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Western Areas’ WA Project Close to Completing Full Circle

THE CONFERENCE CALLER: Australia’s base metals sector is now just two years away from witnessing the rebirth of one of the country’s most idiosyncratic modern nickel operations. By Mark Fraser

If all goes to plan, Western Areas (ASX: WSA) is set to start mining its underground Odysseus ore body sometime in 2022 – a move which will effectively reboot the Cosmos project 50 kilometres north-west of Leinster in Western Australia.

Discovered back in 1997 by the now-gone Jubilee Mines, the original high-grade (about 8%) Cosmos open pit – which sits in a neighbourhood (the Leinster-Wiluna corridor) where nickel grades rarely go over 2.5 per cent – was commissioned in 2000 before production activities were quickly extended by the just-as-robust Cosmos Deeps.

Following that, the company prolonged its corporate life by finding lower strength deposits (including Alec Mairs, Tapinos and Prospero) just to the south.

Aside from establishing a mining operation in double quick time, Jubilee also found itself taking full advantage of the 2000s’ nickel (and mining) boom, becoming one of the ASX’s top performing mid-tier mineral houses during this period.

So successful was the company that, in early 2008, it was bought out by the (then) publicly-listed Xstrata for a whopping $3.2 billion – no mean feat given its stock had hit a 4 cent low between the time it listed on the Australian bourse in 1987 and when the deal with the international miner was eventually struck.

Making this achievement even more impressive for the WA-based outfit was the fact the purchase price ended up being $23 per Jubilee share.

Western Areas acquired Cosmos from Glencore (LSE: GLEN and JSE: GLN) in October 2015, just two months after it had become debt free, for $24.5 million – a sum significantly less than the massive $500 million Jubilee’s colourful founder-boss Kerry Harmanis pocketed from the sale.

Then, earlier this month, the WA-based resources house gave the Odysseus definitive feasibility study the green light and approved the decision to mine.

Assuming this all goes ahead as envisaged, production is expected to begin at the site during late 2022, while the average nickel-in-concentrate output should reach 14,500 tonnes in 2024.

With Odysseus, Western Areas is confident it is sitting on a long life (10 year-plus), low cost project.

The ore body’s current reserves are 8.1 million tonnes grading 2 per cent nickel for 164,000 tonnes, with all-in sustainable costs pencilled in at $3.50 per pound.

Since approving the mine plan the company has also added to the project’s inventory with the announcement of a further reserve at AM6, just to the south, of 2.1 million tonnes at 2.2 per cent nickel for 47,000 tonnes.

During last week’s Diggers & Dealers Mining Forum in Kalgoorlie-Boulder, Western Area’s managing director Dan Lougher said pre-production activities had already started on Odysseus’ underground infrastructure, with the resources house expecting to spend $252 million on the development between 2021-23.

Current work includes the drilling of a pilot hole for a proposed hoisting shaft, as well as the completion of optimisation studies for the expanded 900,000t per annum concentrator (which has a present capacity of 550,000t pa).

In terms of the 1.27 million tonnes per annum (ore and waste) shaft – which was being brought in second hand from South Africa – Lougher said its installation would see the mitigation of 85 per cent of carbon dioxide emissions, a drop in the burning of diesel fuel (1.5 million litres pa) as well as the removal of 5 megawatts of heat generated from diesel engines.

Another take-home message regarding Odysseus was the fact it had significant upside, with trace drilling at depth revealing 3.4 metres at a breath-taking 22 per cent nickel in massive sulphides and a further 37m at 2 per cent in disseminated ones.

Lougher suggested the 22 per cent intersection possibly represented the highest mineable nickel intercept in the world, although he welcomed any opinions to the contrary.

A further interesting point raised during Western Areas’ Diggers & Dealers’ presentation was the fact the company is currently celebrating its 20th anniversary, having listed on the ASX in July 2000 on the back of a $5 million IPO with an issue price of 20 cents per share.

While not dwelling too long on this, Lougher did manage to show a group photo of some of the key people who helped turn this junior into the outstanding mining story that it is today.

Missing from this picture, he noted, was the late Terry Grammer, the geologist who – along with Azure Minerals (ASX: AZS) boss Tony Rovira – discovered Cosmos.

A coincidence perhaps, but given this it’s fair to say that while the fortunes of the resources industry may generally be cyclical, the arrival of Odysseus in 2022 will well and truly mark the completion of a full circle in the history of WA’s modern nickel sector.

 

 

THE DAILY ROADHOUSE 21/1/20

 

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Western Areas Awards new Forrestania Offtake Contracts

THE BOURSE WHISPERER: Western Areas (ASX: WSA) has inked new offtake contracts with BHP Billiton Nickel West Pty Ltd and Jinchuan Co. Ltd for the company’s high-grade Forrestania Nickel Operation concentrate product.

 

Western Areas Awards new Forrestania Offtake Contracts

THE BOURSE WHISPERER: Western Areas (ASX: WSA) has inked new offtake contracts with BHP Billiton Nickel West Pty Ltd and Jinchuan Co. Ltd for the company’s high-grade Forrestania Nickel Operation concentrate product.

Western Areas said the new contracts follow completion of a highly competitive tender process that has resulted in improved commercial terms compared to current offtake agreements.

“The company is very pleased with the execution of the new agreements that extend our long and mutually beneficial relationship with Nickel West and reintroduces Jinchuan as an offtake customer following completion of the Tsingshan contract as at 31 January 2020,” Western Areas managing director Dan Lougher said in the company’s announcement to the Australian Securities Exchange.

“It is notable that both of our offtake customers are involved in the downstream operation of nickel smelters.

“Western Areas firmly believes that the smelting of concentrates is a key process to continue to feed both the emerging Electric Vehicle (EV) battery market, via nickel sulphate, and the traditional stainless steel market.”

The Nickel West contract is a new agreement, rather than an extension of the previous arrangement that completes on 31 January 2020.

The key terms of the new contract include a contract period of three years from 1 February 2020 or until completion of the aggregate quantity of 10,000 tonnes of nickel contained in concentrate per annum with a 30,000 tonne, aggregate limit.

Key terms for the Jinchuan contract include a contract period of two years from 1 February 2020 or until completion of the aggregate quantity of 10,000 tonnes of nickel contained in concentrate per annum with a 20,000 tonne, aggregate limit.

The contract can be extended, by mutual agreement, for a further twelve-month period at an aggregate nickel quantity to be agreed between Western Areas and Jinchuan.

Jinchuan is the largest nickel matte and cathode producer in China and Western Areas believes that aligning itself with a China-based producer of Jinchuan’s calibre is strategically important as the market for higher value products continues to evolve.

 

Web: www.westernareas.com.au