Heron Resources may have set the scene for Western Australia’s next billion-dollar mine in March when it welcomed the world’s second biggest nickel producer, Inco, to evaluate the Kalgoorlie Nickel Project.
Operational nickel projects surrounding Kalgoorlie, which produced a combined $394 million of nickel last year, are also transforming.
It is not only the buoyant nickel price that is driving change, but the opportunity to lower operating costs by increasing production.
What the city stands to gain is a renewal of confidence in traditional nickel sulphide operations and restored faith in the ill-reputed, newer pressure acid leach technology.
Realisation of 40,000 tonnes of annual nickel production at KNP will triple nickel output achieved in the shire of Kalgoorlie-Boulder.
And ownership of WMC, the largest nickel producer in proximity to Kalgoorlie and the biggest employer in the nickel industry, also looks likely to change. BHP Billiton has a takeover offer on the table with support from WMC directors and for the moment refuses to expand on its plans for nickel.
BHP Billiton’s bidder’s statement says the company “intends to pursue opportunities for WMC Resources’ nickel operations to share infrastructure and expertise with BHP Billiton’s Ravensthorpe project”.
City of Kalgoorlie-Boulder councillor Graham Thompson has appealed for BHP Billiton to base its nickel headquarters in Kalgoorlie but the company says it will make a decision after the takeover.
Canadian-controlled LionOre Mining is in the process of expanding nickel production near Kalgoorlie.
The company has bought MPI Mines nickel assets, including the Black Swan/Silver Swan operation forecast to produce 12,000 tonnes of nickel this year, and is in the process of returning the failed Bulong PAL processing plant to production through conversion to a hydrometallurgical process of nickel sulphide concentrates.
And Heron, after a long history of acquiring leases near Kalgoorlie giving it the biggest local landholding of any explorer, looks set to have its day in the sun.
In terms of new projects, it has been a long time between drinks for the city.
Kalgoorlie residents make a point of celebrating the prospect of a new major mine, new jobs and an injection of capital on their doorstep.
The bubbly is perhaps premature, and Inco’s official welcome was alcohol-free – it was held in the indoor pool of the local recreation centre.
But Inco has committed to spend at least $100 million, which will complete a bankable feasibility study of the project.
Inco will secure a 60 per cent controlling interest in the tenements, less than 100 kilometres north of Kalgoorlie, upon committing to project construction and finding project finance.
It is estimated construction of KNP will cost $1.4 billion, most of which will be spent outside Kalgoorlie on materials, although local service industries are likely to benefit once mining has begun.
The project will also contribute jobs – a similar size project at Murrin Murrin employs about 700 people.
Heron Resources managing director Ian Buchhorn will not commit to a timeline for KNP although he said specific dates were included in the contract with Inco.
However, Inco has the benefit of understanding an orebody similar to KNP’s laterite nickel reserves at its Goro operation in New Caledonia, which could accelerate the feasibility process.
It is expected the study of KNP’s feasibility will take less than the seven years it took BHP Billiton to green light the Ravensthorpe mine.
Ravensthorpe is an omen of fortune for KNP. The projects have similar ore types, although at 900 tonnes, KNP is more than three times the size of its southern sister.
Both projects are second generation laterite nickel mines, having learned from the mistakes of the first generation, Cawse, Bulong and Murrin Murrin.
The go-ahead of Ravensthorpe in 2004 led to a surge in confidence in the Heron’s nickel laterite landholdings and an offer from Inco executives at last year’s Diggers and Dealers Conference to form a joint venture.
Mr Buchhorn has been talking about the prospectivity of the project since the late 1990s after he had accumulated a significant tenement holding he thought might be of strategic value to the Cawse project owned at the time by Joseph Gutnick.
Mr Buchhorn will lose control of KNP if the project goes into production but he is pleased to see the project progress.
“There is no emotion attached to a lease,” he said. “It is simply a means to an end. I was always going to introduce a partner, I had to because there is no way a company the size of Heron could raise the amount of money needed to see the project through to production.”