Panoramic Resources Expects to Make Triumphant Return

THE CONFERENCE CALLER: After what has effectively been a four-year hiatus, Panoramic Resources (ASX: PAN) is on the verge of once again becoming a formidable Australian mid-tier base metals producer as it prepares to fully relaunch its wholly-owned Savannah nickel project in Western Australia’s East Kimberley. By Mark Fraser

The refurbished operation, which originally started life in 2004 sourcing open cut ore, had initially been put on care and maintenance during 2016, but was recommissioned in 2018 following the discovery of the Savannah North ore body. It was temporarily suspended earlier this year due in part to the COVID virus.

In July, Panoramic announced a new mine plan for the project based on a healthy reserve inventory of 8.3 million tonnes grading 1.23 per cent nickel, 0.59 per cent copper and 0.08 per cent cobalt for 102,000 tonnes of nickel, 48,500 tonnes of copper and 7,000 tonnes of cobalt.

With the addition of some further inferred resources (located near the above-mentioned reserves), this inventory increases to 10.4 million tonnes at 1.22 per cent nickel, 0.54 per cent copper and 0.08 per cent cobalt for 127,000 tonnes of nickel, 56 million of copper and 8,500 tonnes of cobalt in contained metal.

Panoramic is now confident the project will enjoy a life of around 13 years, with the majority of ore expected to be sourced from Savannah North. It is currently anticipated that the average annual production for years one to 12 will be 8,810 tonnes nickel, 4,579 tonnes of copper and 659 tonnes of cobalt in concentrate.

Over the mine plan, recoveries should average 83 per cent nickel, 98 per cent copper and 92 per cent cobalt based on the historical plant performance for Savannah ore as well as the metallurgical test work conducted on the Savannah North material during 2017.

Meanwhile, the average site all-in costs for years one to 12 of are $7.54/pound payable nickel (US$5.27/lb) net of copper and cobalt by-product credits.

In addition, there are some attractive base case financials involved – namely a pre-tax cash flow of $468 million and a net present value of $262 million.

Located 240 kilometres south of Kununurra, the Savannah project boasts two nickel sulphide ore bodies (Savannah and Savannah North), the underground mine, a 1 million tonne per annum processing plant, a tailings storage facility as well as a 14-megawatt power station.

All up, this represents a $100 million investment which should, according to Panoramic Resources managing director and chief executive Victor Rajasooriar, enable the operation to be brought into production straight away.

Speaking at the RIU Resurgence Conference, Rajasooriar described Savanah as a high-quality asset, with Savannah North being, “the prize that we were going into”.

“When you look at Australian nickel sulphide projects, they are like hen’s teeth – they are very hard to find (and) the nickel sulphide operations that are currently operating are producing grades of less than 1 per cent – I think that the average grade is about 0.6 per cent – and most of those mines are coming to their natural end as well,” he explained.

“And (in terms of) Australian nickel sulphide projects, we are quite well placed when you look at the nickel equivalent grades.”

Rajasooriar also said the updated mine plan was conservative.

Mine dilution at Savanah, for instance, was 12 per cent – it’s now 22 per cent.

Ditto for plant recoveries, which in the old days was 114 per cent as opposed to the current 90 per cent.

Meanwhile the plant, which can churn through one million tonnes per annum, was now set to process 900,000 tonnes a year.

“We’ve been very transparent – we have put all of the costs into the project so that it is very clear,” Rajasooriar said.

“On a base case we are running on about $7.54/lb, and at the consensus case it’s about $7.14.

“Today’s nickel price is about $9.14/lb, so there is a good margin to be made on this project.”

A recent recapitalisation conducted by Panorama, Rajasooriar said, had erased debt and hedging arrangements as well as provided the company with a sufficient runway to progress development to both enable the operation’s reboot as well as fund near term exploration.

It was therefore not surprising that, on the day of Rajasoorier’s RIU presentation, the resources house announced it had launched an exploration program for both Savanah and Savanah North.

At Savannah, surface activities would complete preliminary nickel prospectivity assessments and look at the previous untested oxide and Stoney Creek intrusions.

Meanwhile, the underground drilling at Savanah North would complete an initial test of a series of strong downhole electromagnetic anomalies that were previously identified in several holes.

Earlier this month the company announced that over half of its planned 468 metre ventilation access drive – which has been designed to establish a platform well above the previous zone of instability at its Savannah North underground mine – had been developed, with the remainder to be finished by the end of September.

Upon completion of this ventilation raise and certain other underground works, the project would be significantly de-risked and capable of being fully rebooted by the end of 2021.