In discussions with delegates at the 1999 Australian Nickel Conference held here recently, the consensus was clear: the most dramatic change facing the nickel industry is the emergence of the Western Australian dry laterite nickel-cobalt producers.
This year, three such projects, all of which use pressure acid leach (PAL) technology, have come on-stream. And although expectations were high that the Murrin Murrin, Cawse and Bulong projects would benefit the nickel industry by slashing production costs (much as heap leaching did for gold, and solvent extraction-electrowinning did for copper), all three have been beset by startup problems.
In a speech to delegates, Martin Pyle, an investment banking director of Hartley Poynton, principal sponsor of the conference, acknowledged that Australian producers need to be more forthcoming with technical data.
“The credibility gap facing the new projects must be addressed in order for the next generation of Australasian laterite projects to be financed and advanced,” he said, pointing out that commission dates are one to two years behind schedule, capital costs are higher than expected and reliable data are scarce.
Other concerns cited were: lack of consistency in the reporting of reserves and resources; unrealistic production forecasts; debates over which PAL technology is optimal; high debt-service costs; and the possibility that high-grading will push down cash costs in the early years of the operations.
Chief among these concerns is the problem of how to classify reserves and resources. Laterite deposits typically have large global resources, but when-cutoff grades and metal prices are taken into account, the reserve base falls and the continuity of higher-grade material becomes questionable.
Pyle presented delegates with an example of a typical Australian dry laterite deposit containing 150 million tonnes grading 0.9% nickel. At a cutoff of 0.5% nickel, the deposit has a high degree of continuity. By increasing the cutoff to 0.8% nickel (the industry standard for producers that do not use beneficiation), the tonnage is cut by half, while the grade rises 20%, to 1.1% nickel. Consequently, higher-grade block continuity begins to drop.
Pyle said most projects have a high-grade option, which requires a cutoff of 1%. Tonnage is reduced by 75% from the global resource, and the grade increases to 1.3% or higher. Concerns about mining continuity stem from the elaborate stockpile procedures adopted at first-generation projects, where it is not uncommon to have 20 or more different stockpiles feeding the autoclaves.
“Grade is clearly king in the successful development of any new resource project, and nickel laterites are no different,” said Pyle.
Pyle blames the mining and investment community for failing to understand what is a complex industry.
The equity investments in
.SMurrin Murrin
Situated 35 km east of Leonora, the Murrin Murrin mine is owned 60% by Australian-listed Anaconda Nickel and 40% by Switzerland’s
The mine is being built in two stages. The first stage was completed in January 1999 and cost US$670 million, with funds obtained from a US$420-million junk-bond financing package arranged in the U.S. capital markets.
The first stage is designed to process 4 million tonnes per year, yielding 45,000 tonnes of nickel and 3,000 tonnes of cobalt. The plant utilizes Sheritt’s licensed acid-leach process, a mixed sulphide precipitation circuit and nickel-cobalt refinery to produce high-quality nickel briquettes, and cobalt briquettes and powder. The first refined nickel was produced in May, followed by cobalt in July. In the period ended June 30, Anaconda produced about 1,755 tonnes of mixed sulphides.
However, corrosion damage and problems with the bottom-entry flash vessels of the four autoclave units created a bottleneck in the refining process.
Fluor Daniel, which designed and built the processing plant, is currently modifying the flash vessels. Work on two of the vessles has been completed, and a third is expected to be ready by October.
Richard Monti, general manager of resources at Anaconda, told delegates that Murrin Murrin is targeted to ramp up to 60% of design capacity by the second week of October and to full capacity by early 2000.
Anaconda is proceeding with plans for the second stage of expansion, which will boost capacity to an annual 115,000 tonnes nickel and 8,500 tonnes cobalt over a projected mine life of 30 years. Capital expenditures are expected to total a further US$660 million. Operating costs are projected at US35 cents per lb. nickel, after cobalt credits of US$12.50 per lb.
Monti said Anaconda intends to raise US$230 million by selling off its water, power, gas and acid plants.
Proven and probable reserves at Murrin Murrin are estimated at 306 million tonnes grading 1% nickel and 0.064% cobalt, based on a 0.8% nickel cutoff and metal prices of US$2.25 per lb. nickel and US$10 per lb. cobalt.
.SCawse
Ken Hellsten, general manager of operations for
Situated 50 km northwest of Kalgoorlie, Cawse uses pressure acid leaching, solution purification and solvent extraction-electrowinning (SX-EW) to produce nickel cathode and cobalt sulphide products. Cawse has a design capacity of 8,500 tonnes nickel and 1,600 tonnes cobalt per year.
Commissioned in October 1998, the mine began producing cobalt in December 1998 and nickel in the following month at a total capital cost of US$240 million. Funding came from a US$225-million senior secured note issue in December 1997.
From late March to late May, the mine was plagued by short runs and unscheduled shutdowns caused by equipment failures, sludge buildup in the autoclave, localized corrosion of valves and various piping in the PAL circuit. Production in fiscal 1998-1999 was 1,100 tonnes nickel and 200 tonnes cobalt.
Higher-than-expected scaling rates in the de-salination unit limited output, a problem which was solved by using fresh water and commissioning a back-up plant. Sludge build-up in the autoclave was reduced by installing new pumps.
Centaur is spending about US$6 million on design improvements and upgrades to the equipment and the PAL circuit.
In August, Cawse produced 329 tonnes of nickel and 77 tonnes of cobalt at a cash operating cost of US$55 cents per lb. nickel, after cobalt credits of US$17.66 per lb. Autoclave availability averaged 78% for the month and the throughput rate increased to 79% of design.
In fiscal 1999-2000, the mine is expected to produce 6,300 tonnes of nickel and 1,450 tonnes of cobalt at a cash operating cost of US49 cents per lb.
nickel after cobalt credits of US$16.33 per lb.
Centaur is selectively mining high-grade ore, having delivered some 15,000 tonnes grading 2.7% nickel and 1.3% cobalt in August.
On June 30, 1998, proven and probable ore reserves stood at 30.3 million tonnes grading 1% nickel and 0.06% cobalt.
Centaur is studying the feasibility of expanding production to 40,000 tonnes nickel and 2,500 tonnes cobalt per year over a 30-year mine life. To ensure ample reserves for such an operation, Centaur has entered into agreements with Gilt Edged Mining and Heron Resources.
.SBulong
To fund the purchase, Preston raised US$185 million through U.S. capital markets by issuing senior secured notes.
Initial production is targeted at 9,000 tonnes nickel cathode and 700 tonnes cobalt per year using PAL followed by SX-EW. The plant was built at a cost of about US$160 million. In M
arch 1999, commercial production of nickel began, followed by cobalt production in June.
Adrian Griffin, Preston’s managing director, said Bulong achieved its target for nickel throughput in early September, prior to a scheduled shutdown.
“Commissioning has been very successful to date and we are achieving performance targets,” he stated. However, past problems with agitators has Bulong behind its ramp-up schedule.
Bulong’s long-term operating cost is pegged at US$2.26 per lb. nickel, falling below US$1 per lb. after cobalt credits.
Preston also holds the Marlborough laterite project in Queensland, which is host to a minable reserve of 52 million tonnes grading 0.88% nickel and 0.06% cobalt. An updated feasibility study estimates that a processing plant capable of producing 25,000 tonnes nickel and 2,000 tonnes cobalt per year could be constructed at a capital cost of US$455 million.
.SPositive signs
David Lunt, technical director of Australian-based consulting firm Minproc, said few of the problems being faced by the three laterite producers are related to process chemistry or the failure of specific unit operations.
“The problems are mainly associated with engineering design, equipment selection and materials of contraction,” he explained, adding that “while they have some way to go in attaining a steady and sustainable output of metal, there are positive signs that this will be achieved.” Nickel has recovered to around US$3.21 per lb. at presstime from a low of US$1.69 early this year
Ernest Nutter, an analyst for RBC Dominion Securities, presented three scenarios for the future price of nickel:
* A base-case scenario assumes that: the financed projects under development move ahead, with stage two at Murrin Murrin given the benefit of the doubt; the expansion of the
* A pessimistic outlook would see the new PAL projects run out of money and close down. With funding for many conventional nickel projects frozen, the nickel markets would tighten up, and, by 2005, the industry could be facing a deficit of more than 100,000 tonnes, with nickel trading at US$4 plus per lb.
* The third scenario assumes that the Western Australian laterite projects are successful and expand. Nutter projects a surplus in the order of 150,000 tonnes by 2005, at which time nickel could be in the US$2.25-2.50-per-lb.
price range, or lower.
“Nickel and cobalt markets are at a crossroads,” said Nutter. If PAL laterite projects are successful, there is potential for radical changes in production costs of the type that transformed the uranium, gold and copper markets.
Although laterite projects were clearly the focus of the nickel conference, Tim Gooch, general manager of operations for
Jubilee has arranged a $52-million debt financing facility with a syndicate of Australian banks to fund construction and development of the Cosmos nickel sulphide project, north of Leinster in Western Australia. Cosmos hosts open-pit reserves of 420,000 tonnes grading 7.52% nickel.
The project is expected to generate gross revenue in excess of US$185 million, resulting in pretax profits of US$86 million over a mine life of three years. The project has a 15-month payback and a cash operating cost of US49 cents per lb. Inco has agreed to buy 30,000 tonnes of
nickel-in-concentrate over the life of the mine.
Work will begin in the next 2-3 weeks, with plant construction due for completion early in the second quarter of 2000. The first delivery of nickel concentrate would follow.
The nickel conference attracted 240 delegates and 30 exhibitors from as far away as Canada, South Africa and Indonesia.
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