Western Areas has been boosted by a nickel off-take and funding agreement with LionOre Australia, a subsidiary of Canadian miner LionOre International Mining.
As part of its commitment to buy ore and concentrate with up to 75,000 tonnes of contained nickel, LionOre has also provided a funding facility of up to $20 million.
The agreement will help Western Areas develop its wholly owned Forrestania project.
It also helps LionOre develop its existing nickel sulphide operations in Western Australia and Africa.
The LionOre funding facility includes $5 million that can be converted into equity in Western Areas, either at the election of LionOre at a 20 per cent premium or at the election of Western Areas at a 20 per cent discount to Western Area’s share price at the time of conversion.
While Western Areas is still keen to build its own treatment plant, the first 100,000 tonnes of high-grade ore from Flying Fox will be treated at LionOre’s Emily Ann treatment plant at ‘competitive’ rates.
Western Areas can also elect to treat additional ore from Flying Fox or New Morning/Daybreak at Emily Ann by providing LionOre with production schedules ahead of ore deliveries to the plant.
Emily Ann is a modern nickel concentrate plant located 90 kilometres by road from Flying Fox.
The treatment plant Western Areas proposes to build at Cosmic Boy will then treat remaining ore from Flying Fox, as well as ore from its New Morning/Daybreak, Diggers South and Cosmic Boy operations.
Western Areas chief financial officer Tim Manners said the funding facility gave the company more flexibility in how it handled its staged development of Forrestania.
The new plan is to start with its Flying Fox deposit, progress to New Morning/Daybreak and start on the Cosmic Bay treatment plant before tackling the Diggers South and Cosmic Boy deposits and expanding its treatment facility.
Discussions are in place with contractors to commence stage one. Stage two is expected to start no later than March 2005 – depending on the outcome of a feasibility study – and stage 3, again dependent on a feasibility study, is due no later than December 2005.
LionOre will buy nickel concentrate produced at Cosmic Boy on a take-or-pay basis.
The company is also considering whether it should establish a substantial nickel sulphide processing facility at its recently acquired Bulong Nickel Plant near Kalgoorlie.
The Bulong plant had an original design capacity of 10,000 tonnes a year of nickel metal for the treatment of low-grade (1 per cent to 2 per cent) nickel laterite ores.
LionOre believes increased output can be achieved by processing higher grade concentrates (up to 10 per cent) sourced both from its mines and other third-party sources.
It is currently conducting a feasibility study into the potential development of the Maggie Hays Disseminated Sulphide Zone, which has an indicated resource of 6.9 million tonnes at 1.2 per cent nickel.
LionOre is currently developing the sulphide resource at Maggie Hays and additional mine capital will be needed to access the disseminated zone.
