High Tide Resources (HTRC.C) has released a maiden resource estimate on its flagship Labrador West iron project, located in the Labrador Trough. The initial in-pit resource came in at 655 million tonnes at an average grade of 28.8% Fe using a cut-off grade of 15%. An interesting additional feature – but of course not unique – is the fact the mineralization starts at surface.
The details of the resource estimate are interesting. The pit shell was designed using a pricing of C$129/t for 65% Fe concentrate while the current spot price for the higher quality concentrate is C$178/t. The operating expenses are estimated at C$3/t for mining, C$4.55/t for processing and C$0.35/t for tailings. G&A is estimated at C$5/t (which is really high. If High Tide would develop a scenario with a production rate of 3 million tonnes per day, it will likely need 10-12 million tonnes of low-grade material which would indicate the annual G&A expenses will be C$50-60M per year)while rail & port costs have been budgeted at C$18/t.
The ocean freight costs are estimated at C$28/t which is a little bit on the low side. A valid estimate in the current economic environment but keep in mind the C3 shipping costs which is based on a Brazil-China voyage but are traditionally used for long-haul iron ore shipping exceeded C$40/t for the majority of last year. In any case, the resource appears to be robust and the operating expenses to get to 65% concentrate could be limited to just C$30/t (excluding G&A as the C$5 per processed tonne is unreasonably high). Using a 65% Fe price of US$110/t (C$150/t) versus the current spot price of almost US$150/t, the net received price at the mine gate would be approximately C$104 resulting in a margin of just over C$70/t (minus, of course, the actual G&A expenses that will be incurred).
Disclosure: The author has no position in High Tide Resources. Please read our disclaimer.
