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CONTINENTAL NICKEL LIMITED
TECHNICAL REPORT ON THENTAKA HILL NICKEL PROJECT,LINDI AND
MTWARA REGIONS,TANZANIA
NI 43-101 Report
Qualified Persons:Jason Cox, P.Eng.Peter Munro, FAusIMMChester
Moore, P.Eng.Marc Lavigne, Eng., M.Sc.Christopher Waller,
MAusIMM(CP)
October 28, 2011
ROSCOE POSTLE ASSOCIATES INC.
-
Report Control Form Document Title Technical Report on the Ntaka
Hill Nickel Project, Lindi and
Mtwara Regions,Tanzania
Client Name & Address
Continental Nickel Limited 114 Lakeshore Road East, Suite 202
Oakville, Ontario L6J 6N2
Document Reference
Project #1773
Status & Issue No.
Version
0
Issue Date October 28, 2011 Lead Author Jason Cox, P.Eng.
Peter Munro, FAusIMM Chester Moore, P.Eng. Marc Lavigne, Eng.,
M.Sc. Christopher Waller, MAusIMM(CP)
Signed “Jason Cox” Signed “Peter Munro” Signed “Chester Moore”
Signed “Marc Lavigne” Signed “Christopher Waller”
Peer Reviewer Deborah McCombe, P.Geo. Signed “Deborah
McCombe”
Project Manager Approval Marc Lavigne, Eng., M.Sc.
Signed “Marc Lavigne”
Project Director Approval Jason Cox, P.Eng.
Signed “Jason Cox”
Report Distribution Name No. of Copies Client RPA Filing 1
(project box)
Roscoe Postle Associates Inc.
55 University Avenue, Suite 501 Toronto, Ontario M5J 2H7
Canada Tel: +1 416 947 0907
Fax: +1 416 947 0395 [email protected]
mailto:[email protected]
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page i
TABLE OF CONTENTS PAGE
1 SUMMARY
................................................................................................................
1-1 Executive Summary
................................................................................................
1-1 Technical Summary
..............................................................................................
1-13
2 INTRODUCTION
.......................................................................................................
2-1
3 RELIANCE ON OTHER EXPERTS
...........................................................................
3-1
4 PROPERTY DESCRIPTION AND LOCATION
.......................................................... 4-1
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY
........................................................................................................
5-1
6 HISTORY
..................................................................................................................
6-1
7 GEOLOGICAL SETTING AND MINERALIZATION
................................................... 7-1 Regional
Geology
...................................................................................................
7-1 Local and Property Geology
...................................................................................
7-3 Ntaka Hill Area Geology
.........................................................................................
7-5 Structural Geology
..................................................................................................
7-8 Mineralization
.........................................................................................................
7-9
8 DEPOSIT TYPES
......................................................................................................
8-1
9 EXPLORATION
.........................................................................................................
9-1 Ntaka Hill Area
.......................................................................................................
9-2 Regional Exploration
..............................................................................................
9-5
10 DRILLING
..............................................................................................................
10-1 Drilling and Logging Procedures
...........................................................................
10-2 Summary of Results
.............................................................................................
10-4 Current Drilling Program and Results
.................................................................
10-23
11 SAMPLE PREPARATION, ANALYSES AND SECURITY
..................................... 11-1 Sampling Method and
Approach
...........................................................................
11-1 Specific Gravity Measurements
............................................................................
11-1 Sampling Procedures
...........................................................................................
11-2
12 DATA VERIFICATION
...........................................................................................
12-1 Independent Sampling by RPA
.............................................................................
12-2
13 MINERAL PROCESSING AND METALLURGICAL TESTING
............................... 13-1 Sample
Selection..................................................................................................
13-1 Mineralogy
............................................................................................................
13-1 Comminution Testing
............................................................................................
13-5 Flotation Testing
...................................................................................................
13-5 Flowsheet Design
.................................................................................................
13-8 Recovery and Concentrate Grade Estimates
........................................................ 13-8
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
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14 MINERAL RESOURCE ESTIMATE
.......................................................................
14-1
15 MINERAL RESERVE ESTIMATE
........................................................................
15-31
16 MINING METHODS
..............................................................................................
16-1 Mining Studies
......................................................................................................
16-1 Mine Design
.........................................................................................................
16-5 Production Quantities
.........................................................................................
16-12 Geotechnical Assessment
..................................................................................
16-16 Hydrogeology And Hydrology Assessment
......................................................... 16-16
Seismicity
...........................................................................................................
16-16
17 RECOVERY METHODS
.......................................................................................
17-1 Process Plant Design
...........................................................................................
17-1 Process Plant Description
.....................................................................................
17-5 Flotation
.............................................................................................................
17-10 Sampling
............................................................................................................
17-12 Concentrate Thickening
......................................................................................
17-13 Concentrate Filtration
.........................................................................................
17-13 Services and Utilities
..........................................................................................
17-15 Tailings Disposal
................................................................................................
17-18
18 PROJECT INFRASTRUCTURE
............................................................................
18-1 Utilities and Services
............................................................................................
18-1 Project Infrastructure
............................................................................................
18-2
19 MARKET STUDIES AND
CONTRACTS................................................................
19-1 Markets
................................................................................................................
19-1 Metal Pricing
.........................................................................................................
19-5 Indicative Concentrate Terms
...............................................................................
19-6 Concentrate Transport and Logistics
....................................................................
19-7
20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY
IMPACT
.....................................................................................................................
20-1
21 CAPITAL AND OPERATING COSTS
....................................................................
21-1 Capital Cost Estimates
.........................................................................................
21-1 Operating Cost Estimates
.....................................................................................
21-7
22 ECONOMIC ANALYSIS
........................................................................................
22-1 Alternate Scenarios
..............................................................................................
22-7
23 ADJACENT PROPERTIES
...................................................................................
23-1
24 OTHER RELEVANT DATA AND INFORMATION
................................................. 24-1 Project
Execution..................................................................................................
24-1 Risks and
Opportunities........................................................................................
24-5
25 INTERPRETATION AND CONCLUSIONS
............................................................
25-1
26 RECOMMENDATIONS
.........................................................................................
26-1
27 REFERENCES
......................................................................................................
27-1
28 DATE AND SIGNATURE PAGE
............................................................................
28-1
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Report NI 43-101 – October 28, 2011
Rev. 0 Page iii
29 CERTIFICATE OF QUALIFIED PERSON
.............................................................
29-1
LIST OF TABLES PAGE
Table 1-1 Cash Flow Summary – Base Case Open Pit Scenario
............................... 1-4 Table 1-2 Sensitivity Analyses
....................................................................................
1-6 Table 1-3 Mineral Resources – April 2011
................................................................
1-10 Table 1-4 Proposed Development Plan and Budget
................................................. 1-13 Table 1-5
Mineral Resources – April 2011
................................................................
1-19 Table 1-6 Production Schedules
...............................................................................
1-27 Table 1-7 Summary Flotation Test Results
...............................................................
1-29 Table 1-8 Predicted Metallurgical Performance
........................................................ 1-31 Table
1-9 Indicative Smelter Terms
..........................................................................
1-41 Table 1-10 Base Case Open Pit Scenario - Capital Cost Summary
.......................... 1-42 Table 1-11 Unit Operating Costs
..............................................................................
1-42 Table 1-12 Key Risks Identified and Mitigating Strategies
........................................ 1-46 Table 1-13
Opportunities and Development Strategies
............................................ 1-48 Table 4-1
Prospecting Licences Summary (October, 2011)
........................................ 4-5 Table 4-2 Annual Rents
and Expenditures
.................................................................
4-7 Table 6-1 Summary of 2006 Drill Results - IMX Resources
........................................ 6-5 Table 8-1 Geological
Attributes of the Thompson Nickel Belt and the Nachingwea Area
.....................................................................................................................................
8-3 Table 9-1 2007–2010 Exploration Summary
............................................................... 9-2
Table 9-2 Results from Other Targets in the Ntaka Hill Area
...................................... 9-3 Table 9-3 Drill Results
from the Lionja Target Area
................................................... 9-9 Table 10-1
Drilling Summary
....................................................................................
10-1 Table 10-2 Selected Assays – G Zone
.....................................................................
10-5 Table 10-3 Selected Assays – H Zone
.....................................................................
10-8 Table 10-4 Selected Assays – J Zone
....................................................................
10-11 Table 10-5 Selected Assays – L Zone
....................................................................
10-15 Table 10-6 Selected Assays – M Zone
...................................................................
10-17 Table 10-7 Selected Assays – NAD013 Zone
......................................................... 10-18
Table 10-8 Selected Assays – Sleeping Giant Zone
............................................... 10-21 Table 10-9
Results from 2011 Sleeping Giant Drilling
............................................ 10-24 Table 11-1 QA/QC
Statistics
....................................................................................
11-4 Table 12-1 2010 Independent Surface Samples
....................................................... 12-3 Table
13-1 Mineral Composition of Samples for Metallurgical Testing
...................... 13-4 Table 13-2 Summary Flotation Test
Results
............................................................. 13-6
Table 13-3 Predicted Metallurgical Performance
...................................................... 13-9 Table
14-1 Mineral Resources – April 2011
.............................................................. 14-1
Table 14-2 Uncut Assay Statistics by Deposit
.......................................................... 14-3
Table 14-3 Capping Levels by Deposit
.....................................................................
14-6 Table 14-4 Capped Assay Statistics by Deposit
....................................................... 14-8 Table
14-5 Composite Statistics by Deposit
............................................................. 14-9
Table 14-6 Variogram Parameters
.........................................................................
14-11 Table 14-7 Search Parameters
...............................................................................
14-12 Table 14-8 NSR Parameters
..................................................................................
14-13
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
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Table 14-9 G Zone Mineral Resources – April 2011
............................................... 14-22 Table 14-10 H
Zone Mineral Resources – April 2011
............................................. 14-23 Table 14-11 J
Zone Mineral Resources - April 2011
............................................... 14-24 Table 14-12 L
Zone Mineral Resources – April 2011
.............................................. 14-25 Table 14-13 M
Zone Mineral Resources – April 2011
............................................. 14-26 Table 14-14
NAD013 Zone Mineral Resources – April 2011
.................................. 14-27 Table 14-15 Sleeping Giant
Mineral Resources – April 2011 ..................................
14-28 Table 14-16 Block Model Comparison
....................................................................
14-29 Table 16-1 Lateral Development
..............................................................................
16-8 Table 16-2 Vertical development
..............................................................................
16-8 Table 16-3 Open Pit Mining Fleet at 2.5 MTPA ore
................................................ 16-12 Table 16-4
Production Schedules
...........................................................................
16-15 Table 17-1 Summary of the Process Plant Design Criteria
....................................... 17-4 Table 21-1 Base Case
Open Pit Scenario - Capital Cost Summary ..........................
21-1 Table 21-2 Open Pit / Underground Scenario – Capital Cost
Summary .................... 21-1 Table 21-3 Open Pit Scenario -
Mine Capital Cost Summary ................................... 21-2
Table 21-4 Open Pit / Underground Scenario - Mine Capital Cost
Summary ............ 21-3 Table 21-5 Base Case 1 Mtpa Capital Cost
Estimate Summary ............................... 21-4 Table 21-6
Factored Plant expansion Capital Costs
................................................. 21-4 Table 21-7
Base Case TSF Capital Cost Summary
.................................................. 21-5 Table 21-8
Owners Project OverHead Costs
............................................................ 21-6
Table 21-9 Unit Operating Costs
..............................................................................
21-8 Table 21-10 Summary of Process Operating Costs
.................................................. 21-9 Table 21-11
Summary of General and Administration Costs
.................................. 21-10 Table 22-1 Taxation and
Royalty Summary
.............................................................. 22-2
Table 22-2 Estimated Accumulated Tax Losses
....................................................... 22-3 Table
22-3 Cash Flow Summary – Base Case Open Pit Scenario
........................... 22-4 Table 22-4 Sensitivity Analyses
................................................................................
22-6 Table 22-5 Cash Flow – Open Pit / Underground Scenario
...................................... 22-9 Table 24-1 Risk
Assessment Matrix
.........................................................................
24-6 Table 24-2 Key Risks Identified and Mitigating Strategies
........................................ 24-6 Table 24-3 Residual
Risk Assessment
.....................................................................
24-8 Table 24-4 Opportunities and Development Strategies
.......................................... 24-10 Table 24-5
Recommended Further Work
...............................................................
24-11 Table 25-1 Mineral Resources – April 2011
.............................................................. 25-2
Table 26-1 Proposed Development Plan and Budget
............................................... 26-3
LIST OF FIGURES PAGE
Figure 1-1 Sensitivity Graph
.......................................................................................
1-5 Figure 1-2 Surface General Arrangement
.................................................................
1-21 Figure 1-3 Preliminary Project Development Schedule
............................................. 1-45 Figure 4-1
Location
Map.............................................................................................
4-2 Figure 4-2 Property
Map.............................................................................................
4-4 Figure 6-1 Compilation at Ntaka Hill Area
...................................................................
6-3 Figure 7-1 Regional Geology
......................................................................................
7-2 Figure 7-2 Property Geology
......................................................................................
7-4
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page v
Figure 7-3 Geology of the Ntaka Hill Area
..................................................................
7-6 Figure 9-1 TDEM Targets – Ntaka Hill Area
............................................................... 9-4
Figure 9-2 Radiometric Targets
..................................................................................
9-7 Figure 9-3 Lionja Area
..............................................................................................
9-10 Figure 10-1 Drill Plan – G Zone
................................................................................
10-6 Figure 10-2 Drill Plan – H Zone
................................................................................
10-9 Figure 10-3 Drill Plan – J Zone
...............................................................................
10-12 Figure 10-4 Drill Plan – L Zone
...............................................................................
10-14 Figure 10-5 Drill Plan – M Zone
..............................................................................
10-16 Figure 10-6 Drill Plan - NAD013 Zone
....................................................................
10-19 Figure 10-7 Drill Plan – Sleeping Giant Zone
.......................................................... 10-22
Figure 14-1 Isometric View of the Ntaka Hill Deposits
.............................................. 14-4 Figure 14-2
Specific Gravity Versus Sulphur
.......................................................... 14-10
Figure 14-3 G Zone Grade Distribution / Resource Classification
........................... 14-14 Figure 14-4 H Zone Grade
Distribution / Resource Classification ...........................
14-15 Figure 14-5 J Zone Grade Distribution / Resource
Classification ............................ 14-16 Figure 14-6 L
Zone Grade Distribution / Resource Classification
............................ 14-17 Figure 14-7 M Zone Grade
Distribution / Resource Classification ...........................
14-18 Figure 14-8 NAD013 Zone Grade Distribution / Resource
Classification ................ 14-19 Figure 14-9 Sleeping Giant
Zone Grade Distribution / Resource Classification ...... 14-20
Figure 14-10 Drift Analysis
.....................................................................................
14-30 Figure 16-1 Site Plan
................................................................................................
16-2 Figure 16-2 Isometric View of Ntaka Hill Pit Shells
................................................... 16-6 Figure
16-3 Underground Typical Section
................................................................
16-9 Figure 16-4 Underground Typical Level
..................................................................
16-10 Figure 16-5 Underground Typical Level - Details
.................................................... 16-11 Figure
17-1 Metallurgical Flowsheet
.........................................................................
17-8 Figure 17-2 Process Plant Layout
............................................................................
17-9 Figure 22-1 Sensitivity Graph
...................................................................................
22-6 Figure 24-1 Preliminary Project Development Schedule
........................................... 24-4 Figure 24-2 AS/NZS
4360: 2004 Risk Assessment Framework
................................ 24-5
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-1
1 SUMMARY EXECUTIVE SUMMARY Roscoe Postle Associates Inc. (RPA),
Mineralurgy Pty Ltd (Mineralurgy), and
Lycopodium Minerals Pty Ltd. (Lycopodium) were retained by
Continental Nickel Limited
(Continental), to complete a Preliminary Economic Assessment
(PEA) and prepare an
independent Technical Report on the Ntaka Hill Nickel Project
(the Project) in southeast
Tanzania. The purpose of this report is to provide technical
support information for
Continental’s public disclosure on the Project. This Technical
Report conforms to
National Instrument 43-101 (NI 43-101) Standards of Disclosure
for Mineral Projects.
Continental is a Toronto Stock Exchange (TSX) Venture exchange
issuer involved in the
acquisition and exploration of nickel-copper sulphide mineral
properties. Continental is a
junior exploration company with a corporate head office in
Oakville, Ontario, Canada,
and a regional office in Dar es Salaam, Tanzania. The company
currently holds a 75%
interest in a large exploration property containing zones of
nickel-copper mineralization
near Nachingwea, Tanzania.
Currently, the major assets associated with the Ntaka Hill
Nickel Project are a 6,400 km2
exploration land position, held under licence and licence
applications, containing
numerous geophysical anomalies and seven zones of nickel-copper
mineralization for
which Mineral Resources have been estimated.
The PEA Base Case considers open pit mining and conventional
flotation processing,
producing a bulk nickel-copper concentrate. Four years of mining
small, high-grade
zones at a rate of one million tonnes per year (Mtpa) will be
followed by eight years of
mining larger zones at a rate of 2.5 Mtpa.
The Base Case in this PEA uses the previously-disclosed Mineral
Resource estimate
which was constrained by optimized pit shells and is disclosed
in RPA, 2011.
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-2
ECONOMIC ANALYSIS A Base Case cash flow projection for the Base
Case Open Pit Scenario has been
generated from the Life of Mine (LOM) production schedule and
capital and operating
cost estimates, and is summarized in Table 1-1. A summary of the
key criteria is
provided below.
ECONOMIC CRITERIA Physicals
A resource base of o Measured & Indicated 5.0 Mt, at grades
of 1.22% Ni, 0.24% Cu. o Inferred 17.3 Mt, at grades of 0.8% Ni,
0.2% Cu.
A pre-production period of 2 years.
Total production quantities of 23.8 Mt, at grades of 0.82% Ni,
0.18% Cu.
A mine life of 12 years – four years at 1 Mtpa, eight years at
2.5 Mtpa
A maximum of 158,000 t moved per day at the mine (52.5 Mtpa). A
LOM stripping ratio of 17.2
Average mill recoveries of 87% Ni and 92% Cu.
REVENUE
A nickel price of US$10.20 per lb, and a copper price of US$3.40
per lb.
Smelter terms with an average of 77% payable for the Nickel
contained and average revenue of US$90/DMT of concentrate for
by-products contained in the concentrate, per typical smelter
contracts, which account for treatment and refining.
Net Smelter Return averages US$114 per tonne, including
deductions for concentrate shipment, treatment, refining and
royalties.
Revenue is recognized at the time of production. COSTS
A LOM average operating cost of US$59.30 per tonne milled. A
pre-production capital of US$217 million, expansion capital of $297
million,
and a sustaining capital of US$85 million over the LOM. o
Sustaining capital above does not include recovery of working
capital
and warehouse inventory, totalling $40 million.
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-3
TAXES AND ROYALTIES A royalty of 4% of net revenue.
An average corporate tax rate of 30%. US$55 million accumulated
tax losses at commencement of the project.
CASH FLOW ANALYSIS Considering the Base Case Open Pit Scenario
of the Project on a stand-alone basis, the
undiscounted pre-tax cash flow totals $753 million over the mine
life, and simple
payback occurs in approximately five years (shortly after
expansion to 2.5 Mtpa). Before
tax, the NPV at an 8% discount rate is $310 million, and the IRR
is 25.4%.
After accounting for taxes, the undiscounted cash flow totals
$539 million and simple
payback occurs in approximately six years. The after-tax NPV at
an 8% discount rate is
$207 million and the IRR is 21.5%.
The total cash cost is US$4.24/lb Ni and the mine life capital
unit cost is US$1.48/lb Ni,
for a total production cost of US$5.72/lb Ni. Average annual
nickel production during
operations is 31 million pounds per year and the average annual
copper production is
seven million pounds per year.
All scenarios in this PEA are preliminary in nature and include
both Indicated and
Inferred Mineral Resources. 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. There is no
certainty that the PEA will be
realized.
-
Units Total Year -2 Year -1 Year 1 Year 2 Year 3 Year 4 Year 5
Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12MINING
Operating Days 333 333 333 333 333 333 333 333 333 333 333 333
Tonnes milled per day tpd 2,700 3,000 3,000 3,000 7,290 7,500 7,500
7,500 7,500 7,500 7,500 7,320 Tonnes moved per day tpd 59,259
60,673 67,308 67,051 67,917 135,994 168,269 168,269 168,269 168,269
142,628 95,064 51,731
Production '000 tonnes 23,770 900 1,000 1,000 1,000 2,430 2,500
2,500 2,500 2,500 2,500 2,500 2,440 Cu Grade % 0.18 0.23 0.17 0.27
0.29 0.16 0.16 0.16 0.16 0.16 0.16 0.17 0.17 Ni Grade % 0.82 1.44
1.18 1.42 1.58 0.73 0.73 0.73 0.73 0.73 0.73 0.68 0.60
Waste '000 tonnes 409,000 8,000 18,030 20,000 19,920 20,190
40,000 50,000 50,000 50,000 50,000 42,000 27,160 13,700 Total Moved
'000 tonnes 432,770 8,000 18,930 21,000 20,920 21,190 42,430 52,500
52,500 52,500 52,500 44,500 29,660 16,140 Stripping Ratio 17.21
20.03 20.00 19.92 20.19 16.46 20.00 20.00 20.00 20.00 16.80 10.86
5.61
PROCESSING
Total Ore Milled '000 tonnes 23,770 900 1,000 1,000 1,000 2,430
2,500 2,500 2,500 2,500 2,500 2,500 2,440 Cu Grade % Cu 0.18 0.23
0.17 0.27 0.29 0.16 0.16 0.16 0.16 0.16 0.16 0.17 0.17 Ni Grade %
Ni 0.82 1.44 1.18 1.42 1.58 0.73 0.73 0.73 0.73 0.73 0.73 0.68
0.60
RecoveryCu Recovery % 91.72 90.93 88.59 90.63 88.76 95.00 95.00
95.00 95.00 95.00 95.00 88.86 80.00 Ni Recovery % 87.27 86.60 86.59
83.63 81.60 90.70 90.70 90.70 90.70 90.70 90.70 85.18 75.00
Concentrate GradeCu Grade % 3.42 3.06 2.56 3.48 3.16 4.18 4.18
4.18 4.18 4.18 4.18 2.91 1.92 Ni Grade % 15.21 18.00 16.99 17.27
15.85 18.00 18.00 18.00 18.00 18.00 18.00 11.48 6.35
REVENUE
Metal PricesCu US$/lb 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$
3.40$ 3.40$ 3.40$ 3.40$ 3.40$ 3.40$ Ni US$/lb 10.21$ 10.21$ 10.21$
10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$ 10.21$
10.21$
Payable MetaContained Cu lbs '000 84,683 4,194 3,393 5,299 5,673
8,245 8,482 8,482 8,482 8,482 8,482 8,109 7,359 Contained N lbs
'000 376,544 24,684 22,548 26,259 28,495 35,519 36,543 36,543
36,543 36,543 36,543 31,959 24,368
Total Gross Revenue US$ '000 3,025,265$ 198,970$ 176,028$
211,683$ 227,553$ 288,945$ 297,269$ 297,269$ 297,269$ 297,269$
297,269$ 252,805$ 182,936$
Total Smelter Charges US$ '000 182,772$ 9,456$ 9,063$ 10,437$
12,214$ 13,622$ 14,014$ 14,014$ 14,014$ 14,014$ 14,014$ 24,726$
33,182$
Gross Less Charges US$ '000 2,842,493$ 189,514$ 166,965$
201,246$ 215,339$ 275,323$ 283,255$ 283,255$ 283,255$ 283,255$
283,255$ 228,079$ 149,754$
Royalty US$ '000 121,011$ 7,959$ 7,041$ 8,467$ 9,102$ 11,558$
11,891$ 11,891$ 11,891$ 11,891$ 11,891$ 10,112$ 7,317$
Net Smelter Return US$ '000 2,721,482$ 181,555$ 159,924$
192,779$ 206,236$ 263,766$ 271,364$ 271,364$ 271,364$ 271,364$
271,364$ 217,966$ 142,437$ US$/t ore 114.49$ 201.73$ 159.92$
192.78$ 206.24$ 108.55$ 108.55$ 108.55$ 108.55$ 108.55$ 108.55$
87.19$ 58.38$
OPERATING COSTS
Mining (Open Pit) US$/t moved 2.10$ 3.15$ 3.15$ 3.15$ 3.15$
1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ 1.90$ Processing US$/t
milled 14.38$ 18.65$ 17.83$ 17.83$ 17.83$ 13.75$ 13.64$ 13.64$
13.64$ 13.64$ 13.64$ 13.64$ 13.73$ G&A US$/t milled 6.65$
13.73$ 12.35$ 12.35$ 12.35$ 5.59$ 5.44$ 5.44$ 5.44$ 5.44$ 5.44$
5.44$ 5.57$ Total Operating Cost US$/t 59.30$ 98.63$ 96.34$ 96.09$
96.94$ 52.51$ 58.98$ 58.98$ 58.98$ 58.98$ 52.90$ 41.62$ 31.87$
Mining (Open Pit) US$ '000 909,613$ 59,630$ 66,150$ 65,898$
66,749$ 80,617$ 99,750$ 99,750$ 99,750$ 99,750$ 84,550$ 56,354$
30,666$ Processing US$ '000 341,843$ 16,785$ 17,833$ 17,833$
17,833$ 33,402$ 34,109$ 34,109$ 34,109$ 34,109$ 34,109$ 34,109$
33,503$ G&A US$ '000 158,138$ 12,355$ 12,355$ 12,355$ 12,355$
13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$ 13,590$
Total Operating Cost US$ '000 1,409,594$ 88,769$ 96,338$ 96,086$
96,936$ 127,609$ 147,449$ 147,449$ 147,449$ 147,449$ 132,249$
104,053$ 77,759$ Unit Operating Cost net of by-prod revenu US$/lb
Ni 3.43$ 3.39$ 4.27$ 3.42$ 3.16$ 3.32$ 3.76$ 3.76$ 3.76$ 3.76$
3.34$ 2.62$ 2.41$
Operating Cashflow US$ '000 1,311,889$ 92,786$ 63,586$ 96,693$
109,300$ 136,156$ 123,915$ 123,915$ 123,915$ 123,915$ 139,115$
113,914$ 64,678$
CAPITAL COSTS
Mining US$ '000 179,200$ 2,100$ 29,100$ -$ -$ 51,800$ 96,200$ -$
-$ -$ -$ -$ -$ -$ -$ Processing US$ '000 114,739$ 19,352$ 45,156$
-$ -$ 15,069$ 35,162$ -$ -$ -$ -$ -$ -$ -$ -$ Infrastructure US$
'000 63,656$ 19,389$ 22,699$ 1,780$ -$ 6,894$ 12,894$ -$ -$ -$ -$
-$ -$ -$ -$ Indirect Costs US$ '000 54,234$ 13,940$ 17,548$ 160$ -$
17,620$ 20,243$ -$ -$ -$ -$ -$ -$ -$ (15,276)$ Sustaining US$ '000
69,980$ -$ -$ 1,500$ 1,500$ 1,500$ 1,500$ 5,080$ 1,200$ 10,580$
10,580$ 14,180$ 10,580$ 10,580$ 1,200$ Closure and Reclamation US$
'000 15,000$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 15,000$ C ti
US$ '000 62 176$ 7 736$ 21 284$ 390$ $ 10 610$ 22 156$ $ $ $ $ $ $
$ $
TABLE 1-1 CASH FLOW SUMMARY - BASE CASE OPEN PIT
SCENARIOContinental Nickel Limited – Ntaka Hill Nickel Project
Contingency US$ '000 62,176$ 7,736$ 21,284$ 390$ -$ 10,610$
22,156$ -$ -$ -$ -$ -$ -$ -$ -$ Working Capital US$ '000 -$ 14,795$
1,261$ (42)$ 142$ 5,112$ 3,307$ -$ -$ -$ (2,533)$ (4,699)$ (4,382)$
(12,960)$ Total Capital Cost US$ '000 558,985$ 62,518$ 150,582$
5,091$ 1,458$ 103,634$ 193,266$ 8,387$ 1,200$ 10,580$ 10,580$
11,647$ 5,881$ 6,198$ (12,036)$
CASH FLOW
Net Pre-Tax Cashflow US$ '000 752,903$ (62,518)$ (150,582)$
87,695$ 62,128$ (6,941)$ (83,966)$ 127,770$ 122,715$ 113,335$
113,335$ 112,269$ 133,235$ 107,716$ 76,713$ Cumulative Pre-Tax
Cashflow US$ '000 (62,518)$ (213,100)$ (125,406)$ (63,278)$
(70,219)$ (154,185)$ (26,415)$ 96,300$ 209,636$ 322,971$ 435,239$
568,474$ 676,190$ 752,903$
Taxes US$ '000 213,871$ -$ -$ 494$ 3,002$ -$ 23,958$ 36,832$
36,673$ 36,460$ 40,862$ 33,142$ 2,448$ After-Tax Cashflow US$ '000
539,032$ (62,518)$ (150,582)$ 87,695$ 62,128$ (7,435)$ (86,968)$
127,770$ 98,757$ 76,504$ 76,662$ 75,808$ 92,373$ 74,574$ 74,265$
Cumulative After-Tax Cashflow US$ '000 (62,518)$ (213,100)$
(125,406)$ (63,278)$ (70,713)$ (157,681)$ (29,911)$ 68,846$
145,350$ 222,012$ 297,820$ 390,194$ 464,767$ 539,032$
UNIT PRODUCTION COSTS
Operating US$ / lb Ni 4.24$ Capital US$ / lb Ni 1.48$ Total Cost
US$ / lb Ni 5.72$
ECONOMICS
Pre-Tax Payback Period Years 5.22 1.00 1.00 1.00 1.00 1.00 0.22
- - - - - - Pre-Tax IRR % 25.4%Pre-Tax NPV at 5% discounting US$
'000 435,588$ Pre-Tax NPV at 8% discounting US$ '000 310,483$
Pre-Tax NPV at 12% discounting US$ '000 191,673$
After-Tax Payback Period Years 5.30 1.00 1.00 1.00 1.00 1.00
0.30 - - - - - - After-Tax IRR % 21.6%After-Tax NPV at 5%
discounting US$ '000 301,206$ After-Tax NPV at 8% discounting US$
'000 207,379$ $192,017.53After-tax NPV at 12% discounting US$ '000
118,164$
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
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SENSITIVITY ANALYSIS Project risks and opportunities can be
identified in both economic and non-economic
terms. Key economic risks and opportunities were examined by
running cash flow
sensitivities on the Base Case Open Pit Scenario:
Head Grade Process Recovery Metal price Operating costs Capital
costs
Sensitivity of the after-tax NPV at a discount rate of 8% to the
above variables has been
calculated at -20% to +20% variations over the Base Case, with
the exception of process
recovery, which was varied by ±2%. The sensitivities are shown
in Figure 1-1 and Table
1-2.
FIGURE 1-1 SENSITIVITY GRAPH
$(100,000)
$‐
$100,000
$200,000
$300,000
$400,000
$500,000
‐25% ‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%
After‐Tax NPV
@ 8% (U
S$ '000
)
Percent Deviation From Base Case
Sensitivity to Head Grade
Sensitivity to Process Recovery
Sensitivity to Metal Price
Sensitivity to OPEX
Sensitivity to CAPEX
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TABLE 1-2 SENSITIVITY ANALYSES Continental Nickel Limited –
Ntaka Hill Nickel Project
Parameter Variables Units -20% -10%
Base Case +10% +20%
Head Grade % Ni 0.66 0.74 0.82 0.91 0.99
Process Recovery Ni Recovery (%) 85.3 86.3 87.3 88.3 89.3
Metal Price US$/lb Ni 8.17 9.19 10.21 11.23 12.25
Operating Cost US$/t milled 47.44 53.37 59.30 65.23 71.16
Capital Cost US$ '000 447,188 503,087 558,985 614,884
670,783
After-Tax NPV @ 8% Discount Rate Units -20% -10%
Base Case +10% +20%
Head Grade US$ '000 (24,119) 93,578 207,379 317,378 427,246
Process Recovery US$ '000 142,733 173,669 207,379 232,648
257,165
Metal Price US$ '000 (42,285) 84,679 207,379 325,306 443,069
Operating Cost US$ '000 323,429 265,404 207,379 148,159
87,251
Capital Cost US$ '000 295,003 251,191 207,379 163,567 119,754
ALTERNATE SCENARIOS In addition to the Base Case discussed above,
three alternate scenarios were
considered in this PEA:
An Open Pit / Underground Scenario based on the current resource
estimate – high strip ratios in the open pits suggested that deeper
mineralization may be more economically mined by underground
methods.
An Open Pit Plus Low Grade Sensitivity Analysis (an upside case
to the Base
Case) – drilling results indicate low-grade mineralization
within the open pit, lying above the Sleeping Giant Zone.
Previously this mineralization was not included in the geological
wireframes as it was thought to be uneconomic, however, the work
carried out as part of this PEA has indicated that significantly
lower economic cut-off grades should be considered when developing
the geological block model. This mineralization would displace
waste within the open pit, allowing mining rates to stay the same,
but the mill expansion in year five would be to 4 Mtpa instead of
2.5 Mtpa.
Addition of a free carry interest in the Project Base Case by
the Government of Tanzania.
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OPEN PIT / UNDERGROUND SCENARIO A cash flow projection was
generated based on a production schedule for the Open Pit /
Underground Scenario. A summary of key criteria that differ from
the Base Case is
provided below.
PHYSICALS
Total production quantities of 24.5 Mt, at grades of 0.77% Ni,
0.17% Cu. o Open Pit 5.9 Mt, at grades of 0.99% Ni, 0.21% Cu. o
Underground 18.6 Mt, at grades of 0.70% Ni, 0.15% Cu.
A mine life of 12 years:
o Four years at 1 Mtpa, 8 years at 2.5 Mtpa, o Five years of pit
production and eight years of underground
production with overlap in Year 5
A maximum of 50,000 tpd at the pit (16.6 Mtpa). Stripping ratio
is 12.7:1.
A maximum of 7,500 tpd produced from the underground operation
(2.5 Mtpa)
Average mill recoveries of 85% Ni and 90% Cu. REVENUE
Net Smelter Return averages US$106 per tonne, including
deductions for concentrate shipment, treatment, refining and
royalties.
COSTS
A pit mining cost of US$3.30 per tonne moved and an underground
cost of US$40 per tonne mined.
A LOM average operating cost of US$62 per tonne milled.
A pre-production capital of US$212 million, expansion capital of
$264 million, and a sustaining capital of US$80 million over the
LOM.
o Sustaining capital above does not include recovery of working
capital and warehouse inventory, totalling $40 million.
CASH FLOW ANALYSIS The Open Pit / Underground Scenario offers a
lower return for the Project, with the
undiscounted pre-tax cash flow totalling $567 million. Before
tax, the NPV at an 8%
discount rate is $191 million, and the IRR is 19.1%. After
accounting for taxes, the
undiscounted cash flow totals $398 and after-tax NPV at an 8%
discount rate is $117
million and the IRR is 15.9%.
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OPEN PIT PLUS LOW GRADE SENSITIVITY ANALYSIS RPA ran a
sensitivity analysis which assumed that the low-grade
mineralization located
inside of the Sleeping Giant pit shell would be upgraded to a
Mineral Resource. A cash
flow projection was generated based on a production schedule for
this Open Pit Plus
Low Grade Sensitivity Analysis. A summary of key criteria is
provided below.
The low-grade mineralization consists of 10 Mt to 15 Mt within
the Sleeping Giant pit at a
grade of 0.25% Ni to 0.40% Ni. The sensitivity analysis uses a
12 year mine life - four
years at 1 Mtpa and eight years at 4 Mtpa, with a total
production of 36.7 Mt, at grades of
0.65% Ni, 0.15% Cu. Because the low-grade material is displacing
waste in the pit, the
mining rates remain the same as in the Base Case at a maximum of
150,000 tonnes of
material moved per day (50 Mtpa), however, the LOM stripping
ratio is reduced to
10.8:1. Average mill recoveries of 86% Ni and 90% Cu are
used.
NSR averages US$91 per tonne, including deductions for
concentrate shipment,
treatment, refining and royalties.
Mining operating costs for the sensitivity analysis are
unchanged from the Base Case,
only the proportions of ore and waste are different. Using
Lycopodium’s cost estimates
in Section 21, processing and general and administration costs
were factored from the 3
Mtpa estimate, accounting for fixed and variable portions of
each. As a result, the
sensitivity analysis uses a LOM average operating cost of US$43
per tonne milled.
Mining capital costs are unchanged from the Base Case. The
addition of the low-grade
material would require a plant upgrade to 4 Mtpa in year five,
and this cost was scaled to
the power of 0.6 from Lycopodium’s estimate for a 3 Mtpa plant
expansion.
Infrastructure costs were unchanged from the 3 Mtpa estimate. As
a result, the
sensitivity analysis uses a pre-production capital of US$217
million, expansion capital of
$385 million, and a sustaining capital of US$85 million over the
LOM. The sustaining
capital estimate does not include recovery of working capital
and warehouse inventory,
which totals $46 million.
SENSITIVITY ANALYSIS RESULTS The Open Pit Plus Low Grade
Sensitivity Analysis offers a better return for the Project
with the undiscounted pre-tax cash flow totalling $1,119
million. Before tax, the NPV at
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an 8% discount rate is $456 million, and the IRR is 27.5%. After
accounting for taxes,
the undiscounted cash flow totals $784 and after-tax NPV at an
8% discount rate is $302
million and the IRR is 23.3%.
The Open Pit Plus Low Grade Sensitivity Analysis has total cash
costs of US$3.88/lb Ni
and the mine life capital unit cost is US$1.40/lb Ni, for a
total production cost of
US$5.28/lb Ni. Average annual nickel production during operation
is 37 million pounds
per year and the average annual copper production is nine
million pounds per year.
FREE CARRY INTEREST OF TANZANIAN GOVERNMENT The current mining
act of Tanzania allows for the Tanzanian Government to acquire
a
free carried interest in major mining projects developed in the
country that require a
Special Mining Licence, which is the case for this Project. The
mechanism for
negotiating this free carried interest is in the form of the
mine development agreement.
To date in Tanzania no mining project has been required to
provide a free carried
interest, however, since the possibility exists, the magnitude
of the impact on Project
economics was investigated.
The impact of a 5% free carry interest would reduce the Base
Case Project NPV from
$310 million to $280 million on a pre-tax basis and $207 million
to $176 million on an
after-tax basis.
CONCLUSIONS In RPA’s opinion, the PEA indicates that positive
economic results can be obtained for
the Ntaka Hill Nickel Project, in a scenario that includes open
pit mining, and nickel-
copper-cobalt recovery by conventional flotation.
The Base Case Life of Mine Plan (LOMP) for the Project indicates
that 24 Mt, at average
grades of 0.82% Ni and 0.18% Cu, will be mined over 12 years at
a production rate of 1
Mtpa for the first four years, and 2.5 Mtpa thereafter. Nickel
production is projected to
total 377 million pounds.
All scenarios in this PEA are preliminary in nature and include
both Indicated and
Inferred Mineral Resources. Inferred Mineral Resources are
considered too speculative
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geologically to have the economic considerations applied to them
that would enable
them to be categorized as Mineral Reserves. There is no
certainty that the PEA will be
realized.
Base Case economic results are superior to the Open Pit /
Underground Scenario, due
to higher costs and lower revenues.
The Open Pit Plus Low Grade Sensitivity Analysis provides the
best economic results.
In RPA’s opinion, this scenario is likely to become the Base
Case in the future, should
the low-grade mineralization be included in an updated resource
estimate. The quantity
and grade of the low-grade mineralization is conceptual in
nature and there has been
insufficient analysis completed to define a Mineral Resource. It
is uncertain at this stage
if further exploration or analysis will result in the definition
of a Mineral Resource in this
area.
Specific conclusions by area of the PEA are as follows.
GEOLOGY AND MINERAL RESOURCES
The mineralization in the Ntaka Hill area is considered typical
of magmatic sulphide deposits. A range of sulphide textures from
disseminated to net-textured to massive may be preserved within a
host intrusion, with the massive sulphides typically forming at or
near the base of the intrusion. The most common magmatic sulphide
minerals are pyrrhotite, pentlandite, chalcopyrite, and pyrite,
with pentlandite and pyrrhotite being the nickel-bearing
phases.
The exploration strategy employed by Continental in the search
for nickel-
copper sulphides has focused on the delineation of the various
sulphide zones, the success of which led to an initial resource
estimation for the Project in 2009.
From 2009 to 2010, the company continued to work to expand its
current
Mineral Resources as well as identify and test new targets for
additional zones of nickel-copper mineralization. The success of
both of these objectives, including discovery of the Sleeping Giant
Zone, resulted in the commissioning of an updated Mineral Resource
estimate, used as the basis for the PEA.
Table 1-3 lists the Mineral Resources at Ntaka Hill by resource
category, as
disclosed in a Technical Report dated April, 2011.
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TABLE 1-3 MINERAL RESOURCES – APRIL 2011 Continental Nickel
Limited – Ntaka Hill Nickel Project
Resource Class
Tonnes (000) % Ni % Cu % Co g/t Pt g/t Pd
g/t Au
Measured 1,871 1.74 0.30 0.05 0.033 0.041 0.021
Indicated 3,110 0.91 0.20 0.04 0.012 0.015 0.008
Total M+I 4,981 1.22 0.24 0.04 0.020 0.025 0.013
Total Inferred 17,300 0.8 0.2 0.02 0.03 0.04 0.02
Notes: 1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources were estimated at a NSR cut-off value of $17/t
for open pit mining, this
corresponds to an approximate grade of 0.14% Ni. 3. Mineral
Resources were estimated using an average long-term nickel, copper,
and cobalt prices of
$10.00/lb, $3.50/lb, and $20.00/lb, respectively. 4. Preliminary
metal recoveries were estimated at 87% for nickel, 81% for copper,
and 80% for cobalt. 5. No minimum width was used.
The current drilling program intersected multiple zones of
disseminated sulphide mineralization located above the Sleeping
Giant Zone, which have not been included in the resource estimate.
This “exploration target”, as defined by NI 43-101, could contain
10 Mt to 15 Mt, at grades ranging from 0.25% Ni to 0.40% Ni. The
quantity and grade of the material included in the “exploration
target” is conceptual in nature and there has been insufficient
analysis completed to define a Mineral Resource. It is uncertain at
this stage if further exploration or analysis will result in the
definition of a Mineral Resource in this area.
MINING
The high-value mineralization at Ntaka Hill generates open pits
with high strip ratios. The presence of low-grade mineralization
above the Sleeping Giant Zone represents an opportunity to reduce
these strip ratios.
PEA production schedules and cash flows are based on pit
optimizations, not pit
designs. Although this level of detail is appropriate for
PEA-level studies, more work is required to estimate Mineral
Reserves.
PROCESSING & METALLURGY
Based on the samples tested to date the expectation is that the
Project will generally produce a high grade nickel plus copper bulk
concentrate with very low levels of MgO and clean of other
contaminants using a conventional approach to the recovery of
nickel from sulphide ore.
It is clear that the mineralogy of the samples will be a good
predictor for flotation response and as such can be used to provide
variability screening for the mineralized zones.
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RECOMMENDATIONS RPA recommends that Continental advance the
Project to the next phase of project
development, by collecting data, conducting metallurgical test
work and conducting
studies that allow for estimation of Mineral Reserves.
Specific recommendations by area are as follows.
GEOLOGY & RESOURCES
Complete the diamond drill program (approximately 30,000 m) to
expand and improve the classification of the Mineral Resources at
the Sleeping Giant nickel-copper zone.
Update the Mineral Resource estimate with the results of the new
drilling, including the exploration target, and taking into
consideration the economic results of this PEA.
MINING Carry out a geotechnical drill program and analysis to
confirm appropriate pit
slope angles.
Improve the understanding of the mining cost base and carry out
a preliminary mining plan and develop a detailed estimate of the
mining costs.
Estimate Mineral Reserves as part of a detailed study.
METALLURGY
Collect additional representative samples and carry out a
definitive metallurgical test work program.
Investigate options and optimize the Project in relation to the
trade-off between grade and recovery and also the production of
separate nickel and copper concentrates.
OTHER
Continue the baseline environmental studies program, and
progress permitting activities and community consultation.
Conduct a hydrogeological investigation (drilling, testing, and
analysis) in the proposed water supply borehole location.
Carry out a program of condemnation drilling (approximately
10,000 m) in proposed locations for infrastructure (plant, camp,
waste dumps, tailings storage facility).
Review access road design.
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Review marketing options and begin to develop off-take
agreement(s).
The recommended work program and budget is summarized in Table
1-4.
TABLE 1-4 PROPOSED DEVELOPMENT PLAN AND BUDGET Continental
Nickel Limited – Ntaka Hill Nickel Project
Activity Description Cost (C$)
Drilling Infill Drilling ~30,000 m diamond core drilling at
Sleeping Giant 7,500,000Condemnation Drilling ~10,000 m drilling
for plant, camp, waste dumps and
TSF 2,500,000
Pit Geotechnical Pit geotechnical drilling and investigations
1,795,000Other Geotechnical Plant and TSF geotechnical pits,
drilling and
investigations 170,000
Hydrogeological Hydrogeological drilling to prove up project
water supply 380,000Subtotal 12,345,000Technical Studies Mining
& Geology Resource update following 2011 extension
drilling,
mining optimization studies, detailed costing studies
850,000
Metallurgy Definitive metallurgical test work program and
interpretation
500,000
Engineering Options studies and detailed costing studies for
process plant and infrastructure
1,550,000
Water Supply Hydrogeological interpretation of drilling and
design of bore field
100,000
Tailings Dam Options studies and detailed costing study
140,000Access Road Options studies, road materials identification
and
preliminary design and costing 300,000
Subtotal 3,440,000Other Site Survey LIDAR site survey for
detailed studies and design 150,000Concentrate Marketing Options
studies and development/negotiation of off take
agreement 280,000
Environment Completion of ESIA, EMP, RAP and commencement of
community engagement program
790,000
Subtotal 1,220,000Management and Administration Continental
Management of work outlined above and overhead
costs associated with delivery of work plan 1,180,000
Contingency 1,820,000Subtotal 3,000,000Total 20,005,000
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TECHNICAL SUMMARY
BACKGROUND PROPERTY DESCRIPTION AND LAND TENURE The Ntaka Hill
property is located in southeastern Tanzania, East Africa, 100 km
north of
the border with Mozambique, approximately 180 km west of the
coastal port city of
Mtwara and 400 km south of Dar es Salaam. The property is
located in the Nachingwea,
Liwali, Lindi, and Kilwa districts in Lindi Region, and the
Masasi District in Mtwara
Region. The Ntaka Hill area, where the nickel-copper sulphide
discoveries are located,
is situated in the north central portion of the property, at
approximately 10º06’S Latitude
and 38º33’E Longitude, 47 km northwest of the town of Nachingwea
and 12 km
northwest of Mnero village.
The Ntaka Hill Nickel Project consists of 40 granted Prospecting
Licences (PLs) totalling
4,548 km2 in area and two offered PLs totalling 150 km2. In
addition Continental holds
19 applications for PLs covering 1,685 km2 in a joint venture,
which are largely
comprised of applications for areas that were relinquished as
part of the licence renewal
process.
Since Continental became operator of the Project, it has
commissioned five separate
due diligence reports by Tanzanian legal counsel on the mineral
rights held by the joint
venture in support of equity financings and for annual audit
purposes. All reports
concluded that the granted licences were validly held and in
good standing at the time of
the reviews (Rex Attorney’s 2007, 2008; Mkonos 2009, 2010,
2011).
EXISTING INFRASTRUCTURE The Ntaka Hill Nickel Project can be
accessed via a 300 km road network west from the
port city of Mtwara located in southeast Tanzania. The road
network is comprised of 200
km of sealed highway extending west from Mtwara, followed by an
all-weather dirt road
from the town of Masasi, north to Nachingwea, and ultimately to
the Mnero
village/mission. From Mnero, poorly maintained tracks passable
with four wheel drive
extend 20 km to the Ntaka Hill area in the north central portion
of the property. During
the rainy season, portions of these roads may be temporarily cut
off due to rising rivers
and road washouts.
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There are several villages and towns located on and near the
property and numerous
dwellings scattered between the villages. The largest
towns/villages are Nachingwea
with a population of approximately 20,000, Masasi with a
population of approximately
34,000, and Mnero with a population of approximately 8,000. The
closest village to the
Ntaka Hill area is the Nditi village located some three
kilometres to the east.
In the immediate Project area, there are some commercial farm
cooperatives growing
cashew nut and a large amount of subsistence farming. There is
no significant industrial
activity and there is ample and suitable room available on the
property for the
establishment of mining and processing operations, waste piles,
and a tailings storage
facility. There is a plentiful supply of unskilled labour in the
area; however, extensive
training programs would be required to equip potential employees
of a mining operation
with required skills.
Currently, there is no grid power in the immediate project area.
Electricity in the larger
towns of Masasi and Nachingwea, approximately 45 km from site,
is supplied by
transmission line from the port town of Mtwara where electricity
is generated from a
natural gas fired, commercially run power station.
HISTORY Prior to Continental activities, exploration in the area
of the current Ntaka Hill Nickel
Project was carried on intermittently between 1950 and 2006 by
Inco Limited/Selection
Trust, Broken Hill Proprietary (BHP), and IMX Resources Pty Ltd
(IMX).
Between 1950 and 1953, Inco Limited, in joint venture with
Selection Trust, carried out a
nickel exploration program on the north central portion of the
Nachingwea property. This
work included mapping, trenching, and diamond drilling (six
holes, 1,306.7 m) for the
purpose of testing an outcropping nickel-copper gossan at Ntaka
Hill. The most
significant result was a drill intersection of sulphide
mineralization which graded 1.60%
Ni and 0.56% Cu over 3.7 m.
Between 1996 and 1998, BHP conducted regional airborne magnetic
and radiometric
surveys over an extensive area, which included the present Ntaka
Hill property. The
surveys were part of a base metal sulphide exploration program
largely targeting ‘Broken
Hill’ style lead/zinc/silver deposits.
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A regional geochemical sampling program was also completed which
included 2,571
stream sediments collected at a sample density of one sample per
five square kilometres
and 460 soil samples collected over interpreted magnetic
targets. The geochemical
sampling program returned anomalous platinum group element (PGE)
and base metal
results, which were not followed up. BHP abandoned the project
in 1999 without
completing any drill testing of targets.
IMX initially carried out data compilation, processing, and
interpretation of the BHP
stream sediment data and acquired Ikonos and Landsat Thematic
Mapper scenes for
the Project area. In 2004, a surface sampling program was
completed and anomalous
nickel and copper values were obtained from soil samples in the
Ntaka Hill area and an
additional area to the south.
In 2005, more detailed soil geochemical surveys were completed
and a 450 line-
kilometre VTEM helicopter-borne survey was flown by Geotech Ltd.
The VTEM survey
detected numerous early- to late-channel anomalies, of which
more than 30 anomalies
were identified for follow-up work. Twenty-two of these
anomalies were found to be
coincident with anomalous nickel and copper soil geochemistry
and most had some
aeromagnetic association.
In 2006, a basic field camp was established at Ntaka Hill and a
ground TDEM
geophysical survey was completed to confirm the various VTEM
anomalies identified for
follow-up. Seventeen diamond drill holes totalling 2,153 m were
completed to test
various airborne and ground electromagnetic conductors often
associated with nickel-in-
soil anomalies. Fourteen drill holes were drilled at Ntaka Hill
and three were completed
in an area eight kilometres to the southwest. At Ntaka Hill, 12
of 14 drill holes
intersected nickel-bearing sulphide mineralization including a
new nickel sulphide
discovery from drill hole NAD013 (11.23% Ni, 1.74% Cu, 0.15% Co
over 3.0 m), now
referred to as the NAD013 Zone.
In 2007, the Nachingwea Project was joint-ventured to
Continental as operator. Since
that time, Continental has implemented a multi-disciplinary
exploration program leading
to the discovery and drill delineation of seven separate
magmatic nickel-copper sulphide
deposits for which Mineral Resources have been estimated and
reported.
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-17
GEOLOGY AND MINERALIZATION The Ntaka Hill nickel discoveries lie
within the late-Proterozoic Mozambique Belt (MB) in
southeastern Tanzania. In the Ntaka Hill Nickel Project area, MB
lithologies consist of a
mixed assemblage of mafic to felsic granulites, gneisses, and
migmatites interlayered
with amphibolites and metasedimentary rocks, including
quartzites, banded magnetic
quartzites, pelites, graphitic schists, and marbles. These
lithologies are cross-cut by
mafic to ultramafic intrusions of unknown age and include the
Ntaka ultramafic intrusion.
All units are complexly deformed and metamorphosed to
amphibolite and granulite
grades of metamorphism and occur in blocks bounded by major
northwest, east-west,
and northeast fault zones.
The mineralization in the Ntaka Hill area is considered typical
of magmatic sulphide
deposits. These deposits form as the result of the segregation
of droplets of immiscible
sulphide liquid from an ultramafic or mafic magma and the
subsequent accumulation or
concentration of the droplets generally towards the base of the
magma chamber or
conduit as a result of gravity or other magma flow dynamics. The
magmatic segregation
and accumulation of sulphides in an intrusion is influenced by a
number of factors
including the crystallization history of the magma, the
availability of an external sulphur
source(s), the open versus closed nature and longevity of the
magma system, and the
flow dynamics within the intrusion. A range of sulphide textures
from disseminated to
net-textured to massive may be preserved within a host intrusion
with the massive
sulphides typically forming at or near the base of the
intrusion. The most common
magmatic sulphide minerals are pyrrhotite, pentlandite,
chalcopyrite, and pyrite, with
pentlandite and pyrrhotite being the nickel-bearing phases.
The ultramafic rocks in the Ntaka Hill area contain widespread
sulphide mineralization
and host all of the significant nickel sulphide zones discovered
to date on the property.
Three main styles of nickel sulphide mineralization have been
identified from the drilling:
Intrusion-hosted magmatic sulphide mineralization comprised of
disseminated, blebby, to net-textured with local semi-massive to
massive sulphides hosted within pyroxenitic to locally peridotitic
ultramafic rocks.
Remobilized mineralization occurs in vein systems that consist
of single to
multiple veins and stringers of coarse-grained massive sulphide
mineralization. Individual veins pinch and swell from 10 cm to up
to 4 m, generally hosted within pyroxenite or along the contacts of
ultramafic and intervals of amphibolite and felsic gneiss.
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-18
Sulphide zones intermixed with graphite and rafts of
metasedimentary rocks interpreted to have resulted from the
contamination of the intrusion through assimilation of the
graphitic metasediments. Mineralization consists of intermixed
graphite and sulphides, the latter varying from disseminated to net
textured to nearly massive sulphides in contact with graphite rich
metasediment.
MINERAL RESOURCES Mineral Resources remain unchanged, as
disclosed in a Technical Report dated April,
2011. RPA prepared Mineral Resource estimates for the G, H, J,
L, M, NAD013, and the
Sleeping Giant zones using digital drill hole data provided by
Continental. RPA verified
and modified a set of 3D solids of the deposits also provided by
Continental. Pertinent
statistics and variograms were determined for the individual
deposits and grades were
interpolated into the block models using inverse distance
squared (ID2) methodologies.
Mineral Resources containing nickel, copper, cobalt, platinum,
palladium, and gold were
estimated.
It was assumed that values for nickel, copper, and cobalt will
contribute to the economics
of the deposit. A Net Smelter Return (NSR) was calculated for
each block based on the
estimated grade of nickel, copper, and cobalt, reasonable long
term metal prices,
estimated recoveries for each metal, and standard industry
treatment terms.
Based on the assumption that there is potential to establish a
mining operation using a
centralized mill receiving feed from multiple satellite open pit
operations, reasonable
parameters were used to fit preliminary pits to the appropriate
Ntaka Hill deposits.
Generally due to small tonnages, the mineralization in all zones
continuing below the
potential pit bottoms was determined not to be of economic
interest assuming
reasonable underground mining costs. Thus, only near-surface
resources potentially
mined by open pit methods are reported (Table 1-5).
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-19
TABLE 1-5 MINERAL RESOURCES – APRIL 2011 Continental Nickel
Limited – Ntaka Hill Nickel Project
Measured Mineral Resources
Zone Tonnes (000)
Grade
% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone - - - - - - -H Zone
338 1.394 0.208 0.026 0.034 0.037 0.016J Zone 902 1.586 0.241 0.056
0.024 0.024 0.018L Zone 137 2.427 0.449 0.046 0.046 0.064 0.030M
Zone 380 1.720 0.361 0.035 0.035 0.061 0.027NAD013 114 3.166 0.726
0.043 0.082 0.094 0.034
Sleeping Giant - - - - - - -Total
Measured 1,871 1.74 0.3 0.05 0.033 0.041 0.021
Indicated Mineral Resources
Zone Tonnes (000)
Grade
% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone 1,990 0.652 0.175
0.042 0.006 0.019 0.023H Zone 665 1.257 0.177 0.025 0.029 0.035
0.015J Zone 124 0.414 0.097 0.023 0.007 0.013 0.022L Zone 65 2.937
0.568 0.050 0.071 0.087 0.039M Zone 146 1.552 0.322 0.033 0.044
0.066 0.037NAD013 120 1.989 0.415 0.034 0.047 0.066 0.023
Sleeping Giant - - - - - - -Total Indicated 3,110 0.91 0.2 0.04
0.012 0.015 0.008
Total M+I 4,981 1.22 0.24 0.04 0.02 0.025 0.013
Inferred Mineral Resources Zone Tonnes
(000) Grade
% Ni % Cu % Co g/t Pt g/t Pd g/t Au G Zone 1,240 0.53 0.16 0.03
0.01 0.02 0.03H Zone 620 0.98 0.14 0.02 0.04 0.03 0.02J Zone - - -
- - - -L Zone - - - - - - -M Zone - - - - - - -NAD013 - - - - - -
-
Sleeping Giant 15,400 0.77 0.17 0.019 0.029 0.037 0.016Total
Inferred 17,300 0.8 0.2 0.02 0.03 0.04 0.02
Notes: 1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated using an average long-term
nickel, copper, and cobalt prices of
$10.00/lb, $3.50/lb, and $20.00/lb, respectively. 3. Preliminary
metal recoveries estimated at 87% for nickel, 81% for copper, and
80% for cobalt. 4. Mineral Resources are reported at an NSR cut-off
value of $17 per tonne. This cut-off value
represents a pit discard, or incremental cut-off, and is only
valid within an optimized pit shell.
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-20
5. No minimum mining width was used. 6. Totals may not add due
to rounding.
CURRENT DRILLING Diamond drilling at Ntaka Hill in 2011 (since
the resource estimate noted above)
comprises approximately 14,000 m, which is being carried out for
the purpose of
expanding the Sleeping Giant Zone and to test several new
targets within the Ntaka
Intrusion. A total of 8,668 m of drilling was completed in 26
holes to late September
2011.
The current drilling supports the interpretation that the
Sleeping Giant Zone contains a
higher grade, more sulphidic core comprised of remobilized
sulphide stringers and veins
as well as disseminated and bleb sulphides. Nickel grades within
the core of the zone
average between 1% Ni and 2.5% Ni. The high grade core can be
traced over a strike
extent of 500 m and a dip extent of about 100 m and open down
plunge to the south.
Disseminated sulphide intersections located in the hanging wall
of the zone are also
expected to expand the Sleeping Giant deposit and Continental
expects to undertake a
new Mineral Resource estimate at the completion of the 2011
drilling program.
MINING METHODS The Base Case Open Pit Scenario is based on the
Mineral Resource estimate
completed in April 2011 (RPA, 2011). A general arrangement of
the Project is included
in Figure 1-2. This figure shows the location of main surface
facilities such as open pits,
tailings pond and dams, waste dumps, process plant, and haul
roads.
-
444,000 E 454,000 E450,000 E448,000 E446,000 E 452,000 E8,8
86,0
00 N
458,000 E456,000 E8,8
84,0
00 N
8,8
82,0
00 N
8,8
80,0
00 N
8,8
86,0
00 N
8,8
84,0
00 N
8,8
82,0
00 N
8,8
80,0
00 N
Nditi
444,000 E 454,000 E450,000 E448,000 E446,000 E 452,000 E
55 Mt
5 Mm³
7.4 Mt
28.3 Mt
Process Plant
Camp Site
H
L
G
SG
WasteDump 2
390 Mt
J Pit
M Pit
NAD013
Diversion Ditch
Overburden Pile
Waste Dump 1
Tailings Phase I
Tailings Phase II
Elev. 315
Elev. 313
Elev. 303Elev. 305
0 1000
Metres
2000 3000 4000
N
October 2011
Existing Road
Future Access and Haul RoadSurface General Arrangement
Ntaka Hill Nickel Project
Continental Nickel Limited
Tanzania, Africa
Figure 1-2
1-2
1
ww
w.rp
acan
.co
m
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-22
BASE CASE OPEN PIT SCENARIO Open pit possibilities were
investigated by pit optimization, using Whittle software, run
on
the resource block model. Pit optimizations using updated inputs
in comparison to the
resource work confirmed that a significant proportion of the
resource block model would
be economic to mine using open pit methods.
Whittle pit optimizations were performed based on typical costs
for comparable
operations and projects of a similar scale. Metallurgical
recoveries were based on initial
mineralogy and test work. Metal prices of US$10.00/lb Ni,
US$3.50/lb Cu, and
US$20.00/lb Co were based on short-term independent forecasts.
Revenue factors were
calculated and used to generate a net value model which was used
to float cones in the
Whittle software.
In the absence of geotechnical information, pit slope angles
were selected based on
industry averages. Pit optimizations were carried out using pit
slopes of 45°.
The exercise returned 22.63 Mt grading 0.86% Ni, 0.19% Cu, and
0.025% Co,
considering all resource categories (the updated inputs resulted
in slightly different pit
outlines compared to those used for the resource estimate). Of
the 22.63 Mt, 75% are
Inferred Resources that may be potentially mineable via open pit
methods.
Dilution and mining recovery factors of 5% and 100%,
respectively, were applied to the
above numbers, with dilution at zero grade. As a result, the
diluted and recovered
tonnage and grades changed to 23.77 Mt at 0.82% Ni, 0.18% Cu,
and 0.024% Co.
Waste within the pit shells totals 409 Mt, resulting in an
average strip ratio of 17.2:1.
An upside case for the Open Pit Scenario was developed to
investigate the impact of
adding the low-grade mineralization found outside the current
resource model, but within
the potential Sleeping Giant open pit. This upside case is
discussed in the Economic
section of this report.
OPEN PIT / UNDERGROUND SCENARIO High strip ratios in the Base
Case Open Pit Scenario suggested that deeper portions of
the deposit may be more economically mined by underground
methods. For the Open
Pit / Underground Scenario, the pit optimization inputs were the
same as for the Base
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
Report NI 43-101 – October 28, 2011
Rev. 0 Page 1-23
Case Open Pit Scenario, with the addition of an underground
trade-off cost. This
underground mining cost is evaluated by the software in
comparison with the open pit
mining cost (including all applicable waste mining). Underground
costs were
differentiated by mining method – $30/t for bulk mining
(Sleeping Giant Zone) and $50/t
for cut and fill mining (smaller zones).
The resulting production totals were similar to the Base Case
Open Pit Scenario,
however, the bulk of the tonnage was in the underground
portion.
The South Zones (comprising of Sleeping Giant, L, NAD013 and H)
returned almost no
open pit mining (a total of 670,000 t of mill feed from L and H
versus. 17.4 Mt for
underground). Examination of zone geometry revealed that the
shallow portions of the
mineralization are very narrow and that the strip ratio climbs
above the trade-off value
almost immediately, and never returns below that number. The
small amount of open pit
production in the south is accompanied by 14.7 Mt of waste,
giving a strip ratio of 22:1.
The split in the Northern Zones (comprising J, M, and G Zones)
is more as expected,
with a majority of the mineralization captured in the pits. The
quantities left for
underground mining are not considered large enough to support
the capital costs to
access them, so for this scenario, the larger open pit only
values for the northern zones
were used (4.8 Mt mill feed, at a strip ratio of 12:1).
Dilution and mining recovery was applied to the above numbers,
using 5% and 100%
respectively for open pit mining, and 15% and 95% respectively
for underground mining;
with all dilution at zero grade. As a result, the diluted and
recovered tonnage and grades
changed to 24.49 Mt (5.90 Mt open pit and 18.59 Mt underground)
at 0.77% Ni, 0.17%
Cu, and 0.022% Co. Waste mining of 75 Mt is required for the
open pit stage of the
project, for a strip ratio of 12.7:1.
It is noteworthy that for underground mining, only the higher
grade mineralization of
Sleeping Giant Zone that is currently included in the Inferred
Resource would be mined. OPEN PIT MINE DESIGN Pit optimizations do
not include individual benches or ramp design. For the pit
size,
production requirements, and recommended equipment fleet, RPA
considers mining of
12 m benches and development of 33 m wide ramps, including
ditches and safety berm,
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Continental Nickel Limited – Ntaka Hill Nickel Project Technical
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Rev. 0 Page 1-24
to be appropriate. The ramps should be designed at 10% grade
with exits appropriately
located in order to minimize distances to the mill and the waste
rock dumps.
The production rate is assumed to be 1 Mtpa for the first four
years of production, during
which mining would be carried out by contractors, in order to
keep initial capital as low as
possible. From Year 5 onwards, the production is assumed to be
expanded to 2.5 Mtpa
with owner-operated mining equipment, to reduce operating
costs.
Mining will be carried out using conventional open pit methods
consisting of the following
activities:
Drilling performed by conventional production drills;
Blasting using ANFO (ammonium-nitrate fuel oil) and a down-hole
delay initiation
system;
Loading and hauling operations performed with hydraulic shovels,
front-end loaders and rigid haulage trucks.
The production equipment will be supported by bulldozers,
graders and water trucks.
Sizes of equipment will vary depending on production rate. Owner
operations at 2.5
Mtpa will require the purchase of a large mining fleet.
In the scenario where the Sleeping Giant Zone is mined using
open pit methods, there is
a requirement to divert a river within the footprint of the pit.
A trench (maximum depth 25
m) will be excavated around the west side of the pit, before
returning the flow to the
natural channel. A cost estimate for the river diversion is
included in capital costs.
UNDERGROUND MINE DESIGN The underground mining methods
recommended by RPA are cut & fill for narrow zones,
and longhole mining with transverse access from the deposit
footwall through to the
hanging wall for larger zones. Sleeping Giant Zone (high grade
mineralization only as
low grade proves to be non-economic in an underground mining
cost point of view),
NAD013 Zone and H Zone (the p