PM1 0.00% 3.8¢ pure minerals limited

History/Comparisons and the next 12 months

  1. 932 Posts.
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    Things are getting a little more interesting at the moment.I believe the next 12 months will see things ramp up rather quickly. We have the pilot run, PFS, off-takediscussions, BFS/DFS within a pretty small period of time. Best of allthe path is relatively inexpensive with the DNi pilot plant good to go and nodrilling required. The advantage of this is when it comes to a final investmentdecision there wont be a bloated share register. This is all possible due tothe importing of ore saving much time and money/dilution.

    The history behind importing ore to Townsville is stillquite unknown so I thought I would elaborate on that. To talk about thehistorical importing of ore from New Caledonia one has to look at what happenedwith Queensland Nickel and the Greenvale deposit. The Greenvale mine now makesup part of Australian Mines Sconi deposit and was mined historically between1974 and 1992.

    Depending on who you ask, the Greenvale deposit was either exhaustedor the nickel price fell and made it uneconomic. A combination of the two is moreprobable. Stuart Peterson who is the exploration manager at AustralianMines said in an interview that it was closed due to low nickel prices. Thiswas then restated in the Australian mines BFS by Benjamin Bell. (pg4)

    https://hotcopper.com.au/data/attachments/1588/1588979-72975160ef5bb06b203149e698b6c348.jpg

    Quite clearly the Australian mines crew state they Greenvalewas closed due to low nickel prices.


    Interestingly a paper written by the Executive General Manager ofQueensland Nickel, J G Reid, in charge of the transition from Greenvale ore to importedore says it was exhausted. See below

    https://hotcopper.com.au/data/attachments/1588/1588999-380832f9eb4c12021f878985b27b0760.jpg


    Which is the truth? Stuart Peterson and Benjamin Bell clearly state that Greenvale was closed due to low nickel prices, whilst the Queensland Nickel Executive General Manager who oversaw the transition cites that it was exhausted. Whose take on it do you believe?

    There is clearly still ore at Greenvale so why did Reid say it was exhausted? To answer that you have to look at historical grades at Greenvale. See from AUZ BFS pg 60-61

    https://hotcopper.com.au/data/attachments/1589/1589013-b363a4542a677c7f7028df9222f09bf0.jpghttps://hotcopper.com.au/data/attachments/1589/1589014-b76c33c3742b51f962827af083baf9bc.jpg


    Those grades are much higher than the current Greenvale resource and also Lucknow and Kokomo. Clearly the higher grade parts were indeed exhausted. The truth probably lies in between, the economic portions were probably exhausted for the given processing efficiencies at Yabulu.

    Some will point that there are better processing techniques available now that make those lower grades economic. This may well be the case and we will see if that is indeed the case in the near future. My contention is not to argue that this is false, I wish them all the best in those endeavours, but rather to highlight that there was a conscientious decision to import and process the New Caledonian ore instead of the ore available at those lower grades. Why? Pure economics.

    Below is a table depicting feed grades from different nickel laterite projects and the value per tonne of ore based on nickel and cobalt. As can be seen the value per tonne is upwards of 50% greater for New Cal Ore, this should come as no surprise given the nickel grade is approximately twice that of other ASX laterite projects.

    Column1

    Ni Grade

    Co Grade

    Val/t @ 7Ni,30Co (USD)

    Val/t @ 8Ni, 30Co (USD)

    Val/t @ 9Ni, 30Co (USD)

    1

    CLQ

    0.75

    0.15

    214.89

    231.42

    247.95

    2

    AUZ

    0.67

    0.1

    169.4876

    184.2544

    199.0212

    3

    PM1 (expected grade)

    1.6

    0.18

    365.864

    401.128

    436.392

    4

    PM1 (min guaranteed)

    1.4

    0.15

    315.172

    346.028

    376.884

    The range of PM1 grades are broadly inline with historical imports of limonite ore grades from New Caledonia. As can be seen the value per tonne of ore is vastly higher. This is why Yabulu imported ore from 1992 onwards and why while ‘nickel prices were down’ leading to the closure of Greenvale, imported ore from New Caledonia continued to be processed. It should also be noted that QNI listed on disallowed in 1992, the same year that mining ceased at Greenvale. In 1995 all feed was from imported ore and in 1997 the refinery was merged with Billiton in a $2bn deal, whilst completely processing imported ore (later to be merged with BHP in 2001).

    For those that question the cost of transporting the ore from New Caledonia, it wasn’t prohibitive for the 27 years that QNI did it and costs roughly $9USD per wmt to ship from New Cal to Townsville. Ultramax vessels are used to haul the ore 61000t at a time. QNi shutdown when the nickel price was in the $4s and its processing didn’t allow for much recovery of cobalt, had no other by-products, didn’t produce a Sulphate and used really old and inefficient processing methods. The biggest testament to that is the huge tailings damn that contains massive amounts of cobalt right next to the great barrier reef, but that is a thread for another day.

    Perhaps the biggest point of difference is the CAPEX and capital intensity. The combination of grade and processing technology chosen means that a large plant isn’t required to scale for returns. This is of particular importance when it comes to financing and future equity dilution eroding shareholder returns. After all that is why we invest in stocks. The following table highlights this

    Column1

    CLQ

    AUZ

    PM1

    1

    US$ Capex

    1,495

    947

    297

    2

    Nickel Sulphate t

    80,000

    53,300

    25,500

    3

    Cobalt Sulphate t

    16,000

    8,500

    3,000

    4

    Capex per t production

    18,688

    17,767

    11,647

    5



    6

    Market Cap

    216

    80

    6

    7

    Cash

    100

    5

    2

    8

    Enterprise Value

    116

    75

    4

    Keep in mind that PM1 can scale up the plant as the designis modular. Quite clearly even without 'scale' there is much more bang for you buck, this would only improve further with scale.

    I believe the next 12 months will be an interesting time forall the players in this space. For PM1 in particular as activities ramp-up asignificant re-rate is on the cards.

 
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