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.

·         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