Adriana Announces Completion of the Feasibility Study on the Lac Otelnuk Project

by ahnationtalk on April 23, 2015393 Views

April 22, 2015 – Adriana Resources Inc. (“Adriana” or the “Company”) – (TSX-V: ADI) is pleased to announce that it has completed a Feasibility Study (“FS”) on the Lac Otelnuk Iron Ore Project (“LOM Project”) located in Nunavik, Québec. Lac Otelnuk Mining Ltd. (“LOM”) is a joint venture company between Adriana and WISCO International Resources Development & Investment Limited (“WISCO”), of which Adriana owns 40% and WISCO owns 60%.

A Feasibility Study (“FS”) with AACE Class 3 estimates (targeted accuracy +/- 15%) for the LOM Project designed for a 50 million tonnes per year (Mtpy) operation considering a 30 year mine life has been completed by SNC Lavalin Inc. The results of the study have concluded that, with 50 Mtpy of high quality product developed in two phases, the LOM Project is technically feasible with positive financial results, based on the selected process technologies, product transportation method, power supply concept, water and tailings management system, the long term iron ore price forecasts developed by SNL Metals and Mining and the applicable tax regimes. LOM has engaged Met-Chem Canada Inc., (“Met- Chem”) Montreal, Quebec, to compile a Technical Report in accordance with National Instrument 43-101 (“NI 43-101”), and it will be filed on SEDAR within 45 days after this news release.

Table 1 below shows a summary of the feasibility study results.

Table 1 — Summary of the Feasibility Study Results

Phase 1 (yr 3): US$34.21/tonne – Phase 2 (yr 9): US$31.12/tonne

Base Case: 100% Equity	Alternative Case: 30:70 Equity:Debt Ratio
Capex (USD, Dec.1, 2014)	Phase 1: US$9,384 million; Phase 2: US$4,802 million
Opex (USD, Dec.1, 2014)
Project IRR before Taxes	15.8%	15.8%
Project IRR after Taxes	13.0%	13.5%
Equity IRR before Taxes*		19.7%
Equity IRR after Taxes*		16.4%
NPV before Taxes*		US$10,174 million
NPV after Taxes*		US$5,519 million
NPV before Taxes**	US$10,388 million
NPV after Taxes**	US$5,240 million
Payback Period before Taxes***		7.2 years
Payback Period after Taxes***		7.5 years
Payback Period before Taxes****	7.0 years
Payback Period after Taxes****	7.3 years
Based on dividends to shareholders * Based on Free Cash flow to Equity *Calculated from start of commercial production and based on dividends to shareholders **Calculated from start of commercial production and based on Free Cash Flow to Equity Project NPV discounted at 8% 100% product sale to China

Allen J. Palmiere, the CEO of Adriana said: “We are very pleased to announce the completion of the Feasibility Study for the Lac Otelnuk Project. The results of the study show that the LOM Project has robust and attractive economics under different scenarios. The Feasibility Study provides to our partner, WISCO, the basis for further strategic evaluations and financing arrangements. We are very proud of our team and the work that has been done to complete the Feasibility Study.”

Project and Development Plan

The LOM Project includes the development of an open pit mine, ore processing plant, product delivery system (by a slurry pipeline system to the Port of Sept-Îles, Quebec), product dewatering, storage and reclaiming systems, conveyors and ship loading facilities, high voltage power transmission lines and other necessary facilities and infrastructures.

The final product is designed to be a pellet feed iron ore concentrate with a minimum Fe content of 68.5% and less than 4.0% SiO2 + Al2O3. The average Fe total weight recovery is estimated at 26.5% during the 30 years of mine life.

The LOM Project is designed to be developed in two phases: Phase 1 will produce 30 Mtpy of product and Phase 2 adds an additional 20 Mtpy of product, totalling 50 Mtpy of iron ore concentrate. The Phase 2 construction is planned to be completed in the Operation Year 9.

Mineral Resources
Following the latest Mineral Resource estimate by Watts, Griffis and McOuat Limited (“WGM”), with an effective date of October 31st, 2013, the total Measured and Indicated Mineral Resources are estimated to be 20.64 billion tonnes at a Davis Tube weight recovery (“DTWR”) cut off of 18%. Table 2 below summarizes the details of the Mineral Resource classification.

Table 2 – Mineral Resources

Resource Classification	Tonnes (in billions)	Total Fe Head %	DTWR %	Magnetic Fe %
Measured	16.21	29.3	25.8	17.8
Indicated	4.43	31.5	24.1	16.7
Total Measured and Indicated	20.64	29.8	25.4	17.6
Inferred	6.84	29.8	26.3	17.8

Notes:
1. Interpretation of the mineralized zones were created as 3D wireframes/solids based on logged geology and a nominal 10% DTWR when required.
2. Mineral Resources were estimated using a block model with a block size of 50m x 50m x 5m.
3. No grade capping was done. Tonnages and grades reported above are undiluted.
4. Assumed Fe price was US$110/dmt.
5. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resource will be converted into Mineral Reserves. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing, or other relevant issues.
6. The quantity and grade of reported Inferred Mineral Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as an Indicated or Measured Mineral Resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured Mineral Resource category.
7. The Mineral Resources were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Standards for Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM.
8. Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies.

Using the mineral resource block model prepared by WGM, Met Chem developed a 30 year mine plan which features a large-scale open pit operation that will move on average 92 Mtpy of ore in the first seven years during the Phase 1 production, an average 179 Mtpy during the Phase 2 ramp-up to year 10, and an average of 192 Mtpy for the balance of the 30-year mine life. The overall stripping ratio of the 30 year open pit is 0.28 to 1. The pit includes 4,943 Mt of Proven Mineral Reserves and 50 Mt of Probable Mineral Reserves at a DTWR cut-off grade of 20.65%. The open pit mine and the related Reserves are a subset of the previously discussed Mineral Resources. A Mineral Reserve is defined as a Mineral Resource on which economic viability has been demonstrated by a feasibility study. Table 3 below summarizes the details of the Mineral Reserve classification.

NT3