Cadence Minerals (KDNC) issued an interim update for the 6 months ended 30 June 2023, detailing progress at its flagship Amapa iron asset in Brazil.
Cadence completed Amapa's pre-feasibility study during the period, establishing a robust 5.28 MTpa (dry) iron ore operation with strong cashflow, including a post-tax NPV of US$949m. Amapa's scoping study had also identified cost savings in the Santana port layout and refurbishment of US$28m.
Amapa's resource was increased and upgraded during the half with total Measured, Indicated and Inferred MRE increasing to 276.24 Mt at 38.33% Fe, with a maiden measured resource of 55.33 Mt at 39.26% Fe.
Financially, Cadence significantly reduced its pre-tax loss to £1.95m from £5.05m a year ago, and its total assets increased to £25.79m from £21.64m on December 31 2022.
On the equity investment front, Cadence completed several notable investments, namely ASX-listed Evergreen Lithium (ASX: EG1), Hastings Technology Metals (ASX: HAS), and AIM-listed European Metals Holdings (AIM: EMH).
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Overall, a positive set of results from Cadence as it significantly narrowed losses by 2.5x from a year ago despite a challenging market backdrop for commodities in H1. Amapa is shaping up to be a homerun for the company after a promising pre-feasibility study (PFS) and significant resource upgrade this year, plus cost savings identified at the Santana port.
Amapa's PFS reaffirmed the project's robust economics as it indicated average production of 5.28 Mt Fe concentrate, consisting of 4.36 Mtpa at 65.4% Fe and 0.92 Mtpa at 62% Fe. The study determined a post-tax NPV of US$949m at a discount rate of 10%, a post-tax IRR of 34% and an annual life of mine EBITDA of US$235m. A maiden ore reserve of 195.8 Mt at 39.34% Fe demonstrated an 85% mineral resource conversion. The pre-production capex estimate was US$399m, including rehabilitation of the processing facility and restoration of the railway and port facilities.
Following completion of the PFS, Cadence's focus at Amapa before the end of the year will be on progressing permitting and completion of regulatory requirements for the mining concessions. Following this, the plan is to bring on an operator or EPCM contractor as a joint venture partner before proceeding to a DFS, funding, and construction.
Investors should expect progress at Amapa to be reflected in the company's valuation in the near term. Further putting Cadence at a value inflection point are its investments in Evergreen, Hastings Tech Metals, European Metals and Sonora, which materially bolstered its equity portfolio in H1. Notably, Evergreen Lithium and the Yangibana Rare Earth deposit (which Cadence has exposure to through its ownership in Hastings) were converted from private investments into equity in public listed markets.
The Yangibana project holds substantial neodymium and praseodymium resources with an NPV of £570m. Hastings recently upgraded the project's ore reserve by 25% to 20.95Mt at 0.90% TREO grade, increasing its mine life to 17 years. Hastings has engaged Boston Consulting Group to assist in further investigating the merits of an integrated mine-to-magnets strategy and exploration of partnership opportunities at Yangibana.
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