REG - GreenRoc Mining PLC - PEA Confirms Robust Economics for Amitsoq Graphite

GreenRoc Strategic MaterialsAnnouncement

31/10/2023 07:15

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RNS Number : 7851R  GreenRoc Mining PLC  31 October 2023

GreenRoc Mining Plc / EPIC: GROC / Market: AIM / Sector: Mining

 

31 October 2023

GreenRoc Mining plc

("GreenRoc" or the "Company")

 

Amitsoq Update

PEA Confirms Robust Economics for Amitsoq Graphite Project

 

GreenRoc Mining Plc (AIM: GROC), a company focused on the development of
critical minerals projects in Greenland, is pleased to announce the extremely
positive results of the Preliminary Economic Assessment ("PEA") of its 100%
owned Amitsoq Graphite Project in southern Greenland ("Amitsoq") (Figure 1).
The PEA was completed to internationally recognised NI 43-101 standards by SLR
Consulting Ltd ("SLR"), an independent UK consulting firm with considerable
global expertise in the field of mining and mineral processing, including in
Greenland.

 

Highlights

·     Pre-Tax Net Present Value at 8% discount rate (NPV(8)) of US$235M
with Internal Rate of Return (IRR) of 31.1%.

·      After-tax NPV(8) of US$179M with IRR of 26.7%.

·      Life of mine (LOM) is 22 years with potential to extend through
resource expansion.

·      4-year payback period on capital from start of production.

·      Average Net Revenue of US$89.8M per year throughout the 22-year
LOM.

·     Total gross revenue of US$2.1Bn over a 22-year LOM, with total
undiscounted net pre-tax cash flow totalling US$794.7 M.

·      Initial capital cost (Capex) of US$131M inclusive of 25%
contingency.

·      Average operating cost (Opex) of US$121 per tonne of milled ore.

·      Average annual production of 77,000t of concentrate at a minimum
94% grade.

·   Mine plan assumes mining from the Lower Graphite Layer (LGL) only,
leaving considerable resources from the Upper Graphite Layer (UGL) available
for future production expansion or extension to the LOM.

 

The strong economic results from the PEA provide independent validation of the
Project's potential to become a globally significant producer of graphite
concentrate. Simultaneously, GreenRoc continues to advance its objective of
developing the processing capabilities to upgrade its future graphite
concentrate production into anode material for electric vehicle ("EV")
batteries, which the Company believes will add substantially to the positive
economics of the Amitsoq Project.

 

With a substantial graphite supply deficit being forecast for the coming
decades, and the risks associated with the global EV supply chain's
overreliance on Chinese graphite highlighted by China's recent announcement of
export restrictions on battery-grade graphite, Amitsoq is positioned to become
a key source of the high purity spherical graphite required to produce anode
material for the European car industry.

 

Stefan Bernstein, GreenRoc's CEO, commented:

"We are extremely pleased with the outcome of the PEA, which confirms robust
economic figures for mining activities at Amitsoq. A pre-tax NPV of US$235M
with an IRR of 31.1%, initial CAPEX of US$131M (inclusive of a conservative
25% contingency) and average Opex of US$121 per tonne of milled ore equates to
a four-year payback on capital from start of production, a healthy return on
investment when set against an undiscounted net pre-tax cash flow totalling
US$794.7 M over a 22-year life of mine.

 

"The mine plan set out in the PEA is relatively straightforward thanks to
Amitsoq's simple ore body geometry. All of the on-site processing equipment is
based on the use of standard and proven techniques, but with potential upside
through the use of some new, and more efficient, processing technologies that
we are currently exploring.

 

"The entire mining operation is planned to take place in the Lower Graphite
Layer, thus reserving the Upper Graphite Layer for production expansion, or to
extend the mine life. About 75% of the mined ore in the PEA is sourced in the
Measured and Indicated category and, given the simple ore body geometry, we
are confident that the remaining ca. 25% can be upgraded into the higher
confidence resource categories.

 

"The proposed use of a Drift and Fill mining method, coupled with the
exceptionally high grades of the Amitsoq ore, will mean that as much as 86% of
the tailings will be used as backfill, with a mere 14% required to go to a
tailing storage facility. This is excellent news as it will minimise the
environmental impact of the mine, whilst also saving the cost of transporting
tailings.

 

"While the PEA is based on the use of conventional diesel-generated power, we
are looking into a variety of emission-free energy solutions to replace the
diesel-generated power plants as soon as that is feasible.

 

"China's announcement in the past few days of its imminent imposition of
export restrictions on Chinese battery-grade graphite provides the perfect
backdrop to the release of the Amitsoq PEA and flags up the increasing
strategic importance of Amitsoq to the European and North American battery
supply chain. This PEA provides independent validation of our focus and
determination to get the Amitsoq mine up and running in the shortest time
possible while, at the same time, developing graphite anode material
processing capability through our recently initiated Anode Feasibility Study
in conjunction with the UK's Advanced Propulsion Centre. I am confident that
the Anode Feasibility Study will, in due course, provide further upside to
Amitsoq and for our investors."

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1:

Location of Amitsoq deposit, with GreenRoc's mineral exploration licences
shown in blue (MEL 2013-06) and yellow (MEL 2022-03).

 

 

Details

 

The PEA report contains a detailed description of the ore bodies at Amitsoq
and incorporates the Competent Person Report (CPR) on the resource estimate,
an analysis of processing work and basic design of an on-site processing plant
as well as mine plan, workforce needs, capital cost (Capex) and operating
costs (Opex) and a discounted cash flow (DCF) model.

 

Mine Plan

 

The mine plan is based on 22 years of production with the full mining rate of
400,000t per annum reached after two years of ramp-up.

 

The total mined inventory is 8.26Mt of ore with an average of 21.3% graphite
(Cg). This is based on the mining resource category given in Table 1 showing
that the higher resource categories (Measured and Indicated) account for about
75% of the mine mass. Cut-off grades are calculated at 18.7% Cg. The higher
grades of 21.3% Cg versus the average grade of 20.41% reported as average in
the global resource estimate of January 2023 reflect that all mining takes
place in the LGL, where higher average grades have been recorded to date than
those in the UGL.

 

The fact that the mine design in the PEA assumes production from the LGL only
and is modelled on a total mining inventory of 8.26Mt compared to a total
January 2023 global resource estimate of 23.05Mt, is indicative that there is
significant potential for future production expansion and/or extension to the
LOM at Amitsoq.

 

Table 1: LGL Mining Inventory by Mineral Resource Category

The proposed mining method is Drift and Fill, which requires backfill as the
working platform. One central spiralling decline will provide access to all
mining levels from the deepest level of 320m below sea level to the highest at
10m above sea level. The mining will be completed using a fleet of
diesel-powered, electro-hydraulic drill jumbos, bolters, load-haul-dump
machines, and underground fitted trucks.

 

Mine Design

 

The underground workforce will be comprised of three crews on a four-week on,
two-week off roster. The on-shift workforce at Amitsoq will total 45 persons
(so, 135 workers in total across the three crews) and mine support and
administrative staff at the nearby town of Nanortalik will total a further 19
persons per shift (for a total of 37 personnel).

 

Mined ore will be transported to a processing plant on site, crushed by a
conventional three-stage crushing circuit and then ground by ball mills to
produce a slurry with optimum size distribution for concentration in flotation
units. The final filter-pressed concentrate product will have a minimum
content of 94% graphite. It will be stored in 1t bulk bags before
transportation to Nanortalik town for later shipment to the designated
overseas port of destination.

 

Tailings from the processing plant will primarily be used for backfill in the
mine. With an annual nominal mining rate of 400,000t, ca. 3.8M m(3) of
tailings will be produced throughout the life of the mine (LOM), of which ca.
3.3M m(3) will be used as backfill with ca. 0.5M m(3) remaining for surface
storage. A number of options have been considered for the storage of the
relatively modest volume of tailings, including both dry-stack and wet storage
facility in a nearby dead (not life-supporting) lake. Transport to the storage
facility is planned to take place on barges.

 

Project infrastructure

 

Most of the infrastructure required to run the mine will be situated at the
mine site. In addition to the processing plant, backfill paste plant,
workshops and storage space, the infrastructure will include a T-shaped pier
for accommodating ships, accommodation for day and night shifts, a catering
and recreation complex (for a total of up to 110 people at any given time),
freshwater treatment for water supply based on reverse osmosis, wastewater
treatment, tailings load-out area, power generation plant, short-term fuel
storage and an emergency treatment medical facility.

 

Electric power for the mine, process plants, and infrastructure on the island
will be produced from diesel-fuelled generator sets. The estimated power
demand for the island is 11 MW. Five operating 2500 kVA generators plus one
stand-by unit will provide the power. Electric power for the tailings area
will be provided from a small 300 kW diesel generator.  At the same time, the
Company is investigating the means to transition to zero-carbon electricity
generation as soon as it is feasible to do so.

 

The main fuel depot will be located at the nearby town of Nanortalik (20km
from the mine), where warehouse and office space will be rented partly, or
wholly, using existing structures for marshalling, storage and administrative
purposes. Nanortalik harbour, which has ice-free conditions through the
winter, will be the base for the shipping of graphite concentrate to the
designated ports of destination, which are expected to be either northern
Europe (4-5 days of shipping) or North-East America (5-7 days of shipping).

 

Project Economics

 

Initial Capex (for construction and commissioning) amounts to a total of
US$131M which includes 25% contingency of US$26M (Table 2).

 

Operating costs amount to US$111/t milled ore and break down into mining costs
of US$53.9/t, processing costs of US$24.5/t and general & administration
(G&A) (supporting costs (transport, backfill paste etc) of US$32.7/t (see
Table 3), plus US$10/t to cover shipping of concentrate to port of destination
for a total of US$121/t.

 

Total gross revenue amounts to US$2.1Bn over a 22-year LOM, with the total
undiscounted net pre-tax cash flow (i.e., total revenues less total Capex,
Opex and other costs and charges) totalling US$794.7 M.  This is based on
an average basket graphite price of US$1250/t of 94% concentrate, based on the
forecast average for 2028-2033 published by Fastmarket in May 2023.

 

This results in a pre-Tax Net Present Value at an 8% discount rate (NPV8) of
US$235M with an Internal Rate of Return (IRR) of 31.1%.  The after-tax NPV8
is US$179M with an IRR of 26.7% (see Table 4, which also gives the NPV at 6%
and 10% discount rates).

Table 2: Specification of Capital Costs

 

 Table 3: Specification of Operating Costs

 

 

Table 4. Amitsoq project economic performance with varying discount rates at
6, 8, and 10%. The After-Tax NPV and IRR includes 2.5% royalties to the
Greenland Government.

 

                                   Discount rate    Units       Value
 Pre-Tax IRR                                         %          31.1%
 Pre-tax NPV at 6% discounting     6.0%              US$ '000   $314,441
 Pre-tax NPV at 8% discounting     8.0%              US$ '000   $235,308
 Pre-tax NPV at 10% discounting    10.0%             US$ '000   $177,115

 After-Tax IRR                                       %          26.7%
 After-tax NPV at 6% discounting   6.0%              US$ '000   $243,663
 After-tax NPV at 8% discounting   8.0%              US$ '000   $179,353
 After-tax NPV at 10% discounting  10.0%             US$ '000   $132,224

 

Forthcoming work activities

 

In the light of the resoundingly positive independent economic assessment
provided by the PEA, GreenRoc remains committed to pushing forward the Amitsoq
graphite project to production as fast as possible.

 

A large bulk ore-sample of 10-20t will be collected from the old underground
workings at the Amitsoq mine and shipped to independent processing
laboratories in Europe. This will enable further design processing parameters
to be determined and provide material both for pilot-scale active anode
material processing and for ongoing analysis by interested offtake and
strategic partners.

 

A Phase III drilling programme is planned for 2024, which will provide further
expected upgrades to the graphite resource as well as key geotechnical data to
feed into the Pre-Feasibility Study (PFS) which is planned to commence in H2,
2024. The PFS will build upon the PEA by undertaking detailed engineering in
order to optimise mine and processing design and further constraining the
mining inventory, capital and operating cost estimates and other economic
design parameters.

 

2024 will also see the completion of the Environmental and Social Impact
Assessments for Amitsoq and the submission of an application for an
Exploitation Licence, further key milestones in the route to commercial
production.

 

Lastly, in parallel with the development work at the Amitsoq graphite mine,
GreenRoc is conducting a Feasibility Study on a graphite anode material
processing plant, using specialist subcontractors Benchmark Mineral
Intelligence, ProGraphite, SLR and Decision Risk Analytics and supported by a
£250k grant from the Advanced Propulsion Centre (see RNS Oct 9, 2023). The
Feasibility Study is planned to be concluded in Q2, 2024.

 

This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.

 

Forward Looking Statements

This announcement contains forward-looking statements relating to expected or
anticipated future events and anticipated results that are forward-looking in
nature and, as a result, are subject to certain risks and uncertainties, such
as general economic, market and business conditions, competition for qualified
staff, the regulatory process and actions, technical issues, new legislation,
uncertainties resulting from potential delays or changes in plans,
uncertainties resulting from working in a new political jurisdiction,
uncertainties regarding the results of exploration, uncertainties regarding
the timing and granting of prospecting rights, uncertainties regarding the
timing and granting of regulatory and other third party consents and
approvals, uncertainties regarding the Company's or any third party's ability
to execute and implement future plans, and the occurrence of unexpected
events.

 

Actual results achieved may vary from the information provided herein as a
result of numerous known and unknown risks and uncertainties and other
factors.

 

Competent Person Declaration

The independent Competent Person for the disclosure of the results of the
Amitsoq Project Preliminary Economic Assessment (PEA) is Mr Bryan Pullman,
P.Eng. of SLR Consulting Limited. Mr Pullman has reviewed and approved the
technical content of this news release insofar as it reflects the PEA, in the
form and context in which it appears.  Mr Pullman completed a site visit to
the Amitsoq Project on 27 May 2023 and visited locations relevant to the
Project including the underground workings, and potential process plant, and
other infrastructure sites within the licence area.

 

**ENDS** 

 

For further information, please contact: 

   GreenRoc Mining plc                                        +44 20 3950 0724

   Stefan Bernstein, CEO 

  
   Cairn Financial Advisers LLP (Nomad)                       +44 20 7213 0880

   James Caithie / Sandy Jamieson / Louise O'Driscoll 

  
   SP Angel (Broker)                                          +44 20 3470 0500

   Ewan Leggat / Charlie Bouverat

   
   St Brides Partners Ltd (Financial PR & IR)                 +44 20 7236 1177

   Paul Dulieu / Isabel De Salis / Isabelle Morris            greenroc@stbridespartners.co.uk

  

 

About GreenRoc 

GreenRoc Mining plc is an AIM-quoted company which is developing mining
projects in Greenland in critical, high-demand and high-value minerals.

 

Key points about Amitsoq:

·     Greenroc Mining plc holds the Amitsoq exclusive exploration licence
MEL2013_06 of a total of 72.52km2 in the South of Greenland.

·      The combined resource estimate given above has been achieved after
two drilling phases.

·    Several samples have been extracted for the purpose of testing the
quality of the Amitsoq graphite.

·    Independent micronisation and spheronisation test work has proven that
Amitsoq graphite can be easily upgraded to high-grade anode-quality graphite,
otherwise known as high purity spherical graphite or cSPG, a key raw material
in the manufacturing of EVs.

·    In GreenRoc's test work programmes, Amitsoq spheronised graphite has
achieved higher than 99.95% purity with relatively little energy input and
processing and using the milder alkaline purification method compared to the
industry standard hydrofluoric acid, boding well for future production costs
and sustainability commitments.

·     Significant further upside exists at Amitsoq as the Amitsoq Island
Deposit is open in at least two directions with potential for considerable
further expansion via the similarly high-grade Kalaaq Mainland Deposit as well
as a series of other high-grade targets on GreenRoc's licence package.

·  The deposit was in small-scale production about 100 years ago, and there
remains considerable underground mine development in place from that time,
which will be of considerable benefit to GreenRoc in the mine construction
phase.

·     Following a detailed evaluation process, the European Raw Materials
Alliance has expressed its support of GreenRoc and its Amitsoq graphite
project, stating that "GreenRoc's graphite resource is of global importance
and, together with the Company's strategy, will enable the European Union to
achieve a certain level of independence for the electrical vehicle supply
chain. ERMA has approved the Amitsoq Graphite project and will engage to
support its development and financing to produce these critical raw materials
for the benefit of the European Union goals." (see RNS dated 8 February 2023).

·   On 9 October 2023, GreenRoc was awarded a grant of approximately
£250,000 by the Automotive Transformation Fund in the UK to part-finance a
feasibility study into the establishment of a graphite spheronisation
processing plant in the UK to produce active anode material from graphite
concentrate delivered from GreenRoc's Amitsoq Graphite Project.

 

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