Update on the Development of the Blötberget project
The Company's ongoing preliminary feasibility study has shown both significant improvements to the project and some remaining challenges. The improvements relate to the mineral resources and the possible concentrate production. The challenges relate to the annual ore extraction rate and mining costs due to the geometry and depth of the mineralization. One way to increase the annual production rate is to include additional deposits in the preliminary feasibility study, primarily from the Södra Väsman field. The technical study regarding the biproduct with phosphorus and rare earth elements indicates an opportunity to improve the profitability of Blötberget if such a biproduct would be included. As the financial results of the ongoing preliminary feasibility study are not yet considered sufficient, the Company has decided to extend and expand the preliminary feasibility study, which is now expected to be completed in the third quarter.
The exploration results included in the preliminary feasibility study indicate an increase in the mineral resources of about 20 million tons, from about 67 previously to about 87 million tons - a significant increase. The previously published target of increasing mineral resources by 35 million tons remains and the Company expects that this is likely to be achieved by including additional exploration results from drilling carried out during the autumn and early winter.
The changed mining method and the indicated increased mineral resources could, in a continued preliminary feasibility study, result in an increase in the mineral reserves (ore) by about 15 million tons, from about 34 to about 49 million tons. This in turn would lead to an increased production of ultra high-grade iron ore concentrate by about 8 million tons, from about 16 to about 24 million tons. While this is considered a significant increase, it could increase further with further increased mineral resources.
The preliminary feasibility study indicates that the changed mining method cannot increase the annual ore extraction rate to the desired extent. The increase appears to end up below 10%. Geotechnical work has shown that the mineralization consits of thinner lenses and veins than previously assumed, and that the surrounding rock requires more careful mining and more rock reinforcement. The limited ore extraction rate and the fact that the increased mineral resource has largely been identified at depth, means that mining cost per ton of ore has increased. It implies that profitability does not yet reach the levels deemed necessary to proceed to a definitive feasibility study and subsequent project financing.
One way to increase the annual production of ultra high-grade iron ore concentrate is to, in parallel, supply the process plant with ore from other nearby deposits. The closest deposit is the Södra Väsman field, where the Company has a mining concession and where promising mineral resources assessments and concept studies have previously been carried out. The Company's assessment is that it may be possible to make a significant contribution to the annual earnings and thus significantly improve the profitability through a study combining both Blötberget and the Södra Väsman field.
Furthermore, the technical study regarding a biproduct with phosphorus and rare earth elements has shown that such a biproduct, primarily an apatite concentrate, would be attractive on the market and the Company will be able to supply a strategic raw material for a more self-sufficient Europe, at the same time creating an opportunity to improve profitability if the biproduct is included in the project and the preliminary feasibility study.
As the financial results of the ongoing preliminary feasibility study do not yet reach the levels deemed necessary to proceed with a definitive feasibility study and subsequent project financing, the Company has decided that the preliminary feasibility study shall be expanded to include:
- exploration results from the Blötberget drilling, which will be completed in the first quarter of this year
- continued optimization studies and geotechnical studies of mining in Blötberget with the aim of reducing mining costs and reviewing the ore extraction rate
- the potential of the Southern Väsman field
- the business potential of a biproduct, preliminarily an apatite concentrate
The results of the extended preliminary feasibility study are expected to be presented in the third quarter. The Company remains committed to its vision of becoming a player in the market segment for ultra high-grade iron ore concentrates and is now adding apatite concentrate containing rare earth elements to the vision in order to generate strong long-term returns for our shareholders.