Northcliff goes north on strong economics at Sisson

Northcliff Resources (NCF-T) has shone a spotlight on its Sisson tungsten-molybdenum project in New Brunswick, with a feasibility study confirming it could economically mine the deposit for 27 years. 

On the news Northcliff gained 33%, or 10¢, to end at 40¢. It added another 12.5% the following day to close at 45¢.

The study, prepared by Denver-based Samuel Engineering, demonstrates that Sisson could annually produce 557,000 metric tonne units (mtu) of tungsten trioxide (WO3) in ammonium paratungstate (ATP), and 4.1 million lb. moly in concentrate for 27 years, with output for both metals trending higher in the initial years.

Annual production for the first five years would average 698,000 mtu WO3 and 4.1 million lb. moly, the company says, noting that Sisson could become the largest tungsten producer outside of China.

The large-scale project comes with a $579-million construction price tag, which Northcliff estimates will take four and a half years to recoup on an after-tax basis. It has a post-tax net present value of $418 million using an 8% discount rate and a post-tax 16.3% internal rate of return.

Depending on financing and environmental and construction permitting, mine construction could begin next year with commissioning in 2016.

The company’s president and CEO Chris Zahovskis says he is “confident” regulators will approve Sisson’s construction in 2014. He says the company is seeking partners and offtake tungsten buyers to help fund the project.  

Based on expected annual throughput, Sisson is the biggest tungsten development project in the pipeline, with Masan Resources’ Nui Phao project in Vietnam coming second, followed by Woulfe Mining’s (WOF-V) Sangdong deposit in South Korea, Northcliff says.

Sisson boasts 334 million tonnes of reserves containing 22 million mtu WO3 and 155 million lb. moly at a net smelter return cut-off grade of $8.83 per tonne. The mine plan incorporates 281 million tonnes of total reserves, which would be processed at a milling rate of 30,000 tonnes per day throughout the mine’s life. The proposed open-pit mine has a waste-to-ore strip ratio of 1 to 1. The company expects average recoveries of 77% and 82% for tungsten and moly.

The study assumes long-term average metal prices of US$350 per mtu for ATP and US$15 per lb. for moly, which falls in the low-to-medium range of estimates provided by the London-based Roskill Consulting Group.

Long-term tungsten prices are forecast to increase “irrespective of the supply or demand balance,” Northcliff argues, quoting a report by Roskill that tungsten production costs have climbed globally, making Chinese producers more sensitive than before to higher prices for labour, equipment and consumables.

China has dominated the tungsten market as the world’s top producer and supplier. But the country is restricting its exports to serve its domestic market, as its tungsten mines reach exhaustion, Northcliff says.

“Analogous to rare earths, there is significant potential for new non-Chinese supply to fill a growing [global] tungsten supply-and-demand gap,” it says.

“By advancing Sisson, Northcliff will become one of North America’s major tungsten producers, greatly increasing supply for the large North American, Asian and European markets, where demand is forecast to outstrip supply.”

Sisson is located 100 km northwest of Fredericton, and is well-positioned near roads, rail and tidewater in a stable, mining-friendly province. The Fraser Institute ranked New Brunswick as the top global mining jurisdiction last year.

Tungsten is used as an alloy in steel to increase hardness, elasticity and strength. It is extremely heat resistant, boasting the highest melting point of any metal.

Molybdenum, expected to generate up to a quarter of Sisson’s revenue, is also employed in stainless steel and steel alloys.