A Lengthy Tale of Two Nickel Plays

THE CONFERENCE CALLER: A couple of nickel projects in Western Australia – one containing sulphides and the other made up of lateritic material – look set to see the light of day after some two decades of sitting on the drawing board. By Mark Fraser

Possibly the most advanced is the West Musgrave joint venture between exploration house Cassini Resources (ASX: CZI) and miner Oz Minerals (ASX: OZL), where the proponents are looking to develop the Nebo-Babel sulphide deposit – an ore body that caused quite a bit of market excitement when it was initially discovered by Western Mining back in 2000.

Meanwhile, the second is the Kalgoorlie Nickel Project (KNP), which is being developed by Ardea Resources (ASX: ARL) and contains a globally significant nickel and cobalt resource.

Like Nebo-Babel, the KNP has been around for a long time, having initially been established by Heron Resources in light of the WA nickel laterite boom of the late 1990s. Later, between 2005-2009, it was the subject of pre-feasibility due diligence by Vale Inco.

Shortly before the 2020 RIU Explorers conference – at which both juniors presented – Cassini completed its own pre-feasibility study for the West Musgrave project, which is located 100 kilometres north-east of Warburton, wherein a solid case for the mine’s development was made.

The PFS indicated its maiden ore reserve of 220 million tonnes at 0.33 per cent nickel and 0.36 per cent copper for a contained 720,000t of nickel and 790,000t of copper could support a mine life of 26 years – some 18 years more than suggested by scoping due diligence conducted in 2017.

The project scale of 10 million tonnes per annum remained unchanged, with target annual life of mine production set at 22,000tpa of nickel and 28,000tpa of copper concentrates.

Higher concentrate production – 27,000tpa of nickel and 33,000tpa of copper – was forecast for the first five years, which could see a six year project payback period from a decision to mine or around a three year one from the start of production.

According to brokerage Hartleys, the project was significantly de-risked by the detailed metallurgical test work, which delivered base metal recoveries at the upper end of expectations and provided good (industry standard) concentrate grades of around 10-11% nickel and 25-26% copper.

Moreover, the PFS also suggested improved operating costs thanks to increased by-product credits (including cobalt, gold, silver and platinum group metals), the use of hybrid renewable diesel power generation and innovative processing solutions such as the use of vertical roller mills, which reduces power consumption by around 15% and provides an estimated 2% improvement in nickel recoveries.

The large scale, longer life operation has come with a higher capital cost, which is now expected to be $995 million instead of the scoping capex range of $730-800 million.

Under the terms of the JV with Oz Minerals, Cassini is not required to contribute to the project capital costs until the delivery of a bankable feasibility study. As it stands the JV partners are looking to start construction sometime in 2021-22 and operations by 2023.

During the RIU show, Cassini managing director Richard Bevan said while Oz Minerals ran the PFS, the junior partner (30%) did a number of work packages.

“Oz really approached this as an operator of this asset,” he explained.

“They spent in excess of $50 million on the PFS and a number of the work packages are well passed the PFS stage, especially those that represent the potential risks of this project around metallurgy and resources.”

Meanwhile, just north of the mining hub of Kalgoorlie-Boulder, Ardea is carrying out its own due diligence on the KNP, which currently contains a resource of 773Mt at 0.7% nickel and 0.05% cobalt for 5.6Mt of contained nickel and 405,000t of contained cobalt.

Within the KNP holdings sits Goongarrie, which has resources of 216Mt at 0.71% nickel and 0.06% copper for 1.5Mt of contained nickel and 130,700t of contained cobalt.

Although the history of nickel laterite projects in WA has been fairly dismal, Ardea is confident it will not fall into the same metallurgical traps as some of its predecessors like BHP (at Ravensthorpe) and Anaconda Nickel (at Murrin Murrin).

During his RIU presentation the company’s chief executive, Andrew Penkethman, pointed out Goongarrie’s ore was goethitic which, he said, was the preferred feedstock for pressure acid leaching circuits.

“It’s a crumbly iron rich material that contains the nickel and cobalt, it has low acid consumption and it can be mined and put through the process plant the same day,” he said.

Other deposits that had excess silica or clay, Penkethman noted, needed to be screened and then dried – in some cases for lengthy periods.