Punting on nickel’s future

SOME might say Peter McAleer, Jim Malone, Malcolm Clark and Simon Titchener are taking a big punt.

The quartet has just floated a company that may produce an oxide not currently produced in commercial quantities in Western Australia, using a process untried in Australia.

The oxide may be used in processing ore in a fledgling WA industry or, if that does not remain feasible, possibly supply overseas markets.

Moreover the current plan is already a second choice option for WestMag’s management team, which first hatched the idea with the Kingstream steel project in mind.

WestMag now hopes to produce the State’s first magnesia to supply laterite nickel producers. The company will combine brine with calcined dolomite from its Governor reserve, 350 kilometres south east of Port Hedland.

In the 1970s, WestMag executive technical director Malcolm Clark designed and built a magnesia plant in Israel. As project manager, Mr Clark saw first-hand the success of the brine method of producing magnesium hydroxide and was puzzled why the process was not used in Australia.

With Jim Malone and Simon Titchener, Mr Clark looked to develop markets for Australian magnesia produced by this method and saw the Kingstream potential to use 100,000 tonnes per year.

Hot briquetted iron production also uses magnesia and remains a 9,000 tonne per annum potential market for WestMag magnesia, but from 1999, when laterite nickel plants began to come online, it became obvious this new industry would create the largest local market. One plant was using magnesia as a neutralising agent, consuming 1.1 tonnes per tonne of nickel.

The Cawse laterite nickel processing facility in the eastern goldfields has continued to successfully use magnesia and, although not used at the two other WA facilities, the magnesia method looks to be the process of choice in the future.

An Anaconda spokesperson said that while the company was upgrading its processing facility, which did not use magnesia, the company planned further plants for which the acid leaching process using magnesia would be considered. With Comet Resources and Billiton subsidiary QNI, also investigating the process for a proposed facility at Ravensthorpe, the WA market is expected to reach 60,000 tonnes by 2003.

While Cawse currently purchases magnesia from Queensland at $475 per tonne, WestMag managing director Jim Malone said his company had signed letters of intent for supply with both Cawse and Ravensthorpe Nickel.

WestMag dolomite will be quarried, crushed and calcined on-site at the Governor deposit and then transported to Port Hedland, where concentrated seawater, a by-product of Cargill Australia’s salt production operations, will be used in a proposed wet-plant facility to produce the magnesia.

Mr Malone is upbeat about the economies of the process, the proximity to local markets, a letter of understanding with Cargill, Cargill’s ability to assist with lucrative overseas markets for other magnesia applications and sample product sent to Japan for testing.

Some of the overseas market for high quality magnesia has been estimated at $5,300 per tonne, delivered to port.

Nonetheless, WestMag’s venture remains an expected outcome, rather than a certainty.

What if local laterite nickel production does not take off as expected?

“We’ve looked at this very closely,” Mr Malone assures.

“The extraction of sulphide nickel is costly and deposits are getting rare, but there’s an abundance of laterite deposits and they’re getting the technology right.

“Nickel has a very robust future and at the moment, the best process for nickel requires magnesia.”

But in the long term, WestMag is not relying on nickel production for its sole market.

“In the short to medium term they’ve all said they’ll use the (magnesium) hydroxide with the high pressure acid leach,” Mr Malone says.

“But if anything else comes in that puts us out of business in that market, we will have found ourselves another market. We may be in the flame-retardant market, which would be more profitable. There are a lot of uses for magnesia products. We’ll look at it all.”

The first step towards the company’s intent to build WA’s first magnesia production plant has been achieved with relative ease, last week’s float raising $2.4 million to fund a definitive feasibility study to set up a Port Hedland facility.

WestMag has been unphased by the success of the oversubscribed offer. “With our project the resources are there, they’re unlimited,” Mr Malone says.

“From a supply side there is no risk. The study’s just an exercise in working out what the market’s going to be, how big the plant should be and combining a price with capital expenditure.”

Mr Malone adds WestMag has significant processing, operating and transport cost advantages over its Australian competitor, Q-Mag, in Queensland. Neither is the company’s edge confined to the immediate local market. WestMag also has a transport advantage to deliver to potential projects on the South Australian border and to operations in Indonesia, Mr Malone explains.

Although not expecting too many shareholders to sell out in the meantime, Mr Malone says initial results from the studywill most likely be “some positive announcements about the quality of the magnesia” and will precede a pilot plant.

A green light at the conclusion of the first half, the technical part of the study, will then require WestMag to raise up to $50 million.

Even this does not phase Mr Malone. “Our chairman Peter McAleer has had a lot of experience at raising money. With other people, he’s just recently raised US$296 million.

“This is a real project,” Mr Malone continues, “not a prospect. We’re providing a cheaper value magnesia product to a market that needs it and we’re replacing an interstate import. It’s all very simple.

“Not only are we making money ourselves, but we’re assisting the laterite industry here.”

Definitely no punt in Mr Malone’s eyes.

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