Since we didnt get the whole picture from the news release(and believe me I yelled and screamed)I hope to offer as much as possible to educate all(myself as well)the potential of the new ni property.I offered calculations using 2% ni on 25,35,45 mill tons deposit to get a feel of our potential.I didnt see any numbers so I simplified it to try 44 lbs of ni for the same tonage .Now I hope most get the picture of our potential.It will take time but management thought it best to slowly prove the numbers then meet the naysayers.I wanted to see a halt, numbers and a big slash so our stock would reflect and then if we need more money less dilution.Guess one cant always get what they want.below is a very good article I hope all in CBI read and read several times as it paints the picture of what we are after.I'll try and post as much as possible as I find it as we all learn together.This is starting to appear as a world class property and 2% is higher then I have seen (laterite and ni only)through my homework.
TESTING TIMES FOR NICKEL; NICKEL 1999 - INDUSTRY COSTS TO 2005
In the early 1980s, Western nickel producers were having to contend with a rapid increase in supplies from Russia in the aftermath of the break-up of the Soviet Union and, by the middle of the decade, net imports to the West had risen from around 80,000 t/y to nearer 150,000 t/y. The additional supply was able to be absorbed, thanks largely to the rapid growth in stainless steel production (the principal outlet for nickel), and to the actions of Inco, the biggest Western producer, which acted as a swing producer, restricting its output when necessary in order to maintain a balanced market. Western primary production at that time was running at about 650,000 t/y.
However, just as Western producers were coming to terms with the additional Russian supply, the discovery was announced, late in 1994, of the huge nickel-copper-cobalt resource at Voisey's Bay in Canada. Plans by Inco, which eventually acquired the deposit, envisaged the production of 120,000 t/y of nickel, equivalent at the time to almost 20% of Western mine output, with initial production anticipated before the end of the decade. The potential impact of Voisey's Bay sowed doubts about the wisdom of expanding some existing nickel operations and about the timing and/or viability of a number of new projects, several of which would be employing new, untested technology. Nevertheless, with nickel prices in 1995 averaging in excess of US$3.70/lb on the London Metal Exchange, and a positive outlook for stainless steel consumption, new projects were pursued with some vigour to take advantage of a perceived window of opportunity ahead of the Voisey's Bay development.
Steel stocks hit demand
Three years on and the picture has changed drastically. The price of nickel has fallen steadily. It averaged US$3.40/lb. in 1996, declined to US$3.14/lb in 1997 and is expected to average US$2.50/lb this year, although prices are currently at 11-year lows below US$2.00/lb. A key contributory factor has been the high level of stainless steel stocks built up in the boom production years of 1994/95. These now overhang the market at a time of financial crisis and economic slowdown in Asia. The region has posted the most rapid demand growth for stainless steel in recent years, and has overtaken the US and Japan in the consumption of cold-rolled stainless steel products. However, the metals broking firm, Brandeis, estimates that overall consumption of stainless steel in developing Asia this year will slump by 18.5%.
The outlook for stainless steel remains positive as, unusually amongst metals, the intensity of use for stainless steel continues to increase, and long-term consumption growth seems set to outpace economic growth. But Brandeis expects total Western stainless steel production to grow by only 2-3% next year, much slower than the long-term annual growth rate of 7%. Asian demand will recover, eventually, but destocking might take a year or two. The short-term prospects for nickel, therefore, could be for at least a further year of oversupply and low prices.
On the supply side, the development of Voisey's Bay is taking much longer than expected and nickel production is unlikely to begin before 2004 at the earliest. However, several of the projects relying on new technology to produce low-cost nickel from lateritic ores are going ahead.
The laterite challenge
In Australia, production from three of them is due to begin next year. They have a combined initial rated capacity of 63,000 t/y, equivalent to nearly 9% of 1997 Western production, and comprise the 45,000 t/y Murrin Murrin project (Anaconda Nickel and Glencore), the 9,000 t/y Cawse project (Centaur Mining) and Preston Resources 9,000 t/y Bulong project. The pressure acid leaching (PAL) technology they will employ has been used successfully for 35 years in Cuba to treat lateritic ores but its success has yet to be demonstrated on a commercial scale for the new generation of projects.
Other Australian projects being considered include Mount Margaret, Ravensthorpe, Marlborough and Syerston. Outside Australia, there are potential nickel laterite deposits in Papua New Guinea, Indonesia and New Caledonia. These include Ramu in PNG, Weda Bay and Gag Island in Indonesia and Inco's Goro and Calliope-SMT's Nakety/Canala projects in New Caledonia. All are based o n PAL technology and have the potential for a combined annual capacity of 283,000 t by 2005. In addition, the planned second stage expansions for Murrin Murrin, Cawse and Bulong would add a further 168,000 t.
Some or all of these lateritic nickel projects could experience teething troubles and it does not seem feasible that all will proceed at the same time. As long as uncertainty remains about the success of the PAL process and start-up schedules, establishes nickel producers remain reluctant to implement major production costs. Far more severe cuts than the 65,000 t announced this year are needed if the nickel supply surplus is to be reduced significantly.
If the PAL technology does prove successful, AME Mineral Economics of Sydney, Australia says that it will herald a new era of low-cost production that may have an effect on the nickel industry in the next decade as profound as solvent extraction and electrowinning has had on the copper industry over the past 15 years. AME believes the world's nickel industry is on the threshold of a new cost structure and has recently published a major analysis of the industry's operating costs to 2005.
AME estimates that last year Western producers weighted average direct production cost for finished nickel was US$2.09/lb after by-product credits, representing a 1.5% fall from 1996. For 1998, it expects average costs to fall by at least 10%, to reflect lower energy prices, the implementation of cost-cutting measures by the major producers and, for Australian and Canadian producers, favourable exchange rate movements against the US dollar. By 2002, AME says that industry costs are set to fall by 21% from 1997 levels.
A major advantage of almost all the new PAL laterite projects is that they will recover substantial quantities of cobalt, and AME says there is the potential for these projects to produce nickel at cash costs below US$1.00/lb. Even at a cobalt price of US$8/lb, AME estimates that 50% of Western nickel output could be produced at a cash cost at or below US$1.50/lb by 2002.
In addition to the PAL projects, further laterite-sourced capacity due on stream by 2000 includes Inco's 50% expansion at Soroako in Indonesia (28,000 t) and Minorco/Anglo American's Loma de Niquel mine in Venezuela (18,000 t). AME notes that still more nickel production capacity from lateritic ores is expected by 2002 from expansions by QNI at Cerro Matoso in Colombia and by PT Aneka Tambang at its Pomalaa ferronickel smelter in Indonesia.
At present, lateritic ores provide 44% of Western mined nickel production, with sulphide ores providing the balance. On present indications, AME believes that Western nickel production from laterites will overtake that from sulphides in 2000 and will contribute 57% of total supply by 2002.
Sulphide producers respond
Sulphide nickel producers will need to implement further aggressive cost-cutting if they are to maintain market share. In Australia, WMC reported a 23% reduction in direct nickel cash production costs in the 1998 first half and it has announced its intention to close three high-cost mines next year. In Canada, Inco is implementing major cost-cutting measures, including the closure of the Shebandowan mine early this year and the planned closure of three more Sudbury mines in 1999. Production will fall by 20,000 t to 80,000 t over the next three years. Inco has also been in negotiation with Falconbridge, with a view to combining some of their operations at Sudbury to improve efficiencies and reduce costs. Falconbridge aims to cut overall cash operating costs at Sudbury to US$1.30/lb by 2000 from around US$1.90/lb in 1996,
Mention has already been made of the importance of cobalt as by-product credit in the new generation of lateritic nickel projects, which expect to achieve cobalt recoveries in excess of 85% Voisey's Bay, when it eventually comes into production, will also be a substantial cobalt producer and AME estimates that early in the next century Western nickel mines will be producing four-and-a-half times more cobalt than they produced in 1995.
Salomon Smith Barney (SSB), in a recent research report, estimates that mine supply of cobalt has risen by 7,000 t from a 1993 low and is now running at around 22,000 t/y. It calculates that the supply from new nickel projects could boost Western cobalt output by 10,000 t resulting in a colossal oversupply and a collapse in prices. Cobalt prices this year have been depressed by a slowdown in demand from the aircraft industry - 25% of cobalt is used in superalloys, mostly for jet engines - and the current spot price is US$14-15/lb compared with US$25/lb. in January. Over the next three or four years, SSB expects prices to lurch down towards US$5 to 7/lb.
Despite the reduction in the magnitude of cobalt credits, and expected falls in the prices of by-product copper and precious metals, AME forecasts that for Western nickel producers, the average nickel production cost in 2002, net of credits, will have fallen to US$1.65/lb in real (1998) terms. This, it says, represents a drop of almost 30% in ten years, and will be largely due to the advent of low-cost production by the new generation of lateritic producers.
Mining Journal, London, December 4, 1998