Hampered by a seemingly endless stream of operational problems and severe debt issues, the dry laterite nickel operations in Western Australia continue to face credibility problems. It is therefore refreshing to see a real success story emerge from Down Under, especially since it centres on a sulphide discovery.
Australian-listed
Cosmos lies in the heart of one of the country’s most prospective nickel sulphide belts, 30 km north of Leinster in Western Australia.
The 18.5-tonne-per-hour conventional flotation plant and mine were developed at a cost of A$37.7 million, based on a minable reserve of 420,000 tonnes grading 7.52% nickel, equivalent to a contained 31,850 tonnes nickel. The top of the Cosmos massive sulphide lens sits at a depth of just 50 metres below surface and is defined over a maximum strike length of 260 metres and a downdip length of more than 100 metres.
The plant is designed to process 150,000 tonnes of ore per year, which translates into annual production of 10,000 tonnes nickel in concentrate over a 3-year mine life. Life-of-mine cash operating costs are forecast at US49 per lb. (or US43 per lb. after copper and cobalt credits), whereas total costs (after treatment, refining and transport charges) are pegged at US$1.17 per lb.
The concentrate is sent by road and rail to Esperance, from where it is shipped to
Funding was provided through a A$52-million debt facility provided by a banking syndicate led by BankWest and including the Commonwealth Bank of Australia and NM Rothschild & Sons. Jubilee was required to sell forward 14,000 tonnes of nickel production at varying nickel prices and exchange rates averaging about US$3 per lb. nickel as part of the financing terms. The company retains exposure to the spot and short-term nickel market with 16,000 tonnes of unhedged nickel production.
The open-pit mine is expected to generate A$165 million in pretax earnings over the 3-year life, based on US$3.75 per lb. nickel and a U.S./Australian exchange rate of 65.
To the end of March 2001, Jubilee had so far mined a total of 128,514 tonnes of ore at an average millfeed grade of 7.85% nickel. During the March quarter, the millfeed grade averaged 9.82% nickel, well above the original forecast of 7.9% for this part of the deposit. The increase is attributed to cleaner mining of ore and less dilution, as well as a conservative original grade estimate. Nickel recoveries continue to improve, averaging 95% for the recent quarter and 93% in the previous one, compared with the original feasibility prediction of 90-91%. Concentrate grades also increased last quarter, to 19.9% from 18.7%. Jubilee says Cosmos continues to produce, from the same tonnes, significantly more nickel in concentrate than was forecast.
The mine has exceeded all production forecasts contained in the feasibility study. Recoveries, millhead grade and plant availability have all been well above predicted levels.
For the half-year to Dec. 31, 2000, explorer-turned-producer Jubilee recorded an inaugural net profit of A$15.5 million (or 12.8 per share) on the back of mine-generated sales revenue of A$64 million. Cosmos posted an operating profit of A$30 million for the 6-month period. The company’s borrowings at year-end stood at A$52 million. Jubilee has more than 120 million shares outstanding.
Cosmos Deeps
Last year, Jubilee discovered a second high-grade deposit, dubbed Cosmos Deeps, about 300 metres vertically beneath the planned base of the Cosmos open pit. Some of the better intercepts included 17.8 metres of 9.2% nickel, 10.1 metres of 10.7%, 12.4 metres of 11%, 12.1 metres of 14.2%, 20.4 metres of 9.8%, 11.7 metres of 11.3%, 11 metres of 12.4%, 10.1 metres of 12.8% and 15.8 metres of 11.2%. The Cosmos Deeps deposit lies at a depth of between 450 and 600 metres below surface.
Based on the definition of 65 holes totalling 23,200 metres on a 20-by-20-metre spacing, the Main zone of this deeper deposit contains a measured and indicated resource of 450,000 tonnes grading 9.2% nickel. A further 110,000 tonnes grading 3.9% in the Hangingwall zones are categorized as inferred, which brings the total amount of contained nickel to 46,000 tonnes (100 million lbs.).
A bankable feasibility study completed in April confirmed the economic viability of developing the Cosmos Deep deposit via an underground ramp driven from the western side of the existing open pit. Based on minable reserves of 520,000 tonnes grading 7.2% nickel, equal to 37,400 tonnes, the underground deposit will extend the life of the mine into 2008. Operating cash costs are forecast at A98 per lb. nickel, excluding smelting, refining, depreciation and amortization.
Jubilee has encountered ore-grade mineralization beyond the boundaries of the published reserves and is confident it will be able to extend the mine’s life. As well, the inferred resources in the Hangingwall zone have not yet been incorporated into reserves.
Metallurgical tests on drill core composites showed that concentrate grades of 18-20% nickel are likely to be achieved at a recovery rate of 95-96% nickel. Mineralization occurs as both massive sulphides and sulphide wallrock breccia. Sulphide mineralization consists of pentlandite, pyrrhotite, pyrite and chalcopyrite.
Massive sulphides typically grade in excess of 10% nickel. In addition, Cosmos Deeps contains elevated grades of copper, cobalt, platinum, palladium and gold.
The total capital cost of switching to underground production is estimated to be A$32.9 million. Jubilee plans to begin driving a decline in the fourth quarter of 2001, leading to production some 22 months later in September 2003. Ore will continue to be mined from the open pit until at least October 2003.
Jubilee is arranging a finance package but expects to be able to finance most of the capital cost from cash flow. In June 2000, Jubilee placed 4 million shares with Inco, priced at A$1.30 each, to raise A$5.2 million for further exploration. Jubilee also agreed to sell to Inco the first 30,000 tonnes of nickel from Cosmos Deeps on the same terms as the first off-take agreement.
Leinster-Mt. Keith
Jubilee holds a portfolio of properties covering about 200 sq. km of the Leinster-Mt. Keith greenstone belt, which hosts such major nickel deposits as Mt. Keith, Perseverance and Rocky’s Rewards at Leinster, and Yakabindie. The discoveries of Cosmos and Cosmos Deeps were made in a sequence of ultramafic rocks. The company’s holdings cover a 45-km strike length of this prospective sequence.
Jubilee says the Cosmos Deeps deposit is quite different to the overall Cosmos orebody. The shallower Cosmos is described as a typical West-Australian style, ultramafic-associated, basal-channel-hosted, massive sulphide deposit. Cosmos Deeps is a body of structurally re-mobilized massive and breccia sulphide mineralization hosted entirely in a felsic breccia, known informally as the “hybrid” rock. This hybrid rock forms the footwall to the overlying ultramafics and the Cosmos orebody.
Jubilee says it is unlikely Cosmos Deeps is simply a faulted-off portion of the Cosmos deposit. A more likely possibility is that the Cosmos Deeps sulphides originated from an as-yet-undiscovered, deeper source at the base of the nearby ultramafic unit, and were structurally re-mobilized into the felsic footwall.
Cosmos Deeps may be analogous to the 1A shoot at WMC’s Perseverance deposit at Leinster and LionOre’s Maggie Hays North Deposit. Both these deposits are felsic-hosted, massive and breccia sulphide lenses structurally dislocated from larger, ultramafic-hosted massive and disseminated nickel sulphide deposits.
Kathleen Valley
During the past three years, exploration has concentrated
in the Kathleen Valley area, within 3 km of the northern portion of Cosmos. Incorporating volcanogenic, structural and weathering components in relation to the sulphide mineralization, Jubilee has developed a geological model for the ultramafic belt.
Exploration crews have identified several zones that have strong geochemistry in association with electromagnetic geophysical conductors. Several targets have undergone preliminary testing involving reverse-circulation drilling and shallow core drilling. Ultramafic rocks anomalous in nickel, copper and platinum group metals have been encountered at each of the prospects.
Last year, the company entered into a joint venture with Australian-listed
During exploration drilling, a new zone of sulphide mineralization was encountered, at the Taurus prospect, 11 km southeast of Cosmos on one of the joint-venture properties. Five holes tested 370 metres of strike along the base of an ultramafic unit that extends 2.5 km over the western side of the property. All five holes intersected disseminated and massive sulphide mineralization. The best intercepts included 0.15 metre of 2.9% nickel at a down-hole depth of 325 metres, plus 9 metres grading 0.57% nickel (including 1 metre of 1.3%), from a depth of 351 metres in hole 4. A further 370 metres to the north, hole 5 intercepted a 0.2-metre interval of 8.1% nickel at a down-hole depth of 245 metres.
Drilling of the prospective horizon is continuing.
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