Metallurgical and Market Acceptance Test Work

Early Metallurgical Test Work

In July 2011, an important milestone in the development of the Decar Nickel District was reached based on the positive results of the first metallurgical test campaign. Using drill core samples from the 2010 drilling campaign, metallurgical testing was conducted on more than 1 tonne of mineralized material, a composite representing various grain sizes taken from different areas of the mineralized zones. The metallurgical work was performed at SGS in Lakefield, Ontario, and at Cliffs’ metallurgical facility in Michigan, USA, under the supervision of Dr. Gordon Bacon, P. Eng., an independent metallurgical consultant, and under the direction of Keith Kramer, Engineer of Mineral Processing for Cliffs.

The head grade of the 1-tonne composite sample was 0.22% total nickel, or 0.14% as nickel-iron alloy. The nickel present as nickel-iron alloy represents 64% of the total nickel. The remaining nickel is tied up in the silicate lattice of the rock forming minerals and, except for a very minor amount, is not commercially recoverable.

The metallurgical test work demonstrated the nickel-iron alloy was recoverable using conventional, low-risk two-stage grinding and magnetic separation process. This produced an awaruite concentrate grading 2.6% nickel, with an estimated 80% recovery of the nickel-iron alloy. The concentrate also averaged 52% iron (mainly present as magnetite) and 2.2% chromite, with no deleterious minor elements.

Recovery of the nickel was achieved by using a primary grind of P80 600 microns, followed by magnetic separation. The magnetic fraction was then reground to a P80 75 microns and subjected to further magnetic separation. Tests show that with further gravity processing using a Knelson concentrator, concentrate grades in excess of 15% nickel were achievable, with some subsequent loss in nickel recovery.

During the 2011 exploration program at Decar, a 250-tonne bulk sample of mineralized host rock was collected from the surface of the Baptiste deposit. Portions of this bulk sample have been used for further metallurgical test work and marketing studies.

2013 Bench Scale Smelting Test Work

In October 2013, FPX Nickel District announced the positive results of preliminary lab scale test work, in which high-grade ferronickel was successfully produced from Decar awaruite (nickel-iron alloy) concentrate samples by application of proven and widely-used processes, thereby demonstrating potential amenability of Decar products to processing in existing ferronickel plants. These results represented a key advancement in demonstrating the potential for market acceptance of the Project’s concentrate. The 2013 test work demonstrated that smelting Decar concentrates on a stand-alone basis, with the addition of a reductant and fluxing agents, produces a high-grade product of 35%-50% nickel (the remainder being almost totally iron, plus minor chromite), compared to typical ferronickel products containing 15%-40% nickel. An alternative process route mixing Decar concentrates with saprolite ore at a pre-smelting, kiln reduction stage also gave positive results, but these are preliminary in nature.

These bench-scale results indicate the potential amenability of Decar’s awaruite concentrate to downstream processing using conventional smelting technologies. This represented an important step towards introduction into the market of a new intermediate product derived from Decar or other awaruite projects. Very high nickel recoveries of 94% to 99%-plus, for both a stand-alone awaruite concentrate and a mixed awaruite-saprolite calcine, along with strong iron recoveries, suggest the possibility of robust nickel and by-product payability, as awruite-based concentrates gain traction in the marketplace. To this point, the recovery of chromite as a by-product has not been considered.

The Decar concentrate is a nickel-iron-chromium concentrate produced by magentic separation of awaruite-bearing material followed by gravity concentration. This repesents a new product to be sold into the ferronickel-to-stainless steel production chain. As such, the testing program evaluating smelting performance of the concentrate targeted two possible treatment scenarios:

• Smelting of Decar awaruite concentrate into ferronickel on a stand-alone basis; and
• Blending Decar concentrate with saprolite ore in a kiln reduction/calcine smelting processing sequence. This is a process configuration currently in use in a variety of ferronickel plants around the world.

Stand-Alone Smelting Tests

Five successful stand-alond smelting tests were undertaken, three on concentrates produced in 2013 specifically for this testing program, and two on concentrates originally prepared in 2011 to examine magnetic-plus-gravity recovery. The 2011 concentrates provided the basis for the Preliminary Economic Assessment (“PEA”) of the Baptiste deposit completed in March 2013. In these five tests, awaruite concentrate was premixed with varying combinations of a reductant (anthracite coal) together with silica and magnesia fluxes, placed in a crucible in a muffle furnace and smelted at conventional temperatures (1600°C) and for normal duration (1 hour).

Bench Scale Smelting Tests: Ferronickel Buttons Produced from 2013 Decar Concentrates

The target nickel content of 50% was met for the ferronickel produced in all tests on the 2013 concentrate, and in one of the two tests on 2011 concentrates.Target slag compositions were also achieved, with the exception of one test. Nickel recoveries, ranging from 94% to more than 99%, met or exceeded targets in all but one test, and iron recoveries at 31% to 46% exceeeded the target in each case.

Smelting Test Using Mixed Saprolite-Awaruite Calcines

In these tests, an initial key objective was to determine if the awaruite concentrate would oxidize under kiln reduction conditions; such oxidation would render the material unsuitable for further processing in a conventional ferronickel furnace. The kiln reduction tests demonstrated that the awaruite survived un-oxidized through the process.

Three successful follow-on smelting tests were conducted on the mixed calcines, two in the same type of muffle furnace used in the stand-alone tests, and one in an induction-type furnace. The ferronickel buttons produced contained 17% to 19% nickel and 69%-76% iron, versus targets of 20% nickel and 75% iron respectively, with recoveries for nickel ranging from 95% to 99%, and for iron from 86% to 95%. The metallic product contained 1.4% to 1.9% chromium and a relatively high carbon content of 1.8% to 2.6%, due to the elevated carbon content of the mixed calcine feed. These results are more preliminary than the stand-alone smelting tests, due to experimental difficulties in the laboratory, but are regarded as encouraging.

A further conclusion of this test work is that the Decar concentrate will require some form of agglomeration or sintering, as the material is too fine to be charged directly into conventional furnaces. This work has not yet been undertaken, except to demonstrate that pressure alone is insufficient to produce suitable briquettes.

The lab scale test work was carried out for Cliffs by Process Research ORTECH Inc., at its Sheridan Park, Ontario, facilities, on samples ranging in size from 200 grams to 300 grams of awaruite concnetrate for the stand-alone tests, and 2 kilograms of awaruite concentrate for each of the mixed saprolite-awaruite kiln reduction/calcine smelting tests.

The table below presents a comparison of the specifications for the ferronickel produced from Decar concentrates against the ISO standard specifications and some selected ferronickel products currently in the market. It should be noted that the phosphorous and sulphur contents achieved in the Decar smelting tests are not outside the norm of crude ferronickel. However, refining steps will be required to reduce the level of these elements in the final ferronickel product as typically practised in all ferronickel plants.

Selected Ferronickel Product Specifications

Element	Decar – Stand-Alone	Decar – Mixed	ISO1	Sumitomo Metal Mining 2	Eramet SLN 25(r) 2
Ni	35 — 52 %	17 — 19%	15 — 80%	> 16%	21 — 28%
Fe	Balance	Balance	Balance	Balance	Balance
C	0.04 — 0.20%	1.8 — 2.6%	2.5% Max	< 3.0%	1.2 — 2.0%
P	0.06 — 0.08%	0.03 — 0.04%	0.03% Max	<  0.05%	0.014%
S	0.07 — 1.1%	0.4 — 0.8%	0.04% Max	<  0.03%	0.05%
Cr	0.03 — 0.07%	1.4 — 1.9%	2.0% Max	<  2.5%	0.55%

1. ISO Norm “FeNi specification and delivery requirement”. Source: Eramet Ni Research.
2. Source: Company websites.
Dr. Raja Roy, P. Eng., a Senior Project Manager & Senior Process Engineer at Process Research ORTECH and an independent Qualified Person under NI 43-101, reviewed and approved the metallurgical content regarding the 2013 bench scale smelting tests.

2014 Test of Market Acceptance and Commercial Potential

On April 22, 2014, FPX Nickel District announced the results of an initial market acceptance test of Decar concentrates. Each of six potential consumers participating in the test indicated satisfactory technical success in their analysis and test processing of the concentrates, which had never before been presented to potential offtakers for evaluation. Alternative process routes examined included blending as feedstock to ferronickel production and direct feed to stainless steel circuits.

In addition to the technical acceptance results achieved, the majority of participants provided indicative commercial terms for the purchase of such concentrates. All participants expressed interest in continuing discussions around potential long term availability of Decar concentrates on the world market for nickel products.

Key results from the tests, based on written responses from test participants, were as follows:

• All participants achieved generally satisfactory technical results from their analysis and testing of the samples of Decar concentrates provided, and ruled out the presence of deleterious or penalty elements that would render the product technically unacceptable.
• Test processing and analyses indicated amenability of Decar concentrates to treatment in a variety of conventional processing configurations:- as blending material in the kiln stage of kiln-reduction/ferronickel smelting configuration;
  – as post-kiln feed to the furnace stage of similar ferronickel configurations; and
  – as direct feed to stainless steel production.Direct feed to stainless steel circuits was achieved by agglomeration with a reducing agent, a preparation stage that may enhance performance in ferronickel processes as well. Very high rates of metallization (i.e. recovery of the nickel in the concentrate in the target product, ferronickel or stainless steel metal) and accountability were noted across the various processes assessed, ranging from 85% to more than 97%.
• Commercial feedback indicated the potential to achieve payability for nickel in awaruite concentrates in the range of 85% to more than 95% of the London Metal Exchange (“LME”) nickel price, depending on end use and prevailing nickel price, with no credits for iron or chromite. By comparison, the Preliminary Economic Assessment (“PEA”) of the Baptiste deposit, the positive results of which were announced by FPX Nickel in March of 2013 (See FPX Nickel news release of March 22, 2013), was based on a revenue assumption of 75% of LME payable for nickel in concentrates, with no credits for other elements.

It should be noted that both technical results and commercial indications are preliminary and subject to confirmation following further testing and analysis, including larger scale, more continuous processing runs.

Technical Acceptance

In designing the market test program, FPX Nickel identified world-class participants in the stainless steel value chain, all but one of whom produce both ferronickel and stainless steel in their facilities. A seven-tonne bulk sample from Decar was shipped to ALS Metallurgy in Kamloops, B.C. for metallurgical testing and production of a nickel-iron-chromite concentrate, using conventional magnetic separation and gravity concentrate. Following execution of a non-disclosure agreement, each party was provided with a 2 kilogram sample (one participant requested only 300 grams) of the concentrate, grading approximately 16.5% nickel, 41% iron and 1.5% chromite, for analysis and testing in their respective operations. Testing conducted by potential customers was bench-scale and static, based on the relatively small concentrate sample, which was, in turn, prepared from a bulk sample, taken from a single location at the Project, that was not necessarily representative of the Decar deposit overall. Nonetheless, the samples represented a realistic product both for testing and for the generation of valid results, positive or negative.

Ferronickel

The ferronickel facilities of the parties evaluating the Decar concentrates are, with some differences of customization, conventional two-stage processes: kiln reduction followed by ferronickel smelting. Analytical and testing approaches included blending the awaruite concentrates with laterite ore for treatment in the kiln stage of the ferronickel circuit, and, separately, combining the concentrates with calcines produced from the kiln stage as a blended feed to the final ferronickel production stage. Under conventional operating parameters, high metallization rates (i.e. conversion of the nickel in the concentrate into ferronickel) for nickel and iron are indicated for both processing routes, ranging from 85% to more than 97%, while chromite in the mixed calcine scenario is not recoverable as it reports to the ferronickel slag.

A key optimization suggestion arising from the test was the incorporation of agglomeration or pelletization as a pre-treatment step, both to reduce the potential for oxidation of the fine-particle concentrate during kiln reduction and/or to avoid losses of fine material on direct injection into ferronickel smelting. Other technical issues raised included the importance of maintaining stable silica oxide/magnesium oxide ratios in the concentrates and the need for further demonstration that impurity contents (phosphorous, sulfur, copper) can be maintained at acceptable levels over a longer run. The scope of ongoing metallurgical testing, optimization studies and economic analysis as part of the Pre-Feasibility Study (“PFS”) will be tailored to address these matters.

Stainless Steel

Injection of the awaruite concentrates as direct feed into stainless steel circuits was also evaluated, following pelletizing using coke and the required blend of flux to achieve adequate reducing atmosphere and correct slagging characteristics for the awaruite concentrates. At this stage, using this method, the metallization potential of the chromite has not been determined but the percentage of nickel which may be metallized approaches 99.0 %. Slag characteristics require that the magnesium oxide levels in the pelletized product should be less than 60.0 % of the silica content. The current ratio is 1 to 1 and the correct ratio can be achieved by adding silica either to the pellets or at a later stage of processing. Again, the scope of PFS testing, optimization studies and economic analysis can be altered to address these items.

Commercial Indications

Commercial indications of nickel payability ranged from a low of 70% of the LME nickel price to highs of more than 97%, depending on a combination of factors, including end use and prevailing nickel price (e.g., higher payability as nickel price increases). At this stage, none of the potential customers have agreed to pay for iron or chromite content of the concentrates, but FPX Nickel remains of the view that, as technical performance of the concentrates becomes better established, the argument for payability of these additional elements will gain strength. The responses received demonstrate the potential to achieve nickel payability in the range of 85% of LME to 95% or more. This would represent a material improvement on the 75% of LME — for nickel only, no by-product credits — assumed as the revenue realization driving the positive PEA results announced in March 2013 (See FPX Nickel news release of March 22, 2013).

Further discussions with potential customers — both participants in this test program and others — throughout the PFS stage will be focused on maximizing revenue realization from optimized product designs.

Dr. Peter Bradshaw, P. Eng., FPX Nickel’s Qualified Person under NI 43-101, has reviewed and approved the content of this metallurgical section.