Hello All,

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Regarding the Taconite NPV, my expectation (based on an Excel model I created) is that the Post Tax KeMag NPV will be between $5.888 Billion to $10.151 Billion.    I haven’t done the same exercise for the LabMag deposit, but one could expect that it would yield slightly better results, maybe $6.5 to $10.7 Billion.  Depending on the scope of a combined project, I’d guess that one could expect a post tax NPV of $9 to $15 Billion.  Below I’ll detail how I derived my numbers for the KeMag deposit on its own.

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Production Assumptions:

·         2.1 BT of Proven and Probable Reserves, and .3BT of Proven and Probable Reserves, total reserves in the model of 2.4 BT.

·         76 MT of run of mine ore to make 21.2 MT of concentrate and 22MT of saleable iron product.

·         31.58 year Life of Mine

·         Production of 10MT of 66.5% Fe Blast Furnace Pellets, 7MT of 67.5% Direct Reduction Pellets, and 5MT of 69.1% Fe Concentrate.

·         Cost per tonne of concentrate was $30.47 vs. $20.31 in the PFS, Cost per tonne of BF Pellets was $41.17 vs. $27.40, and cost per tonne of Direct Reduction Pellets was $43.44 vs. $29.06 in the PFS.  I increased the PFS costs by 15% to account for currency changes since the PFS where NML used an exchange rate of $.85 CAD to $1.00 USD, after this increase I further increased costs by a further 30% to be conservative.  The math looks like this (PFS*1.15) *1.30)=Feasibility Product Price.

  Sales Assumptions:

·         Various price points were benchmarked up against the Platts 62% Fe at $25 increments starting at $50 and going up to $200.  For the purpose of this post I only focused on the 62% Fe benchmark at $75.00 and $100.00 respectively.  As an example a $50.00 Platts price equates to $.8065 a dry metric tonne unit (i.e., 62/50= $.8065 per unit).  Following the same example a 69.1% Fe concentrate would be $.8065 times 69.1 equals a sales price of $55.73 for NML concentrate to account for the premium above the benchmark.

·          A further premium of $.50 per dry metric tonne unit was given for blast furnace pellets.  Following the $50 Platts price above an NML Blast Furnace Pellet will fetch $.8065 plus $.50 times 66.5: ($.8065+$.50)*66.5= $86.88 per tonne

·         An additional 10% premium per dry metric tonne unit was given for direct reduction pellets.  Following the same example: ((($.8065 + $.50)*1.10)*67.5)= $97.01.

Tax Assumptions:

·         I didn’t give NML or TSMC any tax credits or any tax holidays, I simply applied a consistent conservative tax rate for every year of the mine till it’s completion.  The taxes were as follows.

·         15% Canadian Income Tax

·         11.9% Quebec Provincial Tax

·         12% Quebec Provincial Mining Tax

·         Total Tax of 38.9% deducted from every years profits (i.e., NML&TSMC profits*.611).

NPV Assumptions:

·         I used an 8% NPV and a 10% NPV for this model

·         I assumed a total initial outlay of $5 Billion which represents a 17% increase from the Pre Feasibility Study when accounting for the recent investment in the dock.

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What do others think?

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All the best,

James