First Bauxite Corporation
TSX VENTURE : FBX
FRANKFURT : FBI
BERLIN : FBI

First Bauxite Corporation

June 18, 2015 17:51 ET

First Bauxite Corporation Announces Proppant Feasibility Study Results

TORONTO, ONTARIO--(Marketwired - June 18, 2015) - First Bauxite Corporation (TSX VENTURE:FBX)(FRANKFURT:FBI)(BERLIN:FBI) ("First Bauxite" or the "Company") is pleased to announce that it has completed a Feasibility Study ("FS") to produce ceramic proppants from First Bauxite's Bonasika bauxite project.

The FS has been prepared in accordance with NI 43‐101 standards by Ausenco Engineering Canada Inc. ("Ausenco") and the Mineral Resources and Reserves estimates by Moose Mountain Technical Services ("MMTS"). The ceramic proppant project anticipates:

  • Mining and beneficiation of raw bauxite ore taking place in Guyana;
  • Shipping beneficiated ore to Southern Louisiana, USA; and
  • Calcining and sintering of the beneficiated ore taking place in a proppants processing plant located in the USA.

FS Highlights

The key FS highlights are summarised in the table below:

Metric Result
Post Tax NPV (@ 10%) $165.3M
Post Tax IRR (100% equity) 17.6%
Probable Reserves 9.7Mt
Project Life (based on Probable Reserves) 29.5 years
Steady State Production 158,000mtpa
Total Initial Capital Costs $254M
Cash Operating Cost $331/mt
Ceramic Proppant Price (average) $827/mt
Revenue (annualised) $130.7M
EBITDA (annualised) $78.1M

"Completion of the FS is a significant milestone for the development of our Bonasika bauxite project" stated Alan Roughead, President and CEO of First Bauxite Corporation. "Following our strategic review last year, we have now demonstrated the feasibility to produce ceramic proppants to position the company to enter a market with greater growth potential than the refractory market that was targeted in previous feasibility studies."

Test Work and Design

The proppants processing plant has been designed to produce a range of ceramic proppant products to provide market flexibility and optimise utilisation of the mineral deposit. Plant capacity is based on a 158,000mtpa rotary kiln and conventional processing equipment.

As part of the development of the FS, a range of ceramic proppant products was produced from the Bonasika deposit in upscale testwork. Independent testing by recognised oil and gas industry testing laboratories indicated that:

  • the Company's intermediate strength proppant products would have:
    • superior strength
    • comparable conductivity
    • comparable specific gravity, sphericity and roundness

compared to the market leading intermediate strength products; and

  • the Company's specialised high strength and ultra high strength proppant products would have:
    • superior strength
    • superior conductivity and specific gravity
    • comparable sphericity and roundness

compared to the market leading high strength and ultra high strength products.

FBX believes these properties are derived from the unique nature of the Bonasika deposit in its naturally occurring state. As a result, production costs for proppant products derived from Bonasika ore are extremely competitive, particularly in the high strength and ultra high strength end of the market compared to current ceramic proppant producers, as performance enhancing high cost additives or specialised production methods are needed to achieve high strength properties.

Mineral Resources and Reserves

The Resource and Reserves are reported as Direct Feed Bauxite (DFB) and Regular Grade Bauxite (RGB).

The Bonasika 7 and 6 unwashed Indicated and Inferred Resources are summarised in the tables below. The Indicated Resource is inclusive of reserves, while the Inferred Resource is not included in the Reserves estimate. This represents an update to the 2010 Resource and incorporates the results of drilling since 2011. The resource model contains 495 drill holes for Bonasika 7 and 164 drill holes for Bonasika 6. Of this, 313 are new drill holes in Bonasika 7 and 18 new drill holes in Bonasika 6 which have been added to reduce the drill holes spacing to 60m x 60m. The new drilling also includes arrays of closely spaced drill holes (between 1m and 20m) to aid in the modelling of the variability in the bauxite grades.

The Resource model has been created using Ordinary Kriging (OK) within the product solid grade shells allowing for some mixing of grades within these products and at their contacts, based on expected mining selectivity within the bauxitic units.

Unwashed Indicated Mineral Resource Statement for the Bonasika 6 & 7 Deposits
Indicated Resources
Tonnage
('000 t)
Al2O3
(%)
SiO2
(%)
Fe2O3
(%)
TiO2
(%)
LOI
(%)
Bonasika 7
DFB 2,061 60.2 4.6 0.8 2.6 30.9
RGB 3,459 55.9 12.1 0.9 2.3 27.8
Sub‐total: DFB+RGB 5,520 57.5 9.3 0.8 2.5 29.0
Bonasika 6
DFB 2,061 61.2 4.3 0.9 2.3 30.7
RGB 3,055 57.1 11.2 0.8 2.2 28.1
Sub‐total: DFB+RGB 5,116 58.8 8.4 0.8 2.2 29.1
Unwashed Inferred Mineral Resource Statement for the Bonasika 6 & 7 Deposits
Inferred Resources
Tonnage
('000 t)
Al2O3
(%)
SiO2
(%)
Fe2O3
(%)
TiO2
(%)
LOI
(%)
Bonasika 7
DFB 0
RGB 64 58.1 8.6 0.8 2.0 29.7
Sub‐total: DFB+RGB 64 58.1 8.6 0.8 2.0 29.7
Bonasika 6
DFB 305 61.8 3.3 0.7 2.4 30.8
RGB 1,441 56.6 12.2 0.8 2.0 27.6
Sub‐total: DFB+RGB 1,746 57.5 10.6 0.8 2.1 28.2
* Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and therefore do not form part of the FS.

Mineral Reserves have been determined from the Indicated Resource with designed pits, mining parameters (recovery and dilution), economics and production scheduling applied. Reserves are reported for the Bonasika project inside economic pits with the following design parameters:

  • Overall slope angle - 26.6°
  • Bench Height - 6m (berms every 12m)
  • Haul Road width - 11.8 metres

Diluted grades and tonnes are reported. A mining loss of 0.3m on the top and 0.3m on the bottom of the bauxite horizon is accounted for. Reserves are reported as in‐situ RAW tonnes and represent dry tonnes of material delivered to the Sand Hills stockpiles.

Bonasika 7 In‐Situ Pit Reserves by Reserve Class
Bonasika 7 Diluted Grades
RAW Ore
('000 t)
Al2O3
(%)
SiO2
(%)
Fe2O3
(%)
TiO2
(%)
LOI
(%)
Waste
('000 t)

S/R
Probable DFB 1,874 60.20 4.58 0.75 2.63 30.9
Probable RGB 2,890 55.75 12.39 0.87 2.34 27.7
Total Probable 4,765 57.50 9.32 0.82 2.46 29.0 40,736 8.55
Bonasika 6 In‐Situ Pit Reserves by Reserve Class
Bonasika 6 Diluted Grades
RAW Ore
('000 t)
Al2O3
(%)
SiO2
(%)
Fe2O3
(%)
TiO2
(%)
LOI
(%)
Waste
('000 t)

S/R
Probable DFB 2,037 61.21 4.36 0.85 2.35 30.7
Probable RGB 2,912 57.13 11.15 0.84 2.16 28.1
Total Probable 4,949 58.81 8.35 0.84 2.24 29.2 65,179 13.17

Mine Production and Schedule

Mining commences in Bonasika 7, and a six month pre‐stripping period is required to achieve steady state production for the remaining mine life. Selective mining is done using 3.2m3 excavators loading 40 tonne haul trucks. Due to the soft nature of the material, drilling and blasting is not required. DFB/RGB boundaries are determined assay lab results collected by drilling ahead of mining as well as face samples. Ore is mined using selective mining techniques during day‐shift only and delivered either to the Sand Hills stockpiles or stored near the pit in pit area stockpiles based on the production requirements by material. Waste material is stored near the pit in external dumps. As pit phases are mined out and in‐pit storage becomes available, waste material is stored in backfill dumps to reduce haulage costs and minimize external surface disturbance areas. Mining is done on 12 hour day and night shifts over a 5‐day work week (Mon‐Fri) with weekends off. Rainy season and other weather related mining delays are handled by utilising overtime labour to work on the weekends.

A 25 year mine schedule is completed for Bonasika 7 and 6 pits. The Bonasika production schedule is built using the following targets:

  • 116,000mtpa raw DFB
  • 110,000mtpa raw RGB.

This is based on a 158,000mtpa processing operation in Louisiana and at this level of production Bonasika 7 and Bonasika 6 Reserves have a life of 29.5 years. Mining commences in Bonasika 7 pit and this pit is finished in Year 15. Mining starts in Bonasika 6 pit in Year 11. Based on the material requirements, RGB inventory from Bonasika 7 and 6 pits is not fully utilised. Once all of the DFB material is used (after 29.5 years), there is 1,357,000 tonnes of RGB material remaining in the pit area stockpiles.

Processing

Material processing to produce ceramic proppants occurs in two stages. The first stage is the preparation of the raw bauxite ore in Guyana at the Sand Hills property located approximately 27km from the Bonasika mine. The ore is then shipped to the processing plant facility located in Southern Louisiana USA for processing into the final proppant products in the second stage.

The Sand Hills facility is designed to prepare run‐of‐mine bauxite ore for shipment and includes stockpiling, crushing, drying, ore storage and ship loading.

The Louisiana processing plant is designed to process the raw bauxite into ceramic proppants. It is anticipated that initially three proppant products will be produced. However, the plant will be designed with enough flexibility to produce various grades and product sizing to match market requirements.

The Louisiana processing plant includes ore receiving, calcination, grinding, agglomeration, sintering, screening and product storage.

Economic Assumptions - Capital Costs

Initial capital costs including contingencies and working capital total $254.4M. The construction period is 15 months for the mining and beneficiation operation in Guyana and 27 months for the processing plant in USA. Sustaining capital over the first 25 years of production amounts to $64.6M.

Capital Category Capital Cost ($M)
Guyana
Direct Costs 31.6
Indirect Costs 11.1
Contingencies and Working Capital 5.2
Total Initial Guyana Capital Cost 47.9
USA
Direct Costs 134.7
Indirect Costs 44.4
Contingencies and Working Capital 27.4
Total Initial USA Capital Cost 206.5
Total Initial Capital Cost 254.4
Sustaining Capital (Over 25 Years) 64.6
Total Capital Cost 319.0

Economic Assumptions - Operating Costs

Cash operating costs average $331/mt once the plant is ramped up to steady state full capacity production of 158,000mtpa.

Cash Cost Category ($/mt) Finished Proppant Product
Guyana Mining and Beneficiation 76
Freight Guyana/USA 61
USA Processing 194
Total Cash Cost 331

Current spot prices have been used for key production inputs (gas, power, diesel, ocean freight, binders, additives and labour). Selling prices and input costs are held constant over the 25 year production period. Although the Reserves life is 29.5 years, the economic model has been limited to a 25 year production period.

Sensitivity Analysis

Variable -20% Base +20%
Initial Capital Costs
IRR (%) 21.0 17.6 15.1
NPV @ 10% ($M) 205.2 165.3 125.4
Operating Cost
IRR (%) 19.3 17.6 15.9
NPV @ 10% ($M) 204.1 165.3 126.7
Proppant Prices
IRR (%) 12.3 17.6 22.1
NPV @ 10% ($M) 44.2 165.3 284.5

Market

The Company commissioned Visiongain to complete a comprehensive study of the North and South American proppant market with a particular focus on the USA ceramic proppant market in the various onshore shale oil and gas plays and offshore Gulf of Mexico market. The study took into account the downturn in the oil and gas markets and the associated proppant market since mid 2014. Visiongain provided demand and price forecasts out until 2025. For the purposes of economic modelling current ceramic proppant spot prices were used in the financial model.

Environment and Permitting

The Company already has in place an Environmental Permit with the Guyana Environmental Protection Agency from previous feasibility study work. This will have to be renegotiated in due course with the Guyana Government to reflect the new project concept. However, the project now has a much smaller footprint in Guyana. Preliminary environmental work has been undertaken in Southern Louisiana including an Environmental Site Assessment conducted by AECOM on the proposed processing plant site.

Guyana Government

The Company committed to deliver a FS to the Government of Guyana by June 30, 2015 and has undertaken to initiate discussions to secure financing. The Company and the Government of Guyana will engage in discussions regarding the Mining License to accommodate the production of proppants from the resource in Guyana.

Next Steps

To advance the project the Company now plans to:

  • Initiate detailed engineering.
  • Undertake a bulk sample pit programme to confirm mining and processing assumptions and to produce large scale proppant samples for production tests in select oil and gas wells.
  • Enter into marketing and offtake discussions in targeted markets
  • Engage in discussions with financial institutions and strategic parties and shareholders regarding financing for the development and construction of the project.

Report Filing

A complete technical report prepared in accordance with National Instrument 43‐101 - Standards of Disclosure for Mineral Projects containing the FS will be filed on SEDAR www.sedar.com and the Company's website www.firstbauxite.com within 45 days.

Qualified Persons

Each of the qualified persons below has reviewed and approved the technical information contained in the FS and in this press release and are independent of the Company. The qualified persons are:

Kevin C. Scott, P. Eng., of Ausenco, is the qualified person responsible for the recovery methods, infrastructure, capital cost and operating cost estimates, and the overall preparation of the report.

Jesse Aarsen, P. Eng. and Sue Bird, P. Geo., of MMTS are the qualified persons responsible for the Reserve and Resource estimates respectively.

About First Bauxite

First Bauxite Corporation (TSX VENTURE:FBX) is a Canadian natural resource company engaged in the exploration and development of bauxite deposits in Guyana, South America. The Company has its head office in Toronto and is managed by experienced professionals with worldwide experience in the global industrial minerals industry across a number of industrial minerals. For further information on First Bauxite Corporation, please visit our corporate website at www.firstbauxite.com.

On behalf of the Board of Directors of First Bauxite Corporation

Alan Roughead, President and CEO

Cautionary Statement

Certain statements contained herein constitute "forward-looking statements". Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "anticipates", "designed to", "indicates", "schedule", "assumptions", "plans", "will", "potential", "believes", "intends" and similar expressions. These statements include, but are not limited to, statements regarding the ability of the Company to complete future financings for the project. These forward-looking statements are based on current expectations and entail various risks and uncertainties. Actual results may materially differ from expectations, if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Factors that could cause results or events to differ materially from current expectations expressed or implied by the forward-looking statements, include, but are not limited to, possible variations in mineral resource and reserve estimates, grades, proppant product prices, operating or capital costs; failure to complete marketing and offtake agreements; availability of sufficient financing to fund planned or further required work in a timely manner and on acceptable terms; changes in project parameters as plans continue to be refined; failure of equipment or processes to operate as anticipated or other unanticipated difficulties or interruptions; political, community relations, regulatory, environmental and other risks of the mining industry and other risks more fully described in the Company's most recent management's discussion and analysis available on SEDAR.
The Bonasika project has no operating history upon which to base estimates of future cash flow. The capital expenditures and time required to develop any new project is considerable and changes in capital and/or operating costs or construction schedules can affect project economics. It is possible that actual capital and/or operating costs, including spot prices for key production inputs, may increase significantly and economic returns may differ materially from the Company's estimates or that prices of proppant products may decrease significantly or that the Company could fail to obtain or maintain the satisfactory governmental approvals or support in Guyana and Louisiana necessary for the construction or operation of a project or obtain sufficient project financing on acceptable terms and conditions or at all, in which case, the project may not proceed either on its original timing or at all. It is not unusual in the mining industry for new mining operations to experience unexpected problems during the start-up phase, resulting in delays and requiring more capital than anticipated. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward looking statements, there may be other factors that cause results to be materially different from those planned, estimated, forecasted, projected or expected.. Readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. The mineral reserve and resource figures referred to herein are estimates only and no assurance can be given that the anticipated tonnages and grades will be achieved or that mineral reserves could be mined or processed profitably.
There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company's control. Such estimation is a subjective process, and the accuracy of any reserve or resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. In addition, there can be no assurance that proppant product properties in small scale laboratory tests will be duplicated in larger scale tests or during production. Lower market prices, increased production costs, reduced recovery rates and other factors may result in a revision of the Company's reserve estimates from time to time or may render its reserves uneconomic to exploit. Reserve data are not indicative of future results of operations. If the Company's actual mineral reserves and mineral resources are less than current estimates or if the Company fails to develop its resource base through the realization of identified mineralized potential, its results of operations or financial condition may be materially and adversely affected. Evaluation of reserves and resources occurs from time to time and they may change depending on further geological interpretation, drilling results and mineral prices. Mineral resources which are not mineral reserves do not have demonstrated economic viability. Until mineral reserves and resources are actually mined and processed, the quantity of mineral reserve and resource grades must be considered as estimates only.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information