REG - Beowulf Mining PLC - Positive Economics from Kallak North Scoping Study
24/01/2023 07:00
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RNS Number : 6163N Beowulf Mining PLC 24 January 2023
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inside information as stipulated under the Market Abuse Regulation ("MAR")
(EU) No. 596/2014, as incorporated into UK law by the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
24 January 2023
Beowulf Mining plc
("Beowulf" or the "Company")
Kallak North Scoping Study Delivers Positive Economics
Beowulf (AIM: BEM; Spotlight: BEO), the mineral exploration and development
company, is pleased to announce positive economic results from the Scoping
Study for Kallak North, part of the Kallak Iron Ore Project ("KIOP") being
developed by the Company's 100 per cent owned subsidiary Jokkmokk Iron Mines
AB ("Jokkmokk Iron"), which boost the Company's plans to begin producing
high-grade iron concentrate in 2026.
The Scoping Study was initiated last summer following the award of the Kallak
North Exploitation Concession on 22 March 2022. The Scoping Study gives
confidence in the underlying value of the Kallak North project, providing
appropriate analyses and interpretations to support the Company's key project
decisions and development strategies, optimising the project development plan
while minimising risks.
The Scoping Study includes design considerations to minimise negative
environmental and social impacts. Looking ahead to Pre-feasibility, planned
to begin in Q2 2023, these concepts will be developed further along with other
innovations to maximise the value of the mined material from the Project, such
as producing construction materials as by-products.
The Scoping Study presents a 'Base Case' which is solely focused on the Kallak
North deposit. It incorporates a Mineral Resource Estimate ("MRE") with
effective date of 9 May 2021 and an economic assessment for a mining operation
producing up to 2.7 million tonnes per annum ("Mtpa") of high-grade iron
concentrate over a production life of 14 years.
Importantly, Kallak North is only part of the KIOP. Kallak South has defined
Mineral Resources and an exploration target, and the Company has an
exploration target for its contiguous licences further south. Pending
completion of additional exploration and, if justified, further technical
work, this provides an opportunity for expansion beyond that currently assumed
in the 14 years 'Base Case', which would utilise the fixed assets paid for by
Kallak North, such as the processing plant and other project infrastructure.
The Company is now considering the possibility of integrating Kallak North and
Kallak South, following completion of a successful exploration drilling on
Kallak South, which could take place this year, in combination with further
technical work, and thereafter an application for an Exploitation Concession.
Scoping Study - Economic Highlights:
· Net Present Value ("NPV(8)") of US$177 million, Internal Rate of
Return ("IRR") of 14.5 per cent and a Payback Period of ~ 4.5 years from
commencement of construction activity.
· The modelled iron concentrates should find appeal with end-users in
traditional Blast Furnace ("BF") (pellet plant or sinter plant) customers,
direct reduction ("DR") route customers (DR-grade pellet production), or with
newer steel production process routes to process BF (higher silica) grade ores
with a lower carbon footprint.
The 'Base Case' assumes 67 per cent of Kallak production is sold to the BF
market and 33 per cent is sold to the DR market consistent over the 14 years
production life.
It has been assumed for the purposes of the 'Base Case' that 100 per cent of
BF-grade production will be exported to international markets, split equally
between Luleå and Narvik ports, and DR-grade will be sold domestically to
steel producers in Sweden. Suitable steel producers may include Hybrit or H2
Green Steel. Swedish domestic steel production regularly exceeds 4Mtpa,
however it is noted that current "green steel" production capacity within
Sweden is only at demonstration scale.
The Marketing Study completed by Vulcan Technologies Pty Ltd ("VulcanTech")
noted a potential upside in producing a higher proportion of DR-grade,
through the reduction in silica content by reverse flotation of the iron
concentrate. The Company will be investigating this opportunity in
Pre-feasibility, to both maximise potential revenues and enhance product
acceptance in the anticipated growth of DR-based steel making projects.
· The economic assessment uses long-term prices of US$109/dry metric
tonne ("dmt") for BF and US$125/dmt for DR which have been derived by
VulcanTech incorporating various value in use adjustments based on a review of
Consensus Economics and Wood Mackenzie data, and a long-term consensus
reference benchmark of Platts62 Fe IODEX of US$80/dmt (USc129/dmtu) where all
prices are assumed as real terms and dated 1 January 2023. BF product point of
sale is considered CFR Rotterdam, and DR product point of sale is assumed to
be an in-country off-taker in Norrbotten.
· Kallak concentrates are viewed as high-grade concentrates that will
yield significant premiums over and above the Platts65 iron ore index pricing
in the long term. The desire to reduce steel making carbon emissions presents
a unique opportunity for Beowulf.
Using current spot prices to calculate US$161/dmt for BF and US$177/dmt for DR
and still assuming the conservative production split of 67 per cent being sold
to BF and 33 per cent being sold to DR the NPV(8) increases by 479 per cent to
US$852 million.
However, it should be noted that current spot prices significantly exceed the
current long-term consensus market forecasts for iron ore, and current spot
prices are unlikely to be maintained throughout the production life.
· 'Base Case' Total Sales Revenue exclusive of any realisation costs of
US$3.7 billion, Operating Costs of US$2.2 billion, an EBITDA of US$1.5
billion. All values are in real terms as on 1 January 2023. A 20 per cent
contingency is applied to mining operating costs and all capital costs only.
No contingencies have been allowed for in other operating costs.
· Total cash costs at the point of sale (CFR Rotterdam or in-country
off-taker) average US$87.3 dmt sold (USc127.1/dmtu).
· Total capital costs of US$602 million (including 20 per cent
contingency applied to all capital costs), split US$463 million pre-production
capital and US$138 million sustaining capital. Excluding contingency, total
capital is US$501 million, split US$386 million pre-production and US$115
million sustaining.
· Post-tax Pre-finance Net Free Cash Flow of US$667 million.
The financial metrics reported are derived from real-terms (1 January 2023)
post-tax pre-finance cashflows at a real discount factor of 8 per cent. The
Scoping Study assumes a capital construction and ramp-up to full production
period of three years, following completion of further technical studies
(Pre-feasibility, Feasibility and environmental studies), associated
stakeholder engagement process, successful permit applications, and financing
arrangements. The Company is planning to begin producing in 2026.
Kurt Budge, Chief Executive Beowulf Mining commented:
"This is a huge step forward for Beowulf and Jokkmokk Iron, to have a Scoping
Study with positive economics and massive upside potential, especially the
positive sensitivity to price, which increases the NPV(8 )from US$177
million to US$852 million using current spot prices.
"Beowulf's commitment to Kallak has so far lasted 16 years, getting the work
done, being undaunted by political impasse, to emerge on the other side with
an Exploitation Concession and now a Scoping Study with positive economics.
"Last year, the Company's application was found to have met the requirements
for an Exploitation Concession, and this is testament to the depth and quality
of the work completed by Jokkmokk Iron's Swedish technical team. The same
attention to detail is now being applied to the Environmental Permit
application.
"The Scoping Study results give the Company a solid foundation on which to
build the most modern and sustainable mining operation possible. Ulla
Sandborgh is leading our efforts towards our goal of bringing the Kallak North
mine into production in 2026 and has brought new energy to the project,
directly engaging with different groups in the community and re-establishing
Jokkmokk Iron as one of Jokkmokk's key local businesses.
"We know there will be challenges ahead and that not everyone supports the
development of a mine, but our employees are listening to everyone, including
those who don't necessarily agree with us. All we hope for is constructive
and inclusive dialogue with all key stakeholders, and for all voices to be
heard and all opinions listened to.
"With the Scoping Study complete, we can now focus on completing a successful
Capital Raising to support the next steps, including completion of our work
programme and really get moving on Kallak. We are seriously excited about
the future and all the possibilities."
Ulla Sandborgh, Chief Executive Jokkmokk Iron commented:
"Swedish mining is crucial in the transition to a sustainable society. New,
climate-smart technology requires a greater amount of minerals than
fossil-based technologies. The demand for minerals will thus clearly increase.
Kallak is excellently positioned as a potential sustainable supplier of
high-quality iron concentrate needed in the Swedish, Nordic, and European
growing green steelmaking sector.
"We will be a natural part of the development of Jokkmokk as a society by
building partnerships with other companies and bringing new jobs into this
area of Norrbotten. For Jokkmokk, a mine will create about 700 jobs over a
potential long period of time. This is done with an integration of Kallak
North and Kallak South and the synergies that would create.
"We look forward to continuing the work with the environmental permit and the
planning of the area with huge respect for the environment, nature, culture
and reindeer husbandry."
Scoping Study Details
The Scoping Study was prepared by independent consulting firm SRK Consulting
(UK) Ltd ("SRK") and is based on the Mineral Resource Estimate prepared by
Baker Geological Services Ltd, effective 9 May 2021, according to Pan-European
Reserves and Resources Reporting Committee ("PERC") Standard, 2017. PERC is a
member of CRIRSCO, the Committee for Mineral Reserves International Reporting
Standards, and the PERC Reporting Standard is fully aligned with the CRIRSCO
Reporting Template. The PERC standards are internationally recognised and
allow the reader to compare the Mineral Resource with that reported for
similar projects.
From 1 January 2023, disclosures in accordance with the PERC Standard must be
made to PERC Standard 2021. As previously envisaged, the Scoping Study was
largely complete by the end of 2022 and it is only the announcement of results
that has fallen into 2023. To be fully compliant, the Company is now assessing
the changes in standards and performing a reconciliation to demonstrate that
the MRE, as it supports all other aspects noted in the Scoping Study, remains
current and valid.
The reader is advised that the Scoping Study summarised in this press release
is preliminary in nature and is intended to provide an initial, high-level
review of the Kallak North project's economic potential and development
options. The Scoping Study mine schedule and economic model include numerous
assumptions and the use of Inferred Mineral Resources. Inferred Mineral
Resources are considered to be too speculative geologically to have economic
considerations applied to them that would enable them to be categorised as
Mineral Reserves, and there is no certainty that the Scoping Study will be
realised. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
Economic Sensitivity
Generic sensitivities to NPV and IRR have been tested, reflecting changes in
sales prices (revenue), operating costs and capital costs, the results of
which are shown below. The project is most sensitive to concentrate sales
prices.
Marketing
An independent marketing study was completed by VulcanTech, an Australian
company, to support the pricing assumptions used in the Scoping Study, and to
model the potential premiums for Kallak's high-grade magnetite concentrate.
VulcanTech considered traditional and non-traditional market opportunities
that might be served by Kallak concentrates. VulcanTech specialises in the
modelling of iron and steel making processes.
In the Kallak North Scoping Study, it has been assumed that high-grade
magnetite concentrate sales will be split with 67 per cent sold as BF-grade
(higher silica) and the remainder 33 per cent sold as DR-grade (at lower
silica).
The proposed chemistries for these two products are detailed in the table
below. Kallak has the potential to produce two BF-grade products, with one
containing up to 10 per cent hematite.
DR-grade BF-grade 1 BF-grade 2
Proportion of production ~33% ~67% ~67%
Fe 70.08 68 68
Fe(2)O(3)* 2.17 10 0
Fe(3)O(4)* 94.75 84.3 94.0
SiO(2) 1.77 4.4 4.7
Al(2)O(3) 0.15 0.15 0.15
P 0.002 0.002 0.002
S 0.001 0.001 0.001
Mn 0.382 0.382 0.382
CaO 0.08 0.08 0.08
MgO 0.12 0.12 0.12
TiO(2) 0.03 0.03 0.03
In addition to the high iron grades, the Kallak products show ultra-low
phosphorus and sulphur content, low alumina and titania, and slightly-elevated
manganese. The manganese in correct proportions can be considered as
advantageous to steel makers, since most steel grades require manganese
additions in the steel refining processes, normally added via expensive
ferro-manganese wire.
Fluoride content is very low at 70 ppm, chemical elements not noted are of
levels deemed below threshold levels for steel making operations.
The VulcanTech study noted the potential upside in the proportion of the
DR-grade production through the reduction in the silica content through
reverse flotation of the concentrate.
The modelled concentrates are expected to target traditional BF customers,
pellet plant or sinter plant, BR route customers, DR-grade pellet production,
or with newer process routes to process BF, higher silica grade ores with a
lower carbon footprint.
The forecast Kallak concentrates are viewed as high grade concentrates that
will yield significant premiums over and above the Platts65 iron ore index
pricing in the long term.
Process models of the BF and Electric Arc Furnace ("EAF") steel production
routes were used to calculated breakeven Value In Use ("VIU") for the
different concentrate grades with premiums of US$10-14/dmt for BF-grade
product and US$16-39/dmt for DR-grade product.
The Kallak North 'Base Case' uses long-term Platts62 price of US$80/dmt
(USc129/dmtu); a Platts65 price of US$99/t (USc160/dmtu); and assumes a price
of US$109/dmt (USc176/dmtu) for BF product (US$10/dmt premium over Platts65)
and US$125/dmt (USc202/dmtu) for DR-grade product (US$26/dmt premium over
Platts65). All prices are in real terms as of 1 January 2023.
Platts62 and Platts65 refer to the Platts Iron Ore Index for 62 per cent Fe
and 65 per cent Fe products, a benchmark assessment by S&P Global
Commodity insights of the spot price of physical iron ore. The Platts62
assessment (IODBZ00) is based on a standard specification of iron ore fines
with 62 per cent iron, 8 per cent moisture, 2.25 per cent alumina, 4 per cent
silica, 0.02 per cent sulphur and 0.09 per cent phosphorous, amongst other
gangue elements. The Platts65 (IOPRM00) assessment is based on a standard
specification of iron ore fines with 65 per cent iron, 8.5 per cent moisture,
3.5 per cent silica, 1 per cent alumina and 0.075 per cent phosphorous. Point
of sale is for both products is CFR Qingdao, China.
At this time, Jokkmokk Iron has no offtake agreements.
Environmental, Social, Governance
The vision for the KIOP is to provide iron concentrates to feed the burgeoning
low-carbon steel industry in Sweden and Europe. The energy transition
currently underway requires a step-change in raw material production - both
primary (mining) and secondary (recycling). Wind turbines, solar panels,
electric vehicles, along with the electrical infrastructure required to allow
these low-carbon technologies to function, are reliant on high-quality steel.
Beowulf and Jokkmokk Iron understand that developing Kallak North will come
with environmental and social challenges. The land on which the deposit sits
is used by indigenous reindeer herding communities of the Jåhkågasska
tjiellde Sámi village (sameby). The Sámi community - including the Sámi
council (Sámiráđđi) - have objections to a mining development, being
concerned that Kallak will affect reindeer herding in terms of a loss of
grazing lands, creating a barrier to free movement and other social and
environmental impacts.
As part of the Scoping Study, SRK and the Company have made a preliminary
identification of the bio-physical, socio-economic and cultural issues
potentially arising from the Project and how this may affect the reindeer
herding communities. Definition of the associated impacts will be the subject
of ongoing dialogue with potentially affected stakeholders, including the Sami
villages, as part of the updated environmental and social impact assessment
(ESIA, or miljökonsekvensbeskrivning MKB ) that is currently being planned
to update the preliminary MKB produced as part of the Kallak K nr 1
Exploitation Concession (Bearbetningskoncession) application in 2013.
At this stage of study, during early Project planning, the focus is on
avoiding potential impacts as far as practicable and starting to identify the
design and operational controls that can mitigate impacts, which cannot be
avoided.
The Scoping Study has included the following design considerations to minimise
negative environmental and social impacts:
· Assessment of alternative tailings storage facility locations to
reduce surface footprint and potential community health risks.
· Fully electric mining and concentrate transport fleet from start-up
of operations, including trolley-assisted charging. This will take advantage
of the low-intensity greenhouse gas emissions of the Swedish national grid,
dominated by hydroelectric power and wind.
· Optimisation of the pit to balance value from extracted ore with
waste rock production, not simply focussed on maximising profitability. This
has minimised the surface footprint of the planned waste rock dumps along with
post-processed tailings waste.
· Concentrate transport route planned to avoid the Laponia World
Heritage site to the north.
· Concentrate transport using battery electric heavy good's vehicles
and existing rail infrastructure.
· Abatements around the pit crest to reduce noise, dust and visual
impacts.
As part of the Pre-feasibility Study, planned to begin in Q2 2023, these
concepts will be developed further along with other innovations to maximise
the value of the mined material, such as producing construction materials as
by-products.
It is the Company's aim to operate the Kallak North mine alongside Sámi
reindeer husbandry and local landowners, and the Company is committed to
ensuring land is restored and rehabilitated on closure suitable for those that
will use it. This requires close communication and sharing of ideas, which has
been achieved for other projects across the Sápmi area of Sweden, Finland and
Norway. Jokkmokk Iron has re-initiated the stakeholder engagement process with
local Sámi communities through consultation and held meetings in Jokkmokk,
with both the Sámi communities and other local stakeholders.
Stakeholder Engagement
Recognising the historical and current opposition to the Project, the presence
of indigenous people and the risk to the permitting processes, the Company
intends to undertake close communication and sharing of ideas with key
stakeholders. Jokkmokk Iron has re-initiated the stakeholder engagement
process with local Sámi communities and held meetings in Jokkmokk with both
the Sámi communities and other local stakeholders. Since the Kallak North
Exploitation Concession was awarded, there has been one information meeting in
Jokkmokk held in December 2022, with more meetings planned before formal
consultation on the draft Environmental Permit begins. An initial meeting
with reindeer herders took place in autumn 2022, though the most impacted Sami
village abstained from attendance, and four meetings per year are planned in
the future. Meetings with authorities are ongoing.
Permitting
The MRE declared in May 2021 (Baker, 2021) for the Kallak North area and used
in the 'Base Case' of the Scoping Study is covered by the Kallak K nr 1
Exploitation Concession granted to Jokkmokk Iron on 22 March 2022. Beowulf
also owns Exploration Permits (Swedish: Undersökningstillstånd) surrounding
and adjacent to the Exploitation Concession (Kallak nr 1 and Parkijaure nr 2),
along with 3km to the south (Parkijaure nr 6 and 7) and 15km northeast
(Ågåsjiegge nr 3).
Beowulf's Exploration Permits include defined Mineral Resources at Kallak
South, along with Exploration Targets (as defined by PERC) within Parkijaure
nr 2, 6 and 7 permits. This identified additional iron mineralisation, in
the Company's view supports the possibility, following completion of
successful exploration and additional technical studies, of a longer life
and sustainable mining operation beyond the current Kallak North 'Only' 'Base
Case'. In addition, the Company has the Agåsjiegge nr 3 licence, which the
Swedish Geological Survey ("SGU") has previously estimated contains magnetite
iron mineralisation (not classified).
EXPLOITATION CONCESSION
NAME LICENCE ID AREA (km2) APPL_DATE VALID FROM VALID TO
Kallak K nr 1 BK-2022:1 1.03 25/04/2013 22/03/2022 22/03/2047
EXPLORATION LICENCES
NAME LICENCE ID AREA_HA VALID FROM VALID TO
Kallak nr 1 2006:197 5.00 28/06/2006 28/06/2023
Parkijaure nr 2 2008:20 2.85 18/01/2008 18/01/2025
Parkijaure nr 6 2019:81 9.99 10/10/2019 10/10/2024
Parkijaure nr 7 2021:47 22.12 16/06/2021 16/06/2024
Ågåsjiegge nr 3 2021:73 27.71 27/10/2021 27/10/2024
The Kallak North Exploitation Concession provides Jokkmokk Iron with exclusive
mining rights in the defined areas for a period of 25 years; however, before
operations can start three additional permits are required:
1. Environmental Permit (Swedish: Miljötillstånd) will be applied for
following completion of an Environmental Social Impact Assessment ("ESIA") and
associated stakeholder engagement process;
2. Land Designation Permit (Swedish: Markanvisning) will be required to
define the industrial area associated with the mining operation (such as
tailings, waste rock, processing plant) and also involves stakeholder
engagement; and
3. Building Permit (Swedish: Byggnadstillstånd) will be required prior to
construction.
Mineral Resource Estimate
The Scoping Study is based on the MRE prepared by Baker Geological Services
Ltd, effective 9 May 2021, according to Pan-European Reserves and Resources
Reporting Committee ("PERC") Standard, 2017. PERC is a member of CRIRSCO, the
Committee for Mineral Reserves International Reporting Standards, and the PERC
Reporting Standard is fully aligned with the CRIRSCO Reporting Template. The
PERC standards are internationally recognised and allow the reader to compare
the Mineral Resource with that reported for similar projects.
From 1 January 2023, disclosures in accordance with the PERC Standard must be
made to PERC Standard 2021. As previously envisaged, the Scoping Study was
largely complete by the end of 2022 and it is only the announcement of results
that has fallen into 2023. To be fully compliant, the Company is now assessing
the changes in standards and performing a reconciliation to demonstrate that
the MRE, as it supports all other aspects noted in the Scoping Study, remains
current and valid.
The MRE defined resources for three separate deposits, Kallak North, Kallak
South North and Kallak South South and included exploration targets across the
Company's permit areas.
The Scoping Study 'Base Case' only includes the Kallak North deposit, 111Mt of
Measured and Indicated Resource grading 28 per cent iron ("Fe(Total)") and
25Mt of Inferred Resources grading 28.3 per cent Fe(Total).
See below for (a) Plan, (b) Cross Section and (c) Isometric views of Kallak
North and Kallak South (North and South):
Mineral Resource :
Notes:
(1) Mineral Resources, which are not Mineral Reserves, have no demonstrated
economic viability.
(2) The effective date of the Mineral Resource is 9 May 2021.
(3) The Open Pit Mineral Resource Estimate was constrained within lithological
and grade-based solids and within an optimised pit shell defined by the
following assumptions; base case metal price of USD130 / tonne for a 65% Fe
concentrate; Fe recovery of 71% at Kallak North, 86% at Kallak South North and
94% at Kallak South South; Fe concentrate grades of 68% at Kallak North, 70%
at Kallak South North and 69% at Kallak South South; Processing costs of
USD6.8 / t wet; Selling cost of USD21.0 / t wet concentrate; Mining cost of
Ore of USD3.3 / t, mining cost of waste of USD3.0 / t and an incremental
mining cost per 10 m bench of USD0.05 / t; Wall angles of 30° within the
overburden and 47.5° in the fresh rock.
(4) Regarding the KSS Pit only, the Parkijaure lake boundaries with a 50m
offset have been used as an input constraint for the optimisation process.
(5) Mineral Resources have been classified according to the PERC Standards
2017, by Howard Baker (FAusIMM(CP)), an independent Competent Person as
defined in the PERC Standard 2017.
Exploration Targets
In addition to the MRE, BGS updated the Exploration Target for KIOP with
inclusion of the Parkijaure permit areas.
At Kallak North, material has been modelled below the currently classified
resource. This material is unclassified at present but represents a valid
target for future exploration. Based on the geological model created, along
with the grades seen in Kallak North, BGS has reported an Exploration Target
of between 3 Mt and 7.5 Mt grading between 20-30 per cent Fe(Total). The
potential quantity and grade are conceptual in nature as there has been
insufficient exploration to estimate a Mineral Resource; and that it is
uncertain if further exploration will result in the estimation of a Mineral
Resource.
In the Kallak licence area, a 'Gap' exists between Kallak South North and
Kallak South South and represents a prospective untested mineralisation
target. BGS estimated an approximate tonnage and grade of material lying
between Kallak South North and Kallak South South. A simple wireframe was
generated to allow for an approximate volume of mineralised material to be
estimated with the thickness and orientation of this wireframe being based on
the continuation of the mineralised units modelled at Kallak South North and
Kallak South South along with the geophysical signature observed. Two
drillholes exist in this area; both are shallow and did not intercept any
mineralisation of material width or grade, although the southern drillhole,
KAL10044, within the gap, did encounter some of reported copper/gold
mineralisation. Given the geophysical signature within the gap and the overall
synform structure proposed, it is possible that the iron bearing lithologies
lie below the two drillholes completed within this area.
Based on the wireframe created, along with the grades seen in Kallak South
North and Kallak South South, BGS report an Exploration Target of between 25
Mt and 75 Mt grading between 20-30 per cent Fe(Total). The potential quantity
and grade are conceptual in nature as there has been insufficient exploration
to estimate a Mineral Resource; and that it is uncertain if further
exploration will result in the estimation of a Mineral Resource.
In the Parkijaure licence areas, mapping, sampling, geophysical surveys and
SGU historical drilling has indicated the presence of further iron
mineralisation and an extension to the mineralisation observed at Kallak.
Limited outcrop exists within the Parkijaure area and in general, the magnetic
anomaly data is less intense than in the Kallak area. This is possibly a
factor of the deeper glacial till material in the southern permits or
potentially a more disseminated style of mineralisation.
BGS assessed all available data for the Parkijaure areas and created simple
trace lines along the magnetic anomalies considered strong enough to be
related to significant iron mineralisation.
Based on the trace lines created, having a total strike length of 4.5km,
limiting the depth of mineralisation to 200m and the width of mineralisation
to 30m, BGS has reported an Exploration Target of between 45Mt and 135Mt
grading between 20-30 per cent Fe(Total). The potential quantity and grade are
conceptual in nature as there has been insufficient exploration to estimate a
Mineral Resource; and that it is uncertain if further exploration will result
in the estimation of a Mineral Resource.
In total, BGS has reported an Exploration Target of between 73Mt and 218Mt
grading between 20-30 per cent Fe(Total). The potential quantity and grade are
conceptual in nature as there has been insufficient exploration to estimate a
Mineral Resource; and that it is uncertain if further exploration will result
in the estimation of a Mineral Resource.
For further details follow link to Company announcement on 25 May 2021 titled
'Kallak Iron Ore Project - Mineral Resource Estimate and Exploration Target
Upgrade':
https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x
(https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x)
Mining
The Mining method selected for Kallak North will be open pit conventional
mining. To identify the economic limit of the open pit mine, a pit
optimisation study was conducted. Within the pit optimisation, multiple
scenarios were tested in a trade-off study with varying production rates and
equipment choices. From the pit optimisation - pit shells were selected which
optimise extraction and minimise Waste Rock stripping.
The Company selected a smaller revenue factor ("RF") pit shell (RF 0.76
corresponding to an assumed long-term price of Usc123/dmtu)) which reduced the
Waste Rock Dump size by 25 per cent relative to the RF1 pit (corresponding to
Usc161/dmtu) and only reducing the total Mineral Resources Mined by 5.5%,
thereby reducing the impact on the environment. The pit optimisation study
also identified an opportunity to stockpile low grade ore and feed higher
grade ore earlier in the life of the mine, thereby optimising cashflow. A
stockpiling capacity of up to 10.7Mt was assumed for the mine.
The pit optimisation results guided staged pit designs comprising of one (1)
cutback design and a final pit design which was based on preliminary
geotechnical bench geometry and 35m width haul ramps to accommodate
trolley-assist infrastructure. The pit was designed such that the overall
slope angle not exceeding 47.5 degrees for fresh rock and 30 degrees for
overburden. The final pit design physicals include 117.7Mt of Ore of which
16.8Mt (14 per cent) is classified as Inferred mineral resources. The final
pit will be 270m deep, 0.6km wide and 1km in length as shown in the figures
below:
Guided by the pit optimisation study strategic scheduling, a Life of Mine Plan
("LoMp") production schedule was developed to provide optimised throughput to
the processing plant. Within the LoMp an effective sink rate was set to not
exceed 100m per annum. The LoMp utilises stockpiles to optimise feed to the
processing plant during Years 6 and 7 (Y6 & Y7) where a drop of ore
tonnage mined occurs. The LoMp schedule ramps up to a total ex-pit tonnes
mined of 20Mtpa mined over 13 years. A steady state of 9Mtpa Magnetite Ore
feed to the processing plant over 14 years was scheduled by a combination of
feed from the stockpiles and the pit. The Kallak North Mining LoMp and
Processing tonnage delivered is shown in the graphs below:
The mining cost assumes a contractor mining model, which reduces the up-front
mining capital expenditure to the Company but includes a contractor mark-up on
the mining operating cost. A conceptual haulage analyses identified that at
20Mtpa ex-pit moved, two (2) electric Hitachi EX2600-7 Primary Excavators
matched with seven (7) Trolley-assist Battery-electric Hitachi EH3500 AC-3
Dump Trucks will be required. The Hitachi dump trucks are fitted with large
batteries which are being charged whilst the truck is powered by overhead
trolley lines. These units were selected to meet the Company's design
objectives of a Net Zero mining operation, utilising renewable energy and
reducing Scope 1 carbon emissions.
The approach to costing the mining aspects of the Scoping Study was conceptual
in nature, based on benchmark information and has an approximate +/- 50 per
cent accuracy level. For a Scoping Study, SRK considers this approach to be
suitable to prove the robustness of the mine. Moving to Pre-feasibility, a
first principles mining cost calculation based on detailed equipment
simulations will be required.
Metallurgy and Processing
To date, testwork has demonstrated the potential to produce a high-grade
concentrate with very low levels of deleterious elements from the
magnetite-dominant ore from Kallak North, at high magnetite recoveries using a
conventional magnetite iron ore processing circuit.
Achieving the high final concentrate grade requires a relatively fine grind
size and a final separation stage, which conventionally might be by flotation,
although as the 2021 testwork showed, might also be achieved using a newly
developed, non-flotation process.
The magnetite ore Fe recovery figure of 71 per cent, used for the Scoping
Study, is based on Davis Tube testwork, and represents the average Fe recovery
from that testwork, and is expressed in terms of the total head Fe grade. The
hematite ore Fe recovery figure of 27 per cent, used for the Scoping Study, is
based on pilot testwork with no further optimisation; additional testwork may
lead to potential higher hematite recoveries.
Waste Management
The Scoping Study included an assessment of the Tailings Storage Facility
("TSF") solutions, including sub-aqueous and on-land tailings storage
options. A total of 10 alternatives were modelled in proximity to the Kallak
North open pit and processing plant location.
The site selected for the 'Base Case' is located in close proximity to the
open pit and processing plant, occupies minimal land space and ranked
favourably, though not the highest, as part of a multi-criteria assessment
using environmental and social criteria. The analysis demonstrated that
sub-aqueous disposal of the tailings from Kallak North ranked highest in the
multi-criteria assessment; while not being used for the 'Base Case', this
option will be studied further during Pre-feasibility.
For the purposes of the Scoping Study assessment, it was assumed that
thickened tailings (~ 50 per cent solids w/w) is the preferred dewatering
technology for this Project; allowing considerably more flexibility with
regards to both sub-aqueous and on-land storage options in the Kallak area.
The concept design for tailings deposition is a valley impoundment structure,
which will include an engineered liner system to ensure environmental
containment. A starter embankment will be constructed of non-acid generating
("NAG") waste rock material. This will provide sufficient storage capacity
for up to two years of tailings production. It has been assumed the embankment
will be raised throughout the LoM using the downstream construction method.
The design aims to maximise waste rock usage in the outer shell, whilst
minimising the required volume of imported fill materials to construct the
seepage control elements. To provide seepage containment, a layered system
with a high-density polyethylene ("HDPE") liner, geosynthetic clay liners
("GCL") liner and filter layer was allowed for on the upstream side of the TSF
embankment and across the base of the facility along with appropriate lined
diversion channels to divert clean run-off water around the embankment.
Tailings are anticipated to be deposited into the facility via a slurry
delivery pipeline system which will be placed on the starter embankment crest.
Infrastructure and Logistics
The Project is located in the Jokkmokk municipality, north of the Arctic
Circle, approximately 40km west of Jokkmokk city centre and 80km southwest of
the major iron ore mining centre of Malmberget in the county of Norrbotten,
northern Sweden. LKAB's Kiruna iron ore mine, the world's second largest
underground mine, is located approximately 120km to the northeast.
Jokkmokk is located on the national road E45 which connects to Gällivare with
the major east-west route national road, the E10, connecting Gällivare to
Luleå, Boden, and Narvik. Access to the Project area comprises all-weather
gravel roads passing through the project area and connecting to the E45; and
all parts are easily reached by well used forestry tracks.
By rail, Jokkmokk is located on the Inlandsbanan Railway, a north-south
railway connecting Gällivare in the north to Östersund in the south.
Gällivare is on the main west-east railway, the Malmbanan line connecting
Port of Narvik (Norway) and Port of Luleå, which carries significant
quantities of iron concentrate predominantly to Narvik, but also through
Luleå. Iron concentrate can also be trucked by road to the Malmbanan line,
which is within 100km of the Project, and which is the base-case for the
project. Battery electric heavy goods vehicles, which are already in operation
across the Nordic region, are proposed.
Kallak is well connected by road and rail infrastructure with distance to
major ports and cities presented below:
Route Options from Kallak North:
Destination Road Distance Road to Jokkmokk + Rail
Luleå, Sweden 205 349
Skellefteå, Sweden 298 458
Narvik, Norway 419 402
Boden, Sweden 169 309
The Parki hydroelectric power plant, capacity 85 MW, is only 6km from Kallak
connecting to the 400 kV power transmission line (the main Swedish
transmission grid). Jokkmokk Iron has commenced discussions with the local
power operator regarding allocation of power for the project.
It has been assumed for the purposes of the 'Base Case' that 100 per cent of
BF-grade production will be exported to international markets, split equally
between Luleå and Narvik ports, and DR-grade will be sold domestically in
Sweden.
Kallak Location and Regional Infrastructure:
Operating and Capital Expenditure
Capital and operating costs for the project have been estimated from benchmark
information for similar projects in the region. Cost estimates from public
domain sources have been scaled for the production rate and escalated from
their original dates to 2023 figures before being averaged to generate the
estimated figure. Where appropriate, costs have also been benchmarked against
the subscription CostMine database. The table below provides a summary of the
unit operating costs applied. A 20 per cent contingency has been applied to
mining costs only.
Operating Costs Units Unit Operating Cost Total Operating Cost (US$ millions)
Mining US$/t mined 2.85 516
Processing US$/ t processed 6.30 742
Site and Infrastructure US$/ t processed 0.27 32
Transport and Logistics US$/ t processed 7.07 832
Tailings Storage Facility US$/ t processed 0.16 19
Water Related Costs US$/ t processed 0.04 5
G&A US$/ t processed 0.50 59
Royalty (0.2%) US$/ t processed 0.06 7
Total Operating Cost US$/ t processed 18.79 2,212
Total cash costs at the point-of-sale average US$87.3 dmt sold (USc127.1/dmtu)
over the Life of Mine.
Capital costs are also shown below, split between pre-production capital and
sustaining capital. Contingency of 20 per cent is shown as a line item.
Capital Costs Initial Capital (US$ millions) Sustaining Capital Total Capital
(US$ millions) (US$ millions)
Mining 54 0.2 54
Processing 180 0 180
Transport and Logistics 80 0 80
Power 35 0 35
Tailings Storage Facility 45 96 141
Water Related Costs 2 1 3
Closure 0 10 10
Sub-total 386 115 501
Contingency (20%) 77 23 100
Total Capital Costs 463 138 602
Glossary:
A Dry Metric Tonne Unit (dmtu) is the internationally agreed-upon unit of
measure for iron ore pricing. It has the same mass value as a metric tonne,
but the material has been dried to decrease the moisture level. A dry metric
tonne unit consists of 1 per cent of iron (Fe) contained in a tonne of ore,
excluding moisture. The price per tonne of a certain quantity of iron ore is
calculated by multiplying the cents/dmtu price by the percentage of iron
content. Iron ore contracts are quoted in US Cents.
Fe(Total) - Total iron content in all minerals present in the mineralised
material.
Fe(Mag) - Iron present as magnetite (or magnetic iron) or Fe(2)O(3) - which
is the commonly reported oxide of iron
Competent Person Review
The Scoping Study was prepared by independent consulting firm SRK Consulting
(UK) Ltd ("SRK").
The Scoping Study refers to the Mineral Resource Estimate prepared by Baker
Geological Services Ltd ("BGS") and announced on 25 May 2021. Follow the link
to Company announcement 'Kallak Iron Ore Project - Mineral Resource Estimate
and Exploration Target Upgrade':
https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x
(https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x)
Howard Baker of BGS is a Competent Person ("CP") as defined by the PERC
Code. Mr Baker has reviewed the technical information as it relates to the
MRE referred to in this announcement and approves the disclosure of technical
information regarding the MRE in the form and context in which it appears.
About Jokkmokk Iron and Kallak
The Kallak deposit is located west of Jokkmokk in the County of Norrbotten.
Kallak was discovered by The Swedish Geological Survey ("SGU") in the 1940s.
The first exploration licence for Kallak was awarded by the Mining
Inspectorate of Sweden in 2006. Drilling was conducted at Kallak North and
Kallak South between 2010-2014, a total of 131 holes and 27,895 metres. An
Exploitation Concession for Kallak North was applied for in April 2013 and was
finally awarded in March 2022; it is valid until 22 March 2047.
At Kallak, the iron mineralisation in the ground, that is to be mined,
contains approximately 28 per cent iron content ("Fe(Total)") which, through
enrichment, can be upgraded to a 'market leading' concentrate containing 71.5
per cent Fe(Mag). The high-grade concentrate makes Kallak production
attractive to downstream markets, such as fossil-free steelmakers in the
Nordic region and the rest of Europe.
Kallak magnetite concentrate would reduce the carbon footprint of traditional
steel manufacturing, improve energy efficiency in any downstream process and
reduce waste; magnetite's inherent energy content, ultimately results in lower
energy demand for steel manufacturing when compared to current common
practice.
It is the Company's ambition for the operation at Kallak to be one of
Sweden's most sustainable mining operations, where the start of fossil-free
steel production begins with primary raw material from Kallak.
The development of Kallak will also bring opportunities for the local
community in Jokkmokk. Investment and the creation of much needed jobs at
Jokkmokk Iron will indirectly create additional jobs locally, encouraging the
establishment of new companies and a reversal of the depopulation that has
afflicted Jokkmokk over recent years. This will contribute to a strong and
vibrant Jokkmokk community in the years ahead.
The Kallak deposit is being developed by Jokkmokk Iron, a 100 per cent owned
subsidiary of Beowulf Mining plc. The Jokkmokk Iron CEO is Ulla Sandborgh,
who is a civil engineer and has held senior positions in the private sector as
well as in public administration, in the infrastructure, electricity and water
sectors. Ulla has extensive experience from managing application procedures
and, as part of this, experience in collaborating with various stakeholders
and ensuring that mutual interests and benefits are shared and secured.
Enquiries:
Beowulf Mining plc
Kurt Budge, Chief Executive Officer Tel: +44 (0) 20 7583 8304
SP Angel
(Nominated Adviser & Broker)
Ewan Leggat / Stuart Gledhill / Adam Cowl Tel: +44 (0) 20 3470 0470
BlytheRay
Tim Blythe / Megan Ray Tel: +44 (0) 20 7138 3204
Cautionary Statement
Statements and assumptions made in this document with respect to the Company's
current plans, estimates, strategies and beliefs, and other statements that
are not historical facts, are forward-looking statements about the future
performance of Beowulf. Forward-looking statements include, but are not
limited to, those using words such as "may", "might", "seeks", "expects",
"anticipates", "estimates", "believes", "projects", "plans", strategy",
"forecast" and similar expressions. These statements reflect management's
expectations and assumptions in light of currently available information. They
are subject to a number of risks and uncertainties, including, but not limited
to , (i) changes in the economic, regulatory and political environments in the
countries where Beowulf operates; (ii) changes relating to the geological
information available in respect of the various projects undertaken; (iii)
Beowulf's continued ability to secure enough financing to carry on its
operations as a going concern; (iv) the success of its potential joint
ventures and alliances, if any; (v) metal prices, particularly as regards iron
ore. In the light of the many risks and uncertainties surrounding any mineral
project at an early stage of its development, the actual results could differ
materially from those presented and forecast in this document. Beowulf assumes
no unconditional obligation to immediately update any such statements and/or
forecasts.
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