Using the database of our sister company Mining Intelligence, The Northern Miner compiled the following list of British Columbia’s four exploration projects with the highest net present values (NPVs), as measured by project studies.
1. Wapiti River coal project
NPV: $2.5 billion
Led by CEO Naishan Liu, the private, Vancouver-based Dehua International Mines Group owns the Wapiti River coalfield near the town of Tumbler Ridge in northeast British Columbia. The company has tried to obtain financing to develop the first of three mines at Wapiti River.
Dehua has a minority stake in HD Mining, which owns the Murray River coal project, also near Tumbler Ridge in northeast British Columbia. In 2012, HD Mining made headlines after trying to bring 201 Chinese workers on temporary foreign worker permits to develop the Murray River mine. After a federal court ruled two Canadian unions could challenge HD Mining’s temporary foreign worker permits, Dehua’s investors withdrew their commitments to fund the Wapiti River project.
The only National Instrument 43-101 compliant technical report for the first mine at Wapiti River, produced in 2015, pegs resources at 560 million tonnes coal.
A study produced by a Beijing engineering company the year before projected the first mine would produce 10 million tonnes of coal per year for 46 years, resulting in a $2.5-billion net present value and a 29% internal rate of return.
In a 2016 financing presentation, Dehua said the first mine’s expected rate of return could be anywhere between 122% and 8,744%.
2. Huguenot coal project
NPV: $1.5 billion
Colonial Coal’s coal resource at Huguenot versus other deposit’s in B.C.’s Tumbler Ridge region. Credit: Colonial Coal.
On July 10, Vancouver-based Colonial Coal (TSXV: CAD; US-OTC: CCARF) reported highlights from an updated preliminary economic assessment of its Huguenot metallurgical coal project in the Peace River coalfield in northeast British Columbia. The full report will be released by the end of August, and comes five years after the first version was released.
Colonial Coal says the update shows a post-tax, $1.5-billion post-royalty net present value and 33% internal rate of return, based on a 7.5% discount rate and US$172-per-tonne coal price. The break-even coal price is an estimated US$120 per tonne.
Resources total 278 million tonnes of coal. The preliminary economic assessment lays out a plan to extract 95 million tonnes via an open-pit mine and 116 million tonnes from an underground mine. The company assumes a third party will front the cost for the Huguenot project connecting to the existing rail line south of Tumbler Ridge, and charge Colonial Coal an annual usage fee. It expects other nearby projects to come online around the same time, and share up to half of that cost.
Management is pursuing financing opportunities for Huguenot, including a possible joint venture.
Shares of Colonial Coal are valued at 30¢ per share with a 52-week range of 9¢ to 40¢. The company has a $47-million market capitalization.
3. Record Ridge magnesium project
NPV: $1.1 billion
Location map of West High Yield’s Record Ridge magnesium project in southern British Columbia. Credit: West High Yield.
Calgary-based West High Yield Resources’ (TSXV: WHY; US-OTC: WHYRF) Record Ridge magnesium project is located just outside the town of Rossland in south-central British Columbia. The magmatic chromite deposit has resources totaling 43 million tonnes of 24.6% magnesium for 11 million tonnes magnesium.
A 2013 preliminary economic assessment outlined a 1-million-tonne-per-year open pit mining operation over 42 years at Record Ridge, with initial capital costs of US$608 million. The study estimated an after-tax net present value of US$830 million and a 17% after-tax internal rate of return, assuming a 5% discount rate and US$1,100-per-tonne price of electrofused magnesia — a refined product of magnesium oxide.
Last November, West High Yield Resources announced an agreement to sell the Record Ridge magnesium project for US$750 million to Maryland-based Gryphon Enterprises. Few had heard of the Record Ridge deposit at the time, let alone the two companies involved in the deal.
The announcement lifted West High Yield Resources’ stock 1,000% that day, with the US$750-million price tag 46 times its market value the day before, and fourth on the list of 2017’s largest global mining deals. This caught the attention of Alberta’s securities regulator.
A month later, West High Yield Resources clarified Gryphon had not yet obtained the financing needed to complete the deal. The next day, the company ended the deal when Gryphon failed to make a US$500,000 deposit.
On May 29, West High Yield Resources reported it has begun permitting for an initial operation at Record Ridge that would extract 500,000 tonnes of magnesium-rich serpentinite over two years. It expects to receive a decision by December.
Shares of West High Yield Resources are valued at 36¢ per share within a 52-week range of 28¢ to $2. The company has a $22-million market capitalization.
4. Turnagain nickel project
NPV: $940 million
Walking through the Highland area of the Turnagain nickel project in B.C. Credit: The Northern Miner
Giga Metals (TSXV: GIGA; US-OTC: HNCKF), formerly Hard Creek Nickel, has been trying to advance the Turnagain nickel project in north-central British Columbia since 2004, steadily growing the large but low-grade resource to 865 million tonnes grading 0.21% nickel and 0.013% cobalt. That makes the project among the world’s largest undeveloped nickel sulphide deposits.
Turnagain’s 2010 preliminary economic assessment predicted a profitable but pricey open-pit mine — US$3 billion in capital expenses would return US$810 million in net present value (based on an 8% discount rate).
A team of metallurgists and advisors was assembled to help solve the project’s biggest hang-up: low nickel recovery that required a US$1.2-billion refinery. In 2011, they reached a breakthrough and eliminated the need for any building.
A worker at a drill site on Giga Metals’ Turnagain nickel project in north-central British Columbia. Credit: Giga Metals.
An updated preliminary economic assessment cut capital costs from US$3 billion to US$1.2 billion. It envisions an open-pit mine producing 53 million lb. nickel and 3 million lb. copper per year for the first five years and 100 million lb. nickel and 5 million lb. cobalt for the next 16 years, after a US$555-million expansion to the mill. That would result in a post-tax net present value of US$724 billion and a 14% internal rate of return.
Since then, not much has changed, though the company expects to publish a feasibility study in late 2019.
On July 11, Giga sold a 2% net smelter return royalty on all future metal production to Toronto-based Cobalt 27 Capital (TSX: KBLT; US-OTC: CBLLF) for US$1-million cash and US$9 million in Cobalt 27 shares.
Giga Metals shares last traded at 22¢ per share, within a 52-week range of 14¢ to 90¢. The company has a $10-million market capitalization.
It seems odd that three of the projects are coal. Especially at a time when using coal for power is on the wane. I guess we’ll have to see if or when new coal mines get built.