Western Areas has announced it will start mining the Spotted Quoll underground mine, in the Goldfields, next April with first production in February 2012.
Western Areas has announced it will start mining the Spotted Quoll underground mine, in the Goldfields, next April with first production in February 2012.
In a statement to the Australian Securities Exchange, Western Areas said the estimated mine life for Stage One of the mine is eight years.
"The decision to mine follows completion of the Feasibility Study for the Spotted Quoll - Stage One underground operation," the statement said.
"Total capital cost for Stage One is estimated at $98 million with the major component of $62.2 million for mine development spread over the life of the project."
"The Spotted Quoll underground mine is a financially robust project even at a US$6 per lb nickel price," said Western Areas' director of operations Dan Lougher.
"Estimated financial returns at current prices are substantial," he said.
"We expect the supply of Spotted Quoll ore to the Cosmic Boy concentrator will transition to the underground once the Tim King open pit is completed with nickel continuing to be delivered at low cash costs,' said Mr Lougher.
See company statement below:
The Board of Western Areas is pleased to announce a decision to mine the Spotted Quoll underground mine. Decline development is scheduled to start in April 2011 with first production in February 2012. Estimated mine life for Stage One of the underground mine is eight years.
The decision to mine follows completion of the Feasibility Study for the Spotted Quoll - Stage One underground operation. Stage One will extend from the mine portal in the Tim King Pit to 525m vertical depth (Figure 1). Drilling below the ore reserve to the limit of drilling (approx. 1,000m depth) indicates Spotted Quoll may extend to twice the depth of the Stage One mine.
This provides the opportunity to extend mine life well beyond eight years or increase production above 10,000tpa nickel in ore, which is the feasibility target when the mine is in full production.
The excellent financial returns expected from Stage One are summarised in Table 1 at different nickel prices ranging from USD$6/lb nickel (base case) to USD$12/lb nickel (top case).
The Stage One mine should produce robust returns at the base case of USD$6.00/lb nickel. Assuming a price of USD$10.00/lb nickel and 0.95 USD/AUD exchange rate, the Feasibility Study indicates A$297 million NPV, 96% IRR and C1 Cash Cost of USD$2.71/lb nickel.
The Feasibility Study Ore Reserve estimate is 1.73 million tonnes ore at an average grade of 4.0% nickel containing approximately 70,000 tonnes nickel as classified and reported in accordance with the JORC Code and listed in Table 2.
Additional Mineral Resources extend below the current Ore Reserve. Drilling is planned in 2011 to infill and extend Mineral Resources and potentially upgrade these into Ore Reserves.
Mine Development and Capital Cost Estimates
First ore production from the underground mine is expected in February 2012 which should enable a relatively smooth transition from open pit to underground ore production.
Dimensions of the Spotted Quoll decline will be 5.5m (wide) by 5.7m (high). The decline and related mine infrastructure should have capacity to increase production above levels considered in the Feasibility Study. A 24m crown pillar, which will be partially retrieved at the end of the mine life, will be left below the Tim King Pit. Mining will involve top down, long hole open stoping using paste fill to remove the requirement for pillars. Levels will be spaced 15m apart.
Total capital cost for Stage One is estimated at A$98 million with the major component of A$62.2 million for mine development spread over the life of the project (Table 3). Funding for mine development and capital costs will be sourced from operating cash flows.
Discussion of Results of Feasibility Study
Western Areas' Director of Operations, Mr Dan Lougher said: "The Spotted Quoll underground mine is a financially robust project even at a USD$6 per lb nickel price. Estimated financial returns at current prices are substantial. We expect the supply of Spotted Quoll ore to the Cosmic Boy concentrator will transition to the underground once the Tim King open pit is completed with nickel continuing to be delivered at low cash costs. Further optimisation studies will now be carried out to enhance the project deliverables".
Mr Lougher added, "With the ongoing success of the deeper drilling it is easy to see potential for a significant extension to mine life and potentially an increase in production at Spotted Quoll."
