Battery metal explorer Conico and its joint venture partner ASX-listed Greenstone Resources are relishing today’s high prices for cobalt and nickel that are turbocharging the economics of the 50-50 Mt Thirsty project in Western Australia.
Mt Thirsty cobalt-nickel project 16km northwest of Norseman is a late-stage venture having already undergone a pre-feasibility study, or ‘PFS’.
The project aims to produce a mixed sulphide product to be consumed by the burgeoning lithium-ion battery industry.
Remarkably, the 2020 PFS was based on repressed metal prices of US$61,000 per tonne of cobalt and US$17,850 per tonne of nickel.
Recent spot prices of the two metals paint a very different picture. Greenstone says, the current price per tonne of cobalt sitting at US$81,380 marks a 33 per cent improvement on the PFS figures.
Similarly, Friday’s closing price of US$37,115 per tonne of nickel on the London Metal Exchange represents a staggering 108 per cent increase in the number assumed by the PFS.
According to Greenstone, substituting the reported prices into the 2020 PFS would result in a pre-tax net present value of $712 million, an incredible increase from an original figure of $44 million.
In particular, Nickel has recently seen some wild action on the Exchange. According to Bloomberg, nickel on the futures market hit an all-time high above US$100,000 a tonne earlier this month.
The volatility seems to have continued with the price of nickel hitting its down limit for the fourth consecutive day when the market opened in London on Monday, settling on a price of US$31,580.
The initial PFS also outlined a capital expenditure of $371 million and an operating expenditure of $1.233 billion over a mine life of 12 years.
The project hosts a resource of 26.9 million tonnes of ore at 0.126 per cent cobalt and 0.54 per cent nickel.
Greenstone says the project has the potential to provide a low-cost and sustainable source of cobalt supply outside the Democratic Republic of the Congo and Russia who combined supply 74 per cent of global cobalt.
The pair is currently considering boosting the bottom line even further by improving metal recoveries or increasing payabilities on recovered metal. The optimisation opportunities include investigating precursor products, processing routes to increase recoveries and also a high-grade nickel sulphide target that remains untested at depth.
In 2010, the last time the target was tested; a 6m hit going 3.4 per cent nickel was encountered.
The International Monetary Fund, or “IMF”, suggests a standard electric vehicle battery pack requires 8kg of lithium, a heavy 35kg of nickel, 20kg of manganese and 14kg pile of cobalt. Considering the substantial sum of battery metals needed for each car it is no wonder analysts are concerned the electric vehicle revolution will be bottlenecked by supply.
Further research by the IMF from late last year suggests metal prices would reach historical peaks for an unprecedented and sustained period as the globe strives for a net-zero scenario. Interestingly for producers, it is suggested the total value of metals production would rise more than four times until 2040.
Greenstone says native title negotiations with the Ngadju Traditional owners are at an advanced stage and further negotiations are scheduled for this month.
Other considerations include simplifying the current ownership through an initial public offer to provide a dedicated management team.
With the battery market appearing to take off like a dog without a leash, Conico and its partner will be hoping the soaring prices of battery metals keep on keeping on.
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By Matt Birney
