East Perth-based Metals X Ltd will move ahead with plans for the development of its Wingellina nickel project in Western Australia following a feasibility study that pegged capital costs at $2.2 billion.
East Perth-based Metals X Ltd will move ahead with plans for the development of its Wingellina nickel project in Western Australia following a feasibility study that pegged capital costs at $2.2 billion.
The study calculated the project would have a mine life of 39 years with an annual production of 40,000 tonnes per annum of nickel and 3000tpa of cobalt.
Cash costs for the project are estimated at $US3.34 per pound of nickel equivalent.
The company said the project's average annual earnings before interest, tax, depreciation and amortisation will be $568 million while the payback of the $2.2 billion in capital costs is estimated to take five years.
The project is subject to funding and approvals with Metals X saying it will hold talks with major shareholders Jinchuan Group Ltd and APAC Resources Ltd.
Below is part of the announcement:
Metals X Limited ("Metals X") has completed its Phase 1 - Feasibility Study on the massive, 100% owned Wingellina Project in the Central Musgrave ranges and concluded that, subject to funding and approvals, the major Nickel-Cobalt-Iron project should be developed.
The feasibility study has determined a project development strategy that builds a High Pressure Acid Leach (HPAL) plant on site to produce a mixed nickel-cobalt hydroxide concentrate for shipping to third party refineries. The project has a nameplate annual production of 40,000 tonnes of nickel and 3,000 tonnes of cobalt metal and a mine life of 39 years.
The feasibility study has significantly eliminated the perceived disadvantage of location and isolation by identifying local supplies of gas for power supply, calcrete for neutralisation, sources of process water, and the delineation of road, rail and transport logistics to service the project.
The feasibility study has distinguished the project from other operating nickel laterite deposits in Australia on the basis of the ore style being a limonite or tropical laterite.The chemical make-up and physical characteristics of the ore vary markedly from typical Australian laterite deposits, having an iron oxide content averaging 47%, magnesium
content of less than 2%, a low strip ratio and the ability to excavate the ore without blasting. In addition acid and consumable consumptions are low.
Financially, the project is estimated to have an after tax NPV (8%) of $A 3.4 billion. The undiscounted accumulated cashflow for the initial 39 year life of the project is $A14 billion and once operational the project generates an annual average EBITDA of A$568 million at current spot metal prices.
Total capital cost estimate for the project (including contingency but excluding EPCM) is A$2.214 billion.
Metals X has applied a long-term sulphur price of $150/t based on expert long term price forecasting. Should current spot sulphur prices (approx $400/t) sustain, the impact on Wingellina would be to increase operating costs from US$3.34/lb after cobalt credits to US$5.06/lb after cobalt credits.
Wingellina is unlike other nickel laterite projects in Australia, distinguished by both the high iron oxide and low magnesium level (typically less than 2%), the ore deposit is a true limonite (or tropical laterite) with the appearance of ochre. It forms from the complete oxidation of dunitic and other mafic and ultramafic units of the Giles Complex
with nickel sourced from within the crystal structure of olivine minerals. Due to the intense oxidation of the ores, mining is extremely low cost as the ores can be extracted without the requirement of blasting. Metals X has dubbed the ore "ferronicolite" describing both the mineralisation and physical characteristic of the ore.
Mining studies, completed by Coffey Mining Ltd have generated a detailed 20 year mining schedule with a diminishing grade production strategy. This front-loads production, increases NPV and shortens simple payback. The ferronicolite is in thick deeply weathered zones from surface with the estimated average waste:ore strip ratio for the first 20 years of mining being only 0.5:1. Mining represents a very low risk component of the overall operation, with only 7% of total operating costs attributable to mining.
Metals X continues to explore its vast land holdings within the Central Musgrave Ranges for additional ferronicolite and is hopeful that in the ensuing year it can significantly add to the size of the Wingellina resource from a number of additional targets that show strong characteristic for limonite development.
An interesting aspect of the current feasibility plan is that the waste material/tailings includes an iron precipitate from the ore averaging 35% Fe. Each year the project will generate up to 5 million tonnes of this material containing 1.5 million tonnes of iron. With strong demand and pricing for iron, Metals X has commenced additional studies to generate a further value add from the project from the iron.
Having completed the first phase of the feasibility study, Metals X is moving to complete all mining and access agreements that are required to enable the project to progress.
Metals X intends to consult with its major shareholders, Jinchuan Group Limited (China's largest nickel producer) and APAC Resources Ltd (HK1104) before progressing with detailed design, engineering and construction plans for the project. These discussions will also consider the funding and finance options available to the company to progress the project to development.
