MAK­ING THE GRADE

The nickel mar­ket is in the midst of ma­jor dis­rup­tion as two dis­tinct com­mod­ity seg­ments ap­pear – nickel sul­phate for the fast grow­ing EV mar­ket, and the tra­di­tional stain­less steel mar­ket, dom­i­nated by lower grade fer­ronickel. In Aus­tralia, West­ern Ar­eas

The Australian Mining Review - - CONTENTS - REUBEN ADAMS

WEST­ERN AR­EAS

IN early Jan­uary, the West­ern Ar­eas share price had climbed to a 52-week high of $3.53.

By late Jan­uary, it was still 30 per cent higher on the same time last year.

West­ern Ar­eas chief ex­ec­u­tive Dan Lougher said the pos­i­tive share price surge mir­rored a sim­i­lar spike in Jan­uary 2017 – with one key dif­fer­ence.

“Fun­nily enough, if you look back at West­ern Ar­eas in Jan­uary last year the stock had a hard run al­most iden­ti­cal to what has hap­pened this year,” he said.

“Ex­cept in Jan­uary 2017 In­done­sia started to re­lax their ban a bit and that caused chaos.

“We aren’t ex­pect­ing any of that this year, so it looks like a good start.”

West­ern Ar­eas is Aus­tralia’s se­cond largest sul­phide nickel miner, pro­duc­ing be­tween 22,000 and 25,000 nickel tonnes per an­num from its Fly­ing Fox and Spot­ted Quoll mines —two of the low­est cost and high­est grade nickel op­er­a­tions in the world.

The miner had an­other strong year of pro­duc­tion in 2017 while ad­vanc­ing its key growth projects, in­clud­ing the con­struc­tion of the Mill Re­cov­ery En­hance­ment Project (MREP) at For­resta­nia and the de­liv­ery of a pre-fea­si­bil­ity study (PFS) on the Odysseus project at Cos­mos.

“At the end of the day the com­pany has worked very hard at po­si­tion­ing it­self where we are to­day,” Mr Lougher said.

Tap­ping an emerg­ing mar­ket

West­ern Ar­eas iden­ti­fied the emerg­ing trend to­wards nickel de­mand for bat­tery man­u­fac­ture a few years ago, when it started se­ri­ously dis­cussing the dis­rup­tive po­ten­tial of the EV mar­ket.

“Nickel is a well know bat­tery prod­uct, so it doesn’t sur­prise me that it has come out as a key com­po­nent of the Li-ion bat­tery,” Mr Lougher said.

“The new [lithium-ion bat­tery] tech­nol­ogy is go­ing to be eight parts nickel, one part cobalt, one part man­ganese.

That prod­uct is go­ing to be­come more and more com­mon which is go­ing to be a ma­jor de­mand driver, Mr Lougher said.

“I can cer­tainly re­mem­ber peo­ple telling us to get off the band­wagon, and I still get peo­ple ask­ing me – ‘are you re­ally buy­ing into these pro­jec­tions for EV?’” he said.

“You just have to lis­ten to what’s hap­pen­ing in some of the smaller coun­tries al­ready. Some Euro­pean coun­tries will be ban­ning all in­ter­nal com­bus­tions en­gine ve­hi­cles.

“His­tory will show us that when these things take hold they run pretty hard.”

MREP: a prod­uct for the bat­tery sup­ply chain

In April last year, West­ern Ar­eas gave the go ahead for the Mill Re­cov­ery En­hance­ment Project (MREP), which will cre­ate a prod­uct for the EV bat­tery sup­ply chain from a spe­cific cut of the live tail­ings stream that was pre­vi­ously dis­carded.

This in­no­va­tive process will gen­er­ate high value prod­uct for sale di­rectly into the bat­tery man­u­fac­tur­ing mar­ket.

Con­struc­tion works have pro­gressed on time and on bud­get with com­mis­sion­ing and pro­duc­tion sched­uled for late in the March 2018 quar­ter.

“The MREP project will be pro­duc­ing a very high qual­ity ma­te­rial – you’re talk­ing about a 45 per cent to 50 per cent nickel sul­phide,” Mr Lougher said.

“When we are com­mis­sion­ing, which is very soon, we will mix it in with the ex­ist­ing con­cen­trate.

“When we have the batch­ing plant up and run­ning, and pro­duc­ing to spec, that prod­uct will be sold sep­a­rately.”

This ma­te­rial will be “high spec”, which means po­ten­tial buy­ers in the EV pre­cur­sor mar­ket will want to “test be­fore they buy”, Mr Lougher said.

“We don’t want to give them sam­ples un­til the plant is fully com­mis­sioned; then we will start the off­take con­ver­sa­tion,” he said.

“We have al­ready had a lot of in­ter­est out of Ja­pan, Ko­rea and now quite a bit of in­ter­est from China.”

A New Morn­ing

The New Morn­ing de­posit is a medium grade nickel de­posit, ly­ing be­tween the high grade Fly­ing Fox and Spot­ted Quoll mines.

New Morn­ing would have been eco­nomic at a higher nickel price, but West­ern Ar­eas be­lieves the MREP tech­nol­ogy will fast track this de­vel­op­ment and sev­eral pre­vi­ously un­eco­nomic or bor­der­line eco­nomic projects.

With the con­struc­tion of the MREP well un­der­way, West­ern Ar­eas has been re-as­sess­ing op­tions for es­tab­lish­ing an open pit op­er­a­tion at New Morn­ing, pro­duc­ing ad­di­tional high-value nickel prod­uct for the EV mar­ket us­ing the com­pany’s patented BioHeap process.

West­ern Ar­eas has com­menced a scop­ing study for an open pit, with an ad­ja­cent heap leach pad.

“Now we have the MREP plant it can ac­tu­ally take more prod­uct in the back end,” Mr Lougher said.

“[New Morn­ing] would work at floata­tion at some point, but the MREP has al­lowed us to bring it on quicker and cheaper.”

Odysseus: a new min­ing cen­tre

In 2015, West­ern Ar­eas paid Glen­core $24.5m for the Cos­mos Nickel Com­plex, 370km north-west of Kal­go­or­lie in WA, with the aim to es­tab­lish a se­cond min­ing cen­tre in the State.

A PFS in­di­cated that the 12,000 nickel tonnes per an­num Odysseys de­vel­op­ment at Cos­mos could be­come a core growth as­set for the com­pany.

With de­fin­i­tive fea­si­bil­ity work now un­der­way, West­ern Area’s De­cem­ber quar­ter re­port in­di­cated that the on­go­ing Odysseus stud­ies were point­ing to­wards a larger project and longer mine life than pre­vi­ously en­vis­aged by the PFS.

Based on pre­lim­i­nary mod­el­ling cur­rent ex­pec­ta­tions see mine life ex­tend­ing be­yond 10 years from the ini­tial 7.5 years.

“If you are pos­i­tive about the EV mar­ket de­mand then [Odysseys] fits quite nicely,” Mr Lougher said.

“There will be a tran­si­tion into Odysseys as a ma­jor pro­ducer.

“It’s go­ing to be a good op­er­a­tion for us; Odysseus cost per tonne is cheaper than Spot­ted Quoll and Fly­ing Fox.

“The other part we haven’t in­cluded in the fea­si­bil­ity study is the AM5/AM6 de­posits which were par­tially mined by Xs­trata [as] they come off the same de­cline as Odysseys.”

The AM5 and AM6 de­posits rep­re­sent up­side of about 53,000t of nickel. The ben­e­fit of Odysseus is that the ex­ist­ing in­fra­struc­ture means pre-pro­duc­tion CAPEX can be done in stages.

“There’s a lot of things we can tweak with low CAPEX to get the project started up,” Mr Lougher said.

Out­look

In WA, BHP Nickel West plans to be­come the world’s big­gest ex­porter of nickel sul­phate by ini­tially pro­duc­ing 100,000t a year by April 2019, us­ing ex­ist­ing in­fra­struc­ture at its Kwinana fa­cil­ity.

A pro­posed stage two ex­pan­sion to 200,000t a year would lever­age off the ini­tial in­vest­ment in stage one.

Al­pha Fine Chem­i­cals has also com­pleted its pre-fea­si­bil­ity study on an Esper­ance Nickel Sul­phate Plant in WA, with a fi­nal in­vest­ment de­ci­sion pend­ing this year.

Mr Lougher said this was a great sign for the fu­ture of the in­dus­try.

“Any­thing that uses up nickel prod­ucts is good for the mar­ket, be­cause it will draw down in­ven­tory stock­piles more quickly than we an­tic­i­pated,” he said.

“The more peo­ple that use nickel, the higher the de­mand for the sul­phide prod­uct.”

Still, some are scep­ti­cal that the bullish sce­nar­ios will play out, with EVs still a niche in­dus­try and nickel over­sup­ply re­main­ing a risk.

“There are still scep­tics out there; there’s still a view that the pro­jec­tions are not sus­tain­able, but if you play the 50 per cent rule that’s still a big mar­ket,” Mr Lougher said.

“My guess is that we will get a pinch point where stain­less de­mand is also still grow­ing.

“The value add for our prod­ucts is only go­ing to get bet­ter.”

Al­lim­ages:WesternAreas.

West­ern Ar­eas chief ex­ec­u­tive Dan Lougher.

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