Projects

Restart of Nickel Projects

Durkin North

Durkin North is currently Mincor’s largest and highest grade undeveloped Mineral Resource (427,000 tonnes @ 5.2% nickel for 22,400 tonnes of contained nickel). The resource (located at North Kambalda) remains open at depth and along plunge, and the near-mine exploration potential is one of the most attractive features of this project.

The key results from the Definitive Feasibility Study include the maiden Ore Reserve for Durkin North of 708,000 tonnes @ 2.50% nickel for 17,700 tonnes of contained nickel.

Pre-production capex is estimated at $20.2 million and this investment is expected to generate a Net Present Value (NPV) of $24.2 million at a 10% discount rate and internal rate of return of 53%, using a flat nickel price of A$20,000/tonne. The NPV more than doubles at a nickel price of A$24,000/tonne.

The study envisages making use of the existing decline at the Otter Juan mine, to a depth of approximately 300 metres, and from there diverging to the east to encounter the ore body after approximately 800 metres of further development. Mining would be undertaken using standard techniques which Mincor is well familiar.

Key risks and opportunities at Durkin North can be found in Mincor’s ASX announcement dated 10 March 2016 (click here).

Durkin North long section

Miitel/Burnett

The Feasibility Study at Miitel/Burnett (located near Widgiemooltha) covers the remaining Ore Reserves at South Miitel and the new, undeveloped Mineral Resources at North Miitel – the area known as Burnett. Due to the generally lower grade of the resulting Ore Reserves, the greater distance from the Kambalda Mill, and the generally less favourable offtake terms, the study shows that Miitel’s trigger price to resume operation is higher than that estimated for Durkin North.

The key results from the Definitive Feasibility Study is Ore Reserves of 428,000 tonnes @ 2.5% nickel for 10,500 tonnes of contained nickel. Pre-production capex is dependent on factors further explained below, but a mid-point estimate is $12.4 million, from which, at a nickel price of A$22,000/tonne, an NPV of $15.0 million (10% discount rate) and internal rate of return of 57% is achievable.

The variability in the pre-start capex relates to the costs of care and maintenance. Unlike Durkin North, there is a cost to maintain Miitel and this needs to be factored into the Feasibility Study as pre-production capex. However, there is a range of maintenance levels that can be applied, each with its own cost. Generally, the higher the cost of maintenance the lower the restart cost, and vice versa. Either way, the cost, whether maintenance or restart, has been factored in as pre-production capex.

Given the poor short-term outlook for the nickel price, Mincor put considerable effort into finding the optimal balance of holding cost versus re-establishment cost. This work identified an opportunity to allow a controlled and partial flooding of the lower levels of the north and south declines, with an option in early FY2018 to recommence pumping before significant mine infrastructure is flooded. The re-establishment cost at that point is estimated to be $6.1 million, which was weighed against the cost of full maintenance to that point of an estimated $6.0 million.

The total pre-production capex is $12.4 million comprising $6.1 million in this re-establishment cost and a further $6.3 million of other pre-production costs. Should Mincor choose, in early FY2018, to remove the remaining infrastructure and allow the mine to flood completely, the estimated re-establishment cost will increase by $2.5 million to $8.6 million.

Key risks and opportunities at Miitel Burnett can be found in Mincor’s ASX announcement dated 10 March 2016 (click here).