On September 9, 2020, the Company announced the positive results of a Preliminary Economic Assessment (“PEA”) for the Baptiste Project at the Decar Nickel District.  The PEA was prepared by BBA Inc. of Montreal, Canada with work on mine planning and tailings by Stantec Inc. of Vancouver, Canada.  The PEA results and assumptions are as follows:

Baptiste Deposit PEA Assumptions and Highlights:

The 2020 Baptiste PEA demonstrates the potential for establishing a greenfield open-pit mine and an on-site magnetic separation and flotation processing plant, using conventional technology and equipment.  At a throughput rate of 120,000 tonnes per day (or 43.8 million tonnes per year), annual production is projected to average 99 million pounds nickel contained in ferronickel (“FeNi”) briquettes at C1 operating costs of US$2.74 per pound of nickel.  It is anticipated that the Baptiste FeNi briquette will be sold directly to stainless steel producers and garner 98% of the London Metal Exchange (“LME”) nickel price, in line with payabilities earned by standard FeNi products in the global marketplace.

Table 1 – Baptiste Project PEA Results and Assumptions (all in US$)

Results
Pre-tax NPV (8% discount rate) $2.93 billion
Pre-tax IRR 22.5%
Payback period (pre-tax) 3.5 years
After-tax NPV (8% discount rate) $1.72 billion
After-tax IRR 18.3%
Payback period (after-tax) 4.0 years
Net cash flows (after-tax, undiscounted) $8.73 billion
C1 operating costs 1 $2.74/lb nickel
AISC costs 2 $3.12/lb nickel
Assumptions
Processing throughput 120,000 tonnes per day
Mine life 35 years
Life-of-mine stripping ratio (tonnes:tonnes) 0.40:1
Life-of-mine average annual nickel production 99 million lbs.
Nickel price 3 $7.75/lb
Baptiste product payability (% of nickel price) 98%
Pre-production capital expenditures $1.67 billion
Sustaining capital expenditures $1.11 billion
Exchange rate 0.76S$/C$
  1. C1 operating costs are the costs of mining, milling and concentrating, on-site administration and general expenses, metal product treatment charges, and freight and marketing costs less the net value of by-product credits, if any. These are expressed on the basis of per unit nickel content of the sold product.
  2. AISC of all-in sustaining costs comprise the sum of C1 costs, sustaining capital, royalties and closure expenses. These are expressed on the basis of per unit nickel content of the sold product.
  3. Nickel price based on the average of six long-term analyst forecast prices.

Cautionary Note: The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.  Mineral resources are not mineral reserves and do not have demonstrated economic viability.  There is no certainty that the conclusions or results as reported in the PEA will be realized.

Capital Costs

The total pre-production capital costs, including direct costs, indirect costs and contingency was estimated at $1.67 billion.  This represents the pre-production capital expenditure required to support start-up of operations in year 1.  The capital cost related to the implementation of in-pit tailings deposition in year 22 was estimated at $103 million.  This is the capital expenditure specifically required to allow for finer primary grinding (resulting in improved nickel recovery) and for pumping tailings to the mined-out pits for in-pit deposition, and other associated costs (see further discussion under Metallurgy and Mineral Processing and Tailings Management below).  Sustaining capital costs (which excludes the capital cost related to the implementation of finer primary grinding and in-pit deposition) were estimated at $1.01 billion.  These costs include items such as mine equipment fleet additions and replacements, facilities additions and improvements and costs relating to tailings storage facility and surface water management which are incurred over the life-of-mine (“LOM”).

Table 2 – Capital Costs

Category Pre-Production US$ million In-Pit Tailings Deposition (Year 21)

US$ million

 Sustaining US$ million Total LOM US$ million
Direct Costs
Mobile Equipment $155 – $354 $509
Tailings $138 $15 $534 $687
Mine and tailings site preparation $96 – $90 $186
Mineral processing $610 $88 $18 $717
Off-site infrastructure $64 – – $64
On-site infrastructure $66 – $7 $73
Total direct costs $1,129 $103 $1,003 $2,235
Indirect costs $292 – $8 $300
Contingency $254 – – $254
Total project capital costs $1,675 $103 $1,012 $2,789

Operating Costs

Table 3 presents a summary of the estimated average operating costs for the initial Phase 1 (Years 1 to 21), Phase 2 (Years 22 to 35, during which period the Project will adopt finer primary grinding and in-pit tailings deposition) and for the life-of-mine, expressed in US$/tonne of dry material processed (milled).

Table 3 – Total Estimated Phase and Average LOM Operating Costs (US$/t milled)

Estimated average LOM operating costs Phase 1

(Years 1-21)

 Phase 2

(Years 22-35)

 Average (LOM)
Mining $2.28 $2.66 $2.43
Mineral processing $2.71 $2.91 $2.79
Product transport $0.19 $0.18 $0.19
Rail terminal and access road $0.05 $0.05 $0.05
General site services $0.62 $0.62 $0.62
General and administration $0.25 $0.25 $0.25
Total operating costs $6.09 $6.66 $6.32

 Table 4 presents estimated phase and average LOM operating costs stated on a per unit of nickel production basis.

Table 4 – C1 costs and AISC costs (US$/lb nickel)

  Phase 1

(Years 1-21)

 Phase 2

(Years 22-35)

 Average (LOM)
C1 costs $2.61 $2.94 $2.74
AISC costs $3.13 $3.11 $3.12

Mineral Resource Estimate

The PEA incorporates an updated 2020 resource estimate for the Baptiste Deposit including all data from the 83 surface drillholes completed since 2010 and 2,053 samples from a re-sampling program of 2010/2011 drill core that was carried out in 2012.  The estimate is geologically constrained within four mineralized domains and is reasonably comparable among different estimation methods (i.e., ordinary kriging, inverse distance squared weighting, nearest neighbour).

The 2020 resource model comprises a large, delta shaped volume that measures approximately 3.0 km in length and 150 to 1,080 m in width and extends to a depth of 540 m below the surface.  The Baptiste Deposit remains open at depth over the entire system and is covered by an average of 12 metres of overburden.

Table 5: 2020 Baptiste Deposit Pit-Constrained Mineral Resource Estimate *

Category Tonnes (000’s) Davis Tube Recoverable (“DTR”) Nickel Content
% Ni Tonnes Ni Pounds Ni (000’s)
Indicated 1,995,873 0.122 2,434,965 5,368,173
Inferred 592,890 0.114 675,895 1,490,092

* See Notes for Tables 5 and 6 below.

Table 6: 2020 Baptiste Deposit Block Model Tonnage and Grades Reported at a Range of Cut-off Grades (Base Case 0.06% DTR Ni) *

Cut-off Grade (DTR Ni %) Indicated Inferred
Tonnes (000’s) DTR Ni Grade (%) Tonnes (000’s) DTR Ni Grade (%)
0.02 2,076,969 0.119 750,633 0.098
0.04 2,055,578 0.120 659,900 0.107
0.06 1,995,873 0.122 592,890 0.114
0.08 1,871,412 0.126 499,993 0.122
0.10 1,617,364 0.131 399,801 0.130

* Notes for Tables 5 and 6:

  1. Updated mineral resource estimate prepared by GeoSim Services Inc. using ordinary kriging with an effective date of September 9, 2020.
  2. Davis Tube magnetically-recovered (“DTR”) nickel is the nickel content recovered by magnetic separation using a Davis Tube, followed by fusion XRF to determine the nickel content of the magnetic fraction; in effect a mini-scale metallurgical test. The Davis tube method is the global, industry standard metallurgical testing apparatus for recovery of magnetic minerals.
  3. Indicated mineral resources are drilled on approximate 200 x 200 metre drill spacing and confined to mineralized lithologic domains. Inferred mineral resources are drilled on approximate 300 x 300 metre drill spacing.
  4. An optimized pit shell was generated using the following assumptions: US$6.35 per pound nickel price; a 45° pit slope; assumed mining recovery of 97% DTR Ni and process recovery of 85% DTR Ni, an exchange rate of $1.00 CAN = $0.76 US; and mining costs of US$2.75 per tonne, processing costs of US$4.00 per tonne. A US$1.00 per tonne minimum profit was also imposed to exclude material close to the break-even cut-off.
  5. A base case cut-off grade of 0.06% DTR Ni represents an in-situ metal value of approximately US$7.00 per tonne which is believed to provide a reasonable margin over operating and sustaining costs for open-pit mining and processing.
  6. Totals may not sum due to rounding.
  7. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

Mining

The PEA mine plan is based on the mineral resource estimate and its underlying geological block model.  The mine plan envisions a three-phased open pit mine development, with the Phase 1 pit covering the first 21 years of mine life.  During this phase, tailings will be deposited in an external tailings storage facility (“TSF”).  The Phase 2 and 3 pits expand laterally towards the northwest and northeast from the Phase 1 pit, providing mill feed for years 22 to 35, allowing tailings to be placed in the mined-out Phase 1 pit.  A pit rim dam will be constructed in year 25 to allow access from the phase 3 pit to the plant and to accommodate the additional tailings that will be stored in the Phase 1 and Phase 2 pits after they are mined out.

Mining will be conducted using conventional truck and shovel methods.  Large-scale open pit mining will provide the mineral processing plant feed at a rate of 120,000 tonnes per day, or 43.8 million tonnes per annum.  Annual mine production of mill feed and waste will peak at 80.1 Mt/a with a life-of-mine stripping ratio of 0.40:1 including preproduction (0.32 during the first 10 years of operation, and 0.22 over the first 16 years of operation).  Ultimate pit quantities with corresponding DTR nickel grades are shown in Table 6.

Table 7 – Ultimate Design Pit Quantities

Material Classification Tonnage (Mt) Grade (% DTR Ni)
Indicated 1,326 0.124%
Inferred 177 0.102%
Total for processing 1,503 0.121%
Waste rock 540
Overburden 55
Total waste 596
Total material mined 2,098
Stripping ratio (LOM) 0.40 :1

Note: Mineral resources are not mineral reserves and do not have demonstrated economic viability

Metallurgy and Mineral Processing

The metallurgical testwork for the PEA was performed at ALS in Kamloops, British Columbia and was focused on the following:

  • Magnetic separation tests at a range of primary grind sizes (P80 from 57 µm to 360 µm);
  • Magnetic cleaning tests to 25 µm final regrind size;
  • Flotation testwork on the magnetic cleaner concentrate under various conditions and reagent additions;
  • Mineralogical assessment of the head sample and some products generated in the testwork.

A conceptual mineral processing flowsheet was developed as the basis for the PEA.  The process flowsheet is based on traditional grinding, magnetic separation and flotation processes.  Unit operations in this flowsheet include crushing and grinding, magnetic separation, magnetic concentrate re-grinding to 25 microns (P80), further magnetic cleaning stages, followed by rougher and cleaner flotation stages to produce a final nickel concentrate grading 63% nickel.

The metallurgical testwork results indicated that at a primary grind of 300 µm, it is possible to produce a 63% nickel concentrate with a nickel recovery of 85% of the DTR nickel feed grade.  In Year 22, when in-pit tailings deposition is implemented, a finer primary grind of 170 µm can be achieved through the addition of a third ball mill resulting in a DTR nickel recovery of 90%.

Subsequent to the flotation process, the 63% nickel concentrate is dewatered, filtered to a filter cake and briquetted into a final saleable ferronickel product.  The flotation process also produces a magnetite-rich tailings stream which has the potential to be sold or further valorized as a saleable iron ore product.  For the PEA, no by-product revenues have been recognized for the potential sale of this magnetite-rich product.

Product Marketing

Metallurgical testwork performed for the PEA Study has shown that the Baptiste Project can produce a clean, high-grade, ferronickel concentrate through a conventional mineral processing flowsheet.  The FeNi concentrate, agglomerated in briquette form, constitutes the final saleable product generated by the Project for consumption by stainless steel producers.  The projected product specification for the Baptiste briquettes is presented in Table 8.

Table 8: Projected Product Specification for Baptiste FeNi Briquettes

Elements and Minerals Content
Ni 60-65%
Fe (total) 30-32%
Awaruite (Ni3Fe alloy) 77-83%
Metallic Fe in awaruite 19-21%
Magnetite (Fe3O4) 13-18%
Co 1% typical
Cu 0.7% typical
P 0.02% typical
S 0.6% typical
MgO 1% typical
SiO2 1.5% typical
Cr2O3 0.4% typical

The selling price to be obtained from the sale of the Baptiste FeNi briquettes to stainless steel producers will generally be a function of two variables: (1) the LME nickel price and (2) a discount or premium to the LME nickel price, based on the market positioning of the Baptiste FeNi briquettes in relation to competing sources of nickel feedstock to stainless producers, including stainless steel scrap, nickel pig iron, standard FeNi and Class 1 nickel briquettes or cathode.  The selling price determined by the analysis of these two components is the price used for the economic analysis performed for the PEA.

A long-term LME base nickel price assumption of $7.75 per pound is assumed in the PEA which is consistent with the average long-term nickel price of forecasts provided by six base metals analysts.  In order to assess the potential payability for the Baptiste product, stated as a percentage of the LME base price, the following sources of information were considered:

  • The results of the Company’s preliminary product market testing undertaken with stainless steel and ferronickel producers;
  • Preliminary market feedback based on informal discussions with nickel consumers and traders, including an independent consultant to the Company and representatives of large international trading houses specializing in nickel products;
  • Benchmarking with typical specifications for standard FeNi and nickel pig iron (“NPI”) products from various producers;
  • Historic premium / discount data for standard FeNi.

The analysis, in consideration of the aforementioned information sources, concluded that a discount of 2% applied to the LME nickel price provides a reasonable assumption for determining the selling price to be used for the PEA.

Off-Site Infrastructure

The Decar District site access road, having a total length of 121 km, consists of an existing paved road segment and an existing forestry service road (“FSR”).  A new 110-m span bridge and a new 4.5 km FSR segment will be required to access the property.  Also, upgrades will be required to an existing 20-m span bridge and to 12 km of existing FSR segments.

A road-to-rail transfer facility is proposed to be constructed off-site in the vicinity of the existing CN Rail branch line.  The transfer facility is to be used primarily for transloading containerized FeNi briquettes onto railcars for transport to the Prince Rupert port terminal for eventual delivery to ports in Asia.  The FeNi briquettes will be loaded into containers at the mine site and trucked by the Company to the transfer facility.  The Project will, on average, produce about 72,000 tonnes of FeNi briquettes annually, or an average of approximately 200 tonnes per day.

Electric power to the Project will be provided through a new hydro-electric power transmission line with a capacity of 120 MW and a transmission voltage of a single, 230 kV circuit.  The proposed power transmission line is based on a tie-in point located approximately 98 km from the Project.

Tailings Management

The proposed tailings disposal strategy for the Baptiste Project is based on two phases.  For Phase 1, spanning from years 1 to 21, tailings are disposed of within a conventional external tailings storage facility.  The proposed external TSF is proposed to be constructed using the centerline construction method with a downstream slope of 3H:1V.  It will be constructed primarily with cycloned sand tailings generated in the mineral processing plant and designed to retain tailings produced during the first 21 years of production based on the mine schedule.  Geotechnical design criteria are based on regional experience as no site investigations related to the TSF structures have been completed to date.

Thereafter, tailings are proposed to be disposed within the exhausted open pit based on an in-pit disposal strategy.  Upon completion of mining of the Phase 1 pit in year 21, the pit would then start being backfilled with tailings produced while processing material mined in the Phases 2 and 3 pits, starting in year 22.  A pit rim dam will be required in order to accommodate the tailings produced while mining the Phase 3 pit to the end of the 35-year mine life.

Project Opportunities

Several project optimization opportunities requiring further study have been identified which may further enhance project economics, including the following:

  • Electric Vehicle Battery Application: Based on batch pressure leach tests performed on a sample of Baptiste flotation concentrate, it is expected that the nickel-cobalt leach solution produced will be an ideal feedstock for the production of nickel sulphate and cobalt sulphate for the electric vehicle (“EV”) battery market.  These positive test results provide the Company with an opportunity to pursue an alternative marketing route for part of its nickel production, which would allow the Company to become a player in the EV battery value chain.  As the Project advances, this opportunity will need to be supported with more testwork and a validation of process economics.
  • Sale of Iron Ore Concentrate: The process flowsheet developed in the PEA generates a flotation tailing with a high iron content (in the form of magnetite), which can potentially be marketable as a magnetite iron ore concentrate and generate additional financial benefit to the Project.  A detailed logistics and marketability analysis to further develop this opportunity is required to incorporate the potential benefit of this product stream into the Project’s economics.
  • Mineral Exploration: Assay results of outcropping bedrock samples have defined a promising drill-ready target at the Van target, which is located 6 km north of the Baptiste Deposit at similar elevations, and accessible via logging roads.  These results demonstrate that the surface expression of the Van target is larger in area and similar in DTR nickel values to the Baptiste Deposit.  A drill program is recommended for the Van target to test its potential to comprise a standalone deposit to complement the Baptiste Deposit.
  • CO2 Sequestration: Laboratory testing by researchers from the University of British Columbia has demonstrated that the Baptiste Deposit’s mineralization can absorb significant quantities of carbon dioxide when exposed to air through a natural process of mineral carbonation. FPX is undertaking further research in collaboration with UBC to assess and advance the potential development of a low-carbon or carbon-neutral operation at Baptiste (see FPX Nickel news release dated September 1, 2020).  The potential benefits of carbon sequestration have not been incorporated into the present PEA.

For further discussion of the PEA results, see the Company’s news release dated September 9, 2020.

The above technical information and all the other technical information on this website pertaining to geology and drill hole data was prepared under the supervision of FPX Nickel’s Chairman Dr. Peter Bradshaw., P. Eng., a Qualified Person as defined in National Instruments 43-101 – Standards of Disclosure for Mineral Projects.