Hard Creek’s Turnagain pricey but profitable

VANCOUVER — Hard Creek Nickel (HNC-T) sizable Turnagain nickel-cobalt deposit in northwest British Columbia could support a large, open-pit mine producing 77 million lbs. nickel a year, according to a new preliminary economic assessment, but to develop the remote operation it would cost almost US$3 billion.

The Turnagain deposit, which sits 70 km east of Dease Lake, is home to 695 million measured and indicated tonnes grading 0.216% nickel and 0.014% cobalt plus 511 million inferred tonnes averaging 0.199% nickel and 0.014% cobalt. Those resources, mined via three open pits, could feed a mill processing 87,000 tonnes of ore daily for 24.4 years. The mine’s strip ratio would average 0.74 to 1 over its lifespan.

The mill would recover nickel and cobalt using conventional flotation and a chloride leach process, followed by on-site nickel solvent extraction-electrowinning refining. The process should extract some 55.3% of the ore nickel and 49.8% of its cobalt, allowing the operation to produce 77 million lbs. nickel and 4.4 million lbs. cobalt, annually.

The assessment found it would cost US$3.34 to produce each pound of nickel at Turnagain, net of cobalt credits.

Using base case metal prices of US$8.50 per lb. nickel and US$17.50 per lb. cobalt, and assuming an exchange rate of US90¢ per Canadian dollar, the study found Turnagain carries a net present value (NPV) of US$819 million, using an 8% discount rate. A mine at Turnagain would produce an 11% internal rate of return based on those metal prices.

If metal prices instead average 10% better, meaning US$9.35 per lb. nickel and US$19.25 per lb. cobalt, the project’s NPV climbs to US$1.5 billion and the internal rate of return rises to 13.4%.

The kicker, however, comes in the estimated cost to develop the operation, which is US$2.92 billion. Using base-case metal prices, it would take almost eight years to repay the capital costs. Construction would span two years and the ramp-up phase would run for another two years.

Hard Creek’s president, Mark Jarvis, highlighted two areas of focus as the company advances the project towards feasibility studies. First, Hard Creek will examine ways to reduce the capital costs of development. Second, the company will investigate metallurgical options to improve recoveries. Jarvis also reminded investors that the resource remains open to the north and at depth, so potential remains to extend the mine life beyond 24 years.

Falconbridge Nickel Mines first identified nickel and copper sulphides on the Turnagain property in 1956, then completed the first exploration programs on the site between 1966 and 1973. To date the project has seen more than 75,620 metres of diamond drilling in 304 holes.

Hard Creek gained a penny on news of the positive economic study to close at 32¢. The company has a 52-week trading range of 10¢- 38.5¢ and 60 million shares outstanding.