As the mining world struggles to raise financing on global capital markets, Toronto-listed diversified junior Fortune Minerals is pursuing a financing strategy based on securing strategic partnerships with companies that need the product it plans to produce from its two development projects in Canada.
One project – Arctos in British Columbia – will mine anthracite and the other – Nico in Northwest Territories – will produce cobalt, bismuth, gold and copper and will have a related refinery in Saskatchewan to process the concentrates into metal and chemical products.
South Korean steelmaker Posco has signed up as the 20% joint venture partner for the $800- million Arctos mine, while a Chinese group has expressed interest in the Nico project, which is currently estimated to cost $440-million.
Fortune president and CEO Robin Goad tells Mining Weekly that Procon Resources, a controlled subsidiary of China CAMC Engineering, has made a C$11.7-million strategic investment in Fortune at the corporate level and it is working towards completing a project-level investment in Nico and a debt facility to develop the asset.
Completing financing for the project is one of four major milestones required to bring Nico into production, the others being the completion of an all-weather road to the site, concluding negotiations for the impact benefit agreement with the government of the Tlicho First Nation and wrapping up the permitting process, which involves securing numerous regulatory permits and documenting its support for the measures contained in the approval received from the Tlicho and federal governments.
The Nico project has advanced to the stage where detailed engineering has started and procurement activities are being positioned for execution, reports VP for operations and COO Mike Romaniuk. In July, Fortune received the Tlicho and Canadian governments’ approval for Nico, after authorities accepted the Mackenzie Valley Review Board’s environmental assessment and reasons-for-decision report, and recommended approval.
“The timeline for the project is tied to financing. If we successfully compete the project financing, we anticipate that production will commence in late 2016 or early 2017,” he says.
However, developing a project in the North brings with it a number of challenges, with infrastructure and labour topping the list. Romaniuk says road access is critical to the Nico project’s success and reports that plans are in place to complete the required road by working with the governments of the Tlicho First Nation and the Northwest Territories. Fortune has also been working closely with the Northwest Territories Power Corporation to extend its grid to the project site, which the company sees as the best solution to meet the project’s power needs.
Commenting on training and retaining skilled labour, Romaniuk says Fortune is working with the local communities to develop the talent pool. The group is also sourcing labour resources from across Canada, when its needs cannot be met locally.
The company has not yet secured an offtake partner for the cobalt and bismuth products that the Nico project will produce and Goad says it is in discussions with interested companies.
Nico will produce about 1 500 t/y of cobalt as a high-quality cobalt sulphate product needed to manufacture lithium ion and nickel metal hydride batteries from the proposed Saskatchewan Metals Processing Plant (SMPP). Goad says the plant can be easily modified to produce other cobalt chemicals and salts to accommodate changes in market conditions or produce multiple products with minimal changes to the plant configuration or capital and operating costs.
Fortune’s project, as a North American vertically integrated mine and refinery, will be well positioned in the global market, especially as the Democratic Republic of Congo (DRC) – a politically unstable country – is currently dominating cobalt mine production with a 53% market share. Zambia accounts for 12% of mine production. Goad points out that the DRC has imposed new export duties on unprocessed concentrates and high moisture cobalt hydroxides that dominate the materials sold to Chinese refineries. He adds that production could shift to cobalt sulphide materials that are more expensive to treat, as there is evidence that oxide concentrates processed by sulphuric acid leaching at atmospheric conditions are being depleted.
Goad is upbeat about the prospects for the cobalt market, which has been growing at a rate of between 6% and 8% a year over the last two decades. Cobalt is used in a variety of metal and chemical applications. Cobalt chemicals are used to make lithium ion and nickel metal hydride batteries, which consume 38% of the world’s cobalt production. Batteries are seen as a high-growth market, with growth of 25% a year forecast on the back of demand for greater portability in electronic devices, growth in emerging markets and the impending proliferation of hybrid-electric and plug-in electric automobiles and other vehicles.
“The SMPP is well positioned to benefit from these factors as a reliable North American supplier,” Goad says. Given the size and distribution of cobalt markets, Fortune’s sales strategy could focus on many jurisdictions, with North America, Western Europe, Japan, South East Asia and South Korea potentially its core focus.
The Nico project will also produce bismuth, which is experiencing significant growth as a non-toxic replacement for lead in various applications and gold as a co-product, which Fortune could use to help finance the project through forward selling or hedging.
Dealing with Community Unease
Fortune’s plans to set up the SMPP hydrometallurgical processing facility in the rural municipality of Corman Park, east of Langham, have been met with some resistance from environ- mental groups, which raised concerns about extraction processes using hazardous chemicals, such as cyanide, and the prospect of solid waste remaining permanently at the site.
Fortune director of regulatory and environ- mental affairs Rick Schryer believes that Fortune has addressed the concerns raised by the public and by the Saskatchewan Environmental Assessment Branch (SEAB) during the review of the environmental impact study. SEAB will make a recommendation to the Saskatchewan Environment Minister. “Fortune has considered the comments and concerns presented by various parties into the design of the facility or mitigation/monitoring plans. With these changes in place, we are confident we can build and operate the facility with minimal impact to the local environment and its residents,” he says.
The Saskatchewan Environmental Society has asked that the Saskatchewan Ministry of Environment refuse approval for the SMPP, stressing that the risks to Langham and the surrounding area outweigh the potential benefits.
But Schryer says, should the project proceed, it will operate with minimum possible impact to the surrounding environment and provide employment to 100 skilled individuals.
“The Nico reserves represent an important Canadian source of materials to support an improved quality of life for a growing world population. For instance, bismuth has physical properties that are otherwise similar to lead, but unlike lead, is not toxic and it is seeing increased use as a lead replacement in applications like electronic solders to reduce environmental damage from e-waste and in potable water supply. Similarly, cobalt is critical for manufacturing rechargeable batteries used in everything from smartphones to electric vehicles and is expected to be at the leading edge of the search for alter- native and renewable-energy systems,” he points out.
Fortune also had to deal with community unease at its Arctos project in north-western British Columbia, where members of the Tahltan First Nation blocked a road leading to the project in September last year. The road is also used to travel to traditional hunting camps. Tahltan community members said they were concerned that contractors started using the access road after the Iskut First Nation, in preparation for the hunting season earlier in the summer, repaired it.
Provincial Aboriginal Relations and Recon- ciliation Minister John Rustad, Energy and Mines Minister Bill Bennett and Environment Minister Mary Polak have reaffirmed the province’s support for the project, and the Klappan Strategic Initiative was launched with the Tahltan to lay the groundwork for long-term development planning. “Government is sup- portive of the legal right of any company who has worked within our laws, regulations and processes to be able to safely perform work within the scope of their Notice of Work and subsequently the Mines Act permit,” the Ministers said in a joint statement in September.
Schryer says it will follow a similar approach at Arctos as to that taken at the Nico project, where environmental concerns and unease over its proximity to the Hislop Lake, which is a site of cultural significance to the Tlicho people, were raised. “After successfully addressing these concerns, we received approval for the Nico project from both the Tlicho and federal governments in 2013,” he reports.
Arctos is currently in the British Columbia Environmental Assessment process, which provides a mechanism for Aboriginal groups, regulatory agencies and the public to review proposed major projects to assess their potential impacts and to help ensure that they meet the goals of environmental, economic and social sustainability. “The process ensures that questions and concerns of Aboriginal groups, the public, interested stakeholders and government agencies are identified and addressed before construction of the project is allowed to proceed.”
Fortune has included Tahltan and Gitxsan First Nation employees in its community relations programme and feedback received from its engagement efforts has contributed to improvements to the Arctos project, such as eliminating the construction of an overland trucking route, removing rock storage piles from the Little Klappan watershed and redesign- ing aspects of the proposed processing operations to minimise the amount of water taken from the environment.
Romaniuk reports that community developments have resulted in delays at the Arctos project, which has an 18- to 24-month timeline for construction and commissioning once the necessary permits and approvals are received.
“Our immediate goal for Arctos is to move forward in a fair and transparent environmental assessment process, which allows any interested party to register their opinion,” he adds.
Fortune concluded a field camp at Arctos in October, which included a drilling programme to support geo- technical, hydrogeological and geotechnical studies. It also conducted archaeological studies and baseline data acquisition at both the proposed mine location and rail line. Goad says the environmental baseline information will inform the environmental protection measures that Fortune will commit to putting in place.
“Should the project move forward, the mine would operate with minimum possible impact to the surrounding environment by managing key components, such as water quality, dust emissions and habitat loss. The mine is being designed – from the beginning – with closure in mind, so that the land can be returned to similar ecological function when operations are complete,” he says.
So far, more than $100-million of work has been invested in advancing the Arctos project, including environmental and feasibility studies, test mining, processing and trail cargos. Strategic partner Posco has advanced $30-million to Fortune and the project.
Arctos will produce anthracite, which is a versatile coal used in steel manufacturing, metals and food processing, as well as for other industrial purposes. Historically, China and Vietnam are the major producers. China is now a net importer of anthra- cite coal and Vietnam has a national policy objective of limiting exports to 5% of their production in order to preserve domestic reserves for their own industries.
“The dramatic reduction of anthracite exports from the two dominant producers, together with the depletion of reserves in other countries and rising metallurgical coal demand is constructive for future pricing,” says Goad.