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  1. invest4it

    2,445 Posts.

    The final resolution of long-running litigation between Japan's Sumitomo and Axiom Mining over control of a large nickel deposit in the Solomon Islands, which is expected around Easter, is likely to see development work on the project accelerated with the intention of achieving initial exports of ore by year end.

    Recent drilling on the prospect has yielded nickel grades of as high as 2.59 per cent at shallow depths of just 8.4 metres, which is significantly higher than the grades of around 1 per cent encountered in earlier shallow drilling on the prospect by Canadian miner Inco.

    In September, Sumitomo lost litigation to try to block Axiom from accessing the exploration acreage with a subsequent appeal expected to be finalised by around Easter. Sumitomo lost on all counts, which has boosted confidence that Axiom will succeed in the final appeal.

    And the simple nature of the operation with mine development and equipment costs estimated at up to $US15 million with a further $US10-12 million needed to finalise feasibility and exploration work, underscores the project's prospective economics.

    Annual output at an initial 2 million tonnes of ore will generate gross cashflow of as much as $US100 million a year at present nickel prices, according to presentations Axiom has been making to fund managers about the project.

    The shallow nature of the resource - which has either no or very limited overburden - coupled with the lack of any population in the area of the resource and limited geological features all act to boost the potential project's economics.

    "Our drilling could double or triple [the size of the original resource]," Axiom chief executive Ryan Mount said, since much of the area has not been subjected to drilling since the original exploration work was undertaken several years ago by Canadian miner Inco.

    Fundamental to any successful mining operation is working closely with the traditional owners, who have a 10 per cent free carried interest, but with their investment to be covered by future cashflows.

    Axiom recently raised $5 million via a convertible note from Anitua, a contract miner, which was formed by the islanders on Lihir initially to work on the local gold mine.

    Late last year the Solomons' High Court ruled that Sumitomo should pay Axiom $4.8 million in costs incurred by the Australian firm in obtaining a judgment in September confirming its right. The funds are being held in trust, pending the outcome of the appeal lodged by Sumitomo.

    Read more: http://www.smh.com.au/business/axio...y-year-end-20150203-134tvq.html#ixzz3QuScT3vk

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