Western Areas doubles resource at Spotted Quoll (September 15, 2008)

If Western Areas (WSA-T, WSA-A) had any doubts that its Spotted Quoll nickel project, in Western Australia, has the potential to become a major underground mine, they seem to have been laid to rest with the latest resource estimate.

Now the company is no longer debating whether Spotted Quoll can support an underground mine, but whether it should develop one early so that it can produce ore concurrently with the latter stages of an open pit.

If the company chooses that option, production could exceed the 8,000-tonne-per-year target it had initially set for the property.

“The revised mineral resource rates Spotted Quoll as one of the world’s highest-grade and most continuous nickel deposits, less than twelve months since its discovery in October 2007,” the company said in a release.

The high-grade mineral resource at Spotted Quoll has expanded 118% since the last estimate was released in April. Now the numbers show that the deposit holds a total of 1.04 million tonnes at an average grade of 7.2% nickel for 75,140 tonnes contained nickel to a depth of 300 metres.

The majority of the new resource, or 88%, is in the indicated category. The deposit holds 916,600 indicated tonnes at an average grade of 7.3% nickel for 66,540 tonnes contained nickel.

In the inferred category, Spotted Quoll contains an estimated 129,300 tonnes at an average grade of 6.7% nickel, for 8,600 tonnes contained nickel.

The newest estimate was based on 88 surface diamond-drill holes and eight surface reverse-circulation drill holes completed between October 2007 and August 2008.

The deposit makes up part of Western Areas’ massive Forrestania project, about 400 km east of Perth.

A mining proposal for an open pit has been submitted and if approved before the end of this year, pre-strip mining will likely begin in February, with first ore production in the September quarter of next year.

Spotted Quoll remains open at depth and along strike. Additional resource upgrades are expected, as drilling continues between 300 and 600 metres, the company said.

Three widely spaced drill holes were completed below the mineral resource, all of which intersected massive or matrix sulphides.

Currently, three drill rigs are testing for extensions below the mineral resource.

If new drill results remain positive, Spotted Quoll could surpass its flagship Flying Fox mine in terms of resource tonnes, grade and contained nickel, the company added.

Initial metallurgical results suggest a 14-16% nickel concentrate grade is possible from primary sulphide ore.

Ore from Spotted Quoll would be treated at Western Areas’ Cosmic Boy concentrator, 15 km south, where it is expected to be blended with ore from Flying Fox. Western Areas expects to commission the concentrator plant by the first quarter of next year. In Toronto at presstime, Western Areas traded at about $8.42 per share, near the top end of its 52- week trading range of $3.25-10.90.

The Perth-based company has 167.8 million shares outstanding.