Duluth Metals Highlights Low Copper (C1) Cash Costs and Strong Operating Margins in its Pre-feasibility Study for Twin Metals Minnesota Project The draft pre-feasibility study set out in the independent National Instrument 43-101 Technical Report (“PFS Technical Report”) prepared by a multi-company team led by AMEC E&C Services Inc. (“AMEC”) for Duluth Metals Limited confirms that the proposed underground copper, nickel and Platinum Group Metals (“PGMs”) mining project (the “TMM Project”) is supported by financial fundamentals showing a competitive cost position, high margins sustained over time, and capital efficiencies resulting from outstanding regional and local infrastructure and competitive advantages. The PFS Technical Report is based on a 30-year underground mine plan focused on the part of the TMM Project known as the Maturi and Maturi SW mineral deposits with an average production rate of 50,000 short tons (st) per day, producing copper and nickel concentrates that are anticipated to be marketable to customers across the world. Over the TMM Project’s planned 30 years of operation, the PFS Technical Report estimates the mine will produce approximately 5.8 billion pounds of copper, 1.2 billion pounds of nickel, 1.5 million ounces of platinum, 4.0 million ounces of palladium, 1.0 million ounces of gold, and 25.2 million ounces of silver. Low C1 cu cash cost of $0.31/lb (net of byproduct credits) over the first 10 years of production and 30 year Copper (C1) cash cost of $0.76/lb (net of byproduct credits). Strong 30 year Onsite Operating Margin of $36.54/short ton. The TMM Project’s pre-tax base case, as calculated by AMEC, shows a net present value (“NPV”) of CDN $1.5billion @8% discount factor (US$1.4 billion @8% discount factor). The TMM Project’s after tax base case, as calculated by PricewaterhouseCoopers LLP, shows an NPV of CDN $0.9 billion @8% discount factor (US$0.8 billion @8% discount factor). Analyst and Investor Conference Call A conference call with senior management of Duluth Metals for the investment community has been scheduled for Wednesday, August 20, 2014 at 10:30 a.m. EDT. Christopher Dundas, Executive Chairman, and Kelly Osborne, President and CEO, will be available to answer questions during the call. To participate in the call, please dial-in five minutes prior to the call: Participant Dial-In Number(s): *Operator Assisted Toll-Free Dial-In Number: (888) 231-8191 *Local Dial-In #: (647) 427-7450 TORONTO, Ontario, August 20, 2014 – Duluth Metals Limited (“Duluth” or “Duluth Metals”) (TSX: DM) (TSX:DM.U) today announced that it has received the draft pre-feasibility study set out in the independent National Instrument 43-101 Technical Report (“PFS Technical Report”) prepared by a multi-company team led by AMEC E&C Services Inc. (“AMEC”) for Duluth Metals for the proposed
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Duluth Metals Highlights Low Copper (C1) Cash Costs and Strong Operating Margins in its
Pre-feasibility Study for Twin Metals Minnesota Project
The draft pre-feasibility study set out in the independent National Instrument 43-101 Technical
Report (“PFS Technical Report”) prepared by a multi-company team led by AMEC E&C
Services Inc. (“AMEC”) for Duluth Metals Limited confirms that the proposed underground
copper, nickel and Platinum Group Metals (“PGMs”) mining project (the “TMM Project”) is
supported by financial fundamentals showing a competitive cost position, high margins sustained
over time, and capital efficiencies resulting from outstanding regional and local infrastructure and
competitive advantages.
The PFS Technical Report is based on a 30-year underground mine plan focused on the part of
the TMM Project known as the Maturi and Maturi SW mineral deposits with an average
production rate of 50,000 short tons (st) per day, producing copper and nickel concentrates that
are anticipated to be marketable to customers across the world.
Over the TMM Project’s planned 30 years of operation, the PFS Technical Report estimates the
mine will produce approximately 5.8 billion pounds of copper, 1.2 billion pounds of nickel, 1.5
million ounces of platinum, 4.0 million ounces of palladium, 1.0 million ounces of gold, and 25.2
million ounces of silver.
Low C1 cu cash cost of $0.31/lb (net of byproduct credits) over the first 10 years of production
and 30 year Copper (C1) cash cost of $0.76/lb (net of byproduct credits).
Strong 30 year Onsite Operating Margin of $36.54/short ton.
The TMM Project’s pre-tax base case, as calculated by AMEC, shows a net present value
The PFS Technical Report indicates a C1 cash cost/lb. of copper (Cu) (“life of mine” or LOM) of $0.76
(net of all byproduct credits) and a C1 cash cost/lb. of copper-equivalent (CuEq.) LOM of $1.64. Duluth
believes that the PFS Technical Report confirms that the TMM Project has:
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a competitive cost position whereby the TMM Project would be in the first quartile of C1 cash
costs per pound of Cu produced over the mine’s 30 years of operation when benchmarked against
other producing copper mines throughout the world,
strong operating margins sustained over time, and
capital efficiencies resulting from outstanding local infrastructure and workforce.
“The PFS Technical Report confirms that the TMM Project offers an extraordinary long-term economic
opportunity for the state of Minnesota, local communities, and TMM Project stakeholders,” stated
Christopher Dundas, Executive Chairman of Duluth Metals. “The TMM Project enjoys many advantages
including excellent infrastructure, a mining friendly jurisdiction and upsides for future expansion and
potential down-stream processing.”
All dollar amounts in this press release are shown in US dollars, unless otherwise stated.
PFS Technical Report Highlights
The independent PFS Technical Report was prepared at the request of Duluth by AMEC, and therefore
the conclusions and opinions expressed in the PFS Technical Report, and those contained in this new
release, are those of AMEC arrived at independently of Duluth Metals, Antofagasta P.l.c. (“Antofagasta”)
and TMM. The estimations set out in the PFS Technical Report and summarized in this news release for
operating costs, commercial terms and metal price parameters are a result of AMEC’s independent
evaluation of the TMM Project.
1. NPV:
In the PFS Technical Report, AMEC has calculated a range of TMM Project pre-tax and after-tax
net present values (“NPVs”) based on discount factors of six, eight (base case) and 10 percent.
The NPV calculation represents cash flows discounted to the beginning of the first year when
construction expenditures are made and represented in 2014 constant dollars.
Base Case* Pre-tax NPV (@8% discount) = $1.36 billion
Base Case After-tax NPV (@8%) = $0.75 billion
Pre-tax NPV (@6%) = $2.22 billion
After-tax NPV (@6%) =$1.45 billion
Pre-tax NPV (@10%) = $0.73 billion
After-tax NPV (@10%) = $0.26 billion
(* “Base Case” calculations use projected metal prices of $3.50/lb copper, $9.50/lb nickel, $1,300/oz gold, $1,680/oz platinum,
$815/oz palladium, and $21.50/oz silver.)
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2. Low 30-year Cash Cost Position:
The C1 cash costs in the PFS Technical Report are as follows:
C1 Cash Cost/lb. of Cu (LOM) = $0.76 (net of all byproduct credits)
C1 Cash Cost/lb. of CuEq. (LOM) = $1.64
where CuEq is derived by adding the lbs. of Cu plus the Ni Revenue/price of copper.
3. Strong Operating Margins:
The PFS Technical Report margins include:
Revenue/ton milled (LOM) = $58.27
Onsite operating costs/ton milled (LOM) = $21.73
Onsite Operating Margin/ton milled (LOM) = $36.54
Total operating costs/ton milled (LOM) = $30.58
Total operating margin/ton milled (LOM) = $27.69
4. Efficient Capital Investment:
The PFS Technical Report capital cost estimates are:
Initial Capital = $2.77 billion
Pre-tax Payback Period = 6.4 years from start of production
Capital Intensity1 = $6.24 /annual lb CuEq produced
LOM Capital = $5.41 billion
Internal Rate of Return Pre-tax (IRR) = 13.6 %
(Note 1: Capital Intensity equals Initial Capital divided by Average Annualized pounds of CuEq produced for the first 10 years.)
5. A Strong Economic Engine during the First 10 Years:
The TMM Project is focused on maximizing project economics from startup. The PFS Technical
Report estimates that, in the first 10 years of production, the total TMM Project will generate the
following average annual financial measures:
Revenue (years 1-10) = $12.11billion
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) = $6.19
billion
Free Cash Flow (pre-tax) = $4.60 billion
Free Cash Flow (after-tax) = $3.87 billion
Production of Payable Cu = 2.11 billion lbs.
Production of Payable Ni = 378.55 million lbs.
C1 Cash Cost/lb of CuEq = $1.36
C1 Cash Cost/lb of Cu = $0.31
Operating Margin = $37.18 per ton milled
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A summary of the TMM Project economics, as set out in the PFS Technical Report, is shown in Table 1,
and TMM Project capital cost is shown in Table 2.
Table 1 - TMM Project Economics
Valuation Indicators Pre Tax UNITS LOM
Cumulative Cash flow Pre Tax $M 7,913
NPV 6% $M 2,231
Base Case NPV 8% $M 1,358
NPV 10% $M 732
Payback period from start of production Years 6.4
IRR before tax % 13.6%
After Tax UNITS LOM
Cumulative Cash flow After Tax $M 6,003
NPV 6% $M 1,449
Base Case NPV 8% $M 753
NPV 10% $M 257
Payback period from start of production Years 7.2
IRR after tax % 11.4%
Table 2 - TMM Project Capital Cost
TMM Project Capital Cost
UNITS VALUE
Initial Capital $M 2,775
Sustaining Capital $M 2,636
LOM Capital $M 5,410
Capital Intensity1 $/lb CuEq year 6.24
(Note 1: Capital Intensity equals Initial Capital divided by Average Annualized pounds of CuEq produced for the
first 10 years.)
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Mineral Reserves
The mine plan is based on the Mineral Reserves converted from 1.233 billion short tons of Measured +
Indicated Mineral Resources within the Maturi and Maturi SW deposits. The Mine Plan, including dilution, estimates total proven and probable reserves, as set out in the PFS
Technical Report, of 527 Mst over the LOM as shown in Table 3. The total contained metal is shown in
Table 4.
Table 3 – Mineral Reserve Estimates
Area Classification Ore Tons Cu Ni Pt Pd Au Ag
(Mst) (%) (%) ppm ppm ppm ppm
Maturi
Proven 130 0.65 0.21 0.152 0.354 0.086 2.31
Probable 351 0.59 0.19 0.163 0.367 0.087 2.15
P&P 482 0.61 0.19 0.160 0.363 0.087 2.19
Maturi SW
Proven 0 0.00 0.00 0.000 0.000 0.000 0.00
Probable 43 0.48 0.16 0.083 0.192 0.048 1.60
P&P 43 0.48 0.16 0.083 0.192 0.048 1.60
Total
Proven 130 0.65 0.21 0.152 0.354 0.087 2.31
Probable 397 0.58 0.19 0.154 0.348 0.083 2.09
P&P 527 0.59 0.19 0.154 0.349 0.084 2.14
Table 4 – Contained Metal in Mineral Reserve Estimates
Contained Metal
Area Classification Ore Tons Cu Ni Pt Pd Au Ag
(Mst) Blbs Blbs Moz Moz Moz Moz
Maturi
Proven 130 1.7 0.5 0.6 1.4 0.3 8.8
Probable 351 4.2 1.3 1.7 3.8 0.9 22.2
P&P 482 5.8 1.9 2.3 5.1 1.2 31.0
Maturi SW
Proven 0 0.0 0.0 0.0 0.0 0.0 0.0
Probable 43 0.4 0.1 0.1 0.2 0.1 2.0
P&P 43 0.4 0.1 0.1 0.2 0.1 2.0
Total
Proven 130 1.7 0.5 0.6 1.4 0.3 8.8
Probable 397 4.6 1.5 1.8 4.0 1.0 24.2
P&P 527 6.2 2.0 2.4 5.4 1.3 33.0
Notes to Mineral Reserve Estimates Table
1. The Qualified Person for the Mineral Reserve estimate is Joanna Poeck, an employee of SRK Consulting (U.S.), Inc. The
Mineral Reserves have an effective date of 1 July 2014.
2. Mineral Reserves are contained within mine designs based on Measured and Indicated Mineral Resources, and assume a mining rate of 50,000 st/d of mineralized material over a 30 year mine life. Underground mining will utilize conventional
post-pillar cut-and-fill and long-hole open stoping methods. Paste backfill will be employed. The mine plan includes the
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mining of remnant mineralized material, which is mineralized material that is above the marginal cut-off grade, but is left
behind during the first pass mining of higher-grade material.
3. Mineral Reserves are contained within Measured and Indicated mine designs using the following net smelter return (NSR)
calculation inputs. Recovery assumptions used in the calculations were 94.0% for Cu, 60.8% for Ni, 82.3% for Au, 36.1% for Pd and 42.5% for Pt. Payability assumptions were 76.4% for Cu, 70.8% for Ni, 45% for Au, 68.6% for Pd and 69.3%
for Pt. Metal price assumptions were $3.00/lb for Cu, $9.50/lb for Ni, $1,200/oz for Au, $700/oz for Pd and $1,650/oz for
Pt. Operating cost assumptions used in the NSR equations total $23.53/st mined and include mining costs of $13.80/st, process costs of $5.02/st, paste backfill costs of $1.28/st, water management costs of $0.21/st, tailings costs of $0.06/st,
general and administrative costs of $2.44/st; technical services costs of $0.45/st and financial assurance costs of $0.27/st.
4. Mineral Reserves are reported using an NSR cut-off of $25.00/st.
5. Mineral Reserves are reported according to CIM Definition Standards for Mineral Resources and Mineral Reserves (May 10, 2014).
6. Mineralization that was either not classified or assigned to the Inferred Mineral Resource category was set to waste within the above NSR cut-off mining shapes. Mine design incorporates geotechnical and hydrogeological considerations that take
into account paste and hanging wall dilution. Dilution is allocated in the mine design based on the mining method, and
ranges from 3–5%. Mining recovery is assumed at 95%.
7. Tonnage figures are reported as million US short tons (st); grade figures as parts per million (ppm) or percent (%);
contained copper and nickel are reported in billion pounds (B lb), contained platinum, palladium, gold and silver are reported in million troy ounces (M oz). Contained metal is reported as in situ metal content and does not include any
adjustments for recoverability.
8. Rounding as required by reporting guidelines may result in apparent summation differences between tons, grade and contained metal content.
9. Antofagasta uses different parameters in its calculation of Mineral Reserves.
Mineral Resources
The PFS Technical Report provides an updated resource estimate for the TMM Project, which includes
four deposits known as the Maturi, Maturi SW, Birch Lake and Spruce Road deposits. The PFS
Technical Report mine plan and financial estimates for the TMM Project are based on Mineral Resource
estimates from the Maturi and Maturi SW deposits that have been updated from the previously-disclosed
January 2014 resource estimates. Maturi Measured, Indicated, and Inferred Mineral Resources
incorporate assay results from 57 drill holes totaling 65,635.5 ft drilled between September 2012 and
January 2014. In addition, the resource estimate tabulates silver grades for the first time, estimating a
Maturi Measured + Indicated grade of 2.14 ppm Ag (0.063 oz/st Ag), and Maturi SW Indicated grade of
1.58 ppm Ag (0.046 oz/st), for a total of 75.4 Moz of silver contained in the Maturi and Maturi SW
Measured + Indicated Mineral Resources.
Current resource estimates for Maturi, Maturi SW, Birch Lake and Spruce Road deposits are presented in
1. The Mineral Resource estimates have different effective dates as follows: Maturi: 4 February 2014; Maturi SW: 15 June 2013; Birch Lake: 15 September 2012; Spruce Road: 15 September 2012.
2. The Qualified Person for the estimates is Dr. Harry Parker, RM SME, who is a Professional Geologist licensed in Minnesota.
3. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not
have demonstrated economic viability.
4. Mineral Resources were estimated assuming underground bulk mining methods and are reported at a cut-off grade of 0.3% Cu.
5. Maturi and Maturi SW copper equivalent (CuEq) grades are based on the following assumptions: CuEq = Cu + 1.459*Ni + 0.265*Au + 0.101*Pd + 0.228*Pt + 0.004*Ag; where global metallurgical recoveries are 93.4% (Cu), 61.4% (Ni), 78.5%
(Au), 74.9% (Pd), and 63.2% (Pt) and 76.5% (Ag); smelter returns are 94.3% (Cu), 77.1% (Ni), 54.9% (Au), 35.0% (Pd),
and 45.2% (Pt) and 47.6% (Ag), and long-term consensus metal prices are $3.50/lb Cu, $9.50/lb Ni, $1,300/troy oz Au,
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$815/troy oz Pd and $1,680/troy oz Pt and $21.50/troy oz Ag. The Birch Lake CuEq formula is based on November 2012
parameters: CuEq = Cu + 1.58*Ni + 0.285*Au + 0.219*Pd + 0.435*Pt, where concentrate metallurgical recoveries are 94.3% (Cu), 60.0% (Ni), 85.0% (Au), 90.0% (Pd), and 93.0% (Pt); CESL metallurgical recoveries are 96.3% (Cu), 95.6%
(Ni), 74.5% (Au), 70.7% (Pd), and 59.4% (Pt); smelter returns are 100% (Cu), 80% (Ni), 80% (Au), 80% (Pd), and 80%
(Pt); long-term consensus metal prices of $3.00/lb Cu, $9.38/lb Ni, $1,050/troy oz Au, $805/troy oz Pd and $1,840/troy oz Pt. The Spruce Road CuEq formula is based on the Maturi parameters, and restricted to Cu and Ni: CuEq = Cu +
1.459*Ni; where global metallurgical recoveries are 93.4% (Cu), 61.4% (Ni); smelter returns of 94.3% (Cu), 77.1% (Ni);
long-term consensus metal prices of $3.50/lb Cu, and $9.50/lb Ni.
6. Silver is not included in the 2012 resource estimate for Birch Lake as QA/QC results had not been reviewed at the time of
the estimate. Silver is not a contributor to either the NSR calculation or the CuEq grade for Birch Lake. Gold, platinum, palladium and silver assays were not available to support estimation in the 2012 Spruce Road resource model. Gold, Ag,
Pt and Pd do not contribute to either the NSR calculation or the CuEq grade for Spruce Road.
7. No allowances for mining recovery and external dilution have been applied. Mineral Resources for Maturi assume a 400-foot-thick safety pillar above the Mineral Resource. Mineral Resources for Maturi SW are tabulated based on a 15 foot
allowance for overburden and no safety pillar. Mineral Resources for Birch Lake do not have a safety pillar allowance since the mineralization is located 600 feet below ground surface. Mineral Resources at Spruce Road assume a 164-foot-
thick safety pillar.
8. Tonnage figures are reported as million US short tons (st); grade figures as parts per million (ppm) or percent (%); contained copper and nickel are reported in billion pounds (B lb), contained platinum, palladium, gold and silver are
reported in million troy ounces (M oz). Contained metal is reported as in situ metal content and does not include any adjustments for recoverability.
9. Rounding as required by reporting guidelines may result in apparent summation differences between tons, grade and contained metal content.
TMM Project Description
Duluth believes that the TMM Project is expected to be one of the world’s largest development-stage
polymetallic projects and that Minnesota offers worldwide competitive advantages through extensive
modern infrastructure such as easily accessible roads, rail lines, ports, power and water supplies, as well
as a highly-experienced mining labor force.
The TMM Project comprises four major areas: the Underground Mine Site, Concentrator Site,
Tailings Storage Facility Site and the Utility Corridors, as shown in Figure 2. The Mine Site is located
at the Maturi and Maturi SW deposits. The TMM Project has two declines that involve non-ore
development, with the portals located on and near the Concentrator Site. The Concentrator Site
includes the primary portal, temporary ore stockpiles (lined with leachate collection), and a process water
pond. The Tailings Storage Facility located south of the city of Babbitt, would store tailings that are not
returned to the underground mine as paste backfill. The Tailings Storage Facility also includes a
concentrate filtration plant, intermediate pond, electrical substation, and rail load-out facility. The TMM
Project will use multiple Utility Corridors for infrastructure needs including concentrate, tailings and
water pipelines, service and contact roads, and an extension of the existing railroad.
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Figure 1 – TMM Project Configuration
Mining Methodology
The TMM Project is based on an underground mining operation with a throughput capacity of 50,000 st
per day, or 18.25 Mst per year. The underground operation would utilize a combination of post-pillar cut-
and-fill and long-hole stoping mining methods (PPCF and LHS, respectively). These methods were
selected for their ability to accommodate specific geometries of the deposit, to allow for a relative low
cost, high ramp-up rate, and high productivity.
The mine plan estimates a LOM production of 527 Mst of mineralized material at 0.59 percent copper and
0.19 percent nickel. Mine infrastructure covers a wide variety of fixed facilities to be constructed