March 28, 2007 - Toronto, Ontario – Baffinland Iron Mines Corporation (TSX: BIM) (“Baffinland” or the “Company”) today announced plans for completion of the Definitive Feasibility Study (“DFS”) for Deposit No. 1 of its 100%-owned Mary River Project, located in Nunavut Territory, Canada. Since reactivating exploration in 2004 Baffinland has spent almost Cdn$60 million advancing the project, a potential direct shipping ore operation with grades of approximately 66% iron. The DFS is being managed by Aker Kvaerner E&C (“Aker Kvaerner”), a division of Aker Kvaerner Canada Inc., and is currently scheduled for completion in December 2007. Aker Kvaerner also managed the Scoping Study for the project completed in May 2006.
The DFS and additional studies of satellite deposits are expected to include several enhancements compared to the previously completed Scoping Study, including:
• In the DFS, expanding the annual output from Deposit No. 1 to 12.6 million dry metric tonnes (dmt) per year from the 10 million dmt per year assumed previously.
• Making Steensby Inlet on the south coast of Baffin Island the priority for the deep water port and terminal for the rail line rather than Milne Inlet on the north coast. This is expected to extend the shipping season to 12 months from 9 months per year and significantly reduce the amount of ice-strengthening that vessels servicing the operation would require.
• Based on the infrastructure established for Deposit No. 1, complete a Scoping Study on Deposit No. 2 assuming an increase in total output by 2.4 million dmt per year to 15 million dmt per year.
• Based on the development of Deposits Nos. 1, 2, 3 and 3A complete a Blue Sky Study assuming a further increase in output to 25 million dmt per year.
Due to the continued tightness of global iron ore markets, iron ore prices continue to increase and have reinforced a revised “stronger for longer” expectation. Consequently, these new studies are expected to use a higher iron ore price assumption than that used in the study of May 2006. The iron ore price used in the base case for these studies will be finalized in the second half of 2007 and the studies will provide iron ore price sensitivities.
“Our outstanding exploration success has allowed Baffinland to contemplate expanded output that is expected to have significant positive implications for our Mary River Project. Although the expanded output and the longer rail line to the south coast of Baffin Island would logically add to the capital costs, the overall project economics are expected to be enhanced significantly,” stated Gordon McCreary, President and CEO of Baffinland.
In May 2006, Baffinland reported the results of a Scoping Study, the highlights of which were a 34 year mine life at a production rate of 10 million dmt per year, with a pre-tax internal rate of return of 15%, a payback period of just under 6 years and a project cash flow in excess of Cdn$6 billion after taking into account capital costs of almost Cdn$1.5 billion. A conservative iron ore price assumption was used in the Scoping Study that was approximately 37% below the actual iron ore price for 2006. The Scoping Study justified proceeding to a more advanced and detailed engineering and economic analysis of the project this year. In addition, iron ore prices on international markets have advanced an additional 9.5 percent in 2007, adding further justification for the new studies. Iron ore prices have tripled since 2002.
In managing the studies, Aker Kvaerner continues to work with several specialist sub-consulting firms who participated in the Scoping Study. Railway design and costs are being prepared by Canarail Consultants Inc., material handling systems design and costs are being prepared by Lassing Dibben Consulting Engineers Ltd – Bulk Handling, shipping costs and port design are being prepared by Aker Arctic Technology Inc. (“Aker Arctic”). Geotechnical engineering services are being provided by Knight Piésold. Comprehensive metallurgical test-work continues at Studien Gesellschaft für Eisenerz-Aufbereitung (“SGA”) in Germany. In addition, Enfotec Technical Services, a subsidiary of Fednav Limited, has provided ice interpretation, ship design criteria and an assessment of shipping lanes for the proposed project. It is expected that in connection with the preparation of the DFS, Aker Kvaerner E&C will also prepare a revised Technical Report in conformance to National Instrument 43-101 which will be filed on SEDAR.
The Company continues to evaluate transportation corridors and ocean shipping routes from both Milne Inlet (100 kilometers) to the northwest, and to Steensby Inlet (140 kilometers) to the south-southeast. Based on discussions with ship owners and operators, the Enfotec analysis of ice conditions and shipping lanes, preliminary community consultations and preliminary baseline environmental studies, the Company has decided that the southerly route to Steensby Inlet is the preferred alternative for transportation of the iron ore to market. Additional traditional knowledge and environmental studies are planned in 2007 to further evaluate and quantify this decision, under the ongoing management of Knight Piésold , who are also coordinating the permitting of the project.
In order to conform to the Company’s original mine-life target of 25 years, the base case production rate for the DFS has been increased to 12.6 million dmt per year. Management believes that the mine-life target is consistent with balancing the maximization of net present value with maintaining long term customer relationships and with the long term nature of the capital assets to be depreciated. This base case will continue to focus exclusively on Deposit No. 1 and will have an intended level of estimation accuracy of +/- 15 percent.
As a result of a successful drilling program at Deposit No. 2 in 2006, a separate Scoping Study will be completed concurrent with the DFS. Deposit No. 2 would share common infrastructure with Deposit No. 1 and, at an incremental production rate of 2.4 million dmt per year, would increase production at Mary River to 15 million dmt per year within the first five years of production. This Scoping Study will have an intended level of estimation accuracy of +/- 20-25 percent.
Aker Kvaerner has also been asked to complete a Blue Sky Study of a production increase to 25 million dmt per year based on exploitation of Deposits No. 1, 2, 3 and 3A. This Study will form the basis for long term strategic planning, and is anticipated to demonstrate a significant reduction in unit operating costs through the full utilization of all infrastructure proposed for the project. Additional exploration drilling is planned for Deposits No. 3 and 3A during the 2007 drilling season to follow up the first hole in Deposit No. 3 that returned a continuous 169.8 metre interval grading 65.8% iron.
An exploration targeting study will also be undertaken to assess the merits of additional exploration at Deposit No. 4. Should this study result in a positive outcome, the first exploration drilling at Deposit No. 4 could commence in 2008.
The Company’s plans in 2007 include additional traditional knowledge studies and environmental baseline studies. A diamond drilling program consisting of 9,300 meters of drilling for infill, exploration and geotechnical purposes is planned using six drill rigs operated by Boart Longyear.
A Mineral Development Advisory Group meeting is planned in June to obtain input from the regulators prior to completion of the detailed project description. In addition, discussions between Baffinland and the Qikiqtani Inuit Association (the “QIA”) to develop an Inuit Impact and Benefits Agreement “in principle” are ongoing and will provide input into the final description of the project. Prior to the end of 2007, the Company plans to submit a detailed Project Description to the regulators in order to initiate the Nunavut Impact Review Board process. At the present time, the Company does not have a target date for construction, as it remains difficult to determine specifically when construction could begin. The DFS is scheduled for completion in December of 2007, and at that time the Company expects to be able to more accurately define when construction could commence.
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 Gharapetian, 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 are 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. Additional test-work was also completed on fine material for sintering.
Drill hole metallurgical data were interpreted by Michael T. Zurowski, P. Eng., Executive VP and a Qualified Person as defined by NI 43-101. As VP Operations and COO, Rodney Cooper, P. Eng., a Qualified Person as defined by NI 43-101, has had oversight responsibility regarding resource estimation, engineering studies and environmental permitting.
Mineral resources which are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty that may attach to indicated mineral resources, there is no assurance that mineral resources will be upgraded to proven and probable ore reserves. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
Certain information included in this press release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “believe”, “plan”, “scheduled”, “intend”, “estimate”, “forecast”, “predict”, “potential”, “continue”, “anticipate” or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management’s future outlook and anticipated events or results, and may include statements or information regarding the future plans or prospects of the Company. Without limitation, statements about the Company’s plans to complete a definitive feasibility study, including the scheduled timing thereof and other related statements, statements derived from the Company’s scoping study on Deposit No. 1, statements about the planned Nunavut Impact Review Board process, and statements about the Company’s plans to complete an additional Scoping Study on Deposit No. 2, a Blue Sky Study, an updated Technical Report, an exploration targeting study, traditional knowledge studies and environmental baseline studies and a 9,300 diamond drilling program, are forward-looking information.
Forward-looking information is based on certain factors and assumptions regarding, among other things, the estimation of mineral resources, the realization of mineral resource estimates, iron ore prices, the timing and amount of future exploration expenditures, the estimation of additional capital requirements, the availability of necessary financing and materials, the receipt of necessary regulatory approvals, and assumptions with respect to environmental risks, title disputes or claims, weather conditions and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Without limitation, in stating that the Company has scheduled the completion of a definitive feasibility study in December of 2007, and that the Company plans to complete an additional Scoping Study on Deposit No. 2, a Blue Sky Study, an updated Technical Report, an exploration targeting study, traditional knowledge studies and environmental baseline studies and a 9,300 diamond drilling program, and related statements, the Company has assumed, among other things, that iron ore prices will not change materially from current levels, that weather conditions will permit the drilling and other exploration activities necessary in order to complete such work, and that the Company will obtain the financing and regulatory approvals and other authorizations required to enable the exploration, development and mining activities required in order to conduct such activities
Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what management currently expects. These factors include risks inherent in the exploration for and development of mineral deposits, risks relating to changes in iron ore prices and changes in the worldwide demand for, and supply of, iron ore, uncertainties inherent in the calculation of mineral reserves and resources, risks relating to the remoteness of the Mary River Property including access and supply risks, reliance on key personnel, operational risks inherent in the conduct of mining activities, regulatory risks, including risks relating to the acquisition of the necessary licences and permits, financing and capitalization risks, including the risk that the financing required to fund all currently planned exploration and related activities may not be available on satisfactory terms, or at all, environmental risks and insurance risks. For a detailed discussion of these and other relevant risk factors, see the Company’s disclosure documents that are publicly filed on SEDAR.
You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.
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