Magna Mining signs toll-mill deal with Vale for Crean Hill project

Magna Mining (TSXV: NICU; US-OTC: MGMNF) has signed a toll-mill agreement with Vale‘s (NYSE: VALE) base metals unit for the advanced exploration portion of its Crean Hill project in Ontario.

Located in the Sudbury Basin nickel district, Crean Hill hosts a past-producing mine that was a significant producer under former owner Vale for over 80 years. 

The project has a 2022 resource that will be updated in the second quarter. But Magna needs to develop a ramp to access the deposit for mine testing and to make a production decision.

It recently filed an amended closure plan for the project and says it’s on track to have all permits needed to build the ramp.

Under the definitive deal with Vale, which Magna referred to as an offtake agreement, initial production from Crean Hill would be shipped to Vale’s Clarabelle mill in Sudbury for processing. This includes material from the Main, Intermediate, 9400, 9400 Footwall and 101 Footwall zones. The 109 Footwall zone, which has high platinum group metals grades, is excluded from the agreement and is planned to be processed through an alternative mill.

Results from metallurgical testing were used to determine nickel and copper concentrate smelting and refining treatment terms, which were not disclosed.

Dalton Baretto, mining analyst at Canaccord Genuity described the deal as positive.

“This agreement is one of the key steps to moving forward on production from the advanced exploration stage, which will generate much-needed
cash flow while also helping de-risk the eventual mining of the entire resource from a technical perspective,” he wrote. “In addition, having this agreement in place likely fast-tracks an agreement on toll milling the entire deposit (if this is the eventual path Magna follows) while also providing data that will help in the trade-off study for the construction of [Magna’s] own processing hub to treat both Crean Hill and Shakespeare ore.”The stock had gained 21% or 11¢ to trade at 63¢ this afternoon in Toronto. The company has a $103-million market cap.

The stock had gained 21% or 11¢ to trade at 63¢ this afternoon in Toronto. The company has a $103-million market cap.

A preliminary economic assessment released last summer projected a $330-million capital cost for a 15-year open pit and underground mine.

Met tests

Prior to negotiating the agreement, Magna completed an extensive test program at a third-party metallurgical facility using representative ore samples from the Crean Hill deposit. The results were used to develop recovery predictions at varying ore feed grades and producing a high concentrate grade consistent with the Clarabelle mill flowsheet.

The predicted mill recovery from the test work was calculated at 80.5% nickel, 93.6% copper, and approximately 70% for cobalt, platinum , palladium and gold. These recoveries, according to Magna, were established using its estimates of potentially mineable grades for advanced exploration.

Magna said it is currently exploring several non-equity sources of capital, which may include government funding or byproduct streams, to fund underground advanced exploration at Crean Hill. As of now, it is fully funded for a 25,000-metre exploration drilling program at Crean Hill and its Shakespeare project.

The advanced exploration grades used to negotiate an a deal were based on the August 2022 estimate, which showed 16.8 million open pittable indicated tonnes grading 1.08% nickel-equivalent and 14.5 million underground indicated tonnes grading 2.07% nickel equivalent.  Contained metals were calculated at over 500 million lb. of nickel, 450 million lb. of copper and 1.7 million oz. of platinum-palladium-gold.

Assay results from more than 19,000 metres of diamond drilling completed at Crean Hill since the resource estimate were excluded. 

As a brownfield site, it is currently subject to an existing closure plan filed by Vale, which has retained surface rights to the property since closing the mine in 2002. Magna acquired the project its takeover of Lonmin Canada, who was responsible for much of the exploration at Crean Hill between 2003-2022.

During its active years, it produced 20.3 million tonnes of ore grading 1.3% nickel, 1.1% copper and 1.6 grams combined platinum-palladium-gold per tonne.