Champion Minerals (TSX: CHM; FSX: P02) announced today a positive preliminary economic assessment (PEA) for its Fire Lake North project in northeastern Quebec, with an IRR of nearly 25%.
Fire Lake North is located adjacent to the operating Fire Lake Mine owned by ArcelorMittal, and is 60 km to the south of Consolidated Thompson's Bloom Lake Mine. It is situated within the Labrador Trough of northeastern Quebec and western Labrador, also known as the Fermont-Wabush-Labrador City Iron Ore District.
The report, completed by engineering firm BBA, showed the project had a net present value of US$1.637 billion, at a cash flow discount rate of 5%, based on an iron concentrate production rate of 7 million tonnes per year at a grade of 65%.
The expected mine life is 14 years, with capital expenditures totaling US$ 890.90 million for a payback period of 2.8 years.
Based on the results, the company said that a feasibility study is being planned for next year. The ongoing 15,000m drilling campaign at the site has the potential to "enhance the project's economics", Champion said, if it increases the mineral resources and production profile, which could result in higher net present value and extend the mine life.
"We now have the potential for a viable project with significant upside potential. This illustrates that in today’s context our portfolio of properties has excellent short and long term growth potential for development of high quality iron ore," said president and CEO Tom Larsen.
The current resource estimate for the project is 388 million tonnes grading 29% total iron. The PEA, which is based on a stand-alone operation and does not consider the Bellechasse adjacent property, has an accuracy of approximately 30%, and the numbers were calculated with a cut-off grade of 10% iron.
Bellechasse is located 12km to the northwest of Fire Lake North. The combined Fire Lake North and Bellechasse inferred mineral resources estimates total 603 million tonnes grading 29% total iron.
At Fire Lake North, Champion said it is aiming to increase the mine life from 14 to 25 plus years and to demonstrate the potential for a higher concentrate production rate at Fire Lake North, Bellechasse and/or from the company's other claim blocks in the area.
Lake North, Bellechasse and fourteen other claim blocks form part of the 642 km2 Fermont Iron property, which is 82.5% owned by Champion, with its joint venture partner Fancamp Exploration (TSX-V: FNC) owning the remaining 17.5% interest.