Champion scales up Fire Lake North

Vancouver – Champion Minerals (CHM-T) has released an updated preliminary economic assessment on its 82.5%-owned Fire Lake North project that significantly increases the net present value and resource size.

The new PEA outlines an open pit design of 921.8 million tonnes grading 28.8% total iron based on an 8% cut-off grade and incluedes measured, indicated and inferred resources. The previous PEA, released in late 2010, was based on an ‘in-pit’ resource of 250.5 million tonnes grading 30.4% iron at a 10% cut-off.

The increased resources, along with an increase in the assumed metal price from US$81.39 per tonne of concentrate to US$115 per tonne, makes for an increase in the net present value from US$938 million to US$3.2 billion, both based on a 10% discount. The internal rate of return for the new base case comes in at 41.5% while the previous study was 24.8%.

Cost, however, have also gone up. Total capital costs come in at US$1.37 billion including US$325.6 million for rail and port infrastructure and US$841.7 million for the mine and concentrator. Previously capital costs totalled US$890.9 million. Payback in the new study is 2.3 years. Costs per tonne of concentrate came in at US$51 per tonne for the first 25 years compared with US$41.69 per tonne in the previous study.

Production has gone from roughly 7 million tonnes of concentrate a year to 8.7 million tonnes per year for the first 25 years, both grading 65% iron, while for the first five years the new plan calls for 10 million tonnes of production. Overall mine life is 40 years. With the significant increase in the resource size however, Champion plans to look into the possibility of doubling the production rate.

As of an early October resource update, the project hosts 400.1 million measured and indicated tonnes grading 30.6% iron and 661.2 million inferred tonnes grading 27.7% iron, both at a 15% cut-off grade. Before receiving the latest PEA Champion launched an infill drill program to upgrade inferred resources so they can be incorporated into a 2012 feasibility study. The company was finishing up drilling at its Oil Can project, contiguous to the north of Fire Lake North, in early November, and planned to transfer the three drill rigs to Fire Lake when done.

Champion is advancing its Fire Lake North project along with 17.5%-holder Fancamp Exploration (FNC-V), which holds the same share in all of Champion’s 17 properties in the Fermont district.

Champion’s share price dropped 10¢ on the news to close at $1.28 with 1.3 million shares traded. The company has a 52-week share price range between 72¢ and $3.30.