Beowulf Mining PLC Positive Economics from Kallak North Scoping Study (6163N)

TIDMBEM

RNS Number : 6163N

Beowulf Mining PLC

24 January 2023

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") (EU) No. 596/2014, as incorporated into UK law by the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

24 January 2023

Beowulf Mining plc

("Beowulf" or the " Company ")

Kallak North Scoping Study Delivers Positive Economics

Beowulf (AIM: BEM; Spotlight : BEO), the mineral exploration and development company, is pleased to announce positive economic results from the Scoping Study for Kallak North, part of the Kallak Iron Ore Project ("KIOP") being developed by the Company's 100 per cent owned subsidiary Jokkmokk Iron Mines AB ("Jokkmokk Iron"), which boost the Company's plans to begin producing high-grade iron concentrate in 2026.

The Scoping Study was initiated last summer following the award of the Kallak North Exploitation Concession on 22 March 2022. The Scoping Study gives confidence in the underlying value of the Kallak North project, providing appropriate analyses and interpretations to support the Company's key project decisions and development strategies, optimising the project development plan while minimising risks.

The Scoping Study includes design considerations to minimise negative environmental and social impacts. Looking ahead to Pre-feasibility, planned to begin in Q2 2023, these concepts will be developed further along with other innovations to maximise the value of the mined material from the Project, such as producing construction materials as by-products.

The Scoping Study presents a 'Base Case' which is solely focused on the Kallak North deposit. It incorporates a Mineral Resource Estimate ("MRE") with effective date of 9 May 2021 and an economic assessment for a mining operation producing up to 2.7 million tonnes per annum ("Mtpa") of high-grade iron concentrate over a production life of 14 years.

Importantly, Kallak North is only part of the KIOP. Kallak South has defined Mineral Resources and an exploration target, and the Company has an exploration target for its contiguous licences further south. Pending completion of additional exploration and, if justified, further technical work, this provides an opportunity for expansion beyond that currently assumed in the 14 years 'Base Case', which would utilise the fixed assets paid for by Kallak North, such as the processing plant and other project infrastructure.

The Company is now considering the possibility of integrating Kallak North and Kallak South, following completion of a successful exploration drilling on Kallak South, which could take place this year, in combination with further technical work, and thereafter an application for an Exploitation Concession.

Scoping Study - Economic Highlights:

-- Net Present Value ("NPV(8) ") of US$177 million, Internal Rate of Return ("IRR") of 14.5 per cent and a Payback Period of 4.5 years from commencement of construction activity.

-- The modelled iron concentrates should find appeal with end-users in traditional Blast Furnace ("BF") (pellet plant or sinter plant) customers, direct reduction ("DR") route customers (DR-grade pellet production), or with newer steel production process routes to process BF (higher silica) grade ores with a lower carbon footprint.

The 'Base Case' assumes 67 per cent of Kallak production is sold to the BF market and 33 per cent is sold to the DR market consistent over the 14 years production life.

It has been assumed for the purposes of the 'Base Case' that 100 per cent of BF-grade production will be exported to international markets, split equally between Luleå and Narvik ports, and DR-grade will be sold domestically to steel producers in Sweden. Suitable steel producers may include Hybrit or H2 Green Steel. Swedish domestic steel production regularly exceeds 4Mtpa, however it is noted that current "green steel" production capacity within Sweden is only at demonstration scale.

The Marketing Study completed by Vulcan Technologies Pty Ltd ("VulcanTech") noted a potential upside in producing a higher proportion of DR-grade, through the reduction in silica content by reverse flotation of the iron concentrate. The Company will be investigating this opportunity in Pre-feasibility, to both maximise potential revenues and enhance product acceptance in the anticipated growth of DR-based steel making projects.

-- The economic assessment uses long-term prices of US$109/dry metric tonne ("dmt") for BF and US$125/dmt for DR which have been derived by VulcanTech incorporating various value in use adjustments based on a review of Consensus Economics and Wood Mackenzie data, and a long-term consensus reference benchmark of Platts62 Fe IODEX of US$80/dmt (USc129/dmtu) where all prices are assumed as real terms and dated 1 January 2023. BF product point of sale is considered CFR Rotterdam, and DR product point of sale is assumed to be an in-country off-taker in Norrbotten.

-- Kallak concentrates are viewed as high-grade concentrates that will yield significant premiums over and above the Platts65 iron ore index pricing in the long term. The desire to reduce steel making carbon emissions presents a unique opportunity for Beowulf.

Using current spot prices to calculate US$161/dmt for BF and US$177/dmt for DR and still assuming the conservative production split of 67 per cent being sold to BF and 33 per cent being sold to DR the NPV(8) increases by 479 per cent to US$852 million.

However, it should be noted that current spot prices significantly exceed the current long-term consensus market forecasts for iron ore, and current spot prices are unlikely to be maintained throughout the production life.

-- 'Base Case' Total Sales Revenue exclusive of any realisation costs of US$3.7 billion, Operating Costs of US$2.2 billion, an EBITDA of US$1.5 billion. All values are in real terms as on 1 January 2023. A 20 per cent contingency is applied to mining operating costs and all capital costs only. No contingencies have been allowed for in other operating costs.

-- Total cash costs at the point of sale (CFR Rotterdam or in-country off-taker) average US$87.3 dmt sold (USc127.1/dmtu).

-- Total capital costs of US$602 million (including 20 per cent contingency applied to all capital costs), split US$463 million pre-production capital and US$138 million sustaining capital. Excluding contingency, total capital is US$501 million, split US$386 million pre-production and US$115 million sustaining.

   --    Post-tax Pre-finance Net Free Cash Flow of US$667 million. 

The financial metrics reported are derived from real-terms (1 January 2023) post-tax pre-finance cashflows at a real discount factor of 8 per cent. The Scoping Study assumes a capital construction and ramp-up to full production period of three years, following completion of further technical studies (Pre-feasibility, Feasibility and environmental studies), associated stakeholder engagement process, successful permit applications, and financing arrangements. The Company is planning to begin producing in 2026.

Kurt Budge, Chief Executive Beowulf Mining commented:

"This is a huge step forward for Beowulf and Jokkmokk Iron, to have a Scoping Study with positive economics and massive upside potential, especially the positive sensitivity to price, which increases the NPV(8) from US$177 million to US$852 million using current spot prices.

"Beowulf's commitment to Kallak has so far lasted 16 years, getting the work done, being undaunted by political impasse, to emerge on the other side with an Exploitation Concession and now a Scoping Study with positive economics.

"Last year, the Company's application was found to have met the requirements for an Exploitation Concession, and this is testament to the depth and quality of the work completed by Jokkmokk Iron's Swedish technical team. The same attention to detail is now being applied to the Environmental Permit application.

"The Scoping Study results give the Company a solid foundation on which to build the most modern and sustainable mining operation possible. Ulla Sandborgh is leading our efforts towards our goal of bringing the Kallak North mine into production in 2026 and has brought new energy to the project, directly engaging with different groups in the community and re-establishing Jokkmokk Iron as one of Jokkmokk's key local businesses.

"We know there will be challenges ahead and that not everyone supports the development of a mine, but our employees are listening to everyone, including those who don't necessarily agree with us. All we hope for is constructive and inclusive dialogue with all key stakeholders, and for all voices to be heard and all opinions listened to.

"With the Scoping Study complete, we can now focus on completing a successful Capital Raising to support the next steps, including completion of our work programme and really get moving on Kallak. We are seriously excited about the future and all the possibilities. "

Ulla Sandborgh, Chief Executive Jokkmokk Iron commented:

"Swedish mining is crucial in the transition to a sustainable society. New, climate-smart technology requires a greater amount of minerals than fossil-based technologies. The demand for minerals will thus clearly increase. Kallak is excellently positioned as a potential sustainable supplier of high-quality iron concentrate needed in the Swedish, Nordic, and European growing green steelmaking sector.

"We will be a natural part of the development of Jokkmokk as a society by building partnerships with other companies and bringing new jobs into this area of Norrbotten. For Jokkmokk, a mine will create about 700 jobs over a potential long period of time. This is done with an integration of Kallak North and Kallak South and the synergies that would create.

"We look forward to continuing the work with the environmental permit and the planning of the area with huge respect for the environment, nature, culture and reindeer husbandry."

Scoping Study Details

The Scoping Study was prepared by independent consulting firm SRK Consulting (UK) Ltd ("SRK") and is based on the Mineral Resource Estimate prepared by Baker Geological Services Ltd, effective 9 May 2021, according to Pan-European Reserves and Resources Reporting Committee ("PERC") Standard, 2017. PERC is a member of CRIRSCO, the Committee for Mineral Reserves International Reporting Standards, and the PERC Reporting Standard is fully aligned with the CRIRSCO Reporting Template. The PERC standards are internationally recognised and allow the reader to compare the Mineral Resource with that reported for similar projects.

From 1 January 2023, disclosures in accordance with the PERC Standard must be made to PERC Standard 2021. As previously envisaged, the Scoping Study was largely complete by the end of 2022 and it is only the announcement of results that has fallen into 2023. To be fully compliant, the Company is now assessing the changes in standards and performing a reconciliation to demonstrate that the MRE, as it supports all other aspects noted in the Scoping Study, remains current and valid.

The reader is advised that the Scoping Study summarised in this press release is preliminary in nature and is intended to provide an initial, high-level review of the Kallak North project's economic potential and development options. The Scoping Study mine schedule and economic model include numerous assumptions and the use of Inferred Mineral Resources. Inferred Mineral Resources are considered to be too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves, and there is no certainty that the Scoping Study will be realised. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Economic Sensitivity

Generic sensitivities to NPV and IRR have been tested, reflecting changes in sales prices (revenue), operating costs and capital costs, the results of which are shown below. The project is most sensitive to concentrate sales prices.

Marketing

An independent marketing study was completed by VulcanTech, an Australian company, to support the pricing assumptions used in the Scoping Study, and to model the potential premiums for Kallak's high-grade magnetite concentrate. VulcanTech considered traditional and non-traditional market opportunities that might be served by Kallak concentrates. VulcanTech specialises in the modelling of iron and steel making processes.

In the Kallak North Scoping Study, it has been assumed that high-grade magnetite concentrate sales will be split with 67 per cent sold as BF-grade (higher silica) and the remainder 33 per cent sold as DR-grade (at lower silica).

The proposed chemistries for these two products are detailed in the table below. Kallak has the potential to produce two BF-grade products, with one containing up to 10 per cent hematite.

 
                           DR-grade  BF-grade 1  BF-grade 2 
                           --------  ----------  ---------- 
Proportion of production    33 %     67 %       67 % 
-------------------------  --------  ----------  ---------- 
Fe                         70.08     68          68 
-------------------------  --------  ----------  ---------- 
Fe(2) O(3) *               2.17      10          0 
-------------------------  --------  ----------  ---------- 
Fe(3) O(4) *               94.75     84.3        94.0 
-------------------------  --------  ----------  ---------- 
SiO(2)                     1.77      4.4         4.7 
-------------------------  --------  ----------  ---------- 
Al(2) O(3)                 0.15      0.15        0.15 
-------------------------  --------  ----------  ---------- 
P                          0.002     0.002       0.002 
-------------------------  --------  ----------  ---------- 
S                          0.001     0.001       0.001 
-------------------------  --------  ----------  ---------- 
Mn                         0.382     0.382       0.382 
-------------------------  --------  ----------  ---------- 
CaO                        0.08      0.08        0.08 
-------------------------  --------  ----------  ---------- 
MgO                        0.12      0.12        0.12 
-------------------------  --------  ----------  ---------- 
TiO(2)                     0.03      0.03        0.03 
-------------------------  --------  ----------  ---------- 
 

In addition to the high iron grades, the Kallak products show ultra-low phosphorus and sulphur content, low alumina and titania, and slightly-elevated manganese. The manganese in correct proportions can be considered as advantageous to steel makers, since most steel grades require manganese additions in the steel refining processes, normally added via expensive ferro-manganese wire.

Fluoride content is very low at 70 ppm, chemical elements not noted are of levels deemed below threshold levels for steel making operations.

The VulcanTech study noted the potential upside in the proportion of the DR-grade production through the reduction in the silica content through reverse flotation of the concentrate.

The modelled concentrates are expected to target traditional BF customers, pellet plant or sinter plant, BR route customers, DR-grade pellet production, or with newer process routes to process BF, higher silica grade ores with a lower carbon footprint.

The forecast Kallak concentrates are viewed as high grade concentrates that will yield significant premiums over and above the Platts65 iron ore index pricing in the long term.

Process models of the BF and Electric Arc Furnace ("EAF") steel production routes were used to calculated breakeven Value In Use ("VIU") for the different concentrate grades with premiums of US$10-14/dmt for BF-grade product and US$16-39/dmt for DR-grade product.

The Kallak North 'Base Case' uses long-term Platts62 price of US$80/dmt (USc129/dmtu); a Platts65 price of US$99/t (USc160/dmtu); and assumes a price of US$109/dmt (USc176/dmtu) for BF product (US$10/dmt premium over Platts65) and US$125/dmt (USc202/dmtu) for DR-grade product (US$26/dmt premium over Platts65). All prices are in real terms as of 1 January 2023.

Platts62 and Platts65 refer to the Platts Iron Ore Index for 62 per cent Fe and 65 per cent Fe products, a benchmark assessment by S&P Global Commodity insights of the spot price of physical iron ore. The Platts62 assessment (IODBZ00) is based on a standard specification of iron ore fines with 62 per cent iron, 8 per cent moisture, 2.25 per cent alumina, 4 per cent silica, 0.02 per cent sulphur and 0.09 per cent phosphorous, amongst other gangue elements. The Platts65 (IOPRM00) assessment is based on a standard specification of iron ore fines with 65 per cent iron, 8.5 per cent moisture, 3.5 per cent silica, 1 per cent alumina and 0.075 per cent phosphorous. Point of sale is for both products is CFR Qingdao, China.

At this time, Jokkmokk Iron has no offtake agreements.

Environmental, Social, Governance

The vision for the KIOP is to provide iron concentrates to feed the burgeoning low-carbon steel industry in Sweden and Europe. The energy transition currently underway requires a step-change in raw material production - both primary (mining) and secondary (recycling). Wind turbines, solar panels, electric vehicles, along with the electrical infrastructure required to allow these low-carbon technologies to function, are reliant on high-quality steel.

Beowulf and Jokkmokk Iron understand that developing Kallak North will come with environmental and social challenges. The land on which the deposit sits is used by indigenous reindeer herding communities of the Jåhkågasska tjiellde Sámi village (sameby). The Sámi community - including the Sámi council (Sámirá i) - have objections to a mining development, being concerned that Kallak will affect reindeer herding in terms of a loss of grazing lands, creating a barrier to free movement and other social and environmental impacts.

As part of the Scoping Study, SRK and the Company have made a preliminary identification of the bio-physical, socio-economic and cultural issues potentially arising from the Project and how this may affect the reindeer herding communities. Definition of the associated impacts will be the subject of ongoing dialogue with potentially affected stakeholders, including the Sami villages, as part of the updated environmental and social impact assessment (ESIA, or miljökonsekvensbeskrivning [MKB]) that is currently being planned to update the preliminary MKB produced as part of the Kallak K nr 1 Exploitation Concession (Bearbetningskoncession) application in 2013.

At this stage of study, during early Project planning, the focus is on avoiding potential impacts as far as practicable and starting to identify the design and operational controls that can mitigate impacts, which cannot be avoided.

The Scoping Study has included the following design considerations to minimise negative environmental and social impacts:

-- Assessment of alternative tailings storage facility locations to reduce surface footprint and potential community health risks.

   --    Fully electric mining and concentrate transport fleet from start-up of operations, including trolley-assisted charging. This will take advantage of the low-intensity greenhouse gas emissions of the Swedish national grid, dominated by hydroelectric power and wind. 

-- Optimisation of the pit to balance value from extracted ore with waste rock production, not simply focussed on maximising profitability. This has minimised the surface footprint of the planned waste rock dumps along with post-processed tailings waste.

   --    Concentrate transport route planned to avoid the Laponia World Heritage site to the north. 

-- Concentrate transport using battery electric heavy good's vehicles and existing rail infrastructure.

   --    Abatements around the pit crest to reduce noise, dust and visual impacts. 

As part of the Pre-feasibility Study, planned to begin in Q2 2023, these concepts will be developed further along with other innovations to maximise the value of the mined material, such as producing construction materials as by-products.

It is the Company's aim to operate the Kallak North mine alongside Sámi reindeer husbandry and local landowners, and the Company is committed to ensuring land is restored and rehabilitated on closure suitable for those that will use it. This requires close communication and sharing of ideas, which has been achieved for other projects across the Sápmi area of Sweden, Finland and Norway. Jokkmokk Iron has re-initiated the stakeholder engagement process with local Sámi communities through consultation and held meetings in Jokkmokk, with both the Sámi communities and other local stakeholders.

Stakeholder Engagement

Recognising the historical and current opposition to the Project, the presence of indigenous people and the risk to the permitting processes, the Company intends to undertake close communication and sharing of ideas with key stakeholders. Jokkmokk Iron has re-initiated the stakeholder engagement process with local Sámi communities and held meetings in Jokkmokk with both the Sámi communities and other local stakeholders. Since the Kallak North Exploitation Concession was awarded, there has been one information meeting in Jokkmokk held in December 2022, with more meetings planned before formal consultation on the draft Environmental Permit begins. An initial meeting with reindeer herders took place in autumn 2022, though the most impacted Sami village abstained from attendance, and four meetings per year are planned in the future. Meetings with authorities are ongoing.

Permitting

The MRE declared in May 2021 (Baker, 2021) for the Kallak North area and used in the 'Base Case' of the Scoping Study is covered by the Kallak K nr 1 Exploitation Concession granted to Jokkmokk Iron on 22 March 2022. Beowulf also owns Exploration Permits (Swedish: Undersökningstillstånd) surrounding and adjacent to the Exploitation Concession (Kallak nr 1 and Parkijaure nr 2), along with 3km to the south (Parkijaure nr 6 and 7) and 15km northeast (Ågåsjiegge nr 3).

Beowulf's Exploration Permits include defined Mineral Resources at Kallak South, along with Exploration Targets (as defined by PERC) within Parkijaure nr 2, 6 and 7 permits. This identified additional iron mineralisation, in the Company's view supports the possibility, following completion of successful exploration and additional technical studies, of a longer life and sustainable mining operation beyond the current Kallak North 'Only' 'Base Case'. In addition, the Company has the Agåsjiegge nr 3 licence, which the Swedish Geological Survey ("SGU") has previously estimated contains magnetite iron mineralisation (not classified).

 
 EXPLOITATION CONCESSION 
                            -----------  -----------  -----------  -----------  ----------- 
 
 NAME                        LICENCE ID   AREA (km2)   APPL_DATE    VALID FROM   VALID TO 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Kallak K nr 1               BK-2022:1    1.03         25/04/2013   22/03/2022   22/03/2047 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 
 EXPLORATION LICENCES 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 
 NAME                        LICENCE ID    AREA_HA                  VALID FROM   VALID TO 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Kallak nr 1                 2006:197     5.00                      28/06/2006   28/06/2023 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Parkijaure nr 2             2008:20      2.85                      18/01/2008   18/01/2025 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Parkijaure nr 6             2019:81      9.99                      10/10/2019   10/10/2024 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Parkijaure nr 7             2021:47      22.12                     16/06/2021   16/06/2024 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 Ågåsjiegge nr 3   2021:73      27.71                     27/10/2021   27/10/2024 
--------------------------  -----------  -----------  -----------  -----------  ----------- 
 

The Kallak North Exploitation Concession provides Jokkmokk Iron with exclusive mining rights in the defined areas for a period of 25 years; however, before operations can start three additional permits are required:

1. Environmental Permit (Swedish: Miljötillstånd) will be applied for following completion of an Environmental Social Impact Assessment ("ESIA") and associated stakeholder engagement process;

2. Land Designation Permit (Swedish: Markanvisning) will be required to define the industrial area associated with the mining operation (such as tailings, waste rock, processing plant) and also involves stakeholder engagement; and

   3.   Building Permit (Swedish: Byggnadstillstånd) will be required prior to construction. 

Mineral Resource Estimate

The Scoping Study is based on the MRE prepared by Baker Geological Services Ltd, effective 9 May 2021, according to Pan-European Reserves and Resources Reporting Committee ("PERC") Standard, 2017. PERC is a member of CRIRSCO, the Committee for Mineral Reserves International Reporting Standards, and the PERC Reporting Standard is fully aligned with the CRIRSCO Reporting Template. The PERC standards are internationally recognised and allow the reader to compare the Mineral Resource with that reported for similar projects.

From 1 January 2023, disclosures in accordance with the PERC Standard must be made to PERC Standard 2021. As previously envisaged, the Scoping Study was largely complete by the end of 2022 and it is only the announcement of results that has fallen into 2023. To be fully compliant, the Company is now assessing the changes in standards and performing a reconciliation to demonstrate that the MRE, as it supports all other aspects noted in the Scoping Study, remains current and valid.

The MRE defined resources for three separate deposits, Kallak North, Kallak South North and Kallak South South and included exploration targets across the Company's permit areas.

The Scoping Study 'Base Case' only includes the Kallak North deposit, 111Mt of Measured and Indicated Resource grading 28 per cent iron ("Fe(Total) ") and 25Mt of Inferred Resources grading 28.3 per cent Fe(Total) .

See below for (a) Plan, (b) Cross Section and (c) Isometric views of Kallak North and Kallak South (North and South):

Mineral Resource :

Notes:

(1) Mineral Resources, which are not Mineral Reserves, have no demonstrated economic viability.

(2) The effective date of the Mineral Resource is 9 May 2021.

(3) The Open Pit Mineral Resource Estimate was constrained within lithological and grade-based solids and within an optimised pit shell defined by the following assumptions; base case metal price of USD130 / tonne for a 65% Fe concentrate; Fe recovery of 71% at Kallak North, 86% at Kallak South North and 94% at Kallak South South; Fe concentrate grades of 68% at Kallak North, 70% at Kallak South North and 69% at Kallak South South; Processing costs of USD6.8 / t wet; Selling cost of USD21.0 / t wet concentrate; Mining cost of Ore of USD3.3 / t, mining cost of waste of USD3.0 / t and an incremental mining cost per 10 m bench of USD0.05 / t; Wall angles of 30deg within the overburden and 47.5deg in the fresh rock.

(4) Regarding the KSS Pit only, the Parkijaure lake boundaries with a 50m offset have been used as an input constraint for the optimisation process.

(5) Mineral Resources have been classified according to the PERC Standards 2017, by Howard Baker (FAusIMM(CP)), an independent Competent Person as defined in the PERC Standard 2017.

Exploration Targets

In addition to the MRE, BGS updated the Exploration Target for KIOP with inclusion of the Parkijaure permit areas.

At Kallak North, material has been modelled below the currently classified resource. This material is unclassified at present but represents a valid target for future exploration. Based on the geological model created, along with the grades seen in Kallak North, BGS has reported an Exploration Target of between 3 Mt and 7.5 Mt grading between 20-30 per cent Fe(Total) . The potential quantity and grade are conceptual in nature as there has been insufficient exploration to estimate a Mineral Resource; and that it is uncertain if further exploration will result in the estimation of a Mineral Resource.

In the Kallak licence area, a 'Gap' exists between Kallak South North and Kallak South South and represents a prospective untested mineralisation target. BGS estimated an approximate tonnage and grade of material lying between Kallak South North and Kallak South South. A simple wireframe was generated to allow for an approximate volume of mineralised material to be estimated with the thickness and orientation of this wireframe being based on the continuation of the mineralised units modelled at Kallak South North and Kallak South South along with the geophysical signature observed. Two drillholes exist in this area; both are shallow and did not intercept any mineralisation of material width or grade, although the southern drillhole, KAL10044, within the gap, did encounter some of reported copper/gold mineralisation. Given the geophysical signature within the gap and the overall synform structure proposed, it is possible that the iron bearing lithologies lie below the two drillholes completed within this area.

Based on the wireframe created, along with the grades seen in Kallak South North and Kallak South South, BGS report an Exploration Target of between 25 Mt and 75 Mt grading between 20-30 per cent Fe(Total) . The potential quantity and grade are conceptual in nature as there has been insufficient exploration to estimate a Mineral Resource; and that it is uncertain if further exploration will result in the estimation of a Mineral Resource.

In the Parkijaure licence areas, mapping, sampling, geophysical surveys and SGU historical drilling has indicated the presence of further iron mineralisation and an extension to the mineralisation observed at Kallak.

Limited outcrop exists within the Parkijaure area and in general, the magnetic anomaly data is less intense than in the Kallak area. This is possibly a factor of the deeper glacial till material in the southern permits or potentially a more disseminated style of mineralisation.

BGS assessed all available data for the Parkijaure areas and created simple trace lines along the magnetic anomalies considered strong enough to be related to significant iron mineralisation.

Based on the trace lines created, having a total strike length of 4.5km, limiting the depth of mineralisation to 200m and the width of mineralisation to 30m, BGS has reported an Exploration Target of between 45Mt and 135Mt grading between 20-30 per cent Fe(Total) . The potential quantity and grade are conceptual in nature as there has been insufficient exploration to estimate a Mineral Resource; and that it is uncertain if further exploration will result in the estimation of a Mineral Resource.

In total, BGS has reported an Exploration Target of between 73Mt and 218Mt grading between 20-30 per cent Fe(Total) . The potential quantity and grade are conceptual in nature as there has been insufficient exploration to estimate a Mineral Resource; and that it is uncertain if further exploration will result in the estimation of a Mineral Resource.

For further details follow link to Company announcement on 25 May 2021 titled 'Kallak Iron Ore Project - Mineral Resource Estimate and Exploration Target Upgrade':

https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x

Mining

The Mining method selected for Kallak North will be open pit conventional mining. To identify the economic limit of the open pit mine, a pit optimisation study was conducted. Within the pit optimisation, multiple scenarios were tested in a trade-off study with varying production rates and equipment choices. From the pit optimisation - pit shells were selected which optimise extraction and minimise Waste Rock stripping.

The Company selected a smaller revenue factor ("RF") pit shell (RF 0.76 corresponding to an assumed long-term price of Usc123/dmtu)) which reduced the Waste Rock Dump size by 25 per cent relative to the RF1 pit (corresponding to Usc161/dmtu) and only reducing the total Mineral Resources Mined by 5.5%, thereby reducing the impact on the environment. The pit optimisation study also identified an opportunity to stockpile low grade ore and feed higher grade ore earlier in the life of the mine, thereby optimising cashflow. A stockpiling capacity of up to 10.7Mt was assumed for the mine.

The pit optimisation results guided staged pit designs comprising of one (1) cutback design and a final pit design which was based on preliminary geotechnical bench geometry and 35m width haul ramps to accommodate trolley-assist infrastructure. The pit was designed such that the overall slope angle not exceeding 47.5 degrees for fresh rock and 30 degrees for overburden. The final pit design physicals include 117.7Mt of Ore of which 16.8Mt (14 per cent) is classified as Inferred mineral resources. The final pit will be 270m deep, 0.6km wide and 1km in length as shown in the figures below:

Guided by the pit optimisation study strategic scheduling, a Life of Mine Plan ("LoMp") production schedule was developed to provide optimised throughput to the processing plant. Within the LoMp an effective sink rate was set to not exceed 100m per annum. The LoMp utilises stockpiles to optimise feed to the processing plant during Years 6 and 7 (Y6 & Y7) where a drop of ore tonnage mined occurs. The LoMp schedule ramps up to a total ex-pit tonnes mined of 20Mtpa mined over 13 years. A steady state of 9Mtpa Magnetite Ore feed to the processing plant over 14 years was scheduled by a combination of feed from the stockpiles and the pit. The Kallak North Mining LoMp and Processing tonnage delivered is shown in the graphs below:

The mining cost assumes a contractor mining model, which reduces the up-front mining capital expenditure to the Company but includes a contractor mark-up on the mining operating cost. A conceptual haulage analyses identified that at 20Mtpa ex-pit moved, two (2) electric Hitachi EX2600-7 Primary Excavators matched with seven (7) Trolley-assist Battery-electric Hitachi EH3500 AC-3 Dump Trucks will be required. The Hitachi dump trucks are fitted with large batteries which are being charged whilst the truck is powered by overhead trolley lines. These units were selected to meet the Company's design objectives of a Net Zero mining operation, utilising renewable energy and reducing Scope 1 carbon emissions.

The approach to costing the mining aspects of the Scoping Study was conceptual in nature, based on benchmark information and has an approximate +/- 50 per cent accuracy level. For a Scoping Study, SRK considers this approach to be suitable to prove the robustness of the mine. Moving to Pre-feasibility, a first principles mining cost calculation based on detailed equipment simulations will be required.

Metallurgy and Processing

To date, testwork has demonstrated the potential to produce a high-grade concentrate with very low levels of deleterious elements from the magnetite-dominant ore from Kallak North, at high magnetite recoveries using a conventional magnetite iron ore processing circuit.

Achieving the high final concentrate grade requires a relatively fine grind size and a final separation stage, which conventionally might be by flotation, although as the 2021 testwork showed, might also be achieved using a newly developed, non-flotation process.

The magnetite ore Fe recovery figure of 71 per cent, used for the Scoping Study, is based on Davis Tube testwork, and represents the average Fe recovery from that testwork, and is expressed in terms of the total head Fe grade. The hematite ore Fe recovery figure of 27 per cent, used for the Scoping Study, is based on pilot testwork with no further optimisation; additional testwork may lead to potential higher hematite recoveries.

Waste Management

The Scoping Study included an assessment of the Tailings Storage Facility ("TSF") solutions, including sub-aqueous and on-land tailings storage options. A total of 10 alternatives were modelled in proximity to the Kallak North open pit and processing plant location.

The site selected for the 'Base Case' is located in close proximity to the open pit and processing plant, occupies minimal land space and ranked favourably, though not the highest, as part of a multi-criteria assessment using environmental and social criteria. The analysis demonstrated that sub-aqueous disposal of the tailings from Kallak North ranked highest in the multi-criteria assessment; while not being used for the 'Base Case', this option will be studied further during Pre-feasibility.

For the purposes of the Scoping Study assessment, it was assumed that thickened tailings ( 50 per cent solids w/w) is the preferred dewatering technology for this Project; allowing considerably more flexibility with regards to both sub-aqueous and on-land storage options in the Kallak area.

The concept design for tailings deposition is a valley impoundment structure, which will include an engineered liner system to ensure environmental containment. A starter embankment will be constructed of non-acid generating ("NAG") waste rock material. This will provide sufficient storage capacity for up to two years of tailings production. It has been assumed the embankment will be raised throughout the LoM using the downstream construction method.

The design aims to maximise waste rock usage in the outer shell, whilst minimising the required volume of imported fill materials to construct the seepage control elements. To provide seepage containment, a layered system with a high-density polyethylene ("HDPE") liner, geosynthetic clay liners ("GCL") liner and filter layer was allowed for on the upstream side of the TSF embankment and across the base of the facility along with appropriate lined diversion channels to divert clean run-off water around the embankment.

Tailings are anticipated to be deposited into the facility via a slurry delivery pipeline system which will be placed on the starter embankment crest.

Infrastructure and Logistics

The Project is located in the Jokkmokk municipality, north of the Arctic Circle, approximately 40km west of Jokkmokk city centre and 80km southwest of the major iron ore mining centre of Malmberget in the county of Norrbotten, northern Sweden. LKAB's Kiruna iron ore mine, the world's second largest underground mine, is located approximately 120km to the northeast.

Jokkmokk is located on the national road E45 which connects to Gällivare with the major east-west route national road, the E10, connecting Gällivare to Luleå, Boden, and Narvik. Access to the Project area comprises all-weather gravel roads passing through the project area and connecting to the E45; and all parts are easily reached by well used forestry tracks.

By rail, Jokkmokk is located on the Inlandsbanan Railway, a north-south railway connecting Gällivare in the north to Östersund in the south. Gällivare is on the main west-east railway, the Malmbanan line connecting Port of Narvik (Norway) and Port of Luleå, which carries significant quantities of iron concentrate predominantly to Narvik, but also through Luleå. Iron concentrate can also be trucked by road to the Malmbanan line, which is within 100km of the Project, and which is the base-case for the project. Battery electric heavy goods vehicles, which are already in operation across the Nordic region, are proposed.

Kallak is well connected by road and rail infrastructure with distance to major ports and cities presented below:

Route Options from Kallak North:

 
       Destination          Road Distance   Road to Jokkmokk + Rail 
    Luleå, Sweden           205                  349 
                           --------------  ------------------------ 
 Skellefteå, Sweden         298                  458 
                           --------------  ------------------------ 
      Narvik, Norway             419                  402 
                           --------------  ------------------------ 
      Boden, Sweden              169                  309 
                           --------------  ------------------------ 
 

The Parki hydroelectric power plant, capacity 85 MW, is only 6km from Kallak connecting to the 400 kV power transmission line (the main Swedish transmission grid). Jokkmokk Iron has commenced discussions with the local power operator regarding allocation of power for the project.

It has been assumed for the purposes of the 'Base Case' that 100 per cent of BF-grade production will be exported to international markets, split equally between Luleå and Narvik ports, and DR-grade will be sold domestically in Sweden.

Kallak Location and Regional Infrastructure:

Operating and Capital Expenditure

Capital and operating costs for the project have been estimated from benchmark information for similar projects in the region. Cost estimates from public domain sources have been scaled for the production rate and escalated from their original dates to 2023 figures before being averaged to generate the estimated figure. Where appropriate, costs have also been benchmarked against the subscription CostMine database. The table below provides a summary of the unit operating costs applied. A 20 per cent contingency has been applied to mining costs only.

 
      Operating Costs               Units         Unit Operating Cost   Total Operating Cost (US$ millions) 
 Mining                          US$/t mined             2.85                           516 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Processing                   US$/ t processed           6.30                           742 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Site and Infrastructure      US$/ t processed           0.27                           32 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Transport and Logistics      US$/ t processed           7.07                           832 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Tailings Storage Facility    US$/ t processed           0.16                           19 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Water Related Costs          US$/ t processed           0.04                            5 
---------------------------  ------------------  --------------------  ------------------------------------ 
 G&A                          US$/ t processed           0.50                           59 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Royalty (0.2%)               US$/ t processed           0.06                            7 
---------------------------  ------------------  --------------------  ------------------------------------ 
 Total Operating Cost         US$/ t processed           18.79                         2,212 
---------------------------  ------------------  --------------------  ------------------------------------ 
 

Total cash costs at the point-of-sale average US$87.3 dmt sold (USc127.1/dmtu) over the Life of Mine.

Capital costs are also shown below, split between pre-production capital and sustaining capital. Contingency of 20 per cent is shown as a line item.

 
       Capital Costs          Initial Capital (US$ millions)   Sustaining Capital    Total Capital 
                                                                 (US$ millions)      (US$ millions) 
 Mining                                     54                        0.2                 54 
---------------------------  -------------------------------  -------------------  ---------------- 
 Processing                                180                         0                  180 
---------------------------  -------------------------------  -------------------  ---------------- 
 Transport and Logistics                    80                         0                  80 
---------------------------  -------------------------------  -------------------  ---------------- 
 Power                                      35                         0                  35 
---------------------------  -------------------------------  -------------------  ---------------- 
 Tailings Storage Facility                  45                         96                 141 
---------------------------  -------------------------------  -------------------  ---------------- 
 Water Related Costs                        2                          1                   3 
---------------------------  -------------------------------  -------------------  ---------------- 
 Closure                                    0                          10                 10 
---------------------------  -------------------------------  -------------------  ---------------- 
 Sub-total                                 386                        115                 501 
---------------------------  -------------------------------  -------------------  ---------------- 
 Contingency (20%)                          77                         23                 100 
---------------------------  -------------------------------  -------------------  ---------------- 
 Total Capital Costs                       463                        138                 602 
---------------------------  -------------------------------  -------------------  ---------------- 
 

Glossary:

A Dry Metric Tonne Unit (dmtu) is the internationally agreed-upon unit of measure for iron ore pricing. It has the same mass value as a metric tonne, but the material has been dried to decrease the moisture level. A dry metric tonne unit consists of 1 per cent of iron (Fe) contained in a tonne of ore, excluding moisture. The price per tonne of a certain quantity of iron ore is calculated by multiplying the cents/dmtu price by the percentage of iron content. Iron ore contracts are quoted in US Cents.

Fe(Total) - Total iron content in all minerals present in the mineralised material.

Fe(Mag) - I ron present as magnetite (or magnetic iron) or Fe (2) O (3) - which is the commonly reported oxide of iron

Competent Person Review

The Scoping Study was prepared by independent consulting firm SRK Consulting (UK) Ltd ("SRK").

The Scoping Study refers to the Mineral Resource Estimate prepared by Baker Geological Services Ltd ("BGS") and announced on 25 May 2021. Follow the link to Company announcement 'Kallak Iron Ore Project - Mineral Resource Estimate and Exploration Target Upgrade':

https://polaris.brighterir.com/public/beowulf_mining_plc/news/rns/story/x8q5k9x

Howard Baker of BGS is a Competent Person ("CP") as defined by the PERC Code. Mr Baker has reviewed the technical information as it relates to the MRE referred to in this announcement and approves the disclosure of technical information regarding the MRE in the form and context in which it appears.

About Jokkmokk Iron and Kallak

The Kallak deposit is located west of Jokkmokk in the County of Norrbotten. Kallak was discovered by The Swedish Geological Survey ("SGU") in the 1940s. The first exploration licence for Kallak was awarded by the Mining Inspectorate of Sweden in 2006. Drilling was conducted at Kallak North and Kallak South between 2010-2014, a total of 131 holes and 27,895 metres. An Exploitation Concession for Kallak North was applied for in April 2013 and was finally awarded in March 2022; it is valid until 22 March 2047.

At Kallak, the iron mineralisation in the ground, that is to be mined, contains approximately 28 per cent iron content ("Fe(Total) ") which, through enrichment, can be upgraded to a 'market leading' concentrate containing 71.5 per cent Fe(Mag) . The high-grade concentrate makes Kallak production attractive to downstream markets, such as fossil-free steelmakers in the Nordic region and the rest of Europe.

Kallak magnetite concentrate would reduce the carbon footprint of traditional steel manufacturing, improve energy efficiency in any downstream process and reduce waste; magnetite's inherent energy content, ultimately results in lower energy demand for steel manufacturing when compared to current common practice.

It is the Company's ambition for the operation at Kallak to be one of Sweden's most sustainable mining operations, where the start of fossil-free steel production begins with primary raw material from Kallak.

The development of Kallak will also bring opportunities for the local community in Jokkmokk. Investment and the creation of much needed jobs at Jokkmokk Iron will indirectly create additional jobs locally, encouraging the establishment of new companies and a reversal of the depopulation that has afflicted Jokkmokk over recent years. This will contribute to a strong and vibrant Jokkmokk community in the years ahead.

The Kallak deposit is being developed by Jokkmokk Iron, a 100 per cent owned subsidiary of Beowulf Mining plc. The Jokkmokk Iron CEO is Ulla Sandborgh, who is a civil engineer and has held senior positions in the private sector as well as in public administration, in the infrastructure, electricity and water sectors. Ulla has extensive experience from managing application procedures and, as part of this, experience in collaborating with various stakeholders and ensuring that mutual interests and benefits are shared and secured.

Enquiries:

 
 Beowulf Mining plc 
 Kurt Budge, Chief Executive Officer   Tel: [phone] 
 SP Angel 
  (Nominated Adviser & Broker) 
 Ewan Leggat / Stuart Gledhill         Tel: [phone] 
  / Adam Cowl 
 BlytheRay 
 Tim Blythe / Megan Ray                Tel: [phone] 
 

Cautionary Statement

Statements and assumptions made in this document with respect to the Company's current plans, estimates, strategies and beliefs, and other statements that are not historical facts, are forward-looking statements about the future performance of Beowulf. Forward-looking statements include, but are not limited to, those using words such as "may", "might", "seeks", "expects", "anticipates", "estimates", "believes", "projects", "plans", strategy", "forecast" and similar expressions. These statements reflect management's expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including, but not limited to , (i) changes in the economic, regulatory and political environments in the countries where Beowulf operates; (ii) changes relating to the geological information available in respect of the various projects undertaken; (iii) Beowulf's continued ability to secure enough financing to carry on its operations as a going concern; (iv) the success of its potential joint ventures and alliances, if any; (v) metal prices, particularly as regards iron ore. In the light of the many risks and uncertainties surrounding any mineral project at an early stage of its development, the actual results could differ materially from those presented and forecast in this document. Beowulf assumes no unconditional obligation to immediately update any such statements and/or forecasts.

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January 24, 2023 02:00 ET (07:00 GMT)