New Energy Minerals commissioned Bara International (“Bara”) to coordinate and complete a scoping study report on the Caula Vanadium-Graphite Project, in Northern Mozambique The Scoping Study was undertaken to an overall ±35% level of accuracy and examined all facets of geology, mining, processing and supporting infrastructure and included a site visit by the consultants in June 2018. The Scoping Study was prepared on the project level and assumes 100% project ownership1. All amounts are in United States Dollars (“USD” or US$) unless otherwise stated.  Production targets are based 100% on JORC Measured Resources.

Summary of Key Study Outcomes (Approximate Figures)

Phase 1 Graphite Concentrate Production (tonnes per annum)
10,000 – 15,000
Phase 1 Vanadium Concentrate Production (tonnes per annum, 1.7% V2O5)
14,000 – 18,000
Phase 1 Capex (pre-production)
US$7.368 million
AU$10.16 million
Phase 2 Graphite Production (tonnes per annum, 97.5% TGC)
120,000
Phase 2 Vanadium Concentrate Production (tonnes per annum 1.7% V2O5)
204,200
Phase 2 Capex (pre-production)
US$114.21 million
AU$157.61 million
Peak Funding Requirement
US$77.54 million
AU$107 million
Ongoing Capex
US$18.14 million
AU$25.03 million
Graphite Basket Price assumption
US$1,103.50
Vanadium Price assumption (US$/tonne 98% V2O5 CIF China)
US$40,785
V2O5 concentrate prices assumption (US$/tonne 1.7% V2O5 concentrate at mine gate)
US$200
Operating Cost (US$ per tonne processed)
US$50.87
Revenue (US$ per tonne processed)
US$135.52
NPV10 (Pre-tax)
US$673.41 million
AU$929.31 million
NPV10 (Post tax)
US$448.76 million
AU$619.29million
IRR (Pre-tax)
78.3%
IRR (Post-tax)
58.8%

The results of the Scoping Study indicate the potential to generate significant financial returns through a two-phase development schedule for an open pit vanadium and graphite mining operation with:

  • The entire Life of Mine based on the JORC 2012 Measured Resources for both Vanadium and Graphite
  • The Caula deposit being technically and financially viable with no immediate or obvious impediments to mining
  • An Outstanding Life of Mine strip ratio of 1:1

Phase 1 Key Study Outcomes2

  • Pre-production capex of approximately US$7.36 million (AU$10.16 million3)
  • Mine production rate of approximately 120,000 tonnes per annum over two years
  • Estimated annual production of approximately 10,000 to 15,000 tonnes of graphite concentrates and 14,000 to 18,000 tonnes of vanadium concentrates over two years
  • Generating approximately US$16 million (AU$22 million) total EBITDA over first 2 years with Phase 2 commissioned in Year 3

Phase 2 Key Study Outcomes4

  • Pre-production capex of approximately US$114 million (AU$157 million) with construction scheduled to commence in Year 2 of Phase 1
  • Estimated mine production rate of 1.5 Mtpa
  • Estimated annual production of approximately 120,000 tonnes of graphite concentrates and approximately 204,200 tonnes of vanadium concentrate (1.7% V2O5 flake) per year over 24 years
  • Generation of approximately US$2.68 billion (AU$3.4 billion) total EBITDA over 24 years
  • Total project Pre-Tax NPV10 estimated to be approximately US$673 million (AU$929 million
  • Total project Pre-Tax IRR estimate of 78%5
  • Total project Post Tax NPV10 estimated to be approximately US$448 million (AU$619 million)
  • Total project Post-Tax IRR estimate of 59%
  • Total project post tax Payback less than 4 years from start of phase 1 production (see Appendix 2 for a detailed sensitivity analysis)

Key Study Assumptions

  • Total Life of Mine of 26 years based on current JORC Measured Resources with JORC Resource inventory expected to be increased following the completion of a recent ~4,000m drilling program6
  • Capital estimates have been subject to stringent independent verification and included appropriate contingencies of 15%
  • Graphite concentrates of up to 98.7% TGC (97% used in study) with 85% metallurgical recoveries
  • Up to 68% large, jumbo & super jumbo graphite concentrates (63% cumulative for oxide and fresh mineralised material)
  • Vanadium recovery 90% to a concentrate grade of 1.7% V2O5 assumed7
  • Note: The Scoping Study assumes that only vanadium concentrates are produced over the life of mine and sold to vanadium treatment plants/roasters in either Mozambique (“over the fence”), South Africa or China at approximately US$200/tonne, at the mine gate. The Company is undergoing further metallurgical testing on the optimal beneficiation process for the vanadium concentrates and results thereof will be announced to the market and incorporated into the PFS where Phase 2 will look at incorporating an appropriate vanadium (>98% V2O5) extraction process.
  • Conservative product pricing assumptions based on significant discounts to current flake graphite and vanadium prices. US$1,103.50/tonne graphite concentrate basket price and US$40,785/ tonne (US$18.49/lb) vanadium price (>98% V2O5) used in study.
    • Current vanadium pentoxide price of US$60,626/tonne (US$27.50/lb) (98% V2O5 flake FOB China)8
    • Graphite pricing assumptions used in the study are at a significant discount to recent (September 2018) market prices and importantly are much more conservative than basket price assumptions used by certain East African industry peers with similar (>60%) Large to Super Jumbo flake size distribution

Key components of the Scoping Study and the material assumptions used in the study are included elsewhere on this webpage. Information includes preliminary mine designs and estimated mine production schedules, metallurgical recoveries from testwork, and costs based on comparison with similar operations and estimates provided by mining and engineering contractors.

Next Steps

The Company considers the results of the Caula Scoping Study sufficient to warrant the continued fast-tracked development of the project with the aim of progressing with the implementation of Phase 1 production in H2-2019 (subject to financing, permitting and final investment decision) and the concurrent completion of definitive feasibility studies and development activities required for Phase 2.

Key items identified by Bara in the conclusions of the study include:

  • Undertaking of additional metallurgical testwork including:
    • Optimisation of the graphite grinding and flotation
    • Further vanadium concentration testwork
    • Optimisation of vanadium concentrate grade
    • Vanadium extraction testwork to produce high purity (>98%) vanadium products
    • Geochemical, mechanical and rheological testwork on tailings materials to support designs for deposition methods and facility lining requirements.
    • Completion of the geotechnical study which will support the current pit design which was based on scoping level work. The site work including drill core logging and selection of samples for laboratory testing has subsequently been completed and this data will be used to complete a PFS level geotechnical characterisation report and pit slope designs to support future mine designs.
  • Undertake a ground water study work to determine the quantity and quality of groundwater in the area, this will be an important input into future study work.
  • Initiate ESIA process and additional permitting where required.

Bara expressed the opinion in the report that, given that the Caula mineral resource is already all in the JORC Measured category, the tasks listed above can be commenced on short notice and there is no reason why the project cannot advance to the next level of study in the short term.

Rationale behind a Two-Phase Project Development Strategy

The results of the Scoping Study are such that the Company has been able to consider alternative methods of de-risking the Caula Project as it considers the quantum of funding needed and various funding alternatives. In consultation with Bara and based upon the assumptions outlined elsewhere in this announcement, the Company has identified that the economics of a small-scale pilot plant (Phase 1) will act as the best method of both de-risking the construction of a full operation (Phase 2) to develop the Project as well as securing finance for Phase 2.

The reasons for this decision can be sumarised as follows:

  • The costs of establishing a small-scale pilot plant to process saleable graphite concentrate and saleable vanadium concrete are relatively modest (approximately AUD$10m).
  • The geological characteristics of the deposit, enable the development of a low cost, low stripping ratio open pit operation supported by the relative simplicity and low costs associated with a graphite floation plant and the WHIMS process for concentrating the vanadium.
  • The economics of the operation of a small-scale pilot plant have been shown in the Scoping Study, using the assumptions outlined herein, to generate early cashflows for the Company of approximately A$22 million EBITDA over the first 2 years of the pilot plant’s operation.
  • The Company has held discussions with parties who have indicated that a successful pilot plant operation would have greater benefit to the Company in seeking funding for the development of a full-scale operation than a bankable feasibility study given its ultimate “proof of concept nature” and its capacity to create saleable graphite concentrate and saleable vanadium concentrate.
  • The Company has already received support for the raising of the funds required to undertake the pilot plant at the Project (Phase 1) (refer to Project Funding Section below).

As such, and as set out herein, the Company has adopted a 2 phase strategy with the intention of undertaking the pilot plant as a means of de-risking the further development and funding risk for the full operational development and giving the Company the best chance of securing funding for the development of the Project. Given the metrics of the project, the Company and its consultants who undertook the Scoping Study have determined that it is prudent to stage the development as a means of increasing the Company’s likelihood of securing the necessary funding to progress the project from pilot stage to a full operation. Due to the staged approach, the Company has received a specific (non-binding and confidential) expression of interest from a major global commodities trader, confirming their interest to participate in the funding and off-take for Phase 1 and subject to the successful implementation of Phase 1 and receiving the off-take rights for Phase 2, to participate in and assist with arranging the funding for Phase 2 of the Project. The proposals for the Company’s funding of the Phase 1 and Phase 2 based on this strategy are set out in Project Funding Section below.

Development Strategy and Timeline

As discussed above, New Energy Minerals proposes a 2 phase development strategy for the Caula project following discussions with various project level stakeholders including, financial and equity advisors, commodity traders and buyers, debt-financiers, off-take partners as well as independent technical advisors.

The Company therefore proposes to advance the project in the following manner:

  • Develop and implement during H2-2019 a plan for a small-scale mining operation producing approximately 120,000 tonnes per annum of run of mine or, equivalent to approximately 10,000 to 15,000 tonnes per annum of saleable graphite concentrate and 14,000 to 18,000 tonnes per annum of saleable vanadium concentrate. This initial small-scale operation during Phase 1 will be used to demonstrate the product types and qualities that the deposit can produce and support initial marketing work, funding and off-take agreement negotiations that would naturally be assumed to be needed to underpin the larger Phase 2 development and could reasonably be expected to reduce the risk of a larger Phase 2 development. The Company believes that Phase 1 will have the additional benefit of generating early cashflows (estimated at approximately US$16.3 million total EBITDA over the first 2 years) which could be a valuable source of equity capital for Phase 2.
  • The processing plant for the small scale mining operation will be configured as a pilot plant. This will allow New Energy Minerals to easily investigate the effects of any flowsheet changes and to fully optimise the design of the Phase 2 Development. Additional benefits of this approach will include a relatively rapid ramp up to full capacity for the Phase 2 operation especially given the challenges and delays others in the industry have faced with ramp up to full production.
  • In parallel with the small mine project New Energy Minerals commissioned an independent scoping level techno-economic study for the mining and processing of the graphite and vanadium-bearing mineralised material at a larger (1.5Mtpa) scale during a Phase 2 expansion. Phase 2 has been designed to mine and process the world-class Caula vanadium-graphite deposit over a 24 year period to produce approximately 120,000tpa of graphite concentrates and 204,200tpa of vanadium concentrates (1.7% V2O5) (see Figure 2 below).

Note: The Scoping Study assumes that only vanadium concentrates are produced over the life of mine and sold to vanadium treatment plants/roasters in either Mozambique (“over the fence”), South Africa or China at approximately US$200/tonne. The Company is undergoing further metallurgical testing on the optimal beneficiation process for the vanadium concentrates and results thereof will be announced to the market and incorporated into the PFS where Phase 2 will investigate incorporating a roast-leach vanadium (>98% V2O5) extraction process.

A high-level project implementation schedule is illustrated below:

Project implementation schedule

Project Funding

The Board of New Energy Minerals believes there is a objectively reasonable basis based on objectively verifiable facts to assume the necessary funding for the Caula Vanadium-Graphite project will be obtained for the following reasons:

  • A mix of debt, equity off-take financing and free cashflow (for Phase 2) is the Company’s most likely funding model. New Energy Minerals has active ongoing discussions with potential financing, off-take and investment partners and has received strong expressions of interest with regard to the funding of the Caula Project given the commodities involved. These parties include mining private equity funds, a major global commodities trader as well as large State-owned Chinese EPC (Engineering, Procurement & Construction) and vanadium-producing companies.
  • The initial pre-production capital expenditure for Phase 1 of approximately A$10 million is deemed by the Company and its advisors as modest given that phase 1 will be able to produce up to 15,000tpa of graphite and up to 18,000tpa of vanadium concentrates delivering an estimated EBITDA of approximately A$22 million over the first 2 years (based on the pricing assumptions outlined herein).
  • The Company has a recent history of accessing funding in the range of the funds required for Phase 1, and has no reason to believe that such funding wouldn’t be available to commence Phase 1 given the modelled outcomes of Phase 1.
  • Acknowledging that no party would be expected to commit to funding or supporting a Phase 2 development without understanding the proven outcome of Phase 1, the Company has received a specific (non-binding and confidential) expression of interest from a major global commodities trader, confirming their interest to participate in the funding and off-take for phase 1 and subject to the successful implementation of phase 1 and receiving the off-take rights for phase 2, to participate in and assist with arranging the funding for phase 2 of the Project.
  • The positive financial metrics of the phased development of the Caula Vanadium-Graphite project and the favourable outlook for graphite and vanadium demand growth published by various sources.
  • The Company has already engaged the services of DJ Carmichael (in Australia) and Jett Capital LLC (in the USA) as experienced corporate advisors with substantial track records in raising equity and debt capital for mining projects. DJ Carmichael has a history of successful capital raising for Australian mineral exploration and development companies, and Jett Capital LLC has acted as the advisor for the Company for a period of time and has assisted in the successful raising of funding for the Company’s previous Montepuez ruby project. Both of these advisors have confirmed that they believe it will be possible for the Company to raise the Phase 1 capital requirement of A$10 million from the equity and debt capital markets through their networks of investors and that following the commissioning of Phase 1 that there is no reason to believe that the required capital cannot be obtained for a Project with a successful Phase 1 commissioning for the further development of Phase 2 on the back of that success.
  • It is reasonable to assume that the successful commissioning of Phase 1 and the delivery of product in accordance within the parameters set out for Phase 1 will see a re-rating of the Company from its present day position as a non-producing, non-revenue generating exploration company.
  • The staged development of the project which allows for the Company to become a producer (though Phase 1), and to potentially re-rate from its present position as such, prior to having to raise the funds required for Phase 2. From discussions with end users, potential off-takers and investors the Company has reasonable basis to believe that the delivery and sale of meaningful volumes of graphite and vanadium products from Phase 1 will open the door to more substantial equity, debt and/or off-take financing especially from end-users and strategic investors through which the Company will be able to fund Phase 2.
  • Notwithstanding the current preference to fund the development using the methods outlined above, the Company acknowledges it is also possible to pursue other methods of value realisation to assist funding of Phase 2 of the project, such as a partial sale of the asset, long term off-take(s) and joint venture arrangements. Based on the size of the Caula Measured Resources, its high grade nature, low strip ratio, integrated flowsheet delivering two high-demand commodities and the shortage of especially vanadium in the market, the Company believes it has a reasobable basis to assume that these alternative value realisation methods of financing are possible.
  • The vanadium price is currently trading at US$27.50/lb (US$60,626/tonne) which compares very favourably with the scoping study vanadium price assumption of US$18.49/lb (US$40,785/tonne). The current and future market outlook for vanadium is very favourable given the growth of demand as a result of policy changes in Chinese steel-making, growing demand from VRFBs and the contraction of supply as a result of the shutdown of polluting Chinese mines and the lack of new mines. This enhances the Company’s view on the fundability of both Phase 1 and Phase 2 of the Project.
  • The price for jumbo (+50mesh), high purity (96% to 97% C) flake graphite is currently trading at US$2,020/tonne (FOB China) which compares favourably with the Scoping Study graphite price assumptions of US$1,440/tonne for similar specification products to be produced from Caula (jumbo flake, >97% C). The current and future demand outlook for graphite is very favourable given the growth of demand for high purity graphite in amongst others the lithium battery and expandable grapite markets and the changes in supply as China shuts down polluting and low quality domestic graphite mines. This enhances the Company’s view on the fundability of both Phase 1 and Phase 2 of the Project.
  • The JORC Resources for the Caula Vanadium & Graphite Project on which the Scoping Study, the production targets and the funding assumptions are based is at a JORC Measured status, giving potential investors and project partners a high degree of geological confidence.
  • Other companies at a similar stage of development to where New Energy Minerals is currently and where the Company will be post-commissioning of Phase 1 and the completion of a DFS, have been able to raise similar amounts of capital in recent financings. Core Exploration (ASX.CXO) raised US$20 million in pre-payment finance for its lithium project prior to completing its PFS ; Magnis Resources Ltd (ASX.MNS) recently raised A$11 million from a strategic equity investor to (amongst others) advance its Nachu Graphite Project in Tanzania; Technology Metals Australia Ltd (ASX.TMT) raising A$6 million through an equity placement; and TNG Limited (ASX.TNG) secured a A$10 million strategic equity investment from an Indian mining group. Furthermore, Pilbara Minerals was able to raise up ~US$180million in debt, pre-payment and equity finance from strategic investors/partners to pursue its Phase 2 expansion once it successfully and sufficiently advanced its Phase 1 development.
  • The Board and Management have a strong track-record in raising capital for numerous ASX and AIM listed companies over the past 15 years with approximately A$50 million raised and secured by the Company’s Managing Director Dr. Bernard Olivier alone. The Company and its Board have previously demonstrated their ability to raise development funding for its projects in Northern Mozambique having successfully raised in excess of A$25 million in equity and convertible debt over the past 2.5 years.
  • The Company has the potential to increase its JORC Compliant Vanadium and Graphite Mineral Resources following the competion of its recent ~4,000m drilling campaign on the Caula Project. This will likely result in the current (Scoping Study) estimated mine life of 26 years being increased and the value of the Company’s mineral resource assets increasing. This enhances the Company’s view on the fundability of both Phase 1 and Phase 2 of the Project.

Announcing the project financial metrics as detailed in this announcement can now allow New Energy Minerals to advance discussions with potential investors, customers and off-takers. The Company believes that these results will greatly aid it to conclude binding off-take and financing agreements as off-takers and investors the Company are currently in discussion with wish to asses the scoping level economics and development plan for the Caula project .

Mining Parameters

A desktop geotechnical study was completed to determine slope angles to be used in the pit design. This work was based on public domain data for the area and rock types found at Caula. The modified rock mass rating (MRMR) system was used to determine slope design. The MRMR values derived were used in the Haines-Terbrugge chart to determine overall slope angles for the various phases of mining. The overall slope angles specified varied from 39o to 410 and these slope angles were used in the pit optimisation.

The physical tonnage contained in the optimum pit shell as determined by the pit optimisation exercise are tabled below in the Tables below.

Total Tonnage
66 108 663 t
Processed Tonnage
30 836 663 t
Waste Tonnage
35 272 000 t
Mine Life
26 years
Strip Ratio
1:1
Pit Depth
175 m
Pit Length
725 m
Pit Width
560 m
Optimum pit shell tonnages

A pit optimisation exercise was undertaken using the following input criteria:

Caula Graphite and Vanadium – Pit Optimisation Input Parameters

Item
Amount
Units
Operating Costs
Mining Cost (Soil)
2.70
$/t mined
Mining Cost (Weathered)
3.20
$/t mined
Mining Cost (Partially Weathered)
3.45
$/t mined
Mining Cost (Un-weathered)
3.70
$/t mined
Process cost
42.29
$/t milled
G&A Cost
10.00
$/t milled
Cost increase with depth
0.07
$/t mined
Technical
Slope angles (oxide)
37
degrees
Slope angles (fresh)
47
degrees
Mining Dilution
5
%
Mining Loss
5
%
Bench height
10
m
Plant recovery - Graphite
85%
%
Plant recovery - Vanadium
85%
%
Ore Production rate
125 000
tpm
Ore Production rate
1.5million
tpa
Economic
Royalties
3.00
%
Graphite conc. -basket price – Oxide
858
$/t conc. (97% C)
Graphite conc. -basket price – Transitional
1 158
$/t conc. (97% C)
Graphite conc. -basket price – Fresh
1 138
$/t conc. (97% C)
V2O5 (98% Flake) price
40 785
$/t
Discount factor to use
10%
%
Caula Graphite and Vanadium – Pit Optimisation Input Parameters

Metallurgy and Processing Plant

Vanadium recovery testwork by wet high intensity magnetic separation (WHIMS) has delivered promising results which could form the basis of a commercial processing route9.

The testwork results outlined above support the assumptions made for the process design, recoveries and concentrate grades in the Scoping Study.

The graphite and vanadium recovery process consists of:

  • Crushing
    • Ore receiving – ROM bin and apron feeder
    • Vibrating grizzly for scalping fines ahead of the jaw crusher
    • Primary Crushing – jaw crusher
    • Secondary and tertiary crushing – cone crushers in closed circuit with a double deck screen
    • Fine ore bin – live capacity 2,000 tonnes
  • Grinding and Flotation
    • Milling – a rod mill and ball mill operating in closed circuit with a spiral classifier
    • Rougher/Scavenger Flotation – rougher and scavenger flotation followed by re-flotation of rougher concentrate.
    • Tailings transfer – a thickener for process water recovery, followed by pumps for transferring thickened tailings to the vanadium recovery section.
    • Regrind cleaner flotation – three stages of attrition regrinding and cleaner flotation, followed by a two cleaning stages.
  • Concentrate Handling
    • Filtration and concentrate drying.
    • Screening of dry concentrate.
    • Bagging of concentrate.
  • Mobile Equipment
    • Two front end loaders, one for ore handling in the crushing section and the other for concentrate bag handling.
    • A telehandler for reagents handling and general plant maintenance work.
    • A 60-tonne rough terrain mobile crane, originally used for plant construction work, and then left on site for crusher maintenance and general use around the mine site, including offloading of sea containers from road transport.

Based on the RoM schedule developed for the mine the plant will receive an average of 1.5 Mtpa at an average grade of 10% TGC. Graphite recovery is planned at 85%, with a concentrate grade of at least 96%.

The Crushing Section design basis was 1.5 Mtpa of ore processed over 6,000 operating hours per year. This corresponds to 250 tons per hour and an overall running time of 68.49%. In practice, the plant is expected to operate for 6 days per week, for 50 weeks per year. The grinding and flotation section design basis was 1.5 Mtpa of ore processed over 8000 operating hours per year. This corresponds to 187.5 tonnes per hour and an overall running time of 91.32%.

The Concentrate Handling Section has been designed to handle up to 250,000 tonnes of concentrate over 8000 operating hours per year. This corresponds to a concentrate production rate of 31.25 tonnes per hour. The design capacity is about 40% higher than average annual production to allow for flexibility to accommodate ore grade fluctuations.

Plant tailings will be thickened and then pumped to the vanadium concentrate recovery section. The thickener will recover water from the tailings to minimise the overall water consumption. The thickener underflow will be at least 50% solids.

Vanadium Concentrate Production

Metallurgical information on the nature and mode of occurrence of vanadium values in the ore has been obtained from the testwork conducted to date. The information has been supplemented from a review of published information on vanadium occurrences in other comparable graphitic schist projects and deposits, other micaceous deposits and vanadium operations utilising similar processing methods.

From premilinerary work done by the Company, the Study has concluded that all vanadium-containing mineral species also contain enough iron to make them paramagnetic. Testwork has indicated that good recoveries of such particles (over 90 %) can be achieved by Wet High Intensity Magnetic Separation (WHIMS). Furthermore, concentrate grades, which are suitable for further processing to economically extract vanadium, can be produced.

Based on WHIMS testwork, and allowing for a more complex multi-stage WHIMS flowsheet, a preliminary estimate for the composition of the New Energy Minerals Caula vanadium concentrate is shown below in Table 6, below.

Analysis
Value (%)
V2O5
1.70
SiO2
50
Fe2O3
15
Al2O3
9
CaO
13
MgO
7
S
5
Vanadium Concentrate Chemical Composition

The vanadium content of the concentrate is distributed across a number of iron-containing minerals. Some of these have been identified by semiquantitative XRD Mineral analyses of concentrate. A very significant proportion of the vanadium is associated with micas such as roscoelite and vanidiferous muscovite. Part of the vanadium is also associated with fine iron oxide minerals and clays. Some of the vanadium may also occur as the vanadium garnet mineral, goldmanite.

The vanadium concentrator will produce a concentrate with a grade of 1.7% V2O5 and the expected recovery to concentrate is 90%. Subsequent semi-quantitative XRD analyses of testwork products showed that the concentrate contained about 25% of the non-magnetic mineral quartz, and that the tailings contained low levels of minerals believed to be vanadium-bearing. These observations support the contention that grade and recovery performance improvements are possible.

The tailings from the graphite concentrator will be treated for vanadium. The vanadium extraction process consists of:

  • Regrinding
  • WHIMS concentration to treat tails from graphite flotation
  • Drying & bagging of vanadium concentrates

Block diagram for the Caula vanadium concentrate extraction testwork

Vanadium Pentoxide (Flake & Powder) Production

The Company has started the process of further testing on Caula ores to determine the optimal flowsheet to produce >98% V2O5 products. One of the processes being tested is as follows:

  • Roasting to to alter the vanadium minerals and render them amenable to leaching
  • Leaching with sodium carobonate/bicarbonate to solubilise the vanadium
  • Solution purification followed by precipitation of ammonium metavanadate
  • Calcining to drive off ammonia and produce vanadium pentoxide
  • Melting to produce a vanadium pentoxide flake product.

This vanadium extraction process consists of roasting with anhydrite followed by carbonate/bicarbonate leaching. After liquid solids separation, the vanadium-containing solution is purified by precipitation of silica and other contaminants. The solution would then be evaporated to close to saturation to allow efficient (close to stoichiometric) vanadium precipitation as ammonium metavanadate.

The Company is confident that this extraction process will be successful given its analysis of two other relevant study documents of similar deposits or processing methods, that are available in the public domain:

  • Syrah Resources, ASX announcement, Vanadium Scoping Study finalised, 30 July 2014. The Syrah Resources Project is less than 50 km away from Caula with similar geological characteristics.
  • Bushveld Minerals, Mokopane Vanadium Project, Pre-feasibility Study, 29 January 2018. The Bushveld minerals pre-feasibility study describes the same process as proposed in the Caula Scoping Study. This study states the following regarding the salt roast process; “The recovery of final vanadium product from ore material is achieved through the salt roast process, as is typically employed by a number of existing vanadium producers in South Africa”

Note: The Scoping Study assumes that only vanadium concentrates are produced over the life of mine and sold to vanadium treatment plants/roasters in either Mozambique (“over the fence”), South Africa or China at approximately US$200/tonne, at the mine gate. The Company is undergoing further metallurgical testing on the optimal beneficiation process for the vanadium concentrates and results thereof will be incorporated into the PFS where Phase 2 will look at incorporating a roast-leach vanadium (>98% V2O5) extraction process.

Tailings

Separate tailings storage facility is planned for the concentrator tailings (graphite and vanadium). The concentrator tailings facility is a conventional clay lined facility.

Mine Support Infrastructure

All required infrastructure to support the proposed mining and processing plan has been allowed for, this includes the following elements:

  • Bulk power supply
  • Bulk water supply
  • Access roads to site
  • Tailings dam facility
  • Waste rock dumps
  • Mine Infrastructure cluster including:
    • Site roads
    • Site water reticulation
    • Site Power reticulation
    • Workshops
    • Offices
    • Change house
    • Stores
    • Sewage treatment
    • Fuel and lube storage and disposal
    • Explosives magazine
    • Accommodation camp

Site layout of the Caula Vanadium-Graphite Project

Labour

Labour has been estimated based on a 30 day per month operation. It is proposed that mining for Phase 1 and security (for Phase 1 and 2) are outsourced to a contractor, whilst all other activities will be undertaken by New Energy Minerals. A summary of the total manpower requirement is shown in the Table below.

Department
No. per
Shift
Total
Camp
Management and Administration
99
191
20
Mining
39
115
16
Engineering and Maintenance
27
49
1
Processing
116
203
19
Total
281
558
56
Total Manpower Complement (Full capacity)

Environmental and Social

An environmental and social scan was undertaken, which included a site visit, to identify and fatal flaws and/or material issues at the site as very little site-specific information is currently available for environmental and social conditions. Detailed baseline studies will need to be undertaken as the project progresses, in support of an EIA process. Generally, more detailed baseline information is required for the pre-feasibility study, and an EIA to follow (which identifies and assesses potential impacts and recommends mitigation measures) is required in support of the detailed feasibility study. No issues were identified which are likely to pose a significant risk to the project.

Financial Evaluation

Capital and operating costs have been generated for the technical solution described above, these costs are summarised in the Tables below.

Area
Initial Cost

USD'mill
Ramp-up Cost

USD'mill
Total Cost

USD'mill
Mining Equipment
-
6.05
6.05
Pilot Processing Plant
5.06
-
5.06
Processing Plant
-
60.09
60.09
Tailings Storage Facilities
0.43
6.92
7.35
Surface Infrastructure and Accommodation Camp
0.82
15.01
15.82
Environmental, Permitting, Relocation
0.10
0.23
0.33
Logistics
-
2.00
2.00
Indirect Costs
-
9.02
9.02
Contingency
0.96
14.89
15.85
Total Project Capital Cost
7.37
114.21
121.58
Summary of Project Capital Cost
Area
LOM Total

USD'mill
Unit Cost

USD / ROM t
Combined Graphite and Vanadium Unit Cost Expressed as USD / t
Graphite Conc.
Mining
227.52
6.81
28.90
Processing - Graphite Concentrator
393.76
11.79
50.02
Processing - Vanadium Pentoxide Concentrator
240.60
7.20
30.57
General and Administration
194.07
5.81
24.66
Concentrate Transport
634.125
18.98
80.56
Overheads
9.36
0.28
1.19
Operating Cost Total
1 699.47
51.67
215.90
Summary of Total Operating Cost

Using the mining schedules, process recoveries and the proposed sales prices, along with the costs generated, a financial evaluation was undertaken.

Description
Value
Unit
Project Cashflows
Revenue – Graphite
3 165 463 842
USD
Revenue – Vanadium
1 361 710 473
USD
Total Revenue
4 527 174 315
USD
Operating cost
1 699 475 930
USD
Total Project Capital cost
139 725 921
USD
Royalties
135 815 229
USD
Project Pre-Tax Cashflow
2 552 157 234
USD
Tax
817 754 564
USD
Project Post-Tax Cashflow
1 734 402 670
USD
EBITDA
2 691 883 155
USD
EBIT
2 553 215 436
USD
FCF
1 734 402 670
USD
Financial Metrics
Pre-Tax NPV (10%)
673 406 247
USD
Pre-Tax IRR
78.3
%
Post-Tax NPV (10%)
448 760 692
USD
Post-Tax IRR
58.8
%
Operating Margin
85
%
Payback Period
3.79
Payback Period
77 545 700
USD
Financial Analysis Results

The project cashflow analysis is illustrated in Figure 9 below, showing that the project is profitable from Year 3 on and the payback period is four years from start of Phase 1.

Caula Project cash flow analysis

Product Pricing

Graphite

A total of eight campaigns of mineral processing testwork has been completed on the mineralised material from Caula and is described in more detail in Section 7 of this announcement. As stated, the graphite concentrate testwork has delivered high-grade concentrates grades of up to 98.7% TGC, with average concentrate grades of >97% TGC for all mineralised material types (see Table 5 in Section 7 and Table 12 below). Graphite pricing is linked to flake sizes and purity (measured in carbon content expressed as a percentage) with prices varying from ~US$400/tonne to over US$3,000/tonne depending on the flake size and carbon content (see Table 13 below). The metallurgical testing done to date has firmly established Caula as being able to yield high percentages Super Jumbo, Jumbo and Large flakes. The Cumulative proportion of large to super jumbo flakes (>180m) averages 60% TGC for the combined Oxide Zone while the Fresh Zone averages 68% TGC giving a combined average for the Oxide Zone and Fresh Zone of 63% TGC. This is a significantly better higher-value product distribution than all other peers in the Balama graphite province (including Syrah Resources).

Bara calculated a basket price of $1,103.50/tonne based on prices for the various flake sizes used in recent published peer group studies as well as market prices published by Benchmark Mineral Intelligence. See Table 11 below for a breakdown of the Caula graphite basket price assumptions.

Category
US$/tonne
% Sales based on Caula’s actual flake distribution
Super Jumbo (+500µm)
$3,500
5.4%
Jumbo (+300µm / -500µm)
$1,440
24.7%
Large (+180µm / -300 µm)
$976
36.3%
Medium (+150µm / -180µm)
$813
10.1%
Small (+75µm / -150µm)
$539
20.2%
Fines (-75µm)
$403
3.2%
Basket Price
US$1,103.50/tonne
Graphite basket price breakdown (concentrates produced from all ore zones)
Graphite Product
Size Fraction (µm)
Fresh Sample
Transitional SampleOxide Sample
Mass (%)
TGC (%)
Mass (%)
TGC (%)
Mass (%)
TGC (%)
Super Jumbo
>500
5.4
97.58
6.5
98.11
0.9
96.81
Jumbo
300 to 500
26.1
97.82
25.0
98.66
10.6
97.64
Large
180 to 300
36.4
97.43
36.6
98.64
34.7
97.70
Medium
150 to 180
9.5
96.96
10.3
98.46
14.8
97.76
Small
75 to 150
18.4
96.85
20.5
98.42
34.7
97.78
Fines
<75
4.2
88.6
1.1
97.71
4.2
96.12
Combined Concentrate
100
96.99
100
98.52
100
97.67
Caula Flake Size Distribution and purity (Carbon content/TGC)

New Energy Minerals believes these prices to be conservative given the 2017 and 2018 published market prices for high purity graphite concentrates with a 19% to 34% discount to the published September 2018 flake graphite prices provided by Benchmark Mineral Intelligence (BMI) as detailed in Table 13 below

Category
Purity/Spec (TGC%)
US$/tonne (Mid)
Jumbo (+300µm / -500µm) (+50mesh)
>96-97% C
$2,020
Large (+180µm / -300 µm)(+80 mesh)
>96-97% C
$1,265
Medium (+150µm / -180µm) (+100 mesh)
>96-97% C
$1,005
Small (+75µm / -150µm) (-100mesh)
>96-97% C
$825
Graphite concentrate prices (September 2018) as published by Benchmark Mineral Intelligence

Furthermore, New Energy Minerals also believes that its average concentrate grade of >97% TGC is well above the product specifications quoted by Benchmark Mineral Intelligence (being 96-97% C) and quoted in Table 13 above.

New Energy Minerals believes the graphite basket price of $1,103.50, based on its flake size distribution and product specifications, as listed in Table 11, to be saleable, especially when comparing its favourable graphite grade and flake size distribution against its East African peers. This is further supported by initial feedback from discussions between the Company and potential off-take partners and customers.

Vanadium

Vanadium Pentoxide (V2O5) is priced according to is purity, predominantly as a FOB price expressed as US$/pound for 98% vanadium pentoxide (V2O5) flake. Various published sources provide current prices, which as at 16 October 2018, for 98% V2O5, FOB China, was quoted at US$27.50 / pound (see www.asianmetal.com and www.vanadiumprice.com for both current and historical vanadium pentoxide prices).

The Scoping Study done by Bara assumed a price of US$18.49 / pound for 98% V2O5, FOB China, which represents a 32.62% discount to the current (16 October 2018) FOB China price of US$27.50 / pound, see Table 14 below.

Vanadium Pentoxide (V2O5) Product Pricing
US$/tonne
US$/pound
1.7% Vanadium Pentoxide (V2O5) Concentrate
$200
$0.09
Vanadium Pentoxide (V2O5) 98% assumed in this Study
$40,785
$18.49
Current Vanadium Pentoxide (V2O5) 98% Price (FOB)
$60,500
$27.50
Percentage Discount to Current Prices
32.62%
Vanadium pentoxide product pricing

The Scoping Study then used this vanadium pentoxide (98% purity) price as the basis from which to calculate a price of US$200/tonne for 1.7% V2O5 vanadium concentrate (Mine gate). The study has estimated the sales value of the concentrate based on the contained value of vanadium in the concentrate using the scoping study price for 98% vanadium pentoxide flake, roasting & leaching treatment costs.  Various delivery destinations were considered, both in South Africa and in China.  A robust transport cost of US$215 per tonne of concentrate was used as an estimate that would allow for shipment to various destinations in either country.  For example, in regard to the South African alternatives this would allow road transport to Pemba, ship-loading and sea-freight to Maputo and then road transport to the Brits area of South Africa or to China. An estimate of the roast leach treatment cost was taken from the Bushveldt Minerals Feasibility Study.  This cost was US$3,870 per tonne of V2O5, (US$68.50/tonne for the 1.7% V2O5 Caula concentrate).

At the vanadium pentoxide price of US$40,785used in the Scoping Study, the value of contained vanadium per tonne of concentrate is US$693.  Subtracting the transport and treatment costs leaves US$409/tonne of potential profit from processing.  Sharing this profit equally between the concentrate supplier and the treatment facility would give a value of approximately US$200 per ton of concentrate to New Energy Minerals.

The Company had preliminerary discussions with potential off-take partners regarding the vanadium concentrates (to be produced from Phase 1 and Phase 2) and these parties confirmed that they believe these products will be saleable given the current market prices for vanadium as well as the strong demand for additional vanadium supply. The Caula vanadium concentrates will either be sold “over the fence” to a vanadium treatment facility near the mine or transported to port and exported either to South Africa or China to be treated there or a combination of both. The Company has already received interest in the “toll-treatment” of vanadium concentrates from the Caula project.

As previously stated it is the Company’s intention to ultimately produce >98% V2O5 products on site in a fully integrated plant and work is currently underway to determine the most optimal processing route to achieve this outcome. Subsequent studies will look to incorporate the results from this work and investigate the economics of the production of high purity flake and powder vanadium pentoxide on site.

Sensitivity analysis

The sensitivity analysis shows that the project is most sensitive to changes in revenue, however the dual product nature of the operation does mitigate this risk to an extent. The contribution to revenue from graphite and vanadium is similar. The sensitivity of the post-tax NPV to changes in Revenue, operating cost and capital cost is shown below.

Caula Project Sensitivity Analysis

Consultants participating in the Scoping Study

The Caula Vanadium-Graphite project Scoping Study was centrally managed from Johannesburg by independent mining consultancy Bara International, with specialist independent consultants contributing to the resource definition, metallurgy, environmental and hydrology and social elements.

The following consultants and individuals contributed to the key components of the Study:

Report Section
Name
Company
Geology and Resources
Johan Erasmus
Sumsare Consulting
Mine design
Clive Brown
Bara International
Metallurgical testwork (Lead)
Evan Kirby
New Energy Minerals
Process plant design and cost estimate (Lead)
Evan Kirby
New Energy Minerals
Metallurgical testwork (Review)
Richard Way
Bara International
Process plant design and cost estimate (Review)
Richard Way
Bara International
Tailings storage facility
Stephan Geyer
Bara International
Mine Infrastructure
Allan du Plessis
Bara International
Environmental and permitting
Peter Theron
Bara International
Financial modelling
Etienne de Villiers
Bara International
Responsible Persons for the Caula Scoping Study Report

Statement: Scoping Study Parameters

The Scoping Study referred to in this announcement has been undertaken to determine the potential viability of an open pit mine plus an integrated vanadium and graphite processing plant constructed onsite at the Caula Project and to reach a decision to proceed with more definitive pre-feasibility studies and the possible construction of a pilot plant. The Scoping Study has been prepared to an accuracy level of ±35%. The results should not be considered a profit forecast or production forecast. The Scoping Study is a preliminary technical and economic study of the potential viability of the Caula Project. In accordance with the ASX Listing Rules, the Company announces it is based on low-level technical and economic assessments that are not sufficient to support the estimation of ore reserves. Further appropriate studies are ongoing and they will contribute to the Company’s ability to estimate any ore reserves or to provide any assurance of an economic development case. This study does not warrant that reserves will be reported. The total LOM production target is in the Measured Resource category. The Company has concluded that it has reasonable grounds for disclosing a production target. The Scoping Study is based on the material assumptions outlined elsewhere in this announcement. These include assumptions about the availability of funding. While New Energy Minerals considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved. To achieve the range of potential mine development outcomes indicated in the Scoping Study, additional funding will be required. Investors should note that there is no certainty that New Energy Minerals will be able to raise funding when needed. reasonable grounds for disclosing a production target. The Scoping Study is based on the material assumptions outlined elsewhere in this announcement. These include assumptions about the availability of funding. While New Energy Minerals considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved. To achieve the range of potential mine development outcomes indicated in the Scoping Study, additional funding will be required. Investors should note that there is no certainty that New Energy Minerals will be able to raise funding when needed. t is also possible that such funding may only be available on terms that dilute or otherwise affect the value of New Energy Minerals’ existing shares. It is possible that New Energy Minerals could pursue other ‘value realisation strategies such as sale, partial sale, or joint venture of the Project. If it does, this could materially reduce New Energy Minerals’ proportionate ownership of the Project. The Company has concluded it has a reasonable basis for providing the forward-looking statements included in this announcement and believes that it has a ‘reasonable basis’ to expect it will be able to fund the development of the Project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

Footnotes
  1. New Energy Minerals Ltd (“the Company”) has an 80% economic interest in the Caula Project through its 80% shareholding in Tchaumba Minerais S.A. the holder of exploration license 6678L (currently mining concession application number 9407C). The balance of shares in Tchaumba Minerais S.A. (20%) is held by the Company’s local partner Mr. Tomas Mandlate (“local partner”). The Company has already started discussions and negotiations with the local partner who has indicated an interest to sell his 20% shareholding or part thereof to the Company. In terms of the binding shareholders agreement signed with the local partner he is free-carried for the duration of exploration but has to contribute his share of project equity finance at the conclusion of exploration and subject to a decision to mine being taken.
  2. The estimated mineral resource underpinning the Caula Scoping Study has been prepared by a competent person in accordance with the JORC Code. Please see “Competent Person Disclosures” found at the end of this document.
  3. Note the exchange rate used is AU$1.00 = US$0.724
  4. The estimated mineral resource underpinning the Caula Scoping Study has been prepared by a competent person in accordance with the JORC Code. Please see “Competent Person Disclosures” found at the end of this document.
  5. Unleveraged project IRRs provided in the Scoping Study. The Company has already started the process of investigating project funding opportunities lead by export credit agency (ECA) senior debt of up to 70% of the Phase 2 funding requirement.
  6. Refer to ASX Announcement dated 8 August 2018 and 6 September 2018
  7. Refer to ASX Announcement dated 3 October 2018. Following simple open circuit metallurgical testing the Company believes it has reasonable grounds to assume a commercial processing plant with multi-stage WHIMS recovery and recycle of intermediate streamswill deliver 90% vanadium recovery to a concentrate grade of 1.7%. In the open circuit testwork, the rougher plus scavenger recovery was 90% to a concentrate grade of 1.42% V2O5, whilst the recovery to cleaner concentrate was 80.6% to a concentrate grade of 1.66% V2O5. Subsequent semi-quantitative XRD analyses of testwork products showed that the concentrate contained about 25% of the non-magnetic mineral quartz, and that the tailings contained low levels of minerals believed to be vanadium-bearing. These observations support the contention that grade and recovery performance improvements are possible.
  8. see www.asianmetal.com and www.vanadiumprice.com for both current and historical vanadium pentoxide prices.