May 4, 2006 - Toronto, Ontario – Baffinland Iron Mines Corporation (TSX-V: BIM) (“Baffinland” or the “Company”) today released the new resource estimates for Deposit No. 1 of its 100%-owned Mary River Project, located in Nunavut Territory, Canada. The indicated resource is 309 million tonnes at an average grade of 66.1% iron plus an additional inferred resource of 28 million tonnes at an average grade of 65.9% iron, defined with a practical open pit geometry.
In addition, there is a significant amount of similarly high grade, mineralized material outside this designed open pit. The indicated resources alone exceed the Company’s publicly stated objective to more than double the historical resources delineated in the 1960’s.
These newly estimated resources are the primary inputs for the Scoping Study being prepared over the last year by Aker Kvaerner E&C, a division of Aker Kvaerner Canada Inc. (“Aker Kvaerner E&C”). At the 10 million-tonne-per-year output assumption, the initial mine life would exceed thirty years. A summary of the conclusions of the Scoping Study is planned to be press-released in mid-May 2006 at which time Baffinland intends to submit its up-dated Technical Report to be filed on SEDAR as required by National Instrument (“NI”) 43-101.
“The release of the first new resource estimate in 40 years for our Mary River Project is a major milestone for our Company,” stated Gordon McCreary, President and CEO of Baffinland. “This significant expansion of resources is the backbone of the economic analysis of the Scoping Study that is being finalized and will provide the first independent view of the substantial economic strength of our assets. I also emphasize that this new estimate of resources for Deposit No.1 represents only a portion of one deposit. Four additional high grade deposits outcrop over significant strike lengths and thicknesses on our wholly-owned mining leases. In 2006, we look forward to exploration results on some of the satellite deposits that will provide further indication of the world class magnitude of our Mary River iron ore project.”
The new resources include appropriate assumptions for internal mining dilution and mining recovery losses. An assumption of 75% lump ore and 25% fines, together with 2% moisture content and a 4.36 specific gravity are used in the estimation. The lump to fines ratio is based on comprehensive metallurgical testwork performed to date at Studien Gesellschaft für Eisenerz-Aufbereitung (“SGA”) in Germany. This testwork at SGA is ongoing.
Mineral Resources December 31, 2005
|
Description |
Mt |
%Fe |
%P |
%S |
%SiO2 |
%Al2O3 |
|
Indicated |
309 |
66.1 |
0.028 |
0.25 |
2.6 |
1.0 |
|
Inferred |
28 |
65.9 |
0.020 |
0.27 |
2.4 |
1.0 |
The conservative long-term iron ore price assumptions used in the estimate are approximately 25% lower than recent market prices. Based on 2005 prices, the FOB Baffin Island prices would be US$50.95 per tonne for our expected lump product and US$39.93 per tonne for our fines. However, the actual FOB Baffin Island price assumptions used for resource estimation purposes are US$38.62 per tonne for lump ore and US$29.84 per tonne for fines. The lump iron ore price assumption reflects the normal premium that lump ores command compared to the fines price. Although conservative relative to 2005 pricing and expected 2006 pricing for iron ore, the robust nature of the resources is highlighted by such price assumptions. Additional key assumptions used to estimate resources include a foreign exchange rate of C$1.15 = US$1.00, a minimum cut-off grade in optimization of 60% iron, an overall pit slope angle of 45 degrees and a 97.5% mining recovery.
Development Update
In addition to the indicated and inferred resources contained within the preliminary open pit, there is a substantial tonnage of mineralized material outside the optimized pit shell. This material tends to be at depth and along strike to the north, is defined by widely spaced drilling and has the potential to significantly add to resources with further exploration drilling and refinement of operating plans.
Baffinland has now approved an expanded drilling program in 2006 with 8,000 metres planned to be focused on in-fill, geotechnical and condemnation drilling on Deposit No. 1 and exploration of the satellite deposits. The results of this drilling will be incorporated in future technical and economic studies that will be the focus of the efforts for our highly qualified group of technical staff and external consultants for the balance of 2006 and through the third quarter of 2007. We are now targeting the Feasibility Study to be completed in the second half of 2007 and based on the exploration success to date we intend to expand the 10 million-tonne-per-year output scenario in the Feasibility Study. These timing and output-scaling issues of the Feasibility Study, together with actual recent development experience of our internal and external technical professionals, suggest that commercial production will occur later, but at a higher production rate, than previously envisioned. We remain committed to getting initial trial cargoes of several hundred thousand tonnes to market in the ice-free period of 2008 to allow selected steel mills to run production-scale tests with Mary River iron ore as part of the standard burden for their blast furnaces. Successful blast furnace tests should lead to the long-term contracts that will underpin the financing of the full scale project.
Additional Disclosure
Geologic analysis is provided by Dr. Lynn Moxham, P. Geo. and geological modeling is performed by George Wahl, P. Geo., while open pit mine modeling is performed by Rene Gharapethian, P. Eng. All three of these independent technical professionals are Qualified Persons as defined by NI 43-101 and they performed their resource analysis and open pit modeling under the guidance of Aker Kvaerner E&C for inclusion in the Scoping Study.
Assaying and analytical work is performed by SGS Lakefield Research Limited (“Lakefield”) under a strict protocol designed for testing lump iron ores. Samples are then sent from Lakefield to SGA in Germany, where samples are composited for detailed metallurgical testing to ISO standards for iron ore. The testwork is specific for lump ores (less than 31.5mm greater than 6.3mm in size). Additional testwork was also completed on fine material (less than 6.3 mm in size) for sintering.
Drill hole metallurgical data was interpreted by Michael T. Zurowski, P. Eng., Executive VP and a Qualified Person as defined by NI 43-101. Since joining Baffinland on March 1, 2006 as VP Operations and COO, Rodney Cooper, P. Eng., a Qualified Person as defined by NI 43-101, has had oversight responsibility regarding the various components of the Scoping Study including the estimation of resources.
This press release includes certain “Forward–Looking Statements” within the meaning of section 21E of the United States Securities and Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential mineralization and reserves, exploration results and future plans and objectives of Baffinland Iron Mines Corporation, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statement.
Important factors that could cause actual results to differ materially from Baffinland’s expectations are disclosed under the heading “Risk Factors” and elsewhere in Baffinland’s documents filed from time to time with the TSX Venture Exchange Inc. and other regulatory authorities.
THE TSX VENTURE EXCHANGE INC. HAS NEITHER APPROVED NOR DISAPPROVED THE CONTENTS OF THIS PRESS RELEASE.
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