Panoramic Resources to Restart Savannah Nickel Operation

THE BOURSE WHISPERER: Panoramic Resources (ASX: PAN) announced it is to restart the company’s Savannah nickel operation, located in the Kimberley region of Western Australia.

Panoramic Resources said it had made the decision following a rigorous assessment process and 12 months of activities designed to reduce operating and financial risk for the operation as well as improving expected profitability.

The upshot from all this is a 12-year mine life with an average annual production target1 of 9,072 tonnes nickel, 4,683 tonnes copper and 676 tonnes cobalt in concentrate.

“It is pleasing to see that Savannah, one of the most advanced nickel sulphide development asset in Australia, is forecast to come into production as the battery thematic continues to grow worldwide,” Panoramic Resources managing director and CEO Victor Rajasooriar said in the company’s ASX announcement.

“We learnt many lessons in the lead up to the temporary suspension of operations at Savannah in April 2020, amid the onset of the COVID-19 pandemic.

“Since that time, we have recapitalised the business and undertaken a range of planning and site-based initiatives to put the operation in a much stronger position for restart.

“This process of optimisation combined with the improved outlook for Savannah’s high-quality nickel, copper and cobalt products, has given the Board confidence in approving the restart with a target of first shipment from Wyndham Port by the end of 2021.

“By engaging a contractor for both the underground mining and processing at Savannah, we are significantly reducing the human resourcing risk in a tightened labour market, which proved to be one of the key challenges encountered at Savannah during 2018 and 2019.

In support of the restart, Panoramic has entered into a new five-year nickel and copper concentrate offtake agreement for the period February 2023 to February 2028 with Trafigura Group Pte Ltd, with the deal set to commence in line with the expiry of an existing offtake agreement with Jinchuan.

Trafigura has also agreed to provide a US$45 million secured loan financing facility which, combined with revenue projections, is expected to fully cover the costs of the restart.

“The new offtake agreement and loan financing facilities with Trafigura are a critical piece of the restart,” Rajasooriar continued.

“The financing package avoids any dilutive equity raising by providing what we expect to be sufficient working capital to support a smooth ramp-up.

“The offtake agreement with Trafigura follows a competitive tender process and has terms which overall are more attractive than our current contract which is scheduled to expire in February 2023.

“Production from Savannah is now committed until February 2028, or for about half of the current 12-year mine life.”

Panoramic has a current cash balance of approximately $27 million and no debt.