EPM Mining Ventures Inc. (TSX VENTURE:EPK)(OTCQX:EPKMF) ("EPM" or the "Company")
is pleased to announce the results of a Preliminary Feasibility Study ("PFS")
for the production of Sulphate of Potash ("SOP") from its Sevier Lake Playa
Sulfate of Potash Project (the "Project") located in southwestern Utah. The PFS
was prepared by CH2M HILL Engineers, Inc. ("CH2M HILL"), Agapito Associates,
Inc. ("AAI"), and Norwest Corporation ("Norwest").
Lance D'Ambrosio, Chief Executive Officer of EPM, said, "We are very pleased
with the completion and positive results of this important study. Through the
efforts of a second drilling and fieldwork program, bench-scale testing of
important evaporation and other process-related parameters, and significant
hydrology modeling and analysis, the PFS highlights and supports the strong
fundamentals and potential of our project."
Preliminary Feasibility Study Highlights
The PFS forecasts average annual SOP production of 300,000 metric tonnes (t)
with an estimated Net Present Value ("NPV") of $629 million (after tax,
inflated, 8% discount rate) and an estimated Internal Rate of Return ("IRR") of
20% (after tax, inflated). The PFS includes an updated Mineral Resource
Estimate, which estimate includes 31.486 million tonnes of SOP in the Measured
and Indicated categories, a 7% increase from previously published estimates, due
primarily to results of recent drilling.
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Economic Indicators
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NPV (pretax, 8%) $ 957 M
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NPV (after tax, 8%) $ 629 M
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IRR (pretax) 24%
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IRR (after tax) 20%
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Average Annual SOP Production 300,000 t
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Mine Life 30 years
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Initial Direct Capital Costs $ 292 M
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Initial Indirect Capital Costs $ 50 M
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Initial Capital Contingency $ 36 M
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Operating Cost $ 180.91/t
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Production Royalties (% of gross revenues) 5.61%
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Year 3 EBITDA (nameplate production) $ 143 M
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Payback Period (from commencement of production) 5.5 years
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Measured & Indicated SOP Resource 31.486 Mt
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The economic analysis in the PFS is based upon the following assumptions:
-- 100% Equity
-- Production Ramp-Up over two years, reaching full production in Year 3
-- 50,000 tonnes in Year 1
-- 100,000 tonnes in Year 2
-- 300,000 tonnes in Year 3
-- Construction on playa in Preproduction Year 3 ("PP-3")
-- Effective tax rate of approximately 29%
The economic analysis was based upon Measured and Indicated Mineral Resources
only. No Inferred Resources were included in the analysis. Mineral Resources
that are not Mineral Reserves do not have demonstrated economic viability.
Although a PFS has been completed, Mineral Reserves will not be established
until further verification of the hydrologic models via longer term
pilot-testing planned during the Feasibility Study in 2014.
Capital Costs
The total direct capital costs of the Project are estimated to be $292 M, not
including indirect costs and contingency, as of 2013. All capital costs in the
economic model are inflated by 2% annually beginning in year PP-3. Contingency
is 12% of direct capital costs. The capital cost estimate has an accuracy of
+25%/-20%.
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Description
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Initial Capital Costs:
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Playa Infrastructure $ 49 M
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Utility Infrastructure $ 45 M
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Plant Facilities & Equipment $ 167 M
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Rail Load-out Facility $ 31 M
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Direct Costs $ 292 M
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Indirect Costs $ 50 M
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Contingency $ 36 M
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Total Initial Capital Costs $ 378 M
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Sustaining Capital Costs (LoM) $ 199 M
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Operating Costs
The total cash operating costs of the Project are estimated to be $180.91/t as
of 2013. All operating costs in the economic model are inflated by 2% annually
beginning in year PP-3.
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Description Unit Cost % of Total
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Operating Costs:
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Labor $ 34.76/t 19%
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Power $ 13.97/t 8%
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Natural Gas $ 37.57/t 21%
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Reagents, Consumables & Maintenance $ 40.34/t 22%
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Salt Harvest & Haul to Rail $ 37.57/t 21%
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General & Administrative $ 16.70/t 9%
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Total $ 180.91/t 100%
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SOP Markets and Price
The Company has conducted extensive research and analysis based on both public
and private materials including industry studies, reports, forecasts, and
estimates, as well as a market assessment and distribution strategy study
commissioned by the Company and prepared by The Parthenon Group ("Parthenon").
This study, titled "SOP Market Assessment, Summary of Findings" (the "Market
Study") included both primary and secondary research and focused on market
analysis, supply and demand capacity and pricing trends, economic forecasting
and modeling, and developed a framework for domestic and international
distribution of SOP and magnesium-based minerals. Interviews were conducted with
agronomists, wholesalers, distributors, and retailers, both domestically and
abroad. Parthenon also completed a comprehensive survey of U.S. farmers that
grow chloride-sensitive crops ("Farmer Survey"). Responses to the Farmer Survey
provided further definition for domestic SOP usage by region and crop, decision
dynamics, as well as barriers and opportunities for increased usage.
Based on the Market Study and the Company's research and analysis, strong SOP
demand is observed not only in the emerging agricultural markets of China,
India, South America, and Southeast Asia, but also in the established markets of
the United States. SOP is the most commonly used potassium-based, chloride-free
fertilizer in the world with global demand of an estimated 6 million tonnes. The
fertilizer is used on chloride sensitive, high value crops such as fruits,
vegetables, and tree nuts. It continues to be priced at a significant premium to
muriate of potash ("MOP") and currently sells between approximately $600 to
$700/t, depending on location ($595-$600/t FOB Gulf, Argus; $703/t, Compass
Minerals Q2 2013 results, converted to metric tonnes ($638/short ton x 1.1023
short ton/t)). By Parthenon's estimates, the global SOP market is expected to
grow 4% annually through 2020.
Based on the Parthenon Farmer Survey, the Company anticipates strong future
demand potential not only for SOP but also for micronutrients such as sulphur
and magnesium, both of which are contained in the Project's brine resource. One
of the important outcomes of the Farmer Survey was the need for better end-user
education as to the economic benefits of SOP. The Company believes that with
additional research, marketing, and educational outreach, greater market
potential for SOP may be realized.
The SOP price forecast utilized in the PFS was based upon the 2012 CRU
International Ltd. ("CRU") price forecasts of $566/t in 2015, and reaching
$721/t in 2020 (inflated at 2% annually thereafter); standard grade product, FOB
Vancouver/Portland. Based on (i) the premium for granular and soluble product
over standard grade product in the marketplace; (ii) the Company's proposed mix
of granular, soluble, and standard grade product; (iii) the Company's estimated
mix of domestic and international sales; and the estimated transportation costs
between the mine gate and Vancouver/Portland (including port fees); the price
forecast used in the economic model represents FOB mine gate (ex-works) pricing,
and is estimated to be equal to the prices projected by CRU.
Hydrology
A comprehensive groundwater modeling effort was conducted to support the PFS.
The modeling included several variations designed to test different aspects of
the conceptual model. Three-dimensional models of the entire playa system were
developed in MODFLOW-2005 to characterize stream-playa lake interaction and
effects of areal recharge and evaporation rates. This was followed by 3D and 2D
models employing MODFLOW-SURFACT, an advanced proprietary version of MODFLOW
with the ability to simulate density-dependent flow, and dual-domain transport.
The models incorporated layer elevations derived from intercepts logged from
over 400 boreholes and wells drilled during the exploration program. Field data
incorporated in the models included estimates of hydraulic conductivity and
storage coefficient based on hydrophysical and aquifer stress test results
employing both wells and trenches. Site-specific estimates of the vertical
infiltration rate and evapotranspiration were also obtained. Data from
laboratory testing incorporated into the modeling included unsaturated flow
properties, saturated hydraulic conductivity, matrix porosity, and solute
concentrations.
Initial modeling determined that the target production rate of 0.09 gpm per
linear foot of production trench could be met with a total demand of make-up
recharge water of 15 cfs +/- 3 cfs. This modeling was followed by numerous 2D
flow and transport simulations to characterize the dilution of the brine
resource over time, determine optimum trench spacing, and support a cost-benefit
analysis of extracting brine from the lower resource zone with deepened trenches
versus wells. To construct the 2D models, a one-meter wide north-south profile
was cut through the 3-D model so that location-specific layer thicknesses and
depths would be preserved. Multiple simulations incorporating trench spacing of
500, 750 and 1000 meters, trench flow rates, and well spacings of 100, 200, 250,
and 400 meters were carried out to prototype various designs. Results showed
that acceptable brine mass rates could be extracted from two trench phases,
based on 1000 meter spacing, followed by well extraction with individual wells
spaced at 400 meters individually discharging at approximately 18 gpm.
Engineering Progress
The PFS considered an optimized process flow sheet (the "Process") that is
anticipated to provide improved operating benefits and flexibility while
maintaining a balance between production, expense, and potential ancillary
mineral production. The Process includes solar pond crystallization, flotation,
and product crystallization. In support of the Process, the Company completed
important thermodynamic modeling and pilot plant testing of pond
crystallization. In addition, bench-scale testing was conducted with Hazen
Research and Swenson Technologies for the flotation and multiple effect
crystallizer circuits. The thermodynamic modeling and subsequent test work
confirmed projected plant recoveries of 78%.
The PFS advanced significant engineering efforts in the areas of plant and rail
load-out design, civil construction design for all playa infrastructure, and
utility/master infrastructure layout and design. The capital cost estimate
included budgetary quotes on 93% of all plant mechanical equipment costs.
Ancillary Mineral Products
The PFS only considered SOP production. The Company anticipates completing a
Feasibility Study in 2014 that will consider minerals extraction in addition to
SOP, including products such as magnesium sulphate, magnesium chloride, sodium
sulphate, and possibly lithium. Given the presence of other mineral constituents
in the brine resource, ancillary minerals may provide the Company with a source
of additional value if such minerals prove to be economic as the result of
further studies.
Resource Estimate
The PFS is based upon an updated Mineral Resource Estimate, which was completed
by Norwest. The original Mineral Resource Estimate was presented in the
Technical Report entitled "Technical Report Mineral Brine Resources of the
Sevier Lake Playa, Millard County Utah" with an effective date of May 1, 2012
(the "May 2012 Technical Report") by Mr. Lawrence D. Henchel, P. Geo. of Norwest
and found on the SEDAR website (www.sedar.com) for full review). The updated
Mineral Resource Estimate is based upon the data collected from the original
drilling and exploration program conducted in 2011-2012, as well as a second
drilling and exploration program conducted in 2013.
A total of 431 holes were drilled on the Project using a variety of drilling
methods from 2011 through 2013. The following brine resource parameters were
acquired from drill hole sampling of brine and host sediments:
-- Gravimetric moisture content in weight percent
-- Specific gravity of brine and solid host sediments
-- Cation in mg/l brine for Mg2+, Na+, and K+
-- Anion in mg/l brine for Cl- and SO42-
The geometry of the brine aquifer was determined from correlations of drill hole
lithologic descriptions, penetrometer results, and moisture content
measurements. The estimations of moisture content and brine grade (cations and
anions) and specific gravity inputs into a MineSight(R) 3D block model were
influenced by the results of geostatistical analyses of the source drill-hole
sample data.
Whetstone Associates, Inc. completed the analysis of data from the
hydrogeological and hydrophysical field-testing program and prepared the
hydrogeological models of the system. AAI developed the layout of the extraction
and recharge system along with the design of the pre-concentration and
production ponds.
The estimated brine resource and associated major dissolved cations and anions
for the brine aquifer are summarized in tables below. Given that sufficient
sulphate is present in the brine to utilize all potassium ions, the mineral
equivalent tonnages of K2SO4 and other potential salt compounds that could be
created using the available cations and anions within the Sevier Lake Playa
brine resource are also listed below.
Brine Mineral Resource Summary and Major Dissolved Cations and Anions
Dated Effective as of October 25, 2013.
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Brine
Category Resource Potassium (K) Sulphate (SO4)
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Mt Wt % Mt Wt % Mt
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Measured 1,937 0.261 5.063 2.161 41.854
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Indicated 3,755 0.241 9.036 2.009 75.414
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Measured plus
indicated 5,691 0.248 14.099 2.060 117.268
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Inferred 476 0.241 1.148 2.101 9.993
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Category Chlorine (Cl) Sodium (Na) Magnesium (Mg)
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Wt % Mt Wt % Mt Wt % Mt
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Measured 8.072 156.332 6.627 128.353 0.326 6.321
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Indicated 7.175 269.411 6.353 238.533 0.308 11.546
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Measured plus
indicated 7.480 425.743 6.446 366.886 0.314 17.866
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Inferred 7.007 33.332 6.675 31.751 0.334 1.586
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Potential Mineral Equivalent Compounds from Brine Resource
Dated Effective as of October 25, 2013.
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Million Metric
Tonnes Potash Bitterns Bitterns Salt Cake Halite
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K2SO4 MgCl2 MgSO4 Na2SO4 NaCl
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State Measured 0.376 0.416 0.526 0.384 7.524
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Indicated 0.754 0.840 1.061 0.732 14.653
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Measured plus
Indicated 1.130 1.256 1.586 1.115 22.177
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Inferred 0.004 0.004 0.005 0.008 0.087
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Federal Measured 10.471 11.391 14.391 32.981 225.649
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Indicated 16.272 17.998 22.738 53.577 346.196
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Measured plus
Indicated 26.774 29.389 37.129 86.558 571.846
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Inferred 1.212 1.259 1.591 4.389 25.889
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LUMA Measured 0.497 0.657 0.830 1.067 10.492
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Indicated 3.116 3.803 4.804 7.027 55.327
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Measured plus
Indicated 3.613 4.460 5.634 8.094 65.819
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Inferred 1.344 1.848 2.335 3.654 25.137
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Total Measured 11.344 12.464 15.746 34.432 243.666
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Indicated 20.142 22.641 28.604 61.335 416.176
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Measured plus
Indicated 31.486 35.104 44.350 95.768 659.841
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Inferred 2.560 3.111 3.931 8.051 51.113
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The total Measured and Indicated Resource for SOP increased from 29.485 Mt in
the May 2012 Technical Report, to 31.486 Mt in the PFS, an increase of
approximately 7%, primarily due to the results of the 2013 drilling program.
No claim for Mineral Reserves has been made at this time pending verification of
the hydrologic models via longer term pilot-testing planned during the
Feasibility Study phase.
Each of the qualified persons shown below has reviewed and approved the
scientific and technical disclosures contained in the PFS and in this press
release and are independent of the company. Qualified persons have verified the
data including sampling, analytical, and test data underlying the information or
opinions contained herein. The qualified persons responsible are:
-- Mr. Michael D. S. Blois Pr. Eng., QP, (CH2M HILL) is the qualified
person responsible for the mineral processing and metallurgical testing,
recovery methods, infrastructure, capital cost and operating cost
estimates, and the overall preparation of the report.
-- Mr. Michael Hardy, P. Eng., (Agapito) is the qualified person
responsible for the mining methods.
-- Mr. Scott Effner, P.G., Principal Hydrogeologist, (Whetstone Associates
Inc) is the qualified person responsible for groundwater modeling.
-- Mr. Lawrence D. Henchel, P. Geo., (Norwest) is the qualified person
responsible for the resource estimate.
-- Mr. David Waite, P.E., (CH2M HILL) is the qualified person responsible
for the environmental and permitting sections of the report.
The Company expects to file the completed PFS technical report (the "PFS
Technical Report") in accordance with National Instrument 43-101 within 45 days
from the date of this Press Release on the SEDAR website (www.sedar.com) as well
as on the Company's website (www.epmmining.com).
Conference Call
The Company will host a call at 11:00 am Eastern Time on October 29, 2013 to
discuss the PFS results. The Company cordially invites all interested parties to
participate in this call. Participants should register 5 to 10 minutes prior to
the call.
Call-in details are as follows:
Call-in Number: +1 888-390-0546
Conference ID: 37215881
About EPM Mining Ventures
EPM, through its wholly owned subsidiary Peak Minerals Inc., controls directly
or through agreement, mineral leases on more than 124,000 acres on the Sevier
Lake Playa property in Millard County, Utah. EPM is targeting the future
development and production of SOP, a premium priced fertilizer used with special
crops and soil types, through a cost-effective solar evaporation methodology.
The Company is currently engaged in engineering and chemical analysis designed
to support the completion of a feasibility study.
For more information on the Company, please visit our web site at www.epmmining.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this release.
Forward-Looking Information
This press release contains "forward-looking information" within the meaning of
applicable Canadian securities legislation. Forward-looking information
includes, but is not limited to, statements related to activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including, without limitation; statements related to the Company's
release of the PFS Technical Report; the economic analysis of the Project; the
Feasibility Study; mineral resource estimate; the permitting process;
environmental assessments; business strategy; objectives and goals; and
exploration of the Sevier Playa Project. Forward-looking information is often
identified by the use of words such as "plans", "planning", "planned", "expects"
or "looking forward", "does not expect", "continues", "scheduled", "estimates",
"forecasts", "intends", "potential", "anticipates", "does not anticipate", or
"belief", or describes a "goal", or variation of such words and phrases or state
that certain actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved. Forward-looking information is based on a
number of factors and assumptions made by management and considered reasonable
at the time such information is provided. Forward-looking information involves
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance, or achievements to be materially different from
those expressed or implied by the forward-looking information. The PFS is, by
definition, preliminary in nature and should be considered speculative. It is
based upon a process flow sheet that may change, which would impact all costs
and estimates. Operating Costs for the Project were based upon assumptions
including future energy costs, natural gas costs, water costs, labor, and other
variables that are likely to change. Capital Costs were based upon a list of
equipment thought to be necessary for production. SOP price forecasts were based
upon third-party estimates and management assumptions that may change due to
market dynamics. The mineral resource estimates were based upon assumptions
outlined in the "Resource Estimate" section. Some figures were calculated using
a factor to convert short tons to metric tonnes. Changes in estimated costs to
acquire, construct, install, or operate the equipment, or changes in projected
pricing, may adversely impact project economics.
Among other factors, the Company's inability to complete further mineral
resource and mineral reserve estimates; the inability to complete the PFS
Technical Report or Feasibility Study; the inability to obtain sufficient
recharge; the inability to anticipate changes in brine volume or grade due to
recharge or other factors; changes to the economic analysis; the failure to
obtain necessary permits to explore and develop the Sevier Playa Project;
environmental issues or delays; inability to successfully complete additional
drilling at the Sevier Playa Project; factors disclosed in the Company's current
Management's Discussion and Analysis; as well as information contained in other
public disclosure documents available on SEDAR at www.sedar.com may adversely
impact the Project. Although EPM has attempted to identify important factors
that could cause actual actions, events, or results to differ materially from
those described in the forward-looking information, there may be other factors
that cause actions, events, or results not to be as anticipated, estimated, or
intended. There can be no assurance that forward-looking information will prove
to be accurate. The forward-looking information contained herein is presented
for the purposes of assisting investors in understanding the Company's plan,
objectives, and goals and may not be appropriate for other purposes.
Accordingly, readers should not place undue reliance on forward-looking
information. EPM does not undertake to update any forward-looking information,
except in accordance with applicable securities laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
EPM Mining Ventures Inc.
Lance D'Ambrosio
Chief Executive Officer
(801) 485-0223
www.epmmining.com
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