Page 83 - pd276-Oct19-mag-web_Neat

market balance. Although “We are also looking at long lead items Now performing to expectations, MREP is
the EV segment of demand for the mill and the reserve position in the producing a separate product sold through
is currently only 6%, there is AM5/6 orebody which is currently outside an offtake agreement with Sumitomo. The
consensus among analysts the 10-year reserve.” next step is to construct a heap leach pad
that it is set to rise above 20% Lougher said the current timetable would using the patented BioHeap technology to
in the coming decade. still be adhered to but also suggested other produce a nickel sulphate feed.
“The EV market may take options were available should the company “That MREP product is a 45% nickel
a while to meet expectations wish to pursue an early mining scenario; grade concentrate which is direct feed and
but if the price holds around “the mill isn’t a constraint”, he said. the signed offtake with Sumitomo contained
$US7-7.50/lb with the occa- The increased margins are also eas- much higher payability than normal concen-
sional jump up to $US8, we’ll ing any concerns investors may have had trate.
be very happy,” Lougher said. about funding plans for Odysseus. “If we can consolidate the technology the
In Western Areas’ full-year “The current price environment is creat- heap leaching could be a valuable tool for
FY19 results, released on Au- ing encouragement, making people under- lower grades [1.5-2%] such as the mill scats
gust 20, there was evidence stand that we don’t need to raise money for and those stockpiles are already right next
of just how profitable a plus- Odysseus,” Lougher said. “We have more to the mill. The BioHeap will start getting its
$US7/lb nickel price could than $100 million in the bank and we are own life and we always thought, even 10
make the company. Western due to receive $33 million from the Kidman/ years ago when we bought it, that it would
Areas posted a net profit af- Wesfarmers deal next week. come into play as grades began declining.”
ter tax of $14.2 million for the “We do have options on equity raisings The next four months loom as a true
year, based on an average on the back of the good share price but that marker of just how far the nickel market has
nickel price of just $US5.59/lb. is not always ideal and we certainly aren’t shifted. Both Western Areas and Independ-
The price rise since the turn short of ideas. There are several large con- ence have begun negotiations over their
of the financial year will only next three-year offtake contracts with the
push that margin higher if sus- new period to being in 2020.
tained through 2020. Lougher expects the move towards EV
The operating margin bo- demand to be reflected in the offtake terms.
nus of higher prices is a given “Instead of a load of scattered jigsaw
but Lougher said nickel’s rise pieces, there is a clearer picture coming to-
offered even more to his com- gether,” he said. “The good news for nickel
pany. is that it hasn’t had its EV-related spike yet.
“The price spike means more operating The EV sector still only accounts for 6% of
cash at the sites and it boosts the bank bal- total nickel demand.”
ance just at a time when we are looking at Spot prices are variable but one improve-
capital growth,” he said. ment Western Areas and Independence
The timing is perfect for Western Areas will be pursuing is higher payabilities – the
as it approaches the heavy lifting period percentage customers pay compared to the
at its Odysseus nickel development at the actual nickel content of concentrates. Cur-
Cosmos complex in WA. The company be- rently, industry average payability is around
gan early works at Odysseus last year and Independence Group managing 70% but both companies believe non-tradi-
has secured and began refurbishing head director Peter Bradford will be among tional clients will pay more than 80%.
gear and winder to be installed as part of a the speakers at the Australian Nickel “We are in offtake discussions now, look-
shaft hoisting system. Conference on October 15 ing at better payability as part of the move
Acquired from a platinum operation in from stainless to sulphate,” Lougher said. “It
South Africa, the head gear and winder will is not yet as much as some people expect
be dismantled and refurbished before being glomerates who have expressed interest but it is happening and by 2022 when Odys-
shipped to Australia early next year. in equity involvement and there are also seus comes on that trend will have acceler-
The hoisting gear is the biggest ticket item offtake mechanisms we could use. But, we ated.”
in Odysseus’ $299 million price tag. Produc- are nowhere near the point where we need Whenever nickel has spiked in the past, it
tion is scheduled to start in 2022 but the resolution on that.” has fuelled a flood of new production from
increased cash flow of recent months has Outside Odysseus, Western Areas is be- new sources but Lougher believes the situ-
Western Areas keen to increase upfront coming increasingly bullish on other organic ation will be different this time around.
spending. growth opportunities. At its Forrestania op- “The supply response doesn’t worry us
“We are accelerating the capital profile,” erations it has a slew of earlier stage ore- because the total forecast out of WA, even
Lougher said. “In FY20 guidance has been bodies it has never developed. The current if all the nickel sulphide mines open or reo-
increased at Odysseus to $80 million from market is providing incentive to change that pen, won’t satisfy demand,” he said. “And,
around $50 million, the driver being the situation. the bottom line is that laterites and nickel pig
head gear and winder. That arrived in Jo- “We have a number of organic opportuni- iron don’t fit into the EV story. There is talk
hannesburg sooner than expected and is ties such as New Morning, Diggers South of a HPAL revolution but we haven’t seen
now being refurbished and will be in Aus- and the low-grade stockpiles at Flying Fox. anything yet and if it did it would go straight
tralia by March. The price increase has led to a definite to the Chinese sulphate market and would
“That meant we needed to do the civil en- broadening of the options but we have to be a higher cost sector than NPI.
gineering at site now which means spend- make sure we don’t overcapitalise.” “Class 1 nickel will be the major benefi-
ing more money earlier. It is actually de- The company’s last major project was ciary of the rise in the EV market.”
risking the project by ensuring there are no the mill recovery enhancement project
delays when the equipment arrives. (MREP) at the Cosmic Boy concentrator. – Dominic Piper

aUSTRaLIa’S PaYDIRT OCTOBeR 2019 Page 83