The project is a joint venture between
The PFS has demonstrated a long life 26-year open pit copper and nickel sulphide mine. It is the first development opportunity within the broader West Musgrave province which includes a number of additional highly prospective opportunities including the nearby Succoth copper deposit. A Maiden Probable Ore Reserve of
Critical path activities are continuing whilst the project is being assessed under the
'During this study we have partnered with the traditional owners, government agencies and industry experts to design a project to meet our objectives in relation to low carbon intensity, innovation and adding value for our key stakeholders. We thank them all for their contribution and look forward to their ongoing support.'
'Building a viable asset in a remote part of
'During 2019 sufficient drilling has been completed to allow the declaration of a maiden Ore Reserve of
'The collaborative process has produced a robust and realisable project. The process has also increased Western Australian government agencies' understanding of the project and this, along with the awarding of 'lead agency' status by the State Government, will assist in streamlining the forthcoming approvals process.'
'We are pleased the study has identified a means for us to reduce the project's carbon footprint significantly and overcome the historical challenge of affordable power for West Musgrave. We believe, supported by the views of potential renewable energy suppliers, that 70-80% of the power needs for West Musgrave can be supplied by renewable sources, supplemented by battery storage and diesel or trucked gas fired generation. The PFS base case assumes the power solution will be outsourced to a third party, with power purchased back over the life of the asset. However, further work is required in a future Feasibility Study (FS) to maximise the project's power position. A gas pipeline remains a secondary option to be further investigated during the next phase.'
'We have been able to achieve a further significant reduction in carbon emissions and power demand through the adoption of vertical roller mills as the grinding mill solution and a flotation flowsheet which achieves metal recovery at a much coarser grind size than was previously considered in the design. This lower power usage has resulted in a reduction in operating costs, while the use of dry grinding from the vertical roller mills has also resulted in an improvement in nickel recovery,' he said.
'A remote operations centre will further reduce the site environmental footprint, with fewer people on site, fewer flights and a smaller accommodation village.'
'Over the past two years,
Cassini Managing Director,
'I'd like to commend our joint venture partner
Forward Looking Statements
Some statements in this document may be forward-looking statements. Such statements include, but are not limited to, statements with regard to capacity, future production and grades, projections for sales growth, estimated revenues and reserves, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for minerals and metals prices, the outlook for economic recovery and trends in the trading environment and may be (but are not necessarily) identified by the use of phrases such as 'will', 'expect', 'anticipate', 'believe' and 'envisage'.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside
Production Targets Cautionary Statement
The Production Target and forecast financial information derived from the Production Target referred to in this ASX release is based on 84% Probable Ore Reserves, 5% Indicated Mineral Resources and 11% Inferred Mineral Resources. The modifying factors used in the estimation of the Ore Reserve were also applied to the Indicated Resources and Inferred Resources. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the Production Target itself will be realised.
West Musgrave Ore Reserve and Mineral Resource
The information on the West Musgrave Mineral Resources and Ore Reserves estimates in this document are extracted from the document entitled 'West Musgrave Project Nebo Babel Mineral Resource and Ore Reserve Statements and Explanatory Notes as at
West Musgrave Pre-Feasibility Study Summary
OZ Minerals Strategy
Creating value for stakeholders is at the centre of the
Context
The Nebo-Babel deposits were discovered by
Location
Cost Estimate
The estimate was compiled by
Post-production growth capital of
Mineral Resource
A detailed explanation of the Nebo-Babel geology can be found in the Mineral Resource and Ore Reserve Statements6 . Since the previous Mineral Resource update provided on
The Mineral Resource has been reported above a 1.2 times multiplier (revenue factor) Net Smelter Return (NSR) cut-off at
A significant increase in Mineral Resource tonnes from the previous Mineral Resource is mainly due to the relative reduction in reporting cut-off grade. The previous Resource utilised a 0.25% Ni cut-off based on the Further Scoping Study8 . The updated Resource utilises an NSR cut-off based on the concurrent PFS study. This NSR cut-off approximates to using a 0.18% Ni cut-off, however, using an NSR cut-off was determined to better reflect the variable metal recoveries of material types and the multi-metal revenue inputs. There has also been a significant conversion of Inferred to Indicated Resource based on recent infill drilling with 82% of the reported Mineral Resource now Indicated.
Mining
The deposits are near-surface and easily accessible by open pit mining with a pre-strip and initial ore stockpile for process plant commissioning of approximately 31Mt, some of which will be free dig. Processing rates between 6Mtpa and 23Mtpa have been thoroughly examined and an optimised rate of 10Mtpa selected. Stockpile strategies and in-pit dumping of waste have all been optimised to minimise operating cost and optimise mill feed grade. Mining is modelled to be conventional drill, blast, load and haul and is assumed to be contractor operated during the first five years of operation, transitioning to owner operate in year six. The haulage fleet will comprise up to twenty-five 220t haul trucks and optionality is being maintained to allow for these trucks to be fully autonomous in the future.
In addition to the Ore Reserves which are entirely based on Indicated Resources, the mine plan includes an additional 40Mt at 0.34% Ni and 0.36% Cu derived from Indicated and Inferred Resources which are predominantly towards the end of the current mine plan. Production targets and forecast financial information set out in the PFS are based on 84% Probable Ore Reserve, 5% Indicated Mineral Resource and 11% Inferred Mineral Resource. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the Production Target itself will be realized. The quantity of Inferred material within the mine plan is minimal, will be mined at the back end of the mine life and is not considered material to the project.
Metallurgy and Processing
Significant improvements in metallurgical performance have been achieved through the PFS via the optimisation of reagent regimes and applying a mineralogical based approach to deliver optimum mineral liberation, concentrate grade and metal recovery. The process flowsheet design has been significantly de-risked through testing of three master composites, 37 variability samples, locked cycle tests and pilot planting. This work strongly supports the metallurgical assumptions used for financial modelling. Additional testing has covered comminution, regrinding, thickening, filtration, site water, ore ageing and tails property testing all in support of the process design criteria.
An innovative mineral processing plant will be built on site. The grinding circuit consists of two stages of crushing followed by two parallel vertical roller mills treating nominally 5Mtpa each. The second stage of crushing and vertical roller mills replace a traditional
A Bulk Separation flotation flowsheet producing separate copper and nickel concentrates will be used. The flowsheet has been developed to minimise primary grinding requirements with the primary separation size at 165 microns, saving significant grinding capital and operating expenditure in terms of grinding consumables and power draw. The flowsheet uses bulk rougher flotation, regrinding, 2 stages of bulk cleaning, then copper nickel separation at elevated pH. The nickel concentrate is a high-quality product with a low MgO content, is low in arsenic other impurities. The copper concentrate is also low in impurities and includes minor by-products of gold and silver. With optimised mine scheduling, the first five years of operation will achieve higher production of circa 33ktpa of copper in concentrate and circa 27ktpa of nickel in concentrate. From year six onwards, production will average circa 27ktpa and circa 22ktpa for copper and nickel, respectively.
Mine Waste Management
Tailings will be stored in a two-cell Tailings Storage Facility (TSF) built as a hybrid system which includes upstream raises and downstream buttressing using mine waste. The facility will be unlined with underdrainage designed to capture seepage for return to the process during operations. Both static and kinetic geochemical test work has confirmed that the tailings are unlikely to generate problematic leachate. Solute fate modelling is underway to demonstrate that there will be no offsite or enduring impacts as a result of seepage. The Nebo pit will be utilised for tailings disposal from year 20 onwards. Utilising the Nebo pit will have an added benefit in minimising long-term ground water drawdown by avoiding the development of a pit lake.
The final design of the TSF will depend on demonstrating to the Regulator that all risks are adequately managed and as such the design is subject to change. TSF design, environmental baseline studies and impact assessments are progressing with a view to submitting a referral under Part 4 of the WA Environment Protection Act early in Q2 2020. Mine waste rock will be stored adjacent to each pit with potentially acid forming material fully encapsulated. Inpit dumping of waste will be utilised for Babel in years 8 to 10 to minimise haulage distances and improve environmental outcomes.
Water Supply
The groundwater drilling program completed in 2018 and subsequent ground water modelling completed in 2019 demonstrated a sustainable, high quality water supply from local palaeochannels of 7 GLpa, sufficient to supply the 10Mtpa processing plant. The Nebo pit intersects one such palaeochannel and as such requires dewatering prior to mining. The borefield will be located approximately 15km north east of the operation and be supplemented by water recovered during pit dewatering. Alternate water supply has also been considered with paleochannels immediately south of the proposed development area having confirmed water supply, and the
Power Supply
A 50MW base case power supply (with a BOOM capital estimate of circa
Modelling has demonstrated that circa 70 - 80% renewables penetration can be achieved for the site, with the current mix modelled to be an optimised mix of wind, solar and diesel supported by a battery installation. There remains considerable upside in power cost through matching plant power demand with the availability of renewable supply (load scheduling), haulage electrification to maximise the proportion of renewable energy utilised and the continued improvement in the efficiency of renewable energy solutions. Should the renewables option be implemented, this innovative power supply solution would make West Musgrave one of the largest fully off-grid, renewable powered mines in the world. The solution would result in the avoidance of in excess of 220,000tpa of carbon dioxide emission compared to a fully diesel-powered operation.
Operating Philosophy
The project will operate as a fly-in-fly-out operation. An airstrip and 400-person operations accommodation village will be constructed at the site. Approximately 60 staff are to be employed in operations monitoring, control and planning functions located in an offsite
Logistics
The logistics route to market includes road transport along the
Execution
The capital cost estimate has been developed assuming an Engineering, Procurement, Construction Management (EPCM) delivery model, however,
Project Management by an Integrated Project Management Team consisting of the current core
Engineering, Procurement, Construction (EPC) delivery of the process plant package.
Other vertical packages to be delivered by specialist design and construct contractors.
Final delivery model for the power solution is still to be decided.
Project funding
The availability of funding to support the capital requirement for the development of the Project is assumed in the PFS, with funding for the Project considered by the existing Joint Venture agreement. The Joint Venture partners have been working collaboratively on potential funding structures through the course of the PFS and indicative financing proposals have been received from a number of interested parties covering a variety of funding options including debt financing, traditional bank resource project financing, offtake funding and streaming mechanisms. The partners intend to continue to explore options to determine the optimal quantum and structure.
Completion of the PFS provides the partners with a sound basis on which to expand those discussions and engage further with a range of potential market and finance partners. Investors should note that there is no certainty that the partners, either individually or jointly, will be able to raise the funding required, or that funding may only be available on terms that may be dilutive to or otherwise affect the value of each company's existing shares. It is also possible that the partners, either individually or jointly, could pursue other value realisation strategies.
Community
The Traditional Owners are the Yarnangu People with a total population of circa 2,000 people living in 10 communities within the Ngaanyatjarraku Shire. The people who have the strongest connection with the land within the Project area live in Jameson (Mantamaru) followed by
The focus during the PFS has been to secure land access and building relationships with the community. Four main heritage surveys occurred in 2018 to secure land access for the project. The surveys typically occurred in blocks of 10 days with an average of 30 people engaged each day. The heritage surveys provided an opportunity to build a strong relationship between project members and the community. Project infrastructure has been designed to avoid culturally sensitive areas identified during surveys. Flexibility has been provided such that infrastructure locations can change without the need for further specific heritage surveys, ongoing consultation and co-design of the site layout will occur. Further heritage surveys will be required outside the immediate project area for other infrastructure corridors such as roads and water pipelines as the level of engineering designs progress.
A Genealogy study was commissioned in 2019 by the
A series of separate community meetings were also held to provide an opportunity for the broader community to be informed about the project and provide feedback. A delegation of community members visited the
Regulatory Approvals
Prior to
The first of three primary approvals submissions, assessment under Part 4 of the Western Australian Environment Protection Act (EP Act) is anticipated for early Q2 2020. Information obtained in the environmental baseline work program to date does not indicate any material threats to the obtainment of this approval. Applications under the Western Australian
Government Engagement
A dedicated government engagement strategy has been developed and is ongoing. The key objectives of this strategy include building
Risks
Indicative market terms have been received from potential customers in
Mixed Nickel Hydroxide Product (MHP)
A concept study and market analysis has determined that there is potentially significant upside value in processing the nickel sulphide concentrate onsite to produce MHP containing nickel and cobalt. MHP is a precursor material in the production of nickel sulphate for use in batteries but can equally be fed to a variety of downstream processes to make nickel metal. The market for nickel sulphate is forecast to grow to circa one million tonnes per annum over the next five years in response to the growing demand for EV batteries. MHP is a relatively high-grade nickel product which will have reduced transport costs and increased nickel payability relative the sulphide concentrate. A number of process routes have been identified, with metallurgical test work and process development required in the next phase of the project.
Succoth
The Succoth copper deposit is located only 13 km north east from Nebo. Cassini has previously reported an Inferred Resource at Succoth of
Power Cost
There remains considerable upside in power cost through matching plant power demand with the availability of renewable supply (load scheduling), the potential use of storage technology, haulage electrification to take advantage of renewable energy and the continued improvement in the efficiency of renewable energy solutions. An initiative already underway is to potentially source funding for the innovative renewable power solution through government agencies, including ARENA. In addition to the renewables solution a gas pipeline remains a potential secondary solution that will require further examination during the next phase of the project.
Threats to the current Base Case
Regulatory Approvals Delay
Nickel Concentrate Sales
It has been assumed that a portion of the nickel concentrate will be sold to domestic customers, realising lower freight costs. It is possible that the assumed customer mix will not eventuate, resulting in higher freight costs to international customers. This may be offset by more favourable terms. Discussion with potential customers will continue in the next phase of the project.
Contact:
Tel: 61 8 8229 6627
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