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Argosy clears up the confusion

INVESTORS appear to have been confused by the detail of Argosy Mineral’s New Caledonia nickel project plans. And if nothing else, the calls to the company’s office to check the facts have underscored keen interest in Argosy’s plans.

Argosy business development manager David Russell believes the misunderstanding is over the company’s deal with major metal refiner Norilsk Nickel, for which final details were announced mid-October.

The deal will deliver Russia’s Norilsk 90 per cent of the Nakety/Bogota nickel laterite project over a number of stages, but will leave Argosy well cashed-up to pursue other ventures.

The project’s value, and hence the total cash to flow to Argosy, compares comparatively with other nickel laterite ventures worldwide.

The laterite is ‘wet’, meaning the ore is far more amenable to treatment, and less costly, than that of dry clay laterites, and the ore is near-surface, suiting an open-cut operation. Norilsk, moreover, will provide virtually unmatched technical expertise, experience and capital to the project it has estimated has a lifespan of more than 30 years, in a relatively politically stable environment.

Norilsk took on the project after searching worldwide for a nickel venture it deemed worthwhile and was not the only company to approach Argosy and partner Société des Mines de la Tontouta.

Another international company spent $1 million looking into taking on the project before a disappointing experience with dry nickel laterites in Western Australia forced executives to decree a temporary ban on further nickel laterite ventures.

While nickel markets like many others, are currently depressed, should it choose, Norilsk can accelerate the project at any stage. Presently, however, the plan is for Norilsk to reimburse Argosy the $US7.166 million it has already spent on the project and to complete a bankable feasibility study over two years.

The study, by Norilsk’s GipproNickel Institute with Bateman Engineering (Australia), will cost an estimated US$15 million and include some further drilling, and will give Norilsk a 45 per cent stake in the project.

Another $US17.5 million to Argosy, together with bank guarantees, will give Norilsk 70 per cent of the venture.

To increase its interest to 90 per cent, Norilsk will pay Argosy a further $US12.5 million and finally, 20 per cent of the net present value of the project.

This 20 per cent has been estimated by Argosy financial modeling and a recent analysis by BNP Paribas to be worth $US92 million, bringing the value of the deal to $US144 million, or between $AUS2.50 and $3.00 per Argosy share. Argosy shares have traded this week around 41 cents.

The company owns a nickel exploration project in Burundi and mining and exploration licences for a gold project in the Slovak Republic.

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Total Shareholder Return as at 31/10/18

1 year TSR5 year TSR
157thAspire Mining32%-19%
463rdAura Energy-18%-20%
490thArgosy Minerals-22%79%
681stArdiden-50%-20%
687thArdea Resources-50%0%
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03/09/18
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387th↓Argosy Minerals$0
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389th↓Aura Energy$0
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