (Mo $13.50/lb)
-------------------------------------------------------------------------
2.50 / 1050
$M
1,559
2,358
2,650
-------------------------------------------------------------------------
2.75 / 1100
$M
1,980
2,876
3,193
-------------------------------------------------------------------------
3.00 / 1150
$M
2,399
3,391
3,732
-------------------------------------------------------------------------
3.25 / 1200
$M
2,804
3,895
4,255
-------------------------------------------------------------------------
3.50 / 1250
$M
3,200
4,389
4,771
-------------------------------------------------------------------------
3.75 / 1300
$M
3,590
4,873
5,276
-------------------------------------------------------------------------
4.00 / 1350
$M
3,971
5,350
5,776
-------------------------------------------------------------------------
4.25 / 1400
$M
4,351
5,827
6,276
-------------------------------------------------------------------------
>>
Capital
and Operating Costs
Initial
and Sustaining Capital
All
three development cases presented in the Preliminary Assessment have the same
initial capital requirement of $4.7 billion.
This includes:
<<
- direct field costs for executing
the project;
- indirect costs associated with
the design, construction and
commissioning of new facilities;
- owner's support costs for
corporate, environmental, permitting and
staffing; and
- capital costs to completion of
construction and commissioning at the
end
of Year -1.
>>
The
capital cost estimate has been developed over a series of project stages and
is largely based on first principles estimates. Quantities have been derived
for project components for which productivity and labour rates have been estimated
for specific trades. As a result, the capital cost estimate approaches a
pre-feasibility level of accuracy.
It
has been anticipated in the financial valuation that the Pebble Partnership
would enter into strategic partnerships as needed to develop, finance and
operate a number of infrastructure assets - including the transportation
corridor (port and road) and the power plant. Each financial case also
considers that the Pebble Partnership would construct a molybdenum autoclave
plant offshore to treat the molybdenum concentrate, and thereby realize
enhanced value through improved pricing for rhenium and additional copper
recovery. Other costs include owner's costs and an overall capital cost
contingency of 17.7%.
The
initial capital cost for all three development cases is shown in the table
below:
<<
-------------------------------------------------
Area
Cost ($M)
-------------------------------------------------
Mining
430.8
-------------------------------------------------
Processing
1,389.3
-------------------------------------------------
Other Infrastructure
422.0
-------------------------------------------------
Tailings
294.0
-------------------------------------------------
Pipelines
97.5
-------------------------------------------------
Access Road *
162.0
-------------------------------------------------
Port Infrastructure *
154.5
-------------------------------------------------
Power Generation *
534.1
-------------------------------------------------
Indirect Costs
1,406.8
-------------------------------------------------
Contingency
865.7
-------------------------------------------------
Molybdenum Autoclave
374.2
-------------------------------------------------
Less: Escalation/
De-Escalation
(121.1)
-------------------------------------------------
Less: Outsourced
Infrastructure * (1,315.0)
-------------------------------------------------
Total
4,694.8
-------------------------------------------------
* Outsourced
infrastructure, including associated indirects and
contingencies
>>
Sustaining
capital requirements (in $M) for all three development cases are shown in the
table below:
<<
-------------------------------------------------------------------------
Area
IDC Case Reference
Case Resource Case
-------------------------------------------------------------------------
Open Pit
2,047
3,286
7,225
-------------------------------------------------------------------------
Processing 146
230
517
-------------------------------------------------------------------------
Infrastructure
12
165
165
-------------------------------------------------------------------------
Waste Management
846
2,211
3,364
-------------------------------------------------------------------------
Other
70
104
180
-------------------------------------------------------------------------
Molybdenum Autoclave
83
144
276
-------------------------------------------------------------------------
Total 3,204
6,140
11,727
-------------------------------------------------------------------------
>>
Operating
Costs
Life
of mine unit operating costs for the 45-year Reference Case are estimated to
be $11.55 per ton milled. This
includes all costs associated with open pit mining of mineralized and
non-mineralized material, processing of mill feed to a final concentrate and
all services required to support the operation. This estimate has been
prepared as an annual cost for each year of the project from plant start-up
to mine closure. Operating costs are based on estimated process plant
throughput rates, which range depending on the grindability of the material
fed to the process plant.
Life
of mine unit operating costs for all three development cases are presented in
the table below:
<<
-------------------------------------------------------------------------
Description
Unit
IDC Case
Reference Case
Resource Case
-------------------------------------------------------------------------
Total Operating
Costs
$M
22,208
43,489
96,063
-------------------------------------------------------------------------
Open Pit $ / ton 3.83
4.30
7.19
-------------------------------------------------------------------------
Process
$ / ton
4.50
4.60
4.93
-------------------------------------------------------------------------
Transportation $ / ton 0.97
0.91
0.91
-------------------------------------------------------------------------
Environmental $ / ton 0.30
0.29
0.31
-------------------------------------------------------------------------
G&A
$ / ton
1.56
1.45
1.38
-------------------------------------------------------------------------
Total Operating
Costs per ton
milled
$ / ton
11.16
11.55
14.72
-------------------------------------------------------------------------
>>
Costs
of ocean freight for the transportation of final concentrate to off-shore
smelters, as well as all smelter and other offsite charges, are summarized in
the table below:
<<
-------------------------------------------------------------------------
Description
Unit
IDC Case
Reference Case
Resource Case
-------------------------------------------------------------------------
Offsite Charges
-------------------------------------------------------------------------
Total Offsite
Charges
$ M 4,752
11,089
19,938
-------------------------------------------------------------------------
Offsite Charges
per ton milled $ / ton
2.39
2.94
3.05
-------------------------------------------------------------------------
Cash Cost
Analysis
-------------------------------------------------------------------------
Offsite Charges $/lb
0.38
0.38
0.39
-------------------------------------------------------------------------
Operating Costs $/lb
1.79
1.48
1.87
-------------------------------------------------------------------------
Copper Cash Cost $/lb
2.17
1.86
2.26
-------------------------------------------------------------------------
By-Product
Credits
$/lb -2.27
-1.97
-2.05
-------------------------------------------------------------------------
C1 Copper Cost $/lb -0.10 -0.11
0.21
-------------------------------------------------------------------------
>>
A
graphic representation of annual cash costs for the 45-year Reference Case
can be found at http://www.northerndynastyminerals.com/ndm/Prelim_A.asp.
Mineral
Resources
Mineralization
within the Pebble deposit is dominated by hypogene pyrite, chalcopyrite and
molybdenite. Bornite is also an important component in some parts of the
Pebble East zone. The Pebble West zone has a thin, volumetrically subordinate
zone of supergene mineralization and a very minor zone of oxide
mineralization. The Pebble East zone contains only hypogene mineralization.
Copper-gold-molybdenum
mineralization, as currently known, extends over an east-west elongated area
of 2.8 by 1.9 miles and to a depth of 2,000 feet in the Pebble West zone, and
to at least 5,000 feet in the Pebble East zone. Mineralization in the Pebble
East zone remains open to the east, north and south. A much larger zone of
strong alteration and low-grade mineralization extends north, south and west
of the known Pebble deposit.
The
current Pebble mineral resource estimate (see Northern Dynasty news release
dated February 1, 2010) represents the
culmination of seven years of geological and geostatistical analysis and is
based on drill data to September 2009.
The
Pebble deposit mineral resources are reported within a defined volume at various
cut-off grades in the table below:
<<
-------------------------------------------------------------------------
Cut-off CuEQ Mt Cu Au Mo Cu Au Mo CuEq
(% CuEQ) (%)
(%) (g/t) (ppm) (Blb) (Moz) (Blb) (Blb)
-------------------------------------------------------------------------
Measured
-------------------------------------------------------------------------
0.30 0.65 527 0.33 0.35 178 3.8 5.9 0.21 7.6
-------------------------------------------------------------------------
0.40 0.66 508 0.34 0.36 180 3.8 5.9 0.20 7.4
-------------------------------------------------------------------------
0.60 0.77 277 0.40 0.42 203 2.4 3.7 0.12 4.7
-------------------------------------------------------------------------
1.00 1.16 27 0.62 0.62 301 0.4 0.5 0.02 0.7
-------------------------------------------------------------------------
Indicated
-------------------------------------------------------------------------
0.30 0.80 5,414 0.43 0.35 257 51.3 60.9 3.07 95.5
-------------------------------------------------------------------------
0.40 0.85 4,891 0.46 0.36 268 49.6 56.6 2.89 91.7
-------------------------------------------------------------------------
0.60 1.00 3,391 0.56 0.41 301 41.9 44.7 2.25 74.8
-------------------------------------------------------------------------
1.00 1.30 1,422 0.77 0.51 342 24.1 23.3 1.07 40.7
-------------------------------------------------------------------------
Measured + Indicated
-------------------------------------------------------------------------
0.30 0.78 5,942 0.42 0.35 250 55.0 66.9 3.28 102.2
-------------------------------------------------------------------------
0.40 0.83 5,399 0.45 0.36 260 53.6 62.5 3.09 98.8
-------------------------------------------------------------------------
0.60 0.98 3,668 0.55 0.41 293 44.5 48.3 2.37 79.2
-------------------------------------------------------------------------
1.00 1.29 1,449 0.76 0.52 341 24.3 24.2 1.09 41.2
-------------------------------------------------------------------------
Inferred
-------------------------------------------------------------------------
0.30 0.53 4,835 0.24 0.26 215 25.6 40.4 2.29 56.5
-------------------------------------------------------------------------
0.40 0.66 2,845 0.32 0.30 259 20.1 27.4 1.62 41.4
-------------------------------------------------------------------------
0.60 0.89 1,322 0.48 0.37 289 14.0 15.7 0.84 25.9
-------------------------------------------------------------------------
1.00 1.20 353 0.69 0.45 379 5.4 5.1 0.29 9.3
-------------------------------------------------------------------------
Details of CuEQ
calculations are provided in the note under Preliminary
Assessment Key Findings
above.
>>
Opportunities
Wardrop
has identified a number of opportunities that could add substantial
additional value to the Pebble Project. It is Northern Dynasty's expectation
that these opportunities will be investigated in subsequent stages of project
planning, and include:
<<
- Numerous compelling exploration
targets exist within the 186 square
mile Pebble property claim boundary. Immediately adjacent to the
Pebble deposit and east of the resource-bounding ZG1 fault is the
high-grade intersection in
drill hole 6348 (949 feet at 1.92%
CuEq(3)). The area to the east of this intersection remains
completely open.
Outside the Pebble deposit, two seasons of exploration drilling have
identified
numerous zones of copper, gold, molybdenum and silver
mineralization. These include the 'No. 1' gold showing, the
'25 zone', the '52 Porphyry zone', the '308 Porphyry zone', the
'37 Skarn zone' and the '65 zone'. In addition, several zones of
strong alteration and elevated levels of Cu-Mo or Au-Zn-Ag indicate
that new, entirely separate porphyry-style mineralizing centres
occur. These deposits and high-priority targets present near-term
opportunities to expand and enhance known mineral resources on the
Pebble property.
- Portions of the Pebble deposit
have superior silver grades that have
not yet been optimized.
- The volume and geo-metallurgy of
the Pebble deposit presents a number
of
opportunities to optimize the project over the mine life, or to
amend the mine plan in response to prevailing market conditions.
- The open pit shells used in the
Preliminary Assessment were generated
using
parameters developed in early 2009. A number of these
parameters (e.g. metal prices of $1.80/lb copper, $800/oz gold and
$10/lb molybdenum) have seen significant improvement, which should be
incorporated into the pit optimization during the next study phase.
- Pit walls could be steepened
from the current 39degrees slope to
41degrees, resulting in a net waste rock reduction of approximately
30
million tons in the 25-year IDC Case, and more in the 45-year
Reference Case and 78-year Resource Case.
- An extended period of low
stripping after year 45 indicates the
sequencing of the 45-year open pit could be optimized by reducing the
strip ratio leading into the mining of the later ore. Further, the
value demonstrated by the 78-year Resource Case demonstrates that
running the pit optimization over the life of the project may further
increase project returns.
- The use of autonomous trucks has
been shown to add significant value
to
the Pebble Project. Additional automation opportunities, such as
blasthole drilling and plant automation, will likely have analogous
benefits.
- Underground mine development has
not been considered as a primary
case in the Preliminary Assessment. Further assessment of this option
is
fully warranted, including through development of an early access
shaft during the initial 25 years of mining, to evaluate
methodologies for determining relative economics of an underground
mine and confirming its performance through feasibility-level
studies.
- The 40 foot SAG mills selected
for the Pebble Project are the largest
currently in operation; however, a 42 foot diameter mill has recently
been ordered for another project. Application of 42 foot SAG mills
would enhance both throughput and NPV at the Pebble Project.
- Some porphyry projects report
higher gold recoveries than are
projected for Pebble. Gold recoveries can be increased by reducing
the copper grade within the copper-gold concentrate. Inasmuch as a 5%
increase in gold recovery would enhance the NPV of the 45-year
Reference
Case by some $300 million, trade-off analysis of this
opportunity should be conducted during the next phase of study.
- In the current grinding circuit
layout, crushed pebbles are returned
to
the SAG mill (SABC-A circuit). An analysis has determined that
returning crushed pebbles to the ball mills (SABC-B circuit) could
increase mill throughput by 5 - 10%. A 5% improvement in throughput
would increase the NPV of the 45-year Reference Case by some
$600 million.
- Due to its size, the Pebble
deposit can accommodate a significantly
higher mill throughput than is currently proposed. Previous analyses
have shown the beneficial financial impact of higher throughput
rates, and warrant further study.
- Wardrop has reviewed the
methodology used to develop the capital cost
estimate and believes certain costs may have been overestimated.
Based on a preliminary, high-level estimate of the likely range of
capital cost outcomes, savings of some $362 million were identified.
For Northern Dynasty's 50% share of the project, this capital cost
reduction would result in an increase in post-tax IRR to 16.7%, and
an
increase in its post-tax NPV7 to $2,486 million. Wardrop
anticipates that further cost savings are possible through
engineering optimization.
- Alternative port construction
techniques may add value to the Pebble
Project, such as building the facility as caissons to be towed to
site and ballasted to the seafloor.
- A range of opportunities exist
to outsource additional elements of
the Pebble Project to enhance project economics and provide
opportunities
for local businesses. These include: air transport;
concentrate and water return pipelines; mine and port site
accommodation facilities; freight transport between the port site and
the mine site; local transportation, at the mine site and between the
mine site and local villages; turn-key fuel supply; and mine
equipment maintenance, among others.
------------------------
(3) 1.24% Cu, 0.74 g/t Au
and 0.024% Mo and calculated using $1.00/lb for
Cu,
$400/oz for Au and $6.00/lb for Mo.
>>
Going
Forward
The
Pebble Project would be a large industrial facility located within a vast
region of Alaska notable for its undeveloped wilderness, isolated and
sparsely populated communities, Alaska Native culture and traditional ways of
life, significant salmon fisheries, and other fish and wildlife populations.
Since 2004, Northern Dynasty and subsequently the Pebble Partnership have
undertaken a comprehensive stakeholder outreach program to document the
priorities and concerns of local communities and area residents, and
facilitate their participation in the process by which the Pebble Project
will be designed, permitted, built and operated.
Concurrently,
extensive baseline studies have been undertaken to characterize the physical,
chemical, biological and social environment of the project area. These
studies have resulted in a superior database, which - in characterizing the
climate, surface and groundwater hydrology, wetlands, terrestrial wildlife habitat,
fish and aquatic habitat, and marine habitat - has guided all aspects of
project planning. The findings of these exhaustive studies will be compiled
in an Environmental Baseline Document planned to be publicly released in
early 2011.
The
Pebble Partnership continues to advance engineering and project design
initiatives for the Pebble Project. This effort will be informed by input
received from project stakeholders through public consultation forums
undertaken in Alaska prior to the completion of a Prefeasibility Study and
the submission of permit applications. At this time, it is expected that the
Pebble Partnership will complete a Prefeasibility Study for the Pebble
Project in 2012, prior to initiating permitting under NEPA.
Permitting
will be initiated when the Pebble Partnership submits its Project Description
and Environmental Baseline Document. These documents will provide the basis
for an Environmental Impact Statement (EIS) to be prepared. The EIS will be
prepared by a third-party contractor under the direction of a lead federal
agency. The Pebble EIS will be the focal point for project permitting. It
will determine whether sufficient evaluation of the project's environmental
effects and development alternatives has been undertaken, and provide the
basis for federal, state and local government agencies to make individual
permitting decisions.
Management
Discussion
The
Pebble Project is a superior, long-life mineral development opportunity of
strategic global importance. As presented in the Preliminary Assessment,
project economics are robust and support a mine development that is both
technically feasible and permittable under existing regulatory standards in
Alaska. Further, the Pebble Project is being designed to achieve
international best practice standards of design and performance, such that
key environmental and cultural values are protected and meaningful
development benefits accrue to local communities, the State of Alaska and the
United States of America.
The
Pebble deposit is located on state land in southwest Alaska that has been
subject to two comprehensive land-use planning exercises, and subsequently
designated for mineral exploration and development. As a jurisdiction, Alaska
has a long history of responsible natural resource development, and
environmental standards and permitting requirements that are stable,
objective, rigorous and science-based.
Since
2004, comprehensive environmental and socioeconomic baseline studies have
been undertaken in the Pebble Project area, including along the
transportation corridor to Cook Inlet, the marine environment in the area of
the port site and throughout the broader Bristol
Bay region. These studies have cost more than $150
million
to date, and resulted in an environmental and socioeconomic database whose
comprehensiveness and depth is unprecedented in Alaska. The aggregated
findings and analyses of these studies, along with the Pebble Partnership's
ongoing, long-term engagement with project stakeholders and federal and state
regulators, are significant corporate assets as it prepares the Pebble
Project for permitting.
The
Pebble Project has the potential to generate significant direct and indirect
employment, business and economic activity, and government revenues in the Bristol
Bay region, the State of Alaska and the United
States.
The Pebble Partnership has a stated intention to maximize project benefits
for the residents and communities of southwest Alaska, and is developing
long-term workforce and business development strategies to realize this goal.
Transportation and energy infrastructure development associated with the
Pebble Project also has the potential to deliver significant benefits for
local communities, by lowering the cost of living and supporting economic
growth and diversification. Pebble also has the potential to contribute to
the health and value of local fisheries by enhancing natural habitat
productivity, and providing power and transportation benefits to enhance
product quality. Meaningful benefits associated with power generation and
transmission, in particular, could be extended to communities throughout the Bristol
Bay region.
Qualified
Persons
Wardrop
Engineering Inc. was commissioned exclusively by Northern Dynasty to prepare
a Preliminary Assessment Technical Report of the Pebble Project, based on its
review of recent engineering and technical studies undertaken by the Pebble
Partnership and Northern Dynasty, as provided and verified by Northern
Dynasty. The Pebble Project Preliminary Assessment conforms to the standards
set out in National Instrument 43-101 (Standards and Disclosure for Mineral
Projects) and is in compliance with Form 43-101F1.
A
summary of the Qualified Persons responsible for various sections of the
Preliminary Assessment are identified in the table below. All are independent
of Northern Dynasty. The contents of this news release has been reviewed and
approved by all listed Qualified Persons.
<<
-------------------------------------------------------------------------
Qualified
Person
-----------------------------------
Report Section
Company Qualified Person
-------------------------------------------------------------------------
1.0 - Executive
Summary
Wardrop Hassan Ghaffari,
P.Eng.
-------------------------------------------------------------------------
2.0 - Introduction
Wardrop Hassan Ghaffari,
P.Eng.
-------------------------------------------------------------------------
3.0 - Reliance on Other
Experts
Wardrop Hassan Ghaffari,
P.Eng.
-------------------------------------------------------------------------
4.0 - Property Description
and
Location
Wardrop Robert Morrison, P.Geo.
-------------------------------------------------------------------------
5.0 - Accessibility,
Climate, Local
Resources, Infrastructure,
and Physiography
Wardrop Robert Morrison, P.Geo.
-------------------------------------------------------------------------
6.0 - History
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
7.0 - Geological
Setting
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
8.0 - Deposit Types
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
9.0 - Mineralization
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
10.0 - Exploration
Wardrop Robert Morrison, P.Geo.
-------------------------------------------------------------------------
11.0 - Drilling
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
12.0 - Sampling Method and
Approach Wardrop Robert Morrison, P.Geo.
-------------------------------------------------------------------------
13.0 - Sample Preparation,
Analyses
and Security
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
14.0 - Data
Verification
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
15.0 - Adjacent
Properties
Wardrop Robert Morrison,
P.Geo.
-------------------------------------------------------------------------
16.0 - Mineral
Processing
Wardrop Andre de Ruijter,
P.Eng/
Hassan Ghaffari, P.Eng.
-------------------------------------------------------------------------
17.0 - Mineral Resource
and Mineral
Reserve Estimates Wardrop Robert Morrison, P.Geo.
-------------------------------------------------------------------------
18.0 - Other Relevant Data
and
Information
-------------------------------------------------------------------------
18.1 - Mining
Wardrop Tysen Hantelmann,
P.Eng.
-------------------------------------------------------------------------
18.2 - Infrastructure
Wardrop Hassan Ghaffari,
P.Eng.
-------------------------------------------------------------------------
18-3 - Tailings, Waste
Rock, and
Water Management
Wardrop Aleksandar
Zivkovic,
P.Eng.
-------------------------------------------------------------------------
18.4 - Sustainability
Wardrop Doug Ramsey, P.R.
Bio
-------------------------------------------------------------------------
18.5 - Capital Cost
Estimate
Wardrop Hassan Ghaffair,
P.Eng.,
Tysen Hantelmann, P.Eng.,
Aleksandar Zivkovic,
P.Eng.
-------------------------------------------------------------------------
18.6 - Operating Cost
Estimate
Wardrop Andre de Ruijter,
P.Eng.,
Tysen Hantelmann, P.Eng.
-------------------------------------------------------------------------
18.7 - Project Execution
Plan
Wardrop Hassan Ghaffari,
P.Eng.
-------------------------------------------------------------------------
18.8 - Financial
Analysis
Wardrop Scott Cowie,
MAusIMM
-------------------------------------------------------------------------
19.0 - Interpretation and
Conclusions
Wardrop All; sign off by
discipline
-------------------------------------------------------------------------
20.0 - Opportunities and
Recommendations
Wardrop All; sign off by
discipline
-------------------------------------------------------------------------
>>
About
Northern Dynasty
Northern
Dynasty Minerals Ltd. is a mineral exploration and development company based
in Vancouver, Canada,
with direct and indirect interests in 592 square miles of mineral claims in southwest
Alaska. Northern Dynasty's principal asset is a 50% interest in the Pebble
Limited Partnership, owner of the Pebble Copper-Gold-Molybdenum Project. The
Pebble Project is an advanced-stage initiative to develop one of the most
important mineral resources in the world.
About
the Pebble Project
The
Pebble Project is an initiative of the Pebble Partnership to responsibly
develop a globally significant copper, gold and molybdenum deposit in
southwest Alaska into a modern, long-life mine. The project is located 200
miles southwest of Anchorage on state land
designated for mineral exploration and development. It is situated
approximately 1,000 feet above sea-level, 65 miles from tidewater on Cook
Inlet and presents favourable conditions for successful mine site and
infrastructure development.
The
Pebble Project consists of the Pebble deposit, surrounding mineral claims and
a stream of financing provided by Northern Dynasty's project partner Anglo
American US (Pebble) LLC. The Pebble Partnership was established in July
2007
as a 50:50 partnership between a wholly-owned affiliate of Northern Dynasty
and a wholly-owned subsidiary of Anglo American plc. Both Northern Dynasty
and Anglo American have equal and identical rights of management,
operatorship and control in the Pebble Partnership.
Under
the terms of the Pebble Limited Partnership Agreement, Anglo American is
required to elect to commit $1.425 to $1.5 billion
in staged investments in order to retain its 50% interest in the Pebble
Project. If a feasibility study for the Pebble Project is completed after
2011, Anglo American's overall funding requirement increases from $1.425
billion to $1.5 billion. Funds provided by Anglo American are
currently being invested in comprehensive exploration, engineering, environmental
and socioeconomic programs toward the future development of the Pebble
Project.
<<
Ronald W. Thiessen
President & CEO
Sole Responsibility
>>
No
regulatory authority accepts responsibility for the adequacy or accuracy of
this release.
Northern
Dynasty is solely and entirely responsible for the contents of this news
release. No other party, including any parties which have an interest in the
project, are in any way responsible for the contents hereof.
<<
Forward Looking Information and other Cautionary Factors
>>
All
information contained in this press release relating to the contents of the
Preliminary Assessment, including but not limited to statements of the Pebble
Project's potential and information under the headings "Preliminary
Assessment Key Findings," "Production Profiles,"
"Financial Valuation" and "Capital and Operating Costs" are
"forward looking statements" within the definition of the United
States
Private Securities Litigation Reform Act of 1995. The information relating to
the possible construction of a port, road, power generating facilities and
power transmission facilities also constitutes such "forward looking statements."
The Preliminary Assessment was prepared to broadly quantify the Pebble
project's capital and operating cost parameters and to provide guidance on
the type and scale of future project engineering and development work that
will be needed to ultimately define the project's likelihood of feasibility
and optimal production rate. It was not prepared to be used as a valuation of
the Pebble project nor should it be considered to be a pre-feasibility study.
Although based on a comprehensive technical review of recent engineering and
technical studies undertaken by the Pebble Partnership and Northern Dynasty,
the studies of capital and operating costs are incomplete and have not been
optimized, so the ultimate costs may vary widely from the amounts set out in
the Preliminary Assessment. This could materially and adversely impact the
projected economics of the Pebble project. The Preliminary Assessment, in
part, uses inferred mineral resources which are considered too speculative
geologically to be categorized as mineral reserves and to have economic
considerations applied to them. There can be no assurance that the operating
and financial projections contained in the Preliminary Assessment will be
realized.
The
following are the principal risk factors and uncertainties which, in
management's opinion, are likely to most directly affect the conclusions of
the Preliminary Assessment and the ultimate feasibility of the Pebble
project. A portion of the mineralized material at the Pebble Project is
currently classified as an inferred resource and it is not a reserve. The
mineralized material in the Preliminary Assessment is based on the measured,
indicated and inferred resources estimated by Hunter
Dickinson
Inc. and audited by Wardrop. Additional process tests and other engineering
and geologic work will be required to determine if the mineralized material
is an economically exploitable reserve. There can be no assurance that this
mineralized material can become a reserve or that the amount may be converted
to a reserve or the grade thereof. Final feasibility work has not been done
to confirm the pit design, mining methods, and processing methods assumed in
the Preliminary Assessment. Final feasibility could determine that the
assumed pit design, mining methods, and processing methods are not correct.
Construction and operation of the mine and processing facilities depends on
securing environmental and other permits on a timely basis. No permits have
been applied for and there can be no assurance that required permits can be
secured or secured on a timely basis. Data is incomplete and cost estimates
have been developed in part based on the expertise of the individuals
participating in the preparation of the Preliminary Assessment and on costs
at projects believed to be comparable, and not based on firm price quotes.
Costs, including design, procurement, construction, and on-going operating
costs and metal recoveries could be materially different from those contained
in the Preliminary Assessment. There can be no assurance that mining can be
conducted at the rates and grades assumed in the Preliminary Assessment. The
project requires the development of port facilities, roads and electrical
generating and transmission facilities. Although Northern Dynasty believes
that the State of Alaska favours the development of these facilities and may
be willing to arrange financing for their development, there can be no
assurance that these infrastructure facilities can be developed on a timely
and cost-effective basis. Energy risks include the potential for significant
increases in the cost of fuel and electricity. The Preliminary Assessment
assumes specified, long-term prices levels for gold, copper, silver and
molybdenum. Prices for these commodities are historically volatile, and Northern
Dynasty has no control of or influence on those prices, all of which are
determined in international markets. There can be no assurance that the
prices of these commodities will continue at current levels or that they will
not decline below the prices assumed in the Preliminary Assessment. Prices
for gold, copper, silver, and molybdenum have been below the price ranges
assumed in Preliminary Assessment at times during the past ten years, and for
extended periods of time. The project will require major financing, probably
a combination of debt and equity financing. Interest rates are at
historically low levels. There can be no assurance that debt and/or equity
financing will be available on acceptable terms. A significant increase in
costs of capital could materially and adversely affect the value and
feasibility of constructing the project. Other general risks include those
ordinary to very large construction projects including the general
uncertainties inherent in engineering and construction cost, the need to
comply with generally increasing environmental obligations, and accommodation
of local and community concerns. The Company is also subject to the specific
risks inherent in the mining business, as well as general economic and
business conditions. For more information on the Company, Investors should
review the Company's annual Form 40-F filing with the United
States
Securities and Exchange Commission and its home jurisdiction filings that are
available at www.sedar.com.
<<
Information Concerning Estimates of Measured,
Indicated and Inferred Resources
>>
This
news release uses the terms "measured resources", "indicated
resources" and "inferred resources". Northern Dynasty Minerals
Ltd. advises investors that although these terms are recognized and required
by Canadian regulations (under National Instrument 43-101 Standards of
Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission
does not recognize them. Investors are cautioned not to assume that any part
or all of the mineral deposits in these categories will ever be converted
into reserves. In addition, "inferred resources" have a great amount
of uncertainty as to their existence, and economic and legal feasibility. It
cannot be assumed that all or any part of an Inferred Mineral Resource will
ever be upgraded to a higher category. Under Canadian rules, estimates of
Inferred Mineral Resources may not form the basis of feasibility or
pre-feasibility studies, or economic studies except for Preliminary
Assessment as defined under 43-101. Investors are cautioned not to assume
that part or all of an inferred resource exists, or is economically or
legally mineable.
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