Okay, good morning and welcome, everyone. My name is Ivar Fossum. I'm the CEO of Nordic Mining. A warm welcome also to our webcast audience. I hope you can see and hear us clearly. A bit of practical information, to start with. After the presentation, we will have a Q&A session here in the audience. It will also be possible to post your questions on the webcast, and we will read them out here, and we will answer. Secondly, the presentation we will give this morning is a part of a complete package. It is an ex to our press release this morning. A full 75-page summary of the DFS is now published on our webpage with a lot of details that should give you a very, very good overview of the DFS study. Let's move on.
I want to start by saying that, on behalf of the whole team in Nordic , our board of directors, and on behalf of all the shareholders, I'm very, very pleased to be able to present the DFS study for the Engebø project today. It's been a long journey. We spent most of the time up to 2015 mitigating the permit risk. After we got that in 2015, we have embarked on developing the project: two drilling campaigns, lots of investigations, research, test work, bidding rounds, engineering, which have led up to this big milestone. Let's move on. We have divided the presentation in four sections. After a brief introduction, I'll take you through a little bit more of the details, hopefully not too technical. We'll go through the financials, and we'll share with you how we will move forward from here.
Since we started Nordic Mining, our vision and our focus strategy has been on high-end industrial minerals, minerals which we think have increased demand and increased use in a modern society. Over these years, we have seen a transformation. It's been a big change in the world's perception and understanding of the importance of minerals in our society, not at least as enablers in the new green energy value chains, but also in a lot of other applications. To be honest, I don't think we have seen the start even of this new era, of how the elements will transform our lives. As a junior miner, we have to focus. Our focus is the Engebø rutile and garnet project in Norway and our stake in Keliber Oy, the Lithium project in Finland.
We are also glad that we jointly, together with IFE, can move on and carry out research with regard to production of alumina, with new minerals and with a new process, actually a process that consumes CO2 and is not emitting CO2. Other minerals also have their place in modern society: Lithium in the renewables energy value chain. We all know it as a key element in modern batteries; garnet, which is unique in cutting and blasting operations in an environmentally friendly manner; and alumina as a recyclable material; and not at least rutile, titanium dioxide, with very many environmentally friendly applications. First of all, the most effective and environmentally friendly pigment, but also the reason why new aeroplanes are significantly lighter today, and to a range of health applications.
We see constantly, new applications for the element titanium, from superconductors to new batteries and to surface cleaning, surfaces. As miners, we have to think beyond only being miners and building industry. We have to have in mind, sort of something beyond that and consider ourselves as caretakers of global resources, which we have to handle carefully. We will, as Nordic Mining, commit to develop and operate our projects according to the highest principles internationally, principles which are all based on United Nations' sustainable goals. Mining industry globally are touching on all of these goals in general. In Norway, one of the richest countries in the world, we will focus on climate responsibility, how to efficiently take out the ore with minimum footprint. We will seek to use renewable energy where we can find it, and we have plenty of it in Norway.
We will follow the sort of speedy development on how we could electrify all of our vehicles in the mining operations. Secondly, environmental footprint, both on land and in the marine environment. We want to ensure ourself and our stakeholders that we are avoiding irreversible effects on biodiversity and ecosystems. We want to monitor and mitigate these effects. As you can imagine, health and safety is paramount in the mining industry with heavy machinery, lots of tons that are to be moved. We want to take care of health and safety also for our neighbors. We want to seek that there is more, more girls coming into the mining industry. It's been a men's world for decades. Now we are moving into automation. We are moving into IT. We think mines will be better with a more sort of balanced picture between the sexes.
Finally, but not least, we will establish a new industry for a long period of time, in a local community. We want to be a part of that community. We want to engage with our neighbors and be conscious that it's not only our shareholders who are going to get something back. It's the local community in a wide range of elements. That's in our blood, building new industry in Norway. DFS study, it used to be called bankable study for a good reason. It's a tremendous de-risking milestone for any mining project that needs financing, and particularly for junior miners. It's the start gate. It's the start gate for getting into financing the project and building the project. It also represents a transformation of Nordic Mining as a company, from being a tiny small developer, investigator, researcher, communicator to becoming a full-fledged operating company.
It is really a big milestone for our company and for the project. It is very, very good to see that the DFS is coming out with very solid figures, after tax, both on NPV and rate of return. In addition, also very strong cash flow the first 15 years, which is crucial when you want to finance a project from the market. We have an impressing EBIT margin of over 70% also, which is extremely important going forward. Combined with that, a limited payback period of just about four years. Our perspective from the study is just about 40 years, above 40 years as a project lifetime.
To be honest, we don't really know what will be the total duration of the Engebø project, because in this study, we are using a part of the ore body to fuel sort of our financials, which I will come back to later. Let's move more into the project and the details of the Engebø project as such. Location. You can't move around deposits. They are sort of sitting where they are sitting, and we have to make the most out of it. Our location is one of the best ones. Norway has one of the longest coastlines, which means blue infrastructure. We can ship out product. We can ship in equipment. We can actually also ship in part of our staff in the future. Being close to sea has tremendous advantages for a mineral deposit in general.
Adding to that, Norway, as we know it, a very stable country. Yes, we have political risk, but the constitutional risk is extremely low in Norway. We have infrastructure. There is actually a road virtually going through the deposit at Engebø, and we can drive 50 minutes to the west to a local airport, or 50 minutes to the east to another airport. It is a regional town called Førde, which is 40 minutes away. These are extremely important elements when you want to build a long-term industry, particularly in our part of the world. Finally, we have an ample source of hydropower in the area, fresh water. It is a region also with quite a bit of skilled labor, a lot of labor which is today commuting to platforms and also into other industries.
There are quite a few vendors which are keen to get the product off ground and which are keen to be there and assist us with service and maintenance going forward. I'm not a geologist, but just a few words about the ore body as you see it. I picture this sort of some million years back coming up from the ground and which has sort of outcropping on the top of the little Engebø ridge, and then it's fading out to the east. It really is a big ore body, 2.5 kilometers long. We have got to know it quite extensively, through drilling and through numerous investigations.
During the last years, we have also got better grip on the geotechnical parameters for the deposit, which enables us to carry out quite sort of efficient and, how to put it, aggressive mining solutions in an ore body as such. As most Norwegian rock types, it has very low levels of heavy metals and radioactive elements, which also is an important parameter when you are going to go down the value chain and make products. On the picture down to the right, you see a 3D image of the ore body. The red colors are rich ore. We made a very early understanding with the local municipality. We both wanted to develop and make industry and long-term employment, but we saw that we needed to compromise. We saw that we needed to make a rich open pit mine and then go underground.
That has stuck to our plan and seems to hold very good in our strategy. I won't dwell too much on these figures, but the mineral resource statements and the reserves is really sort of the backbone of any DFS study. That's what's fueling our financials and are crucial for the lifetime of the operations. The more we sort of looked into the Engebø project, the more we understood that this deposit, this mineral resource is unique on a global scale. We haven't seen any other place these high grades of rutile and garnet and certainly not together. It is quite special, which means that we can make a very robust mineral project. We are reporting according to the Australian code called JORC, which is sort of coming from the stock exchange in Australia.
These figures are kind of the Holy Bible and the background for all we do in this study. You can note that, in addition to the measured and indicated categories, which are the numbers we are allowed to use in this study, we have a huge potential in the so-called inferred resources. These are resources which we can qualify going forward by more drilling. Still, we do not really know the final depth of the deposit itself. We have drilled it down to minus 200 below sea level, but still in ore. It is a tremendous potential. As I said earlier, permitting was an important part, and we got all the major permits granted, which is not automatic in Norway at all. We have the zoning plan. We have a full environmental plan. We handle landowner agreements for the full open pit.
We actually got the detailed zoning plan approved in 2019, the first one in 2011, and then a second one in 2019 because of change of the law. It has really been sort of a comprehensive approval of the industrial area as such. We have had our application for the operational license in process for a year. We think it is around the corner, which is a license not really about if we are allowed to mine, but how, focusing on safety, for taking out sort of how we are actually mining. It is about the utilization of the resource short term and long term. It is about reclamation of the mining area in stages as we move along. Finally, we also need a tiny small zoning plan for the freshwater pipeline sourcing process water to the plants.
The ore body, as I said, has some interesting parameters that enables us to optimize, and to really choose a schedule on how we do mining. In the last two years, the team with Hatch in Johannesburg has rescheduled and optimized the mining and found out that by doing two stages of the open pit mining, we can reduce the waste ore dramatically and increase the ore. We have also reclassified some of the rocks that we thought was kind of intermediate into ore. We are now sort of sit with an open pit, where we will take out more ore than the plant can actually handle for the first years, and we will stockpile that, and we will pull it back in to the end. Waste rock is less than half approximately from what we had before.
You can see sort of an image, a little bit of these two stages on the top, on the top picture. We will go underground for 19 years, partly overlapping with the open pit mining. We will pull in the stockpiled ore for the last eight years. Since the deposit is outcropping, we are actually starting to mine right into ore in the first year. There are very limited waste drops, which we had to take out in connection with the ore. These are important sort of cost-driving elements, which is very positive for our deposit. Another picture indicating the schedule. You can see in the blue areas of this graph, which is the open pit extraction of ore, that we actually are pulling out more ore from the open pit than we are feeding to the plant.
This ore will be stockpiled as a reserve, which we will take into the process plant after the underground. We will focus for the first 15 years. That is where we have optimized our plans. We have options to do overlap and optimization of the underground and the stockpile as we move forward. This whole sequence is just about 40 years of operation. Our process team in Naustdal, together with the Hatch team in Johannesburg, has done impressive work testing the flow sheets over and over again. The DFS is really about variability. It is about repeatability. It is really to design a flow sheet that can withstand the variation that the process plant will meet as they go along the deposit.
All the units we are using is standard technology, but how they are put together, the mass balances and the flow of these, is unique for our rock. That is testing and testing and even more testing. Most of that in scalable equipment. We have shipped ore to Johannesburg. We have shipped ore to Brisbane to be able to test it in full-scale process equipment. It is an art a little bit to make this flow sheet, integrated so that we can take out high-grade products of both rutile and garnet. It will be a very sort of monitored process. We are in Norway. There will be a lot of instrumentation, and a control room so that we can really be as efficient as possible. It will be a 24/7 operation, so there will be need for a certain amount of people.
In addition, we have catered for a heat recovery system so that some of the dryers will recover the heat, which we are using other places in the process plant. I move a little bit into markets. Some of you know these products from before, but for many, they are very new. Rutile, which is one of three, four various feedstock, titanium feedstock, but it is the purest form of titanium feedstock. The two main market segments is making pigment, like all the white we see in the room here. The second one is making titanium metal for a range of applications. We have a smaller sector, but also a vital one called welding rods, because rutile is used as a cover for the welding rods in order to make the weld nice and to avoid sparks for the welders as such.
It is a specific one for rutile. It has sort of unique properties, that is impossible to replace both as oxide and as metal. That's why the underlying demand for titanium and for rutile will always be there. Garnet is a different product. It's not to be processed in any plant. It's an end-user product, but still it has certain, specific properties that make it unique. It's the only mineral that has the right balance between density and hardness so that it can be used in water jet cutting. It's light enough to be accelerated, but strong enough to actually cut. It's the only mineral that has been able to make water jet cutting a big industry. It started out with having two-dimensional cutting boards.
Now we are moving into 3D cutting, with water jet. I think that will be a very, very fascinating development to follow. The other big market segment for garnet is abrasive blasting. There it's competing with a range of other materials like slags from other things, coal slags and metallic slags. There are legislation coming into that picture. Garnet is inert. There's no health problems associated with it, and it can be recycled. We see that it's gradually sort of growing its place also in that market. We get help from TZMI in Australia, which are research experts on the titanium space. They have for some years indicating a decline in the supply of rutile. Recently the forecasts have been a little bit more dramatic.
We see that current suppliers of rutile from Australia, from East Africa, and from West Africa are stopping their production simply because they are running out of mineral resources. Even Ukraine here in Europe, which is the only producer, will also stop in a few years from now. It is a sudden decline of rutile supply as it looks. Of course, there are new projects in the pipeline, and there will be sort of expansions in the current suppliers. At the same time, demand for rutile is increasing. We see a strong sort of demand for rutile, in particular in the metal segment, which had been flat historically, but now it really has a surge. Most of the sponge producers are running sort of and pushing their capacity. They need high-grade feedstock.
This, of course, is impacting over to the price landscape for rutile. Since 2015, the prices have gradually ticked upwards. TZMI's long-term outlook has also been sort of increased gradually over the years. We are sort of adopting their so-called local inducement price. That is the break-even price where the producers of pigment and metal find it right to take in for them the highest-grade feedstock compared to other feedstocks. It seems to be a price that will continue to increase in the future. We will follow that with great excitement. Right now, the price is actually somewhat above our assumption. We want to be on the conservative side with regard to the rutile price. Garnet is a different story in terms of supply and demand. There are no producers in Europe.
Europe and North America have been historically the big drivers, the big markets for garnet. Then the Middle East came along, and recently Asia is becoming a big market, not at least because of the water jet cutting. The growth in the water jet cutting is quite healthy, and more and more machines are being pushed out in the market, into automated industrial applications. I'll move on with that. The garnet market is harder to read. It's a younger industry, and the analysts are struggling maybe to see where it's going. Again, we have a good study from TZMI, and we have put our price on the conservative side. We see a healthy grow, in particular in the water jet market. We think that prices on garnet are also coming upwards in the years to come.
Our position in that market will be a little bit special. We will be the only producer in Europe, so we'll be very close to the European market. We are ideally located to serve the US market on the East Coast. We will be one of the few with high-quality garnet from hard rock, which will give us an edge in the market. As we have announced over the years, we have entered into partnerships both in the titanium space and on garnet. On rutile, we have signed an intentional agreement with a Japanese trading house. The understanding is that they will actually buy the majority of our rutile production. They are also looking to how to finance our project, both with equity and debt financing. We may, of course, also serve important customers in Europe.
I think it's a luxury that we have this strong demand for rutile from Norway. Barton is one of the leading producers and distributors of garnet, and we have had an understanding with them for many, many years. Our garnet products have been tested in their machinery, and they have assisted our team also to design the process plant. They are currently also one of the biggest shareholders in our company. We move over and touch upon the financials. We briefly told you already, but just a few sort of highlights on that, in particular the post-tax figures again, which we think are strong.
Also, the EBIT contribution from the project of about $80 million, in average per annum, the first 15 years, I think really demonstrates a robust project and a debt serviceability, which we think is extremely important in the time phase we are moving into. Sensitivities, we see that it's quite robust, even with quite significant variations in both CapEx and other of these parameters. We're holding at what we call a decent level of returns, which we think is good. It's proving a good robustness, in particular with IRR, net present value, a little bit more sensitive to the garnet revenue, but still in our view, very healthy figures, and in particular to variations in OpEx and CapEx.
Cash flow profile, and it's here again, you can see the strong cash flow for the whole lifetime of the project, in particular in the first years. I would like to add here that we have spent tremendous time to optimize the open pits. That's where we are going to pay for the projects. When we move forward and get into operation, we will optimize the underground continuously. We have a lot of options how to sort of fine-tune that. Really now how to focus, the first 15 years of operation, that's where we are going to pay back the project and the lenders. You can also see accumulated here that we have a very, very short payback time.
Our friends in Perth, every year they produce a peering among titanium feedstock producers, and sort of rating them based on TR2 units, regardless of the source of titanium, whether it's ilmenite or rutile or any in between. They credit the side products. Because we are completely alone having garnet and rutile together, we get a fantastic high revenue to cash cost on TR2 units, which only indicates that we will be a very, very robust producer of rutile compared to our peers. I will finalize my presentation and share with you a little bit how do we view our journey from here, because it will be a new journey. We have some big, impressive chapters of work laid behind us. Now it will be a different time. We are entering into a phase of the project with three different activities.
We'll go into the so-called feed phase, front-end engineering and design. We'll work on offtake, along with project financing. Time schedule-wise, kick off construction by year-end 2020. We have managed to squeeze the schedule for construction down to 22 months, because of this modular strategy, which we have applied. We should, at schedule, be producing first products towards the end of 2022. The feed phase is about detailed engineering. It's about finding and bidding for the right EPCM contractor. It's about negotiating some of the bigger packages. It's focusing on procurement, the long lead items. We have smaller activities, but that also important, like applying to the municipality for building permits, getting our baseline environmental monitoring programs off the ground. That's important for us. It's important for our stakeholders. These will start this summer.
The overall focus for this phase will be to continue our strategy to have an EPCM partner, to be able to construct the modules off-site and then followed with a stage sort of installation at site. We will try to see, is it possible to optimize some of these bigger packages to get some synergies. As I said before, it is also about transforming our company. We need different types of people into our organization, and we need to grow the organization. We really want to focus on key personnel, and we will build our team in Naustdal. We want to focus on procurement. We want to focus on construction.
We want to focus on key persons that can follow the project, from when we start detailed engineering throughout to commissioning, because we do not consider the risk on mining to be that big, but always, a new process plant is always a risk to be able to start that one up efficiently, and on time. That is important. We will be a team of around 10 people in Naustdal during construction. We will stick to our current plan of having contract mining for the first five years so that we know that we get the right ore and the right feed into our plants, to start with. In parallel with that, we will develop plans, according to our environmental and social management strategy, plans related to environmental monitoring, engagement in the local community, extractive waste, energy, and closure plan, and probably some others in addition.
Finally, we are stepping up our activity with regard to project financing. They have started. The banks have started a little bit on their due dil process, but the DFS results, the DFS report is really sort of the point where we can accelerate that work, and give the possible lenders the necessary background to evaluate the production, the project. Based on the meetings we've had so far with advisors, with possible guarantors and banks, we think it's wise to stick to our base plan, to traditional project financing, to see if we can maximize the debt at best possible terms. We will, of course, also consider what other possible financing sources that may come into play as we move along. It is a project in the project, the project financing.
I think we should underline that, and we try to indicate a little bit of those important steps at the bottom of the slides. I come to the end of my presentation. I want to conclude it by saying that this is certainly a team effort, from Nordic Mining, but also our technical advisor, Hatch in Johannesburg, and project manager Conrad Blake is also here, which you can talk to afterwards. We have got a tremendous contribution from a number of other advisors and consultants and test laboratories and experts here in Norway and around the world, as such. With that, I just want again to thank our own team, the whole Nordic team. Most of them are here. I would like you to come up to the stage so that we can prepare for the Q&A session.
Please come up, Mona Schanche and Kenneth, Birte. Lars will be our director for the Q&A session. You will take it from here, Lars.
Okay. Thank you very much. I suggest that we start with questions from the audience here in Oslo whilst the webcast audience are warming up their keyboards. Any questions? Yes.
I am a bit curious about the future resources.
Excuse me. Can you please present yourself?
Yeah. I am sorry. I am sorry. My name is Hafsan Karsen, supervising the magazine Gjerde. I am curious about future resources. You are talking about a potential for, in line with the tradition for Norwegian mining industry, maybe 100 years of operations. You did not say 100, but I figured out it could be that. Where do you find these resources, potential resources, say?
Yeah. I think I will leave that question to Mona.
Maybe you can give a few words about the resource and potential.
Sure. The resource in Engebefjell has been qualified according to JORC standards, which means that it's really high quality standards in terms of the knowledge you need to have for the resource. We know that the resource is much larger than that. There is substantial amounts of inferred ore in the eastern part of the deposit. There is also a substantial amount of inferred ore in the western part and also in the depths. As Ivar said earlier, some of these drill holes, which are long, end in ore, 200 meters below sea level. We know that potentially there could be even more ore into the depths of the deposit, which could be accessible in the future through underground mining. I hope that answers your question.
Just in addition, is there potential for ore in, in the, say, neighborhood, in the area, general area outside Englafjell?
I think that's too early to say. There are other exogytes bodies in the area, but we, they haven't been drilled and, and sampled extensively. I think that's for the future to show.
Any other questions from the audience in Oslo? Yes.
Morten Normann, Carnegie. In the PFS, CapEx was about $207 million. Now it's $311 million, and the NPV has changed by 10%. What has happened on the revenue side?
Yeah. I think I can start to answer, and maybe others can follow us. I think there are a couple of, sort of very important elements.
First of all, what I told you about the open pits, that we have been able to increase the ore output from the open pits and significantly reduced the waste rock. That has a massive impact, both on revenue and on cost. In addition, we have seen a price increase of rutile. On both products, we have seen increased output for the first years. I think these are the most important factors. I should also add that the PFS results were calculated with a slightly different discount rate. If you correct for that, we have approximately $100 million increase in NPV.
Yes, please. Jette Jønsson, shareholder. I'm a bit concerned about the project plan for going forward.
I think it's fair to say that so far Nordic Mining hasn't been very good at sticking to the project plans always. Now you indicate the startup of full production in Q3, Q4, 2023. Is it fair to say that there is a kind of robustness in such a project plan, or is there a risk of being, of having delays?
You know, these stages we are passing through as a project is all about de-risking and maturing and actually taking away risks that are out of control and continue forward with risks that we are able to mitigate ourselves. I think we are sort of continuing on that path. The big next task is to get a robust financing for the project.
That is why we have in our current plans, we have allowed for more time to actually put that financing package together, and we hope that that is kind of an ample schedule to do that.
Any more questions from the audience in Oslo? Apparently not. While you are thinking, guys, we take a question from one of the webcast viewers. It is, please comment on the increased CapEx and the drivers for this.
Yeah. I think I leave that question to you, Kenneth. Maybe you can add some comments to that.
We have a different CapEx from before, but it is also a very different methodology to get to the CapEx. If you look at significant changes, I think the major, major change from CapEx in PFS to DFS is related to the underground and the civil and earthworks.
Based on the updated DFS plan, the zoning plan, everything, we now have a fixed and firm quote from reputable vendors for that work. We also have changed a little bit the way we do the underground infrastructure by moving tunnel entrance due to geotechnical conditions to get access to the upper level of the underground. We also see that in the time of the quotations related to steel, et cetera, there was a quite high spike in the steel prices in the market, which also affects this CapEx. We do see that in the feed stage, as mentioned, we will work with value engineering. We'll also work with how to combine packages and look detail into negotiations of these big and major contracts, which has not been done at this time.
Okay. We have received some questions regarding financing.
What plans do you have for short-term financing up to the third, fourth quarter of this year? Birte.
Yes. The company continues to assess methods of financing our short-term liquidity need. As we have communicated before, amongst those potential sources of capital is sale of our Keliber shareholding, strategic investors, and also capital raised in the market. Further information on that will come in due course.
There is a question regarding the financing schedule. Do you have any financers already? What about export subsidies?
I would not say that we have them already because this is just now starting following the publication of this DFS, but we have been in dialogue with several banks internationally and also locally, including guarantee institutes.
Also, the due diligence process has started, but now, it's time to develop further with the banks and agree on a term sheet. Our intention is to have more than 100% secured so that we have some flexibility when the banks go to credit.
An additional question: how will year 2020 be funded?
I think I'll refer to my previous response on that question.
Yep. One question regarding the tailings deposit. Is deep sea tailings management still anticipated?
Yes, it is. Mona, you can add your comments to that maybe.
Absolutely. We are now forming a quite substantial monitoring program for monitoring the effects on the environment from the tailings management, but also terrestrial effects of the mining operation. Yes, definitely. This environmental monitoring program will be also approved by the Environment Agency.
Back to the financing.
Do your answer mean that we will have to see a share issue in the close future?
As I said, further information on this will follow in due course. It is not appropriate to comment on any of it, but we do have the same options as we have had before, and we are continually working on this.
Thank you, Birte. Any questions from the audience that have arisen since? Apparently not. No further questions received from the webcast viewers. I think that is about it.
Thank you very much, Lars. Thank you to all who have followed us and all of you here in the audience. Thank you.