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Hudson Reports Robust Preliminary Economic Assessment for Specialty Alumina Production From the White Mountain Anorthosite Deposit

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Hudson Reports Robust Preliminary Economic Assessment for Specialty Alumina Production From the White Mountain Anorthosite Deposit

 

 

 

 

 

HUDSON RESOURCES INC. (TSX-V:HUD) (OTCQX:HUDRF) is pleased to announce the results of the Preliminary Economic Assessment for the primary production of specialty grade alumina using White Mountain anorthosite as feedstock. The study was managed by John Goode, P.Eng. and incorporated the work of Arithmetek, Hains Engineering, TAK Industrial Mineral Consultancy, and the 43-101 resource filing dated January 30, 2013. Note that all currencies are denominated in US dollars and tonnages are stated as metric tonnes.
 

The purpose of the study was to evaluate the economics of producing specialty grade alumina utilizing the anorthosite rock from Hudson’s White Mountain project. The deposit is a monomineralic calcium aluminum silicate feldspar with very low impurities and high aluminum oxide (30%) content. The study was based on extensive metallurgical testwork over the last two years where Hudson successfully produced a high quality calcined alumina product suited to specialty non-metallurgical applications (refer to NR2014-05, December 11, 2014). The metallurgical flowsheet utilizes known technologies, does not produce any waste, and produces two potentially valuable co-products, amorphous silica (AS) and calcium silicate (CS). The study is based on shipping crushed anorthosite from Greenland for final processing in Eastern Canada or the US Gulf Coast, where there is a ready supply of natural gas and customers for the co-products.
 

Alumina production is one of three potential revenue streams Hudson is pursuing for the White Mountain project. Hudson is currently in the final permitting stage with the government of Greenland to build the anorthosite mine to supply the E-glass (fiberglass) industry. As well, the Company is also in advanced negotiations for off-take agreements with E-glass producers. It is important to note that the current indicated mineral resource, as defined in Table 5, is sufficient to support both the E-Glass and alumina projects.
 

To determine the economic viability of the project, this alumina study was developed as if it was a standalone project without any of the benefits associated with an existing mining operation.
 

Highlights of the Study include:

 

 
 
--  Net Present Value of $205M at a 10% discount rate, after-tax 
--  Internal after-tax rate of return (IRR) of 23.5% and a 3.9 year payback
    assuming a 20 year mine life 
--  Initial capital costs of $184 million which includes a contingency of
    $33M and working capital of $17M, for a 1,100 tonne per day open-pit
    mine in Greenland and an off-shore processing facility in North America 
--  Operating costs of $115/t, including shipping costs of $25/t between
    Greenland and North America 
--  Revenue of $287/t of mined rock, based on an average specialty alumina,
    AS and CS selling prices of $850/t, $75/t and $75/t, respectively, of
    finished product, ex-plant 
--  Annual sales of specialty alumina, AS and CS of 110,000, 85,000, and
    199,000 tonnes, respectively, representing sales of 81%, 6% and 13%, by
    value
 

 

 

James Tuer, Hudson’s President, stated, “We are extremely pleased with these results as they demonstrate that we can produce a high value product utilizing known technologies without producing the waste products we see in the Bayer process when processing bauxite into alumina. The unique, highly soluble nature of our feed material means we can leach it at atmospheric pressures without the need for expensive autoclaves. We now plan on advancing the alumina project to the next level, which will include pilot plant testing and potentially bringing in a strategic partner to advance the project to prefeasibility.”
 

Hudson, as reported last December (NR2014-05), has produced a high quality specialty grade alumina with the following key attributes:

 

 
 
--  High quality Alpha alumina content measured at 99.8%. 
--  High alumina content of 99.5%, including the loss of ignition (LOI)
    measured at 0.37%. 
--  Very low soda content (less than 0.05%) a requirement for high tech
    electronic and ceramic applications 
--  Fine median particle size of 3.5 micrometres following grinding 
--  Flat tabular particles based on scanning electron microscope images. 
--  BET measured surface area of 4.1 m2 /g which compares favorably with
    other reactive aluminas.
 

 

 

John Goode commented, “The project design is based on a basic flowsheet for alumina recovery from anorthosite that was originally pioneered and tested by Alcan International Limited in the 1980’s. Hudson has further refined and developed and extensively tested the process at SGS Lakefield on a bulk sample of White Mountain anorthosite leading to the production of high quality smelter grade alumina (SGA) and high purity specialty calcined alumina.”
 

Preliminary Economic Assessment Results

 

The following table presents a list of the Project parameters and assumptions derived from the PEA and cash flow model.

 

 
 
Table 1 - Capital and Operating Costs                                       
----------------------------------------------------------------------------
REVENUE                                              US$/t Mined Anorthosite
----------------------------------------------------------------------------
Alumina                                                              $233.69
----------------------------------------------------------------------------
Amorphous Silica                                                      $15.89
----------------------------------------------------------------------------
Calcium Silicate                                                      $37.26
----------------------------------------------------------------------------
                                                                     $286.84
----------------------------------------------------------------------------
OPERATING COSTS                                                             
----------------------------------------------------------------------------
Mining                                                                 $9.86
----------------------------------------------------------------------------
Processing                                                            $92.50
----------------------------------------------------------------------------
Shipping                                                              $25.00
----------------------------------------------------------------------------
G&A                                                                    $4.62
----------------------------------------------------------------------------
Contingency                                                           $13.20
----------------------------------------------------------------------------
Sustaining Capital                                                     $9.53
----------------------------------------------------------------------------
TOTAL OPERATING COSTS                                                $154.71
----------------------------------------------------------------------------
  
 
                                                                          
----------------------------------------------------------------------------
CAPITAL COSTS                                                   US$ MILLIONS
----------------------------------------------------------------------------
DIRECT                                                                      
----------------------------------------------------------------------------
Mining                                                                 $12.0
----------------------------------------------------------------------------
Processing                                                             $87.3
----------------------------------------------------------------------------
                                                                       $99.3
----------------------------------------------------------------------------
INDIRECT                                                                    
----------------------------------------------------------------------------
Mining                                                                  $1.3
----------------------------------------------------------------------------
Processing                                                             $33.7
----------------------------------------------------------------------------
                                                                       $35.0
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Working Capital                                                        $17.1
----------------------------------------------------------------------------
Contingency                                                            $32.9
----------------------------------------------------------------------------
                                                                       $50.0
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
TOTAL CAPITAL COST                                                    $184.3
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Other notable inputs include:                                               
----------------------------------------------------------------------------
Specialty Grade Alumina                                               $850/t
----------------------------------------------------------------------------
Amorphous Silica                                                       $75/t
----------------------------------------------------------------------------
Calcium Silicate                                                       $75/t
----------------------------------------------------------------------------
Hydrochloric acid (35% HCl)                                           $150/t
----------------------------------------------------------------------------
Natural gas                                                          $4.0/GJ
----------------------------------------------------------------------------
Water                                                                 $1.0/t
----------------------------------------------------------------------------
Electricity                                                        $0.06/kWh
----------------------------------------------------------------------------
Greenland Royalty                                                       2.5%
----------------------------------------------------------------------------
Greenland Corp Tax Rate                                                31.8%
----------------------------------------------------------------------------
Nominal North America Tax Rate                                         20.0%
----------------------------------------------------------------------------
 

 

 

The financial model is based on a two year construction period followed by shipments of 200,000 tonnes in year three, 300,000 tonnes in year four and 400,00 tonnes of anorthosite each year thereafter.

 

 
 
Table 2 - Net Present Value Calculations                                    
----------------------------------------------------------------            
                     Mining        Process                 Total            
                  Operation          Plant         Operation Net            
                  Greenland           N.A.         Present Value            
----------------------------------------------------------------            
NPV @ 7.5%             $32M          $256M                 $288M            
----------------------------------------------------------------            
NPV @ 10%              $23M          $182M                 $205M   BASE CASE
----------------------------------------------------------------            
NPV @ 12.5%            $17M          $126M                 $143M            
----------------------------------------------------------------            
IRR                   26.1%          23.2%                 23.5%            
----------------------------------------------------------------
 

 

 

The financial model is most sensitive to changes in the specialty alumina price as evidenced in Table 3 below. Hudson commissioned Ted Dickson of TAK Industrial Mineral Consultancy, to prepare a report titled “Non-metallurgical Alumina Market Study”. The report noted that specialty alumina producers and grades can vary from $600/t to $3,000/t with most falling in the range $700/t to $1,200/t. In general the finer grain size, lower soda content, and higher degree of calcination/sintering/fusing achieve higher prices. Hudson Resources’ inherently low soda content indicates that it could achieve premium prices of $1,000/t to $1,100/t. The report also comments on potential pricing for the AS and CS co-products resulting in a nominal value of $75/t being used for both. The after-tax Net Present Value at 10% is $83M if no value is attributed to the AS and CS.
 

For the purposes of the Study, Hudson has chosen to use a conservative base price of $850/t for specialty grade alumina to reflect that it would be a new entrant in the market with volumes of just over 100,000 tonnes per year at full production. With time, a range of higher added value products could be developed in order to achieve an average price of $1,000/t to $1,100/t.

 

 
 
Table 3 - Sensitivity in Net Present Value due to Changing Alumina          
 Prices                                                                     
------------------------------------------------------------------          
                                                Total                       
                                            Operation                       
Specialty  Change in     Mining   Process         Net    Change in          
Alumina      Alumina  Operation     Plant     Present  Net Present          
Price          Price  Greenland      N.A.       Value        Value          
------------------------------------------------------------------          
$700            -18%       $23M      $88M       $111M         -46%          
------------------------------------------------------------------          
$850              0%       $23M     $182M       $205M           0% BASE CASE
------------------------------------------------------------------          
$1,000           18%       $23M     $274M       $297M          45%          
------------------------------------------------------------------
 

 

 

Other than the sales price of the alumina, the model is most sensitive to the price of natural gas (Table 4). Natural gas is needed to calcine the alumina chloride hexahydrate (ACH) to the alpha phase at above 1250 degrees C and in the HCl acid recovery step. Hudson believes that low natural gas prices in North America are a significant reason why the anorthosite project can be competitive with the Bayer process to produce alumina. As a result, Hudson has determined that it is uneconomic to consider undertaking the final processing in Greenland since it would require importing liquid natural gas (LNG) to the site. Likewise, higher natural gas prices in Europe do not make the location there an attractive option.

 

 
 
Table 4 - Sensitivity in Net Present Value due to Changing Natural Gas      
 Prices                                                                     
------------------------------------------------------------------          
                       Change in                             Total          
            Change in        Net     Mining    Process   Operation          
Natural   Natural Gas    Present  Operation      Plant Net Present          
Gas Price       Price      Value  Greenland       N.A.       Value          
------------------------------------------------------------------          
$3.00            -25%        10%       $23M      $202M       $225M          
------------------------------------------------------------------          
$4.00              0%         0%       $23M      $182M       $205M BASE CASE
------------------------------------------------------------------          
$5.00             25%       -10%       $23M      $162M       $185M          
------------------------------------------------------------------          
                                                                            
----------------------------------------------------------------------------
                                                                       Total
                                            Mining     Process     Operation
Natural              Indicative World    Operation       Plant   Net Present
Gas Price   Natural Gas Price Indices    Greenland        N.A.         Value
----------------------------------------------------------------------------
$2.68      Henry Hub (NA) - Feb 27/15         $23M       $209M         $232M
----------------------------------------------------------------------------
             EU NG Import Price - Feb                                       
$8.27                           28/15         $23M        $96M         $119M
----------------------------------------------------------------------------
$13.37          Japan LNG - Feb 28/15         $23M       ($9M)          $14M
----------------------------------------------------------------------------
 

 

 

Proposed Mining Plan and Processing
 

Key parameters utilized in the study are as follows:
 

Greenland:

 

 
 
--  Open pit mine processing 400,000 tonnes annually    
--  Two- staged crushing to generate a -1/4 inch product    
--  No other processing in Greenland required    
--  No indoor storage required and 100% of material processed is shipped (no
    tailings)    
--  Deep-water bulk shipping directly from the project
 

 

 

Process Plant:

 

 
 
--  Alumina process plant established near source of natural gas and
    industrial chemicals 
--  Final site location will also depend on near-source demand for co-
    products AS and CS 
--  Grinding of anorthosite prior to entering leach reactor 
--  Filter and clean AS produced in leach reactor for sale and for use in
    acid regeneration on site 
--  Produce alumina chloride hexahydrate (ACH) from leach filtrate by HCl
    sparging 
--  Two stages of calcination to purify and produce high quality/purity
    specialty calcined alumina 
--  HCl acid regeneration recovers the HCl and produces a CS industrial
    mineral product
 

 

 

The flowsheet utilized in the PEA is based on recent bench-scale metallurgical testwork at SGS Lakefield. Hudson has posted a technical alumina presentation on it’s website which includes a schematic of the flow diagram (http://www.hudsonresources.ca/files/HUD_2015-Alumina.pdf). The work was conducted under the supervision of John Goode. Based on these bench scale tests, the process was modelled using Aspen Plus, a leading chemical process simulation software package, by Mike Dry, of Arithmetek Inc. The capital and operating costs were generated using the modelling software. At $185M in capital costs, the average cost per tonne of capacity is equivalent to $1,677/t. As a comparison, the recently constructed P.T. Indonesia Chemical Alumina plant, a joint venture between Showa Denko of Japan and PT ANTAM of Indonesia, cost $1,600/t of alumina capacity using the Bayer process.
 

White Mountain Project Background
 

Hudson’s White Mountain project in Greenland has outlined a 43-101 compliant indicated resource of 27Mt of anorthosite below a grade of 2.5% Na2O.
 

Table 5 – Mineral Resource Estimate

 

 
 
----------------------------------------------------------------------------
               Na2O  Tonnes                                                 
Class    Cut-Off(1) (000's)   SiO2  Al2O3  Fe2O3    CaO    MgO   Na2O    K2O
----------------------------------------------------------------------------
Indicated     2.50%  27,384  49.2%  30.0%  1.26% 14.95%  0.55%  2.35%  0.29%
----------------------------------------------------------------------------
Inferred      2.50%  32,724  49.4%  30.1%  1.22% 15.01%  0.52%  2.34%  0.26%
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Indicated     3.00%  35,707  49.6%  29.8%  1.25% 14.72%  0.53%  2.41%  0.31%
----------------------------------------------------------------------------
Inferred      3.00%  42,034  49.7%  29.8%  1.25% 14.77%  0.52%  2.40%  0.30%
----------------------------------------------------------------------------
 
  1. Note: Cut-Off means all material is below the grade specified of Na2O. The sensitivity of the model to an increase in Na2O to a 3% cut off is included to show that the resources remains within E-Glass specifications.

The resource estimate is classified as Indicated and Inferred Mineral Resources as defined by CIM and referenced in NI 43-101. The resource estimate was prepared by GeoSim Services Inc. of Vancouver.
 

The White Mountain Anorthosite project is 100% owned by Hudson. The anorthosite has three potential high value applications that are being investigated, as follows:

 

 
 
1.  A new source of feedstock to the high-end fiberglass (E-glass) industry;
2.  A new source of high-purity specialty alumina as described in this press
    release; and 
3.  A new source of filler and coatings material, used extensively by the
    plastics, paints and polymer industries.
 

 

 

The company is rapidly advancing the E-Glass project at White Mountain. The mine permitting process is underway and the Company expects that a mine exploitation permit will be granted in the first half of 2015, which will allow for the commencement of construction shortly thereafter.
 

According to the cautionary statement required by NI 43-101, it should be noted that this assessment is preliminary in nature as it includes indicated mineral resources that cannot be categorized as reserves at this time and as such there is no certainty that the preliminary assessment and economics will be realized. The full Study will be available at the Company’s website www.hudsonresources.ca and on SEDAR www.SEDAR.com within 45 days.
 

Posted March 30, 2015

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