(TheNewswire)
Highlights
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Jervois Global Limited (“Jervois”) completesBankable Feasibility Study (“BFS”) for Stage 1 of São MiguelPaulista Nickel and Cobalt refinery (“SMP”) restart to processmixed nickel hydroxide (“MHP”) and cobalt hydroxide through tometal.
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Initial Stage 1 forecast production of10,000mtpa 1 and 2,000mtpa ofrefined nickel and cobalt metal cathode respectively. Stage 2 BFSregarding a return to full 25,000mtpa refined nickel productioncapacity expected to be finalized in 2H 2022.
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Net Present Value (“NPV”) for Stage 1 restart ofUS$228 million and US$141 million at an 8% (real) discount rate on apre-tax and post-tax basis respectively; nominal Internal Rate ofReturn (“IRR”) of 47% (pre tax) and 35% (post tax).
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At US$8.00/lb nickel and US$25.00/lb cobalt, post rampup of Stage 1 to BFS production rates, average annual EBITDA in realterms projected to be over US$30 million. Refinery economicsresilient to a range of market scenarios, including current spotmarket conditions for refined and intermediate products.
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Total project capital cost of US$55 million,representing a competitive refurbishment of an existing brownfieldnickel and cobalt refinery. SMP has a long operating history, mostrecently placed into care and maintenance managed by current ownerCompanhia Brasil de Alumino (“CBA”).
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Restarting the only electrolytic nickel-cobalt refineryin South and Latin America will deliver significant local and regionaleconomic and social benefits to the São Miguel Paulista area of SãoPaulo city, Brazil.
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SMP benefits from competitive low carbon energy(predominantly hydropower), skilled workforce, existing infrastructureincluding main arterial roads and ~120km from Brazil’s largestcontainer port at Santos.
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Jervois is advancing discussions on commercial supplycontracts of MHP and cobalt hydroxide to underpin SMP restart. Workcontinues on design of an autoclave to process cobalt concentratesfrom Jervois’s 100%-owned Idaho Cobalt Operations (“ICO”); onceavailable, this will be incorporated into the Stage 1 BFS.
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Execution planning has commenced and a final investmentdecision for Stage 1 is anticipated to occur in parallel to closing ofthe SMP acquisition. Jervois continues to advance operating permitrenewal process with the São Paulo City Hall, a condition precedentto closing, before 31 August 2022.
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First commercial production from SMP’s Stage 1restart is expected during 2023.
Australia - April 28, 2022 – TheNewswire - Jervois Global Limited (the “Company” or “Jervois”) (ASX:JRV) (TSXV:JRV) (OTC:JRVMF)is pleased to announce successful completion of the BFS for an initialStage 1 partial restart of the SMP refinery.
SMP, located in São Paulo, Brazil, previously operatedfor more than 30 years, producing high quality nickel and cobaltelectrolytic cathode. Refined products from SMP are registered andmarketed as the brand Tocantins, which Jervois plans to continue afterrestarting the facility. SMP was placed on care and maintenance in2016 upon the closure of the majority of nickel feed supply at thetime, the Niquelandia mine in the Brazilian State of Goias, also ownedby CBA.
Jervois engaged Ausenco Pty Ltd (“ Ausenco ”) to lead the BFS engineeringand Metso Outotec to complete testwork, using third-party suppliersamples of mixed nickel-cobalt hydroxide (“ MHP ”) and cobalt hydroxide. Testworkwas carried out in Pori, Finland, at Metso Outotec’s laboratory. Brazilian permitting is being handled by Environmental ResourceManagement (“ ERM ”),Jervois’ environmental and licensing adviser during its SMP duediligence.
SMP’s location in São Paulo is exceptional,providing good access to highways and nearby port facilities, accessto competitive energy and skilled labour, and due to its nature as anexisting refinery, can be refurbished for a fraction of what a similargreenfield would cost to construct.
Key technical and economic outputs from the BFS aresummarised in Table 1 below.
Table 1: KeySMP BFS Parameters
Parameter | Input | Parameter | Result | |
Assumed operating life | 20 years | NPV (@ 8% real post-tax) | US$141 million | |
Capital cost | US$54.8 million | IRR (nominal post-tax) | 35% | |
Nickel price 1 Cobalt price 2 | US$8.00/lb US$25.00/lb | EBITDA 3, 4 Payback (post-tax) | US$33 million per annum 3.3 years | |
MHP payability Cobalt hydroxide payability Brazilian real: US dollar | 75% CIF Santos 75% CIF Santos 5.30 | Production rate | 10,000 mtpa Nickel metal 2,000 mtpa Cobalt metal 10,740 mtpa Ammonium Sulphate | |
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LME Cash in real 2022 dollars.
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Fastmarkets Metal Bulletin ( MB ”) Standard Grade (“ SG ”) in real 2022 dollars.
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Average life of operations, in real 2022dollars.
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EBITDA is a non-IRFS measure but is commonly used inevaluating financial performance. While the common definition ofEBITDA is “Earnings Before Interest Expense, Taxes, Depreciation andAmortization”, EBITDA used in this news release may not becomparable to EBITDA presented by other companies.
The Votorantim Group, a Brazilian diversified familyconglomerate, constructed the refinery in 1981. Originally designedby Outotec (now Metso Outotec), the refinery underwent several stagesof debottlenecking and expansion up to its nameplate of 25,000mtpanickel and 2,000mtpa cobalt, in refined metallic form.
Due to a change in proportion of nickel feed, fromnickel carbonate to MHP, a decision was made to conservatively capnickel throughput at 10,000mtpa refined nickel. Cobalt third-partyfeed remains unchanged (cobalt hydroxide), andJervois notes that approximately 10-20 percent of refinery nickel feedin the years prior its being placed on care and maintenance, was alsoMHP.
SMP is located in the city of São Paulo, the mostpopulous city in Brazil and the Americas. SMP is 14km by roadsoutheast from the main Brazilian international airport of São PauloGuarulhos, and 120km by road northwest from the Port of Santos,Brazil’s largest commercial port. Access from the Port of Santosis 100km north along BR-050 Highway and 20km east along Ayrton SennaHighway (SP-070 Highway).
The State of São Paulo is the industrial andmanufacturing heartland of Latin America, with a population of greaterthan 45 million people. The State accounts for approximately onethird of total Brazilian GDP, with its economy in the region secondonly to Mexico. The State of São Paulo’s GDP exceeds that ofother advancing national economies such as Chile, South Africa orSingapore. It is the manufacturing and export hub of South America,and an extremely competitive and attractive investment destination.
The SMP flow sheet includes a feed preparation circuit,atmospheric leaching and neutralization circuits, impurity removal andfiltration, cobalt solvent extraction (“ SX ”), nickel and cobaltelectrowinning, product packaging, and associated infrastructure.
Engineering and testwork are progressing for the futureintegration of the pressure oxidizing (“ POX ”) leach circuit to process cobaltconcentrate from Jervois’ Idaho Cobalt Operations (“ ICO ”) in the USA at the existingrefinery.
Metal hydroxides are leached at nominal temperatures of+90 0 C at a pH of <2.0. Nickel and cobalthydroxides are highly soluble in acid solutions with typicalextractions of over 98% readily achieved. The discharge from theatmospheric leach circuit is discharged to the neutralization circuitwhere the pH is adjusted using soda ash or a mixed hydroxide productto increase the pH to approximately 5.0, where predominantly iron andaluminium are precipitated. As all of the iron is ferric iron, noadditional air (oxygen) is required to precipitate the iron duringneutralization.
Upon recommissioning the refinery on nickel and cobalthydroxides, the copper content is low and most of the copper istherefore co-precipitated as a residue with iron and aluminium.
Copper can be recovered separately via a selectiveprecipitation circuit using sodium hydrosulphide (“ NaHS ”), however the initial restartwill not recover the small amount of copper in the hydroxide feed.
Testwork to support the initial restart of the refinerywas completed by the Metso Outotec Research Center in Pori, Finlandunder supervision of the Jervois team. The testwork program wasprogressed to understand the kinetics and extent of extraction fornickel and cobalt hydroxides. Results were favorable and typicallyconsistent with the plants historical performance when it commerciallyprocessed the same feed materials as envisaged in this BFS.
Magnesium and manganese are deleterious elementscontained in MHP and cobalt hydroxide feedstock. To managemanganese, an existing fit for purpose SX circuit will berecommissioned in the cobalt electrowinning (“ EW ”) circuit as part of the refineryrestart using D2EPHA extractant to remove manganese calcium and zinc. This will be stripped and precipitated in a wastewater stream usinglime and soda ash. Similarly, magnesium is also removed from thewastewater stream using lime prior to discharging the clarified liquorto the SABESP (São Paulo State water and sewerage company) treatmentfacility, located close to the refinery.
A separate cobalt SX circuit extracts cobalt from the“clean” SX feed. The cobalt catholyte is recycled as the cobaltstrip solution to strip the cobalt from the Cyanex 272. The cobaltSX raffinate nickel sulphate is discharged to the nickel EW circuitfor harvesting. Nickel electrolyte is recycled back to the leachcircuit utilising the acid generated at the cathode to re-leach nickeland cobalt hydroxides.
Nickel harvesting is completed in stages, with two daysrequired to prepare the starter sheets and six days required toachieve the optimum nickel cathode product quality with typicaldimensions of 1m by 1m by 15mm full plate cathode. Cobalt isharvested after two days; no starter sheets are required as thecathode produced is in broken form, suitable for subsequentdissolution by customers.
Overall nickel and cobalt recovery from blended MHP andcobalt feed is forecast at 99% nickel and 97% cobalt respectively.
Figure 3: SMPProcess Flowsheet
Ausenco was the lead engineer for the BFS. Ausencowas supported by Metso Outotec and Elemental Engineering(“ Elemental ”) toprogress testwork and sysCAD modelling. Mass and energy balances,steam and water balances were prepared by Elemental under thedirection of Ausenco. The process design criteria (“ PDC ”) were prepared by Ausenco forthe BFS. Marked up PDFs were used to markup key control loops. Equipment lists including motor and power loads were prepared byAusenco.
Promon Engenharia Ltda.(“ Promon ”) initially completed an independent refinery refurbishmentcapital estimate and preliminary schedule. Promon is an experiencedlocal engineering contractor that has completed major projects inBrazil. Ausenco utilized the initial Promon refinery refurbishmentcost as a platform for the BFS. In addition to that, several sitevisits were scheduled to:
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assess the condition of all processing equipment,building and infrastructure;
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validate the existing process flow diagrams;
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review procedures, reports, manuals, and otherdocuments;
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identify plant bottlenecks;
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carry out on-site interviews with former process,mechanical, electrical staff;
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discuss contractors’ estimation strategy to ensureproper scope of work was captured; and
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identify key equipment that represent a sample of theoverall plant (i.e., pumps, agitators, etc.).
Ausenco used a combination of factored costs and budgetestimates to define the capital refurbishment cost including new plantand equipment to a AACE Class 3 +/-15% level of estimate.
As the refinery is a brownfield restart, most of therefurbishment activities fall within a number of clustered criticalactivities such as initial geotechnical investigation, 3D plant laserscanning, and updating engineering drawings and preparation of vendorpackages.
Long lead items required for the refinery restart areclustered around several packages including early environmentalremediation works, new feed preparation circuit and D2EPHA solventextraction plant (including media filters and carbon column to removeimpurities such as manganese and zinc) and equipment (certain newagitators and pumps, media filters), rectifier refurbishment,warehousing and the waste water treatment plant upgrade.
The restart schedule is estimated at 12 months. Early works execution will occur at therefinery encompassing completion of the environmental remediation,geotechnical investigations, 3D laser scanning and modelling theexisting refinery, preparation and updating plant engineeringdrawings, vendor packages preparation and new civils works. Fullrefinery refurbishment and construction is anticipated to restart oncethe anticipated closure of the SMP acquistion has occured with firstcommercial production forecast for 2023.
Next steps for Jervois, in addition to procurementpackages, are to develop refurbishment package contracts, coveringconcrete and building repairs, refurbishment of inter alia rectifiers,automation, rotating equipment including pumps and agitators, staticequipment, lifting equipment (overhead cranes, monorails, hoists) andfilter presses.
All infrastructure required for the restart of therefinery was assessed by Ausenco and is included in the capital costestimate. This includes electrical distribution, motor controlcenters, rectifiers, mechanical and electrical workshops, warehousesand reagent storage. Wastewater treatment, raw water anddemineralized water requirements were defined by the mass balancedeveloped for the BFS, and have been incorporated into restart andoperating forecasts.
Feed materials will arrive containerized in 1.5-tonnebags into Santos port, and will be trucked to SMP. Due to thefacilities location within an industrial hub of São Paulo, maintenance materials andother reagents, such as flocculant, extractants, and diluents, can beordered on an as-needed basis. Waste solids from process residuewill also be transported in 1.5-tonne bags by truck, as occurredhistorically.
ERM’s office in São Paulo coordinated the BFS environmental work stream,supported by Jervois’s and CBA’s local team in Brazil. Permitting and regulatory compliance were reviewed in preparationfor the restart. In conjunction with finalization of the outstanding São Paulo City Hallpermit by CBA, which remains a condition precedent to acquisitionclosing by Jervois, the modifications associated with the restart forthe existing BFS scope will require approval by CETESB (the São PauloEnvironmental Agency). Agreed timelines with the regulator have beencaptured in the 12-month restart timeline.
The capital cost estimate was prepared in accordancewith an Advancement of Cost Engineering (AACE) International Class 3feasibility study estimate and Ausenco’s capital cost estimatingguidelines, with an accuracy of ± 15%. The capital cost estimatewas developed from first principles and is based on engineeringdeliverables, equipment pricing, and contractor rates obtained duringthe BFS, and is summarised in Table 2.
Prior to developing the capital cost estimate for theexpansion, the site field inspection program was completed at therefinery to assess the condition of existing equipment and determinewhich equipment can be refurbished, reused, or repurposed. The fieldinspection program also quantified the refurbishment scope, which ismajor part of or the capital cost estimate.
Table 2: Capital Cost Estimate
R$ millions | US$ millions | |
Process Plant | 149.0 | 28.1 |
On-site Infrastructure | 23.7 | 4.5 |
Total Directs | 172.7 | 32.6 |
Project Indirect | 43.8 | 8.3 |
Owner’s Costs | 44.1 | 8.3 |
Contingency | 30.1 | 5.7 |
Total Indirects | 118.0 | 22.3 |
Total Restart Capex | 290.6 | 54.8 |
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Note that numbers on table maynot sum due to decimal place rounding.
The operating cost estimate includes on-site costs fromthe receipt of cobalt hydroxide and MHP feed material and consumablesthrough to product packaging and effluent discharge includingprocessing, general and administration (G&A), and effluentdisposal costs. The operating cost estimate for an average operatingyear is provided in Table 3. The average annual operating cost basedon selected input cost assumptions for reagents, consumables, energyand labour, together with a currency of 5.3 reals to the US$, isUS$36.5 million.
Table 3: Annual Operating Cost Estimate
R$ millions | US$ millions | % Total Opex | |
Fixed Costs | |||
Labour | 53.8 | 10.2 | 27.8% |
G&A | 11.7 | 2.2 | 6.1% |
Maintenance | 20.3 | 3.8 | 10.5% |
Transportation from Port to the Plant | 4.1 | 0.8 | 2.1% |
Subtotal (Fixed Costs) | 89.9 | 17.0 | 46.5% |
Variable Costs | |||
Reagents and Operating Consumables | 78.6 | 14.8 | 40.6% |
Electrical | 17.9 | 3.4 | 9.2% |
Effluent and Tailings Treatment Station | 7.2 | 1.4 | 3.7% |
Subtotal (Variable Costs) | 103.6 | 19.6 | 53.5% |
Total Opex | 193.6 | 36.5 | 100.0% |
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Note that numbers on table maynot sum due to decimal place rounding.
Nickel and cobalt prices used for the BFS wereUS$8.00/lb and US$25.00/lb respectively, lower than or consistent withanalyst long term forecasts. Whilst current prices are higher forboth commodities, the benefits of elevated near term pricing was notfactored into the forecasts.
Intermediate Markets
Nickel and Cobalt Hydroxides or Mixed Hydroxides(” MHP ”)
MHP is a growing intermediate form of nickel, withexisting producers being the Ravensthorpe Nickel Operations inAustralia, Goro in New Caledonia, Ramu in Papua New Guinea, and Gordesin Turkey. Historically SMP processed material from Ravensthorpe andGoro. MHP supply is expected to expand rapidly in the next decadewith many large new HPAL operations planned, already commissioning or under construction to produce MHP in Indonesia. MHP is sold on the open market to refiners for further processing tofinal products.
Market terms and pricing for MHP are not publiclydisclosed, but trade at a discount to metal prices depending onunderlying demand and supply, and the prevailing metal prices. Whilst MHP payabilities today are approximately 90 percent, an MHPpayable of 75 percent for nickel and cobalt was selected for the BFS,consistent with lower commodity prices than prevail today.
Cobalt Hydroxide
Cobalt hydroxide is the predominant intermediateproduct available to cobalt refiners, with the majority of thismaterial coming from the Democratic Republic of Congo (” DRC ”) as a by-product of copperproduction. Major producers in the DRC are Glencore, China Molybdenum,and ERG. Cobalt hydroxide is sold on the open market to refiners forfurther processing to final products. Whilst specific contractsbetween suppliers and refiners are not disclosed, Fastmarkets MetalBulletin publishes a reference price which has largely become theindustry benchmark for spot business. This index has varied frompayables in the low 60 percents in 2019 to as high as the low 90percent payables more recently on the back of supply shortages andstrong demand. A cobalt hydroxide payable of 75 percent was selectedfor the BFS.
SMP has extensive historical experience at successfullyrefining cobalt hydroxide from tier 1 suppliers with the requisite,strong ESG credentials.
Due to elevated pricing and the absence of acquistionclosing, Jervois has chosen to not yet enter formal supply contractsfor either MHP or cobalt hydroxide to support the SMP restart. Discussions with supply partners to advance the restart are nowaccelerating in lieu of anticipated acquisition closing.
POX Circuit for SulphideConcentrates
Work continues on design of an autoclave to processboth cobalt concentrates from ICO and a limited volume of third partynickel concentrate. Once available, this will be incorporated intothe Stage 1 BFS and is expected to fall within the existing refineryrestart schedule. The POX circuit has long lead items and earlyworks packages that will be progressed in parallel to the refineryrestart. Appropriate engineering tie-ins will be required to supportthe installation of the POX circuit. Stage 2 BFS to expand nickelproduction back to the nameplate 25,000mtpa via a larger autoclavecontinues in parallel and is anticipated to be completed in the secondhalf of 2022.
As previously noted, the BFS has a pre-tax NPV ofUS$228 million at a discount rate of 8.0% (real); post-tax NPV isUS$141 million on the same basis. The pre-tax and post-tax nominalIRR’s are 47% and 35% respectively. Post-tax payback of allcapital is forecast at 3.3 years from technical completion aftercommissioning (‘simple payback’).
Table 4 summarises the key economic assumptions and BFSoutcomes.
Table 4: KeyMacro Economic Assumptions and BFS Outcomes
Unit | Value | |
Brazilian real | BRL : USD | 5.3 : 1.0 |
Nickel (LME) (real) | USD/pound | 8.00 |
Cobalt (Metal Bulletin Standard Alloy Grade) (real) | USD/pound | 25.00 |
MHP Payability | % CIF Santos | 75.0 |
Cobalt Hydroxide Payability | % CIF Santos | 75.0 |
Discount rate (real) | % | 8.0 |
Operating life | Years | 20 |
NPV (pre tax) | USD millions | 228 |
NPV (post tax) | USD millions | 141 |
Nominal IRR (pre tax) | % | 47% |
Nominal IRR (post tax) | % | 35% |
Payback (pre tax) | Years | 2.5 |
Payback (post tax) | Years | 3.3 |
Commodity prices and exchange rates are consistent withinvestment banking forecasts, despite current volatility in bothmarkets. Sensitivity to commodity prices, the Brazilian realtogether with capital and operating cost variances are outlinedbelow.
Sensitivities | -20% | -15% | -10% | -5% | 5% | 10% | 15% | 20% | |
USD/BRL | 4.2 | 4.5 | 4.8 | 5.0 | 5.3 | 5.6 | 5.8 | 6.1 | 6.4 |
IRR (Post Tax, Nominal) | 21% | 25% | 28% | 31% | 35% | 38% | 41% | 44% | 47% |
NPV (Post Tax) | 69 | 90 | 109 | 126 | 141 | 154 | 167 | 178 | 189 |
Nickel US$/Lb | 6.4 | 6.8 | 7.2 | 7.6 | 8.0 | 8.4 | 8.8 | 9.2 | 9.6 |
IRR (Post Tax, Nominal) | 24% | 27% | 30% | 32% | 35% | 37% | 39% | 42% | 44% |
NPV (Post Tax) | 74 | 91 | 108 | 124 | 141 | 157 | 174 | 191 | 207 |
Cobalt US$/Lb | 20 | 21 | 23 | 24 | 25 | 26 | 28 | 29 | 30 |
IRR (Post Tax, Nominal) | 32% | 33% | 33% | 34% | 35% | 35% | 36% | 36% | 37% |
NPV (Post Tax) | 123 | 127 | 132 | 136 | 141 | 145 | 150 | 154 | 159 |
Opex US pa | 29.2 | 31.0 | 32.9 | 34.7 | 36.5 | 38.3 | 40.2 | 42.0 | 43.8 |
IRR (Post Tax, Nominal) | 42% | 40% | 38% | 36% | 35% | 33% | 31% | 29% | 27% |
NPV (Post Tax) | 187 | 175 | 164 | 152 | 141 | 129 | 118 | 106 | 95 |
Capex US | 43.9 | 46.6 | 49.4 | 52.1 | 54.8 | 57.6 | 60.3 | 63.1 | 65.8 |
IRR (Post Tax, Nominal) | 40% | 39% | 37% | 36% | 35% | 33% | 32% | 31% | 30% |
NPV (Post Tax) | 149 | 147 | 145 | 143 | 141 | 139 | 137 | 135 |
Planned closure of SMP acquisition
Jervois intends to close the acquisition of SMP oncethe the outstanding SãoPaulo City Hall permit has been finalized byCBA. This remains a condition precedent to acquisition closing byJervois. The outside date for closing the acquistion is 31 August2022. Closing the acquistion will trigger a payment of R$47.5million (US$9.6 million) 2 inaccordance with the terms of the acquistion announced on 29 September2020.
On behalf of Jervois Global Limited,
Bryce Crocker, Chief Executive Officer
For further information, please contact:
Investors and analysts: James May Chief Financial Officer Jervois Global | Media: Nathan Ryan NWR Communications nathan.ryan@nwrcommunications.com.au Mob: +61 420 582 887 |
Forward-Looking Statements
This news release may contain certain“Forward-Looking Statements” within the meaning of the UnitedStates Private Securities Litigation Reform Act of 1995 and applicableCanadian securities laws. When used in this news release, the words“anticipate”, “believe”, “estimate”, “expect”,“target, “plan”, “forecast”, “may”, “schedule”,“expected” and other similar words or expressions identifyforward-looking statements or information. These forward-lookingstatements or information may relate to the proposed operations at SMPrefinery, including the proposed flowsheet, anticipated capital costs,anticipated operating costs, permitting, timing of construction andoperations, markets and marketing products and certain other factorsor information. Such statements represent Jervois’ current viewswith respect to future events and are necessarily based upon a numberof assumptions and estimates that, while considered reasonable byJervois, are inherently subject to significant business, economic,competitive, political and social risks, contingencies anduncertainties. Many factors, both known and unknown, could causeresults, performance or achievements to be materially different fromthe results, performance or achievements that are or may be expressedor implied by such forward-looking statements. Jervois does notintend, and does not assume any obligation, to update theseforward-looking statements or information to reflect changes inassumptions or changes in circumstances or any other events affectionssuch statements and information other than as required by applicablelaws, rules and regulations.
Neither TSX Venture Exchange nor its RegulationServices Provider (as that term is defined in policies of the TSXVenture Exchange) accepts responsibility for the adequacy or accuracyof this release.
1 Metric tonnes per annum.
2 At current USD/BRL exchange rate of 4.95.
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