ELK CREEK PROJECT

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The Elk Creek Project’s Projected Economics

According to a positive CIM-compliant National Instrument 43-101 Feasibility Study, completed in 2017, the Elk Creek Superalloy Materials Facility is forecast to deliver robust economic returns. You can review the full text of the Revised Technical Report in regard to the Project Feasibility Study here.  Highlights of the findings of the Feasibility Study are shown below.  Comparisons below are to the Company’s 2017 FS.  All currency figures in US $ unless otherwise noted. 

  • Pre-tax NPV (8% discount rate) increases by 12.0% to $2.57 billion, and after-tax Internal Rate of Return (“IRR”) improves to 25.8%, which is an 18.9% increase.
  • Gross revenue over Life of Mine (“LoM”) of $20.8 billion is 16.2% higher.
  • Cumulative revenue of $2.9 billion over the first 5 years of operation is 17.0% higher, and cumulative 10-year revenue of $5.8 billion is 9.2% higher.
  • Cumulative operating cash flow3 over the first 5 years of operation of $1.83 billion is higher by 23.6% and increases over the first 10 years of operation to $3.46 billion, a 12.9% increase.
  • Cumulative EBITDA2 over the first 5 years of operation of $1.9 billion is 16.5% higher, and cumulative EBITDA over 10 years of $3.8 billion is 6.4% higher.
  • Tonnage in the Project’s Probable Mineral Reserve has increased by 14.7%.  Tonnage in Indicated Mineral Resources has increased by 101.5%.
  • Contained Niobium, Scandium, and Titanium in the Project’s Indicated Mineral Resource have increased by 63.9%, 67.4%, and 67.6%, respectively.
  • Mine life has increased from 32 years to 36 years, and the after-tax payback period from the onset of production has been reduced to 2.86 years.
  • Environmental impacts and associated permitting risks are reduced further from the previous 2017 FS, including the utilization of artificial ground freezing technologies for mine shaft sinking, onsite water treatment that eliminates process water discharge, and the elimination of previous plans to discharge excess water into the Missouri River.

 

The mine design, 2019 FS update, and an update to the Project’s Mineral Resource and Mineral Reserve were completed by the Nordmin Group of Companies (“Nordmin”), with technical inputs from other experts.

 

 

 

2019 FS Summary Details

 

The 2019 FS financial model is based upon a mine life of 36 years with an annual steady state ore throughput rate of 1,009,000 metric tonnes (“mt”).  At this rate, the Elk Creek Project is estimated to generate $20.8 billion in gross LoM revenue and $370 million in averaged annual EBITDA3 over its operating life.  Below are some highlights of the 2019 FS findings.

 

Table 2
Elk Creek Project 2019 FS Highlights
(Currency in US$’ millions)

Description2017 FS2019 FSChange
Pre-Tax NPV (8% discount)$2,291$2,56412.0%
Pre-Tax IRR24.3%27.3%12.4%
After-Tax NPV$1,666$2,09825.9%
After-Tax IRR21.7%25.8%18.9%
After-tax payback period from production onset (yrs.)3.682.86-22.3%
Net pre-production CAPEX2$1,008$879-12.8%
Mine Life (yrs.)32.036.012.5%
Life of Mine (“LoM”) Gross Revenue$17,906$20,80716.2%
Niobium$5,695$7,86038.0%
Scandium$11,896$12,5325.4%
Titanium$316$41431.3%
Averaged Annual EBITDA3 over LoM$370$370
Averaged EBITDA Margin3
(EBITDA as % of total revenue)
69%67%-3.4%
LoM OPEX (US$/mt)$179.99$196.419.1%
Effective Tax Rate24.1%17.5%-27.3%

 

 

Table 3
Elk Creek Project Operational Summary

Description2017 FS2019 FSChange
Ore Mined (kt)31,66136,31314.7%
Mining Rate (mt/d)2,7622,7640.1%
Nb2O5 Grade0.79%0.81%2.3%
Scandium Grade (g/mt)71.5865.71-8.2%
TiO2 Grade2.81%2.86%1.9%
Processing Rate (kt/y)1,0091,009
Average Recovery, Nb2O582.4%82.4%
Average Recovery Sc93.1%93.1%
Average Recovery TiO240.3%40.3%
Realized Product Prices
Nb ($/kg Nb as Ferroniobium)$39.60$46.5517.5%
Sc2O3 ($/kg as Sc2O3)$3,675$3,6760.0%
TiO2 ($/kg as TiO2)$0.88$0.9912.4%
Payable Metal
Nb (mt)143,824168,86117.4%
Sc2O3 (mt)3,2373,4105.3%
TiO2 (mt)359,128418,84116.6%

 

 

Table 4
Life of Mine Operations and Financial Profile
Operating Year123456789102030
Production
Niobium (mt-Nb)4,9745,0954,9014,6594,6564,6514,4834,7014,6824,6624,6864,677
Scandium (mt-Sc2O3)1121091039596919710010410010088
Titanium (mt-TiO2)12,62912,55412,11711,78211,60312,11611,75311,56812,25912,00911,92012,041
Realized Pricing
Niobium ($/kg)$45.46$45.46$45.46$45.46$45.46$45.46$45.46$45.46$45.46$46.06$47.00$47.00
Scandium ($/kg)$3,985$3,486$2,988$3,086$3,186$3,384$3,584$3,734$3,735$3,750$3,750$3,750
Titanium ($/kg)$0.99$0.99$0.99$0.99$0.99$0.99$0.99$0.99$0.99$0.99$0.99$0.99
Gross Revenues ($M)$685$622$544$518$529$533$562$598$614$601$608$562
Total OPEX ($M)($201)($196)($197)($198)($199)($191)($199)($196)($207)($206)($204)($193)
EBITDA ($M)$484$427$347$320$330$342$363$402$406$395$404$368
EBITDA Margin71%69%64%62%62%64%65%67%66%66%66%66%
Operating Cash Flow ($M)$484$427$335$289$294$299$310$341$346$338$322$291
EBT ($M)$224$207$161$151$179$216$255$292$293$281$290$268
Net Income ($M)$224$207$149$120$142$173$202$232$233$223$207$191
Net Income Margin33%33%27%23%27%32%36%39%38%37%34%34%

 

 

Production Profile and Gross Revenue

 

When in operation, the Project is expected to be the sole producer of Scandium oxide and a commercial version of Niobium, known as Ferroniobium, in the U.S., and one of only a handful of producers in the world of these critical and strategic materials.  The 2019 FS assumes a 10-month commissioning and ramp up period to the facility’s nameplate production capacity from first ore, while the 2017 FS assumed a nine-month period for the same activity.  Estimated production and revenues in the 2019 FS are as follows:

 

 

 

Table 5
2019 FS Production Summary

Average Annual Production Over Run of Mine5
DescriptionTonnes/YearRevenue/Year
($ millions)
Ferroniobium7,220$219
Scandium Trioxide95$348
Titanium Dioxide11,642$12
Life of Mine Revenue Breakdown6
DescriptionRevenue
($millions)
Proportion of Revenue
Ferroniobium$7,86037.8%
Scandium Trioxide$12,53260.2%
Titanium Dioxide$4142.0%
TOTAL$20,807100%

Note:  Totals may not sum due to rounding.

 

 

Increased Revenue From Niobium

 

In the 2019 FS mine plan, Niobium production generates more revenue as a percentage of total revenue than in the 2017 FS, as shown in Figure 6 below.  This result is driven by the updated mine plan’s targeting of higher niobium grades in the early years of mining operations and because commodity pricing for Niobium has increased since the issuance of the 2017 FS.

 

 

 

 

Improved Environmental Performance

 

The new mine plan further reinforces the environmental performance of the Elk Creek Project.  Together with previously disclosed environmental and process innovations incorporated in the 2017 FS, the Project now incorporates these following strategies and technologies designed to minimize environmental impacts of operation:

 

— Zero Process Liquid Discharge:  The Elk Creek facility will now operate as a Zero Process Liquid Discharge facility, with no releases of process liquids.  Instead, both naturally occurring, brackish (slightly salty) water produced during mining operations, and water used in ore processing, will be treated onsite for use in operations.  A solid salt will be produced from water treatment operations which will be stored onsite.

— No Wastewater Discharge to the Missouri River:  By treating water onsite, the Project no longer intends to transport water for discharge into the Missouri River.  This will release the Project from having to obtain a specific NPDES water quality discharge permit from the State of Nebraska, as well as an additional Section 404 permit, and a Section 408 permit, from the U.S. Army Corps of Engineers.  The Section 408 permit would have required completion of an Environmental Assessment study, a process that is governed by the National Environmental Policy Act (“NEPA”) and involves review by multiple federal government agencies.

— Additional Protection of Groundwater Resources Through Artificial Ground Freezing:  The Project’s new mine plan will utilize artificial ground freezing as part of the process of sinking the Project’s production and ventilation shafts.  Artificial ground freezing creates a temporary frozen barrier that helps to protect groundwater resources in the area while shaft-sinking operations are underway.

— Avoidance of Permanent Impacts to Federally Jurisdictional Waters:  NioCorp designed the layout of the Elk Creek Project to minimize or avoid permanent impacts to any federally jurisdictional waters and/or wetlands on the property.  This reduced the Project’s expected environmental impacts and allowed the Project to secure a Clean Water Act Section 404 permit from the U.S. Army Corps of Engineers under the Nationwide Permit program, a much more efficient and less expensive process than an individual Section 404 permit.  No other NEPA-level federal permits are now expected to be required for the Project.

— Recycling of Reagents Used in Mineral Processing:  Metallurgical and process breakthroughs that NioCorp accomplished in 2016 and 2017 (see this previous announcement) are expected to help reduce the volume of material planned for disposal in the Project’s tailings storage areas.  As more of this material is recycled, the environmental footprint of the Project is reduced.

— Utilizing Tailings as Underground Mine Backfill:  NioCorp plans to fill underground voids concurrently with mining operations using a paste backfill material that contains mine waste material that typically would be stored in above-ground mine tailings storage areas.

 

 

 

Capital Expenditures (“CAPEX”)

 

As detailed in Table 6 below, the net pre-production CAPEX is $879 million, which includes a contingency of 10.33%6 and a pre-production net revenue credit of $265 million, which is generated during a six-month production ramp-up period (versus a three-month ramp-up in the 2017 FS) and is net of pre-production capital and operational costs.  Total upfront CAPEX for the Project is $1.14 billion, a 5.1% increase over the 2017 FS and which reflects the following:  additional and larger water treatment equipment; higher costs due to inflation between 2017 and 2019; replacing a ventilation raise system with a ventilation shaft sinking method using proven artificial ground freezing methods to mitigate water inflow risks for this requirement; and higher capital costs incurred by initially mining at greater depths where ore grades are higher.

 

Table 6
2019 FS CAPEX Breakdown

(US $millions)2017 FS2019 FS Change
Direct Costs
Preproduction CAPEX$71$8316.2%
Mining CAPEX$179$25744%
Processing CAPEX (excluding water treatment)$343$3677.1%
Water management CAPEX7$100$6-94%
Water Treatment8$24$68180%
Tailings$20.2$21.46.1%
Site prep$30.6$40.62.6%
Indirect Expenses
Mining$21.9$23.78.1%
Mining EPC$12.3$16.030%
Processing$34.1$33.4-1.8%
Processing EPC$64.5$62.6-2.9%
Site$7.2$7.42.7%
Water management9$10.8$8.5-20.8%
Owners Costs$38.4$33.6-12.4%
Commissioning
Mining$0.7$1.4102%
Processing$13.0$13.32.7%
Contingency$109$101-7.3%
Sub Total$1,088$1,1435.1%
Net Pre-Production Revenue($79)($265)234%
TOTAL$1,008$879-12.9%

 

 

 

 

Operating Expenditures (“OPEX”)

 

Operating expenditures over the life of mine in the 2019 FS are higher than the 2017 FS as a result of several factors, including but not limited to the following:  (1) NioCorp intends to use a contract mining model as opposed to self-perform mining operations;  (2) prices for some consumables used in surface processing facilities are higher than quotes received in 2017; and (3) water management costs for the Project are higher as a result of the more intensive water treatment and related operations outlined in the 2019 FS.

 

Table 7
OPEX Summary

 2017 FS2019 FS
 LoM Costs
($millions)
Cost / TonneLoM Costs
($millions)
Cost / Tonne
LoM Operating Costs
Mining Costs$1,244$39.30$1,563$43.04
Processing Costs$3,285$103.77$3,875$106.70
Water Management & Infra$251$7.92$609$16.78
Tailings Management$46$1.44$72$1.99
Other Infrastructure$212$6.68$199$5.47
G&A$268$8.47$301$8.29
Other Expenses$136$4.31$229$6.30
Subtotal OPEX$5,442$171.89$6,847$188.56
Royalties/Annual Bond Premium$257$8.10$285$7.84
Total All-In OPEX$5,699$179.99$7,132$196.41

 

 

 

 

Financial Performance

 

The financial performance and valuation of the Project were conducted using a discounted cash flow (DCF) methodology over its 36-year mine life and an 8% discount rate.  The 2019 FS projects a pre-tax NPV of $2.57 billion and an after-tax IRR of 25.8%.  Gross revenue is $20.8 billion.

 

 

 

Figure 11 below shows the total cumulative net cash flow (after tax) over the 36 modeled life of mine.  Total cumulative net cash flow, after tax, is $9.8 billion.  Figure 12 below shows the initial capital spend over the first 44 months of the Project.

 

 

 

 

Sensitivity Analysis

 

A sensitivity analysis was conducted as part of the 2019 FS to determine the effect of key variables at a plus-or-minus 30% on the Project’s base case of pre-tax NPV of $2.57 billion and IRR of 27.3% and a base case of after-tax NPV of $2.10 billion and IRR of 25.8%.  The results of this analysis are shown below in Tables 8 and 9.

 

Table 8
Pre-Tax NPV & IRR Sensitivity Analysis ($B)

Pre-Tax-NPV-30%-25%-20%-15%-10%-5%Base5%10%15%20%25%30%
Nb Price$1,947$2,050$2,153$2,256$2,359$2,462$2,564$2,667$2,770$2,873$2,976$3,079$3,182
Sc2O3 Price$1,560$1,728$1,895$2,062$2,230$2,397$2,564$2,732$2,899$3,066$3,234$3,401$3,568
TiO2 Price$2,531$2,537$2,542$2,548$2,553$2,559$2,564$2,570$2,575$2,581$2,586$2,592$2,597
Operating Costs$3,086$2,999$2,912$2,825$2,738$2,651$2,564$2,478$2,391$2,304$2,217$2,130$2,043
Capital Costs$2,913$2,855$2,797$2,739$2,681$2,622$2,564$2,506$2,448$2,390$2,332$2,274$2,216
 
Pre-Tax IRR-30%-25%-20%-15%-10%-5%Base5%10%15%20%25%30%
Nb Price23.2%23.9%24.6%25.3%26.0%26.7%27.3%28.0%28.7%29.3%30.0%30.7%31.3%
Sc2O3 Price20.3%21.5%22.7%23.9%25.1%26.2%27.3%28.5%29.6%30.7%31.8%32.8%33.9%
TiO2 Price27.1%27.2%27.2%27.2%27.3%27.3%27.3%27.4%27.4%27.5%27.5%27.5%27.6%
Operating Costs30.6%30.1%29.6%29.0%28.5%27.9%27.3%26.8%26.2%25.6%25.1%24.5%23.9%
Capital Costs37.7%35.5%33.5%31.7%30.1%28.7%27.3%26.1%25.0%24.0%23.0%22.2%21.3%

 

 

Table 9
After-Tax NPV & IRR Sensitivity Analysis ($B)

After Tax NPV-30%-25%-20%-15%-10%-5%Base5%10%15%20%25%30%
Nb Price$1,594$1,678$1,763$1,847$1,932$2,016$2,098$2,180$2,262$2,343$2,425$2,506$2,588
Sc2O3 Price$1,292$1,427$1,562$1,697$1,832$1,966$2,098$2,228$2,357$2,486$2,615$2,744$2,872
TiO2 Price$2,072$2,076$2,081$2,085$2,089$2,094$2,098$2,103$2,107$2,111$2,116$2,120$2,124
Operating Costs$2,480$2,417$2,353$2,290$2,226$2,162$2,098$2,034$1,967$1,900$1,833$1,767$1,699
Capital Costs$2,446$2,388$2,330$2,272$2,214$2,156$2,098$2,040$1,982$1,924$1,866$1,808$1,750
 
After Tax IRR-30%-25%-20%-15%-10%-5%Base5%10%15%20%25%30%
Nb Price21.9%22.6%23.3%23.9%24.6%25.2%25.8%26.4%27.0%27.6%28.2%28.8%29.4%
Sc2O3 Price19.3%20.5%21.6%22.7%23.7%24.8%25.8%26.8%27.8%28.8%29.8%30.7%31.7%
TiO2 Price25.6%25.6%25.7%25.7%25.7%25.8%25.8%25.8%25.9%25.9%25.9%26.0%26.0%
Operating Costs28.7%28.2%27.7%27.3%26.8%26.3%25.8%25.3%24.8%24.3%23.8%23.3%22.8%
Capital Costs36.3%34.1%32.1%30.3%28.6%27.2%25.8%24.6%23.5%22.4%21.5%20.6%19.8%

 

 

Mineral Resource Estimate Update

 

A component of the 2019 FS update included an update to the Project’s Mineral Resource and Mineral Reserve, with the results shown below.

 

Table 10
February 19, 2019 Mineral Resource Summary

ClassificationCut-off NSR
(DIL)(US$/mt)
Tonnage
(x1000 mt)
Nb2O5
Grade

(%)
Contained
Nb2O5
(mt)
TiO2
Grade
(%)
Contained TiO2
(mt)
Sc Grade
(ppm)
Contained Sc
(mt)
Indicated180183,1850.54981,0922.153,940,41957.6510,562
Inferred180103,9920.48498,8641.811,886,18147.384,928

Source: Nordmin, 2019.  All figures are rounded to reflect the relative accuracy of the estimates.  Totals may not sum due to rounding.

  • Mineral resources are reported inclusive of the mineral reserve. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, Nordmin does not consider them to be material.
  • The reporting standard adopted for the reporting of the MRE uses the terminology, definitions and guidelines given in the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Standards on Mineral Resources and Mineral Reserves (May 10, 2014) as required by NI 43-101.
  • CIM definition standards for mineral resources and mineral reserves (May 2014) defines a mineral resource as:
    • “(A) concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge”.
  • Historical samples have been validated via re-assay programs, and all drilling completed by NioCorp has been subjected to QA/QC. All composites have been capped and then composited where appropriate, and estimates completed used ordinary kriging. The concession is wholly owned by and exploration is operated by NioCorp Developments Ltd.
  • The project is amenable to underground longhole open stoping mining methods. Using results from metallurgical test work, suitable underground mining and processing costs, and forecast product pricing Nordmin has reported the mineral resource at an NSR cut-off of US$180/mt.
  • Economic Assumptions Used to Define Mineral resource Cut-off Value:

Diluted NSR (US$) = Revenue per block Nb2O5 (diluted) + Revenue per block TiO2 (diluted) + Revenue per block Sc (diluted)
Diluted tonnes per block

  • Price assumptions for FeNb, Sc2O3, and TiO2 are based upon independent market analyses for each product.
  • Price and cost assumptions are based on the pricing of products at the “mine-gate”, with no additional down-stream costs required. The assumed products are a ferroniobium product (metallic alloy shots 0.65NbŸ0.35% Fe), a titanium dioxide product in powder form, and scandium trioxide in powder form.
  • The “reasonable prospects for economic extraction” requirement generally implies that the quantity and grade estimates meet certain economic thresholds and that the mineral resources are reported at an appropriate Cut-off Grade (“CoG”), considering extraction scenarios and processing recoveries. Based on this requirement, Nordmin considers that major portions of the project are amenable for underground extraction with a processing method to recover FeNb (as the saleable product of Nb2O5), TiO2, and Sc2O3 products.
  • The result of positive indications from the company’s metallurgical testing and development program, titanium (TiO2) and scandium (Sc) were added to the mineral resource Statement in February 2015. Both metals can be recovered with simple additions to the existing process flowsheet and would provide additional revenue streams that would complement the planned production of ferroniobium.
  • Nordmin has provided reasonable estimates of the expected costs based on the knowledge of the style of mining (underground) and potential processing methods (by 3rd party Qualified Persons).
  • Mineral Resource effective date February 19, 2019.
  • Nordmin completed a site inspection of the deposit by Glen Kuntz, BSc, P.Geo., Consulting Specialist – Geology/Mining, an appropriate “independent qualified person” as this term is defined in NI 43-101.

 

 

Mineral Reserve Estimate Update

 

An update to the Project’s Mineral Reserve was conducted, and the results are shown below.

 

Table 11
February 19, 2019 Mineral Reserve Summary

ClassificationTonnage
(x1000
mt)
Nb2O5
Grade
(%)
Contained
Nb2O5

(mt)
Payable
Nb

(mt)
TiO2
Grade
(%)
Contained
TiO2

(mt)
Payable
TiO2

(mt)
Sc
Grade
(ppm)
Contained
Sc

(mt)
Payable
Sc2O3

(mt)
Proven          
Probable36,3130.81293,321168,8612.861,039,050418,84165.72,3873,410
Total Proven and Probable36,3130.81293,321168,8612.861,039,050418,84165.72,3873,410

Source: Nordmin, 2019.  All figures are rounded to reflect the relative accuracy of the estimates.  Totals may not sum due to rounding.

  • Nordmin has reported the mineral reserve based on the mine design, mine plan, and cash-flow model utilizing an average cut-off grade of 0.788% NB205 with an NSR of $500/mt.
  • Nordmin considers that the mineral reserve is amenable for underground extraction with a processing method to recover FeNb (as the saleable product of Nb2O5), TiO2, and Sc2O3products.
  • The economic assumptions used to define Mineral Reserve cut-off grade are as follows:
    • Annual life of mine (LoM) production rate of ~7,220 tonnes of FeNb/annum,
      • Initial elevated five-year production rate ~ 7,351 tonnes of FeNb/annum
    • Mining dilution of ~6% was applied to all stopes and development, based on 3% for the primary stopes, 9% for the secondary stopes, and 5% for ore development.
    • Mining recoveries of 95% were applied.
    • Price assumptions for FeNb, Sc2O3, and TiO2 are based upon independent market analyses for each product.
    • Price and cost assumptions are based on the pricing of products at the “mine-gate”, with no additional down-stream costs required. The assumed products are a ferroniobium product (metallic alloy shots 0.65NbŸ0.35% Fe), a titanium dioxide product in powder form, and scandium trioxide in powder form.
  • The mineral reserve has an average LoM NSR of $538.63 /tonne.
  • Nordmin has provided detailed estimates of the expected costs based on the knowledge of the style of mining (underground) and potential processing methods (by 3rd party Qualified Persons).
  • Mineral Reserve effective date February 19, 2019.  The financial model was run post-February 2019, which reflects a total cost of $196.41 (Table 7) versus $189.91 (February 19, 2019 Mineral Reserve Details Table above).  Nordmin does not consider this a material change.
  • Price variances for commodities is based on updated independent market studies versus earlier projected pricing.  The updated independent market studies do not have a negative effect on the reserve.
  • Nordmin completed a site inspection of the deposit by Jean- Francois St-Onge, P.Eng, Associate Consulting Specialist – Mining, an appropriate “independent qualified person” as this term is defined in NI 43-101.

 

 

Technical Disclosure

 

The technical information in this news release and the forthcoming FS update has been reviewed and approved by Mr. Chris Dougherty, P.Eng, Consulting Specialist and Chairman (Nordmin Group of Companies), Mr. Gregory Menard, P.Eng., CET, PMP, Senior Mechanical Engineer (Nordmin Engineering Ltd.) and Mr. Glen Kuntz, P.Geo., Consulting Specialist – Geology/Mining  (Nordmin Engineering Ltd.), and Mr. Joshua Sames, B.S., PE, Senior Consultant (SRK Consulting), Mr. David Winters, PE, SE, MBA, Senior Consultant (TetraTech), each of whom is a “qualified person” under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI-43-101”).

The Mineral Resource and Reserve Estimates were completed by Mr. Glen Kuntz, P. Geo, Consulting Specialist – Geology/Mining (Nordmin Engineering Ltd.) and Mr. Jean- Francois St-Onge, P.Eng, Associate Consulting Specialist – Mining and Vice President (Optimize Group Inc.).  Both are independent Qualified Persons in accordance with the requirements of National Instrument (NI) 43-101 and they have approved the disclosure herein.

All other technical information in this news release has been approved by the following Qualified Professionals:  Mr. Adrian Brown, PE, Consultant (Adrian Brown Consultants); Mr. Joshua Sames, B.S., PE, Senior Consultant (SRK Consulting); Mr. John Tinucci, PhD, PE, Principal Geotechnical Engineer (SRK Consulting); Mr. Mark Willow, M.Sc, C.E.M., SME-RM, Principal Environmental Scientist (SRK Consulting); Mr. Chris Dougherty, P.Eng, Consulting Specialist and Chairman (Nordmin Group of Companies); Mr. Gregory Menard, P.Eng., CET, PMP, Senior Mechanical Engineer (Nordmin Engineering Ltd.); Mr. Eric Larochelle, B.Eng., President (Specialty Metals & Hydrometallurgy); Mr. David Winters, PE, SE, MBA, Senior Consultant  (TetraTech); Mr. Sylvain Harton, P.Eng., President (Metallurgy Concept Solutions); and Mr. Orest Romaniuk, P.Eng, Senior Engineer (Zachry Group).

The relevant qualified persons have reviewed and verified the data disclosed, including sampling, analytical and test data underlying the information contained in the disclosure.

 

Footnotes

 

1  See endnote regarding Mineral Reserve and Mineral Resource.

2  Net pre-production CAPEX includes a 10.33% contingency and a pre-production net credit of $265 million for revenue generated during the six-month production ramp-up period minus pre-production capital and operational costs.

3  See endnotes for discussion of the use of non-GAAP financial measures.

4  Source: U.S. Department of Labor, Bureau of Labor Statistics, March 2019 data.

5  “Run of Mine,” or ROM, is defined as the period of time during which the mine is fully operational and excludes the periods of time when the mine is conducting its initial production ramp or is ramping down to closure.  “Life of Mine,” or LOM, encompasses the entire expected operational life of the mine, including ramp-up and ramp-down production periods.

6  Project contingency percentage is calculated on all features of the project excluding the water treatment plant, which is quoted on a design-build-operate basis and incorporates its own contingency.

7  Water management CAPEX of $100 million in the 2017 FS were primarily attributable to the cost of constructing the then-planned waterline to the Missouri River and costs associated with pre-production dewatering wells and hydrogeological investigations. 2019 water management CAPEX encompasses hydrogeological investigations.

8  Water treatment includes direct costs of the Project’s water treatment systems.

9  Indirect expenses for water management in the 2017 FS included hydrogeologic investigations and installation and testing of prototype water pumping wells.  In the 2019 FS, these costs encompass the indirect costs of building the Project’s water treatment facility.

 

Endnotes

 

Non-GAAP Financial Measures:  This news release includes certain forward-looking non-GAAP financial measures, including EBITDA and Free Cash Flow. These non-GAAP financial measures are included in this news release because these statistics are key performance measures that management uses to monitor performance, to assess how the Company is performing, to plan and to assess the overall effectiveness and efficiency of operations. These performance measures do not have a standard meaning within GAAP and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with GAAP.  Reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and the financial impact of such items impacting comparability and the periods in which such items may be recognized. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

 

SEC Standards Regarding Mineral Resources and Reserves.  Estimates of mineralization and other technical information included or referenced in this news release have been prepared in accordance with NI 43-101. The definitions of proven and probable mineral reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. As a result, the reserves reported by the Company in accordance with NI 43-101 may not qualify as “reserves” under SEC standards. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities laws, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Additionally, the disclosure of “contained pounds” in a resource

is permitted disclosure under Canadian securities laws; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measurements. Accordingly, information contained or referenced in this news release containing descriptions of the Company’s mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of United States federal securities laws and the rules and regulations thereunder.

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