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Advancing the Mont Sorcier Iron Ore and Vanadium Project

PEA Results February 2020

PEA Highlights

PEA generated after tax NPV of C$ 1,699 million and IRR of 33.8%

• Annual production targeted at approx. 5.0 million tonnes of high grade, low impurity, iron concentrate grading ~65% iron with 0.6% V2O5 per tonne of concentrate
• Initial Capex C$457.5 million
• Payback period of 3.0 years
• Current Mineral Resource Estimate supports a potential mine life of 37 years
• Total Site Operating costs of C$52.38/t of concentrate over potential LOM
• Upside potential from resource expansion and the potential to expand production

Iron and Vanadium Pricing Market Study

In preparation for the PEA, the Company commissioned an Independent Market pricing Study to determine the potential value of the vanadium rich iron product produced by Mont Sorcier given the lack of available  quoted market index prices. The study was completed by Paul Vermeulen of Vulcan Technologies in late October 2019. The study reviewed main iron index price forecasts as well as estimates of the applicable vanadium credits. The study reviewed a value in use methodology based upon a review of the grade and concentrate chemistry from Mont Sorcier relative to other similar iron products and the study concluded that the concentrate from Mont Sorcier should receive a US$15/t premium to the Platts 65 price iron Index for the contained vanadium credits (based on a net attributable value using a long term V2O5 price of $7.25/lb). The PEA used a concentrate selling price aligned with those in the Vulcan Market Study (October 2019) with an average value over the life of the project at C$140.79/t. An example of the pricing for 65% concentrate is provided in the table.

Mining

The mine design is based on the sequential mining of the South zone followed by the North zone using standard open pit mining techniques of drill, blast and haul. This will allow for the South pit to be used for waste disposition in future years. CSA Global has developed a mine plan which processes 555 million tonnes of the current resource base over a 37-year mine life at an average strip ratio of 0.89 to 1. Mining will reach a peak of material movement of approximately 44 million tonnes per annum. Mining costs are estimated at C$2.29/t of material moved. SiO2 content will be kept under 2.5% through pit grade-control practice to maintain above 65% Fe in concentrate.

Metallurgy and Processing

As outlined in a press release dated February 10, 2020, Vanadium One Iron engaged COREM to undertake
initial metallurgical test work to support the recoverability of the iron and vanadium into concentrates. The
results of the test work confirmed the production of premium high grade 65.8% iron concentrate with 0.67%
V2O5 expected at Mont Sorcier, averaged from 4 composite samples representing high and low grade drill
core samples from the north and south deposits.
The processing plant designed for Mont Sorcier is in line with similar projects in production globally using
standard equipment and technologies. The PEA has included crushing and grinding to a P95 of 45 microns
to ensure the production of premium concentrate grades, with three stages of magnetic separation. Based
upon the mine plan, Mont Sorcier is expected to produce a life of mine average concentrate grading 65%
iron with 0.6% V2O5.

Capital Cost

Upfront capital costs are estimated at C$457.5 million with a pay back of 3.0 years with an after-tax IRR of
33.8%. Sustaining capital is estimated at C$600.7 million over the life of mine and is principally related to
equipment replacement. Capital costs include a 15% continency for equipment and 30% for plant and
infrastructure. It should be noted that included within mine capital costs is C$229.1 million (C$28.8 million
initial capex) for the mining fleet and C$226 million (C$31.5 million initial capex) for rail cars for concentrate
transport. Based upon expressions of interest from vendors, management is of the view these items can
be readily leased to reduce initial capital needs with an increase in operating costs. This will be determined
at a later date, based upon the receipt of more formal quotes, as will a review of the potential benefits of
using contract mining.

 

Operating Cost

Upfront capital costs are estimated at C$457.5 million with a pay back of 3.0 years with an after-tax IRR of
33.8%. Sustaining capital is estimated at C$600.7 million over the life of mine and is principally related to
equipment replacement. Capital costs include a 15% contingency for equipment and 30% for plant and
infrastructure. It should be noted that included within mine capital costs is C$229.1 million (C$28.8 million
initial capex) for the mining fleet and C$226 million (C$31.5 million initial capex) for rail cars for concentrate
transport. Based upon expressions of interest from vendors, management is of the view these items can
be readily leased to reduce initial capital needs with an increase in operating costs. This will be determined
at a later date, based upon the receipt of more formal quotes, as will a review of the potential benefits of
using contract mining.

Note: Cash Costs is a non IFRS financial performance measure with no standard definition under IFRS. The Company provides them as supplementary information that management believes may be useful investors.

Overall Project Economics

The overall project shows potentially robust economic results with a an after tax NPV at 8% discount rate
of C$1,699 million and IRR of 33.8%. Project economics are based on a potential 37-year mine life with a
3-year payback period, with positive after-tax cash flow commencing in Year 1. Total cumulative, after tax
free cash flow over the life of mine is estimated at C$6,253 million.

Proposed Development Program

In light of the robust PEA results, the Company is in the process of developing a detailed development plan
and budget to determine the requirements to bring Mont Sorcier to a development decision with the
completion of a formal Feasibility Study. While details are still being finalized such a program would be
expected to take approximately 24 months from commencement consisting of the following key components:
• Undertake a formal Strategic review of potential development partners and enter into an agreement
to support project development and future funding requirements.
• Undertake additional drilling to improve resource confidence levels to support a Feasibility Study.
A total of approximately 12,000 meters is recommended to complete this program.
• Undertake further metallurgical testing to determine final concentrate characteristics to optimize
final product specifications and to enhance overall recovery based upon more detailed resource
and mine sequencing details,
• Commence Environmental base line studies,
• Commence formal discussion with first nations and local community groups to negotiate an Impact
and Benefits agreement,
• Commence and complete the required permitting process,
• Increased management and operational capacity with the addition of key specialists to bring the
project to a final development decision,
• Commence and Complete project financing negotiations

Mineral Resource Estimate

The PEA is based on a mine plan derived from the Mineral Resource Estimate dated April 23, 2019 outlined
below.

 

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