Shakespeare feasibility works at 4,500 tonnes per day (January 30, 2006)

A feasibility study for Ursa Major Minerals (UMJ-V, UMJMF-O) gives a thumbs-up to a 4,500-tonne-per-day open-pit mine and mill operation on the Shakespeare nickel-copper property southwest of Sudbury, Ont.

The study, by Micon International, puts a 14.5% internal rate of return and a $16.2-million net present value (NPV) on the project, the NPV based on a discount rate of 10%.

It estimated the capital cost at $118.5 million, with the biggest ticket — $48.6 million — on the mill. A mining fleet is likely to cost $18.9 million; pre-stripping about $10.8 million; and infrastructure, tailings disposal, and a high-compression thickener about $18.5 million together. Owner’s costs, the construction contract, and a contingency reserve make up the remaining $21.7 million.

The mine would have a life of just under seven years and would take out a probable reserve of 11.3 million tonnes at average grades of 0.33% nickel, 0.35% copper, 0.02% cobalt, 0.33 gram platinum, 0.37 gram palladium and 0.19 gram gold per tonne. The pit designed around the reserve is 250 metres deep and has a stripping ratio slightly over 5:1.

The reserve is part of an indicated resource of 12.4 million tonnes at 0.35% nickel, 0.37% copper, 0.02% cobalt, 0.35 gram platinum, 0.39 gram palladium and 0.2 gram gold per tonne. There is another 1.8 million tonnes outside the designed pit, which runs 0.37% nickel, 0.41% copper, 0.03% cobalt, 0.36 gram platinum, 0.39 gram palladium and 0.22 gram gold. Most of that material is at depth, suggesting a large push-back of the pit would be necessary to take it out.

Micon’s estimate of operating costs is $22.55 per tonne, of which $10.80 is mining and stripping and $11.75 processing and overhead.

Micon’s price estimates put the net smelter return on 1 tonne of ore at $44.10. The figure was based on nickel at US$12,080 per tonne (US$5.48 per lb.), copper at US$2,950 per tonne (US$1.34 per lb.), cobalt at US$20.05 per lb., platinum at US$805.30 per oz., palladium at US$225.20 per oz., and gold at US$438.30 per oz. All those prices were averages over a 5-year decay to long-term historical median prices.

The Canadian dollar was assumed to stay around US82.

Based on those prices and exchange rates, Ursa is assuming a fairly conservative net-back of about 50% of the gross metal value.

Ursa Major and partner North American Palladium (PDL-T, PAL-X), which is earning a 60% interest in Ursa’s share of the project, have already decided to take the project to the permitting stage. The feasibility study triggers North American Palladium’s obligation to begin funding 60% of the project; it will vest its 60% interest by securing full project financing.

The other partner, Falconbridge (FAL.LV-T, FAL-N) — which currently holds 20% — is allowing its interest to be diluted. Ursa will hold 86% by the completion of the feasibility work now under way.

T.N.M. Snapshot

Shakespeare Feasibility Study

OWNERSHIP: Ursa Major Minerals, 86%; Falconbridge, 14%; North American Palladium to earn 52% out of Ursa share.

RESERVE: 11.3 M t, 0.33% nickel, 0.35% copper, 0.02% cobalt, 0.33 g/t platinum, 0.37 g/t palladium, 0.19 g/t gold

MINE: Open pit, 4,500 t/day, stripping ratio 5:1

PLANT: Conventional flotation

CAPITAL COST: $118M

PRODUCTION COST: $22.55/t

ECONOMICS: IRR 14.5%, NPV $16.2M at 10% (after tax)