Mincor Resources NL (ASX: MCR) is targeting a potential return to production at Kambalda in Western Australia on the back of positive DFS results on its integrated nickel re-start plan.
Managing Director David Southam said the positive DFS paves the way for a Final Investment Decision (FID) early in the September quarter, which would result in first nickel-in-concentrate production being achieved in the second half of CY2021.
Mincor believes that this production timeline could be well timed to coincide with the forecast ramp-up in demand for Class 1 nickel for the burgeoning electric vehicle (EV) battery market.
Mr Southam said the Mincor Nickel Operations (MNO) DFS confirms the potential to develop a five‐year operation producing 63,000 tonnes of recovered nickel-in-concentrate with relatively low capital intensity, as demonstrated by the estimated pre-production CAPEX of $68 million and pre-tax IRR of 98%, and attractive financial returns.
Based on a forecast nickel price of $10.20/lb (US$7.14/lb at an exchange rate of 0.70 AUD:USD), which is largely founded on medium to long term consensus pricing, MNO is expected to generate significant EBITDA and free cash- flow at a low forecast all‐in sustaining cost (AISC).
The flagship Cassini mine is forecast to contribute 56% of the total nickel-in- concentrate production over the initial life of the Project. MNO is expected to consist of Cassini and the Northern Operations (Long and Durkin North) at commencement, with the Miitel mine contributing in the back half of the project life.
Importantly, the DFS reflects a starting position only, as potential extensions to the LOM have been identified at Cassini, where recent diamond drilling returned a significant intersection of 17.6m @ 5.0% Ni which is outside the current Mineral Resource boundary and has been excluded from the DFS.
At the Northern Operations, underground drilling is planned once mine development commences targeting extensions and new discoveries in this well-endowed nickel mining area.
Mr Southam said that from a funding perspective, Mincor is well placed with $52 million in cash at bank and discussions for project funding with various financing partners is well underway.
To this end, an Independent Technical Expert (AMC Consultants) was appointed in early March 2020 to undertake a technical due diligence review of the DFS and the process is well advanced. A number of domestic and international financial institutions are currently reviewing the opportunity with Mincor, and the company is planning for the receipt of binding credit- approved terms sheets during the June 2020 quarter.
A FID early in the September 2020 quarter would trigger immediate mobilisation of the Company’s preferred mining contractor and the commencement of mine development at Cassini and the Northern Operations.
The early works programme at Cassini is well advanced and is expected to be completed in April 2020, resulting in a fully accessible and development ready site.
Mr Southam said the delivery of a positive DFS on the integrated nickel re-start plan just seven months after executing an Ore Tolling and Offtake Purchase Agreement (OTCPA) with BHP Nickel West represents an excellent outcome for Shareholders.
“This establishes a clear blueprint for Mincor’s return to nickel production at Kambalda, based on an integrated mining and production plan with relatively low capital intensity, low forecast operating costs and attractive financial returns. Importantly, capital expenditure and operating cost estimates in the DFS are based on tendered contract rates provided by the mining contractors,” he said.
“I would particularly like to highlight that our greenfields discovery and flagship mine, Cassini, has made an exceptional contribution to the DFS accounting for 56% of the total nickel-in-concentrate production and a low unit cash cost of production of $2.71/lb (US$1.90/lb).
“What’s important for Shareholders to appreciate is that the release of the DFS is just the beginning for Mincor, as we are already working on extending mine life.
“We ruled off the Mineral Resource at Cassini for the purposes of the DFS in November 2019, which was used for today’s announcement of a maiden Cassini Ore Reserve.
“Given the spectacular results from recent extensional drilling, we believe there is excellent potential to further increase the Mineral Resource with infill and down plunge drilling.
“As announced on March 18, 2020, an infill drill program is already underway focused on converting some of the Inferred Mineral Resource at Cassini into the Indicated category, and initial results are very encouraging with hole MDD342 recently intersecting 8.2m @ 7.6% Ni. This is in addition to the high-grade intersection announced on 6 January 2020 of 17.6m @ 5.0% Ni.
“The Northern Operations in Kambalda represent one of the most highly endowed high-grade nickel sulphide mining areas in Australia. Historic ore production from the Northern Operations tenements (Otter Juan and Long mines) totals 23.0mt @ 3.6% for 818kt of contained nickel.
“We see excellent potential to explore the 1.1km of untested basal contact between Long and Durkin North, taking advantage of underground drilling access that will be created from mining the Long access incline drive to the Durkin orebodies. These orebodies were historically separated by a notional tenement boundary and could not be drilled from surface efficiently.
“Engagement with financial institutions for funding has been encouraging given our low-risk approach to development, low capital intensity, an exceptional counter-party in BHP Nickel West and significant operating history. We expect to provide further updates on the financing process during the June 2020 quarter.
“Our early works programme at Cassini is also advancing well in shown in the photo below, which was taken recently of the Cassini box-cut being excavated this month,” Mr Southam said.