Perth, April 30, 2008 AEST (ABN Newswire) - During the March quarter, Nickelore Limited ("Nickelore") (ASX: NIO) completed a Heap Leach Scoping Study ("Study") for the Canegrass Nickel Cobalt Project ("CNCP"). The Study has confirmed the potential for a 20,000 tonne per annum nickel plant generating a positive net cash flow (before tax) of in excess of $182 million a year. Nickelore has assembled a strong professional team to lead the development of the project.
SIGNIFICANT EVENTS DURING QUARTER
- Results of the Study were released during the quarter. These included the following estimates and results-
- A net cash flow of more than $182 million per annum (before tax);
- A payback period of 4.5 years, from a 20,000 tonnes per annum operation;
- A net present value of A$757 million using a discount rate of 8% and a conservative long term nickel price of US$18,600 tonne Nickel;
- Cash operating costs of US$2.67/lb Nickel (after Cobalt credits;
- Laboratory test work showing that the CNCP ore would be ideal for heap leach treatment.
- During the quarter, Nickelore lodged a provisional patent application for the method for heap leach extraction of nickel and cobalt from Canegrass nickel laterite ores.
- The discovery of calcrete sub crops on tenements held by Nickelore has the potential to significantly reduce the operating costs of the proposed heap leach nickel plant.
- The Company considered the direct shipping of nickel ore product to China for the pig iron industry but found the project was not attractive enough to warrant further work.
- AYR Capital Pty Ltd was appointed as an investment advisor focussed on introducing investors to Nickelore from China and other Asian countries who may be interested in investing in the CNCP.
- The Company cancelled a Rights Issue on 1 February 2008 as a result of the widespread volatility in the stock market.
- The Company announced in early January 2008 the first JORC Ore Reserve estimate on tenements held by Nickelore, of 1.35M tonnes at 0.87%Ni, containing approximately 11,745 tonnes of nickel.
- Exploratory drilling results from the CNCP tenements (best intercept of 4m @ 1.15 %Ni, 0.02% Co, from 36m below surface) demonstrated good continuity of nickel and cobalt mineralisation with some new zones being identified that were outside the current resource model.
- Initial exploratory RC drilling at the Siberia Nickel Laterite Project (next to CNCP) led to the discovery of a new zone of nickel laterite mineralisation.
- Results from infill RC drilling at the Big Blow North prospect in M24/890, which is part of the Bardoc Gold Project, during the quarter reported a best intersection of 4m @ 6.8 g/t Au from 19 metres.
- The Company completed a gravity survey at Lake Marmion Uranium Project during the quarter and identified the presence of deep uranium paleochannels within the lake sediments.
- At Goongarrie East, a thirty five line kilometres of ground magnetic survey was completed over airborne magnetic anomalies thought to be wholly concealed ultramafic rocks, potential hosts for nickel sulphide bodies similar to those nearby at Ringlock Dam.
- The Company raised a total of $1.02 million in March/April from the sale of the nickel rights in the Bardoc Nickel Project (BNP) to Minara Resources Limited and a small capital raising book build. The raisings are subject to the terms of the sale agreement and any requisite shareholder approvals.
- The Company still owns extensive nickel interest at Canegrass, Siberia and Goongairre East.
INTRODUCTION
Nickelore is a nickel company listed on Australian Securities Exchange (Code NIO). In the last three months, the Board and Management have implemented major changes to the Company's capital structure, paving the way for Nickelore's development as an emerging nickel company. The new corporate strategy is to take a more direct role in nickel exploration and production. In this context, the Company has focussed on the development of nickel production and processing operations in Western Australia's North Eastern Goldfields.
CORPORATE
RIGHTS ISSUE
The Board of Nickelore cancelled a Rights Issue on 1 February 2008 as a result of the widespread volatility in the stock market. Application monies already received from shareholders pursuant to the rights issue were refunded according to the conditions as set out in the prospectus dated 4 January 2008.
The Company believed that the turn of events in the market could not have been predicted when the Rights Issue was launched. The Company is currently pursuing alternative opportunities to raise additional capital to fund the next stage of development, including private placements, share purchase plan, and divestment of non-core assets.
INVESTMENT ADVISOR
During the quarter, the Company appointed AYR Capital Corporation Pty Ltd (AYR Capital) as an investment advisor, focussed on introducing parties from China and other Asian countries interested in investing in the project. AYR Capital is an investment and advisory corporation based in Perth, Western Australia, with established contacts and relationships in China and Hong Kong. AYR Capital will continue to advise Nickelore as the company looks to raise funds to develop the CNCP.
CNCP
A Clearing Permit for mining of the first pit (Patch-Gulch) and to clear up to 60 hectares on ML24/290 and M24/39 (CPS 2171/1) was granted by DOIR on 16 February 2008. A Bore Water Licence was granted by DOW (GWL 165180(1)) on 25 January 2008 on L24/148 to extract water from the Bardoc Bore field.
DIRECT SHIP SCOPING STUDY
The Company has completed a scoping study for the direct shipping of an upgraded nickel ore product to China for the pig iron industry. The option would have involved a wet beneficiation plant to upgrade ore to around 1.5% Ni with annual sales of 0.5Mtpa. The project had been considered as an interim development step to support the Company's long term growth. However, the success of the Canegrass Scoping Study has indicated that a heap leach will be a much more attractive option.
HEAP LEACH SCOPING STUDY
The Company released the results of its Scoping Study for the CNCP project ahead of schedule.
According to the Study the CNCP would be a robust project with the potential to begin production in 2011. The two key factors in the positive results were the favourable characteristics of Nickelore's resource and the attractive economics of processing the ore using heap leach technology.
Based on the results of the study for the heap leach project the 20,000 tpa Nickel and 1,400 tpa Cobalt plant has the potential to generate approximately A$182 million net cash per annum (before tax) at a long term nickel price of US$18,600 /tonne Ni. The project NPV (real and non-geared, before tax) is estimated at A$757 million using a discount rate of 8%.
The cash operating cost is estimated at US$2.67/lb Nickel, after Cobalt credits, averaged over the life of mine.
The project nickel price assumptions of US$18,600/tonne (or US$8.45/lb) are based on IBIS long term forecasting and compare with current spot market price (29 April 08) of US$29,152/tonne (or US$13.25/lb Ni). The capital and operating costs are based on production of a mixed hydroxide intermediate product which can be readily on-sold to nickel refiners.
-------------------------------------------------------------- Nickel Price Nickel Price US$ 18,600/t Ni US$ 22,000/t Ni (US$ 8.45/lb Ni) (US$ 10.00/lb Ni)Cobalt Price US$12/lb US$12/lb---------------------------------------------------------------Capital Costs A$ 865 million A$ 865 millionRevenue pa A$ 427 million A$ 498 millionNet Cash pa (before tax) A$ 182 million A$ 251millionNPV1 (non-geared, real @8%) A$ 757 million A$ 1,351millionIRR1 18% 25%---------------------------------------------------------------C1 Cash Cost (after Co credits) US$ 2.67/lb US$ 2.67/lb---------------------------------------------------------------
The major components of the operating costs comprise mining, sulphur plus neutralising costs, maintenance and labour costs.
The capital costs for a 20,000 tpa nickel extraction plant have been estimated at A$865 million. The capital cost breakdown includes the following:
-----------------------------------Acid Plant $170mPower Plant $64mBore field Development $80mHeap Leach Pads & Ponds $66mProcessing Plant $255mEPCM, temp camp & owner costs $86mContingencies $144m-----------------------------------Total $865m-----------------------------------
The technical assessment - a major component of the Study - shows that Nickelore's resource at the CNCP is well suited to the heap leach process. The site is close to well established infrastructure and the city of Kalgoorlie and therefore well placed for the development of a significant project.
The metallurgical test work has included both heap leaching and atmospheric leaching test work. The test work is now focussed primarily on 4 metre column tests. These leaches are continuing to perform well and are achieving excellent percolation and leach kinetics consistent with those detailed in reports to ASX on February 5, 2008. The rapid leach kinetics has the potential for shorter heap leach cycles which will benefit the economics of the project. This aspect of reduced heap leaching cycles will need to be confirmed with the operation of a demonstration plant.
The Study contains a significant amount of detailed work, normally introduced at pre-feasibility level. The end result indicates a robust project which has the potential to deliver significant long term economic benefits to shareholders.
The key driver of the economics of our project is the lower acid consumption compared to other heap leach projects as a result of the ore body characteristics. The Canegrass ore is predominantly a siliceous type ore (containing 50%-75% silica) with less clay and iron content than some other ores in the region. This silica component consumes minimal acid contributing to significant savings on overall acid consumption.
Acid consumption is the key economic driver of the project, representing approximately 38% of production and consumable costs. Subsequent neutralisation represents an additional 27%. This means that around 65% of the total production and consumable costs are related to ore acid consumption.
Based on the results, the Nickelore Board has decided to proceed to the pre-feasibility phase, the next stage of project development. The Company is currently seeking to raise additional capital to fund this next stage of development, Perth based engineering company BatteryLimits, with extensive knowledge experience of nickel laterite processing will remain as lead engineer.
The pre-feasibility stage will take approximately six to nine months to refine capital and operating costs estimates and complete additional work relating to ore reserves, water, calcrete, operating recoveries and consumable supplies undertaken.
The Company has the mineral rights to mine and extract a total of 140,000 tonnes of nickel metal on the CNCP tenements, M24/290 and M24/39. The Company also acquired the nickel rights for 13 square kilometres of ground from Monarch Gold comprising the Siberia Nickel Laterite Project and 100% of tenements covering 14 square kilometres from Kalgoorlie-Boulder Resources, all of which are adjacent to the Canegrass project tenements. This establishes a combined additional project area of 27 square kilometres of highly prospective laterite nickel ground. The Company has previously announced additional laterite nickel exploration targets on the Canegrass project tenements and the discovery of a new zone of laterite nickel mineralisation on the Siberia project tenements. Further resource evaluation is planned for the prefeasibility stage with the aim of identifying additional ore reserves and potential mine sites in adjoining areas, with the objective of providing sufficient reserves for the project.
Water supply remains a very important challenge for the project with limited sources of water in the area. Fortunately, the project will be able to use hyper-saline water for the heap leaching.
With respect to risks associated with heap leaching of nickel laterites, Minara Resources, a high pressure acid leach (HPAL) producer, has successfully developed and applied heap leaching technology to large scale commercial operations at the Company's Murrin Murrin facility.
Murrin Murrin is the most advanced in heap leach development in the world. Minara has reported expenditure of $80 million over 4 years on testing, research, development, demonstration plant operations and commercial applications. Minara has successfully heap leached scats and has now commenced heap leaching of ore on a large commercial scale. The Company has recently announced a $300 million expansion plan to expand its heap leach nickel operations from 2,000 tpa Ni to 10,000 tpa.
PROVISIONAL PATENT APPLICATION
During the quarter, Nickelore lodged a provisional patent application for the method for extraction of nickel and cobalt from nickel laterite ores. The Company has developed a method of heap leaching in relation to the highly siliceous nickel laterite ore. The method details the use of high magnesia ore as a pre-treatment step prior to neutralisation in order to reduce both the amount of acid and neutralising agents used. The method of processing developed is novel for the CNCP type of ore and further work and testing will be conducted during the pre-feasibility phase to quantify the overall benefits.
DISCOVERY OF CALCRETE
The Company has discovered calcrete sub crops at the CNCP. This discovery has the potential to significantly reduce the operating costs of a proposed heap leach nickel plant.
The Company geologists has mapped the outcrop discovery, cut a cross-section trench to test the thickness of the calcrete layer and collected metallurgical samples.
Table 1 below provides an exploration potential estimate of the contained calcrete within one of these outcrops in the mapped area.
Table 1 - Sub crop 1, Exploration Potential
-------------------------------------------Area Thickness Volume Density Tonnes24,100 sq/m 2 m 48,200 2.6 125,320-------------------------------------------
The analysis of the calcrete bulk sample showed an excellent calcium carbonate CaCO3 content of 41%. Metallurgical test work using the calcrete sample for neutralisation of the heap leach pregnant liquor solution (PLS) confirmed its neutralisation potential, in line with the active calcium carbonate content. The test work showed that the calcrete would be a suitable alternative or supplement to limestone for neutralisation. Nickel laterite heap leach operations; require significant quantities of acid for nickel extraction and calcium for subsequent acid neutralisation.
These calcium neutralising reagents represent a large component (between 15% and 20%) of the consumable operating costs, consequently, the discovery of calcrete on site has the potential to deliver significant cost savings. Examination of Nickelore's tenements has identified at least 12 other sites in the Canegrass project area with the potential to yield more calcrete.
FIRST ORE RESERVE STATEMENT
The Company announced in early January the first Ore Reserve estimate for the CNCP following an in-fill drilling program at Patch- Gulch, a former mining area which is expected to be the first mine site for the CNCP.
Mining consultant Lower Quartile Solutions Pty Ltd (LQS) was commissioned by Nickelore to perform a Whittle pit optimization and design a pit at thePatch-Gulch area on mining leases M24/290 and M24/39 using the CSA Australia Pty Ltd block model and Indicated Mineral Resource data.
The work completed by LQS is based on an optimal Whittle pit shell and a final pit design which has estimated a Probable Ore Reserve of 1.35M tonnes at 0.87%Ni, containing approximately 11,745 tonnes of nickel.
The pit design has a waste to ore strip ratio of 3 to 1, a cut off grade 0.5% Ni and is based on supplying ore for a local High Pressure Acid Leach (HPAL) operation. The final pit design incorporates a 26m wide haul ramp narrowing down to 16m at depth at a gradient of 1in 9 and has a final pit depth of 50 metres.
DRILLING RESULTS AT CNCP
Further positive reverse circulation (RC) drilling results were announced during the quarter. The drilling program consisting of eight (8) RC drill holes was completed in Area 3, half a kilometre North East of Patch- Gulch - a former mining area which is expected to be the first mine site for the CNCP.
The work identified extensions of nickel and cobalt mineralised zones around Patch-Gulch, where Nickelore will update resource estimates for the CNCP scoping and feasibility studies.
The best intercepts were 4m @ 1.15 %Ni, 0.02% Co, from 36m below surface, 4m @ 1.11%Ni, 0.03% Co from 12 m and 6m @ 1.06%Ni 0.06% Co from 34 m below surface. The drilling demonstrated good continuity of nickel and cobalt mineralisation with some new zones being identified outside of the current resource model.
SIBERIA NICKEL PROJECT
DRILLING RESULTS
Initial exploratory RC drilling at the Siberia Nickel Laterite Project has led to the discovery of a new zone of nickel laterite mineralisation. The Company acquired 100% of the nickel laterite rights at the Siberia Project from Monarch Gold Mining Company Ltd (Monarch) on 21 August 2007. The Siberia Project covers Monarch's mining tenements M24/51, M24/352, M24/427, M24/546, M24/633, M24/654, M24/754, M24/755, M24/830 and P24/2838.
The Siberia Nickel Laterite Project adjoins the Company's CNCP, 70 kms NNW of Kalgoorlie. The Company will have unlimited access to laterite nickel discoveries on the adjoining Siberia leases.
The first drill program consisted of sixteen RC drill holes completed in two highly prospective areas (Area 1 & 2) of tenement M24/352, located north of the Canegrass area.
The best nickel result in Area 1 was HSIC229, 28m @ 0.77 %Ni, 0.05% Co, from 22m below surface
The best nickel result in Area 2 was HSIC234, 12m @ 0.74 %Ni, 0.09% Co, from 20m below surface.
BARDOC GOLD PROJECT UPDATE
DRILLING RESULTS
Results from infill RC drilling at the Big Blow North prospect on M24/890 within the Bardoc Gold Project were reported during the quarter.
The ten-hole Reverse Circulation ("RC") drill program included intersections of 4m @ 6.8 g/t Au from 19 metres, 4m @ 3.5 g/t Au from 53 metres, 4m @ 2.6 g/t Au from 30 metres and 3m @ 2.5 g/t Au from 26 metres.
The majority of these drill intersections in the mineralised zone at Big Blow North are less than 40m below the surface, supporting the potential for an open-pit mining operation at this prospect. At the southern limit of drilling, the mineralised intercepts are wider but of lower grade. The mineralisation is still open to the south and at depth.
The Company plans further drilling at Big Blow North in order to extend the current mineralised zone southward and to test the continuity and grade at depth in the higher grade zone.
LAKE MARMION URANIUM UPDATE
The Company completed a gravity survey on E29/634 at the Lake Marmion Uranium Project during the quarter. The survey was designed to test for the presence of deep channels within the lake sediments. On Nickelore's tenement E 29/637 south of E 29/634 but in the same drainage system, previous explorers intersected paleodrainage channels which returned values of over >3000 ppm U3O8 from 4m heavy mineral concentrate samples taken over a 4 metre interval.
A 42 km gravity survey by Haines Surveys Pty Ltd followed seven eastwest lines at right angles to the potential paleodrainage channels.
Readings were taken at 200-metre intervals on lines three kilometres apart. Figure 1 shows the resulting image and contours of the bouguer gravity data, superimposed over an aerial photograph of the Lake Marmion Project area.
The rising gradient in the south west corner is interpreted as a probable near-surface basic intrusive in an otherwise granitic terrain. The strong gravity gradients from this intrusive are partially masking a lower density 'channel' that is evident towards the east. Sampling undertaken to the south of this area, in February 2007, found total counts per second (CPS) readings of up to 850 CPS and U3O8 values of up to 59ppm from hand auger samples.
The low density area to the northwest is believed to reflect a deepening of the lake in this direction. In the central area of the survey, there are two linear trending lower (less dense) bouguer gravity areas. These may reflect an increase in sediment thickness due to a local increase in lake depths. Their linear nature and probable thicker sediments suggest possible channels. It is possible that these channels may have or have had a higher fluid flow. If there are suitable reducing materials, such as organic material, in the channels then uranium in solution may have formed a deposit.
Possible drainage directions through the lower density areas are indicated in Figure 1. These are based on current surface drainage patterns which may also reflect the paleodrainage.
Some re-processing of the gravity survey data is still to be completed. It is expected that this work will outline those areas with the greatest uranium potential.
GOONGARRIE EAST
A ground magnetic survey was completed over airborne magnetic anomalies thought to be wholly concealed ultramafic rocks, potential hosts for nickel sulphide bodies similar to those nearby at Ringlock Dam. Thirty five line kilometres were surveyed over ten sites in four of the five Goongarrie East tenements. The results which showed an offset between the two magnetic data sets led to the shifting of many previously planned holes.
Notes:
The information in this report that relates to Exploration Results (with the exception of Lake Marmion) is based on information compiled by Andrew Radonjic an Non Executive Director of Nickelore Group, who is a member of The Australasian Institute of Mining and Metallurgy. Mr Radonjic has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Radonjic consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to Explorations Results at Lake Marmion is based on information compiled by David Wilson BSc MSc MAusIMM from 3D Exploration Ltd based in Western Australia. Mr. Wilson is a full-time employee of 3D Exploration Pty Ltd, a consultant to Nickelore Limited. Mr. Wilson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr. Wilson consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.
The information in this report that relates to Mineral Resources is based on information compiled by Mr M Elias who is a Fellow of The Australasian Institute of Mining and Metallurgy. Mr Elias is employed by CSA Australia Pty Ltd. Mr Elias has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. He has consented to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to Ore Reserves is based on information compiled by Mr P Fourie who is a member of The Australasian Institute of Mining and Metallurgy. Mr Fourie is employed by Lower Quartile Solutions Pty Ltd (LQS). Mr Fourie has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. He has consented to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Contact
Iggy Tan - Managing Director
Tel: +61 8 9481 2433
email: iggy@nickelore.com.au
John Nayton - External Affairs
Tel: +61-422-414-983
email: naytoncom@bigpond.com
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