Royalties tables scoping study for Raglan South (May 10, 2006)

Royalties tables scoping study for Raglan SouthQuebec-based nickel explorer Canadian Royalties (CZZ-T, CRYAF-O) plans a full feasibility study on its Raglan South nickel-copper deposits in the Nunavik (Ungava) region of Quebec following a preliminary economic study that concludes production from four deposits is feasible.

The study examined the economics of production from open pits on the Expo, Mesamax, Mequillon and Ivakkak deposits, feeding a single mill that would seasonally ship concentrate through a deep-water port. The operation would produce 9,100 tonnes nickel and 10,000 tonnes copper annually, plus byproduct platinum and palladium.

Capital costs of building a mill would likely run to $85 million, plus $26 million for the mine fleet, facilities and site preparation. Another $44 million would go into sitework, a power plant, a port facility, roads and an airstrip. With overhead and transportation, the study put the pre-production capital cost at $225 million.

Production costs ring in at US$2,970 per tonne nickel (US$1.35 per lb.).

A cash-flow analysis, using prices of US$11,000 per tonne (US$5 per lb.) for nickel, US$2,750 per tonne (US$1.25 per lb.) for copper, US$900 per oz. for platinum and US$300 per oz. for palladium, put the project’s internal rate of return at 20%, with a net present value of US$175 million at a 5% discount rate.

There would be four open pits:

• Expo, with 4.7 million tonnes grading 0.86% nickel, 0.81% copper, 1.5 grams paladium and 0.4 gram platinum per tonne, at a stripping ratio of 4.9;
• Mesamax, with 2.1 million tonnes grading 1.84% nickel, 2.31% copper, 3.7 grams palladium and 0.9 gram platinum per tonne, at a stripping ratio of 2.4;
• Mequillon, with 2.4 million tonnes grading 0.5% nickel, 0.68% copper, 1.7 gram palladium and 0.5 gram platinum per tonne, at a stripping ratio of 5.1; and
• Ivakkak, with 475,000 tonnes grading 1.65% nickel, 4.83% copper, 7.8 grams palladium and 0.75 gram platinum per tonne, at a stripping ratio of 17.8.

About 783,000 tonnes of material inside the proposed pits are currently only inferred resources.

Royalties is reviewing the report and expects to go ahead with a final feasibility study.