14/10/2020 - 15:43

Blackstone delivers billion-dollar nickel baby

14/10/2020 - 15:43

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Blackstone Minerals has unveiled its much-anticipated scoping study for the Ta Khoa nickel project in Vietnam, delivering a tantalising set of numbers headlined by a AU$1 billion present-day valuation and net pre-tax cash flows in excess of US$1.2 billion over the projected 8.5-year life of mine. The financials clearly support the case for a revival of its mothballed nickel operation in Vietnam.

Blackstone’s Ban Phuc Nickel Sulphide Mill in Vietnam. Credit: File

Blackstone Minerals has unveiled its much-anticipated scoping study for the Ta Khoa nickel project in Vietnam, delivering a tantalising set of numbers headlined by a AU$1 billion present-day valuation and net pre-tax cash flows in excess of US$1.2 billion over the projected 8.5-year life of mine.

The financials clearly support the case for a revival of its mothballed operation in Vietnam offering a more than respectable 45 per cent internal rate of return.

Other projections to jump off the page include forecast nickel production of 12,700 tonnes per annum, an impressive US$179 pre-tax cash-flow and pre-production capital costs of US$314 million, which will be paid back over the first 2.5 years of operation.

And reading between the lines, the scoping study might actually just be the tip of the iceberg. The mining potential of the disseminated sulphide body at Ban Phuc, next to the existing mill also presents an up and down-stream processing opportunity to produce a precursor product for sale into the burgeoning lithium-ion battery manufacturing industry.

The study also perhaps understates the overall potential of the project which shows tremendous exploration upside from a plethora of high-grade satellite discoveries within easy trucking distance of the milling operation. The deposits could be used to restart the existing mill and generate an early income, funding a larger development of the operation, in addition to providing high-grade feed through the life of the mining operation, further enhancing the economics of the developing nickel mining centre.

Blackstone Minerals Managing Directors, Scott Williamson said:

“The Scoping Study defines a project path that maximises economics, minimises environmental and social impacts, and offers a lasting legacy to the people in our local community.”

“Whilst we are pleased with the outcomes of this study, we will continue to expand our resource and increase our production potential in this exciting, and yet under-explored region of Vietnam and have commenced work on PFS level studies for the project.”

Blackstone’s Ta Khoa Nickel-PGE project is located around 160km east of Hanoi in northern Vietnam. The project occupies a strategic position over one of Asia’s richest nickel terranes, hosting two distinct styles of mineralisation namely high-grade massive nickel sulphide veins, or “MSV” and larger tonnage, disseminated sulphide, or “DSS” ore systems. The company’s tenure stretches over more than 15km of strike of the Ta Khoa district and takes in 25 recognised nickel prospects.

The company acquired the project in May 2019 and immediately set about identifying a raft of potential new feed sources for its mothballed Ban Phuc plant in the central tenement area. The mine and mill at Ban Phuc operated between 2013 and 2016, exploiting the high-grade sulphide nickel vein adjacent to the mill, and was only placed on care and maintenance in 2017 due to falling nickel prices.

Exploration through 2020 identified a number of high-grade MSV targets through the project area including the prospects at Ban Chang, King Snake and the new discovery at Viper. However, the company has concentrated on the delineation of the DSS ore system at Ban Phuc, adjacent to the existing mothballed operation.

Blackstone’s tireless drill fleet have uncovered a wealth of nickel mineralisation at Ban Phuc, outlining a broad zone of potentially open pitable ore.  The company’s maiden resource over the deposit weighs in at a hefty 44.3 million tonnes at 0.52 per cent nickel containing 229,000 tonnes of nickel. Importantly, most of this resource sits in the coveted “indicated” category, adding an extra level of confidence to the study and providing the feed for the restart of the proposed mining operation.

In the course of drilling out the Ban Phuc deposit, Blackstone also made the high-grade, down-slope discovery of the previously unrecognised King Cobra Zone, or “KCZ”. The KCZ continues to return an abundance of higher-grade nickel intercepts including 47m at 1.1 per cent nickel and 60m at 1.3 per cent nickel. Notably, the potential ore from KCZ does not form part of the current scoping study but will undoubtedly be included in the developing feasibility study, providing a further boost to the economic modelling of the project.

However, it is the scale of the proposed operation that will no doubt pique the interest of key industry pundits. Whilst the existing mill at Ban Phuc is set up to process the narrow, high-grade nickel ore bodies in the region at around 450,000 tonnes per annum, the proposed operation ups the ante with a new plant looking at processing between four and six million tonnes of ore per annum. The proposed mill will utilise a mix of tried and true processing technologies, including crushing, grinding and floatation to produce a high-grade nickel concentrate. What then happens to this concentrate is what will likely set this operation apart.

The company is evaluating a number of potential flowsheets but will look to transport a portion of its nickel concentrate production to a downstream processing plant in order to produce a precursor nickel-cobalt-manganese, or “NCM” product for sale to the manufacturers of lithium-ion batteries. This precursor product would likely be used in the manufacture of cathodes for the batteries which attracts a 125 to 135 per cent premium to the nickel price, making a potentially lucrative addition to the company’s product stream.

Blackstone says that the manufacture of a NCM product will also deliver a range of other side benefits including reduced export tariffs, reduced transportation and rehandling costs, a boost to local employment and facilitating the delivery of a key component into the battery supply chain in an ‘environmentally friendly manner’.

The company is now working with the local government in Son La to secure a site for the downstream processing plant in the Mai Son industrial park, 42km from Ban Phuc. This site will deliver the company ready access to power, water and transport, also improving the environmental credentials of the developing operation.

Electric vehicle mogul and Tesla Chief Executive Officer Elon Musk recently sent a plea to the nickel industry, saying:

“Wherever you are in the world, please mine more nickel….”

“Tesla will give you a giant contract for a long period of time, if you mine nickel efficiently and in an environmentally sensitive way.”

With drilling continuing across the Ta Khoa project in Vietnam and its feasibility study having already kicked off, it appears Blackstone Minerals will soon be in a position to respond to Musk’s request as it positions itself to supply a growing consortium of lithium-ion battery manufacturers through Asia and the rapidly evolving electric vehicle sector.

 

Is your ASX listed company doing something interesting? Contact: matt.birney@businessnews.com.au

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