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Metallica's Heap Leach Nickel Project

Posted: 23 August 2006

Metallica Minerals Limited announced it will move to a Pre-feasibility Study of the Company’s 100 per cent held NORNICO Heap Leach Nickel Project in North Queensland after an international engineering consulting firm found the proposal was ‘technically robust’.

A just-completed Scoping Study, by Aker Kvaerner Australia Pty Ltd, found a NORNICO project producing 10,000 tonnes of nickel and 435 tonnes of cobalt per year would have an approximate capital cost of A$278 million and annual operating costs of A$71 million.

The accuracy of the cost estimates within the scoping study are plus or minus 30 per cent.  The capital cost estimate includes a sulphur burning acid plant and power station at A$56 million which represents the single largest direct capital cost item.

Metallica Minerals Managing Director, Mr Andrew Gillies, said the Company was encouraged by the findings of the Scoping Study and had initiated a Pre-feasibility Study which is expected to be completed within six months.

“The Scoping Study report indicates that the development of a relatively simple and lower cost laterite heap leaching process and a treatment plant to produce a nickel hydroxide precipitate would be technically robust and commercially encouraging on the basis of a life of mine nickel price assumption of US$5/lb LME (currently nickel price is around US$12/lb), US$12/lb cobalt price and a US$/A$ exchange rate of 0.75,” Mr Gillies said.

“The project has potential to generate average revenues of about A$120 million a year and an average operating surplus of around A$50 million a year, or approximately an A$35 per tonne margin of treated heap leach feed,” he said.

“During the Pre-feasibility phase, Metallica will be seeking to increase and upgrade its resource base to allow a project life of around 20 years, as well as provide higher nickel grades in the early years of operation to maximize margins early and enhance the project economics.”

The proposed NORNICO Heap leach operation would be sited adjacent to Metallica’s Bell Creek nickel deposits, located approximately 30 kilometres south of Mt Garnet in North Queensland.

‘Heap leaching’ uses dilute sulphuric acid, passing though a stacked heap of sized nickel laterite on an impermeable liner (leach pad), to extract metals into a solution from which they are then precipitated or extracted into marketable nickel compounds or metal products.

The heap leach process for nickel laterite oretypes is also being developed by London-based European Nickel Plc (in which BHP Billiton is a shareholder) for its Caldag nickel laterite mine development in Turkey. Minara Resources Ltd is also developing a heap leach operation adjoining its pressure acid leach nickel laterite mine in Western Australia.

The Scoping Study is an Initial desktop conceptual study to evaluate project concept and to provide an order-of-magnitude cost, return and viability.

The study was based on the current Inferred Resource, assumed processing tonnages and grades, with preliminary metallurgical data, and as such should be regarded with appropriate caution. The Scoping Study is early stage and there is no certainty that the estimates of the Scoping Study will be realised in the future.

The Scoping Study was based on the first 10 years of a heap leach nickel operation using a base case that assumed a heap leach processing rate averaging 1.42 million tonnes a year of upgraded (via simple screening) nickel laterite feed to the heap leach pads averaging 1.0 per cent nickel and 0.05 per cent cobalt.

A nickel recovery rate from the heaps of 70 per cent (cobalt 50 per cent) was used to produce an average of approximately 10,000 tonnes of nickel and 435 tonnes of cobalt annually as mixed hydroxide product (MHP).

The nickel resource is shallow and can be extracted freely without the use of blasting. Higher nickel grades of leach feed would be made available during the early years of operation.

The production of high quality mixed (nickel-cobalt) hydroxide precipitate product would be suited, for example, as feedstock to BHP Billiton’s Yabulu nickel refinery near Townsville. The price paid for the nickel product is budgeted to realise 75 per cent of the contained metal value.

The Scoping Study was based on the current NORNICO (JORC-compliant) resource statement which has an estimated Inferred Resource of approximately 20.75 million tonnes – at 0.78 per cent nickel and 0.04 per cent cobalt at a 0.5 per cent nickel cut-off grade – containing approximately 161,000 tonnes nickel and 8,000 tonnes cobalt.

The February 2006 resource statement was based on drilling on the Bell Creek and Minnamoolka (about 30 kilometres south of Bell Creek) nickel deposits up until late 2005.

Since then approximately 300 drill holes have been completed, which is expected to significantly increase the size and status of the NORNICO resource. An updated NORNICO resource statement is expected to be completed in November 2006.

Mr Bob Martin, a qualified metallurgist with extensive experience in Project Management, Feasibility Studies, Mine Development and Operations, including heap leach operations, has recently been appointed as Metallica’s General Manager Project Developments, with specific responsibility and focus on NORNICO’s feasibility and developments.

It is Metallica Minerals intention to progress to a Pre-feasibility study on the NORNICO nickel project immediately, with a base case timetable targeting nickel-cobalt mixed hydroxide product (MHP) concentrate production in 2009.

It is the Company’s vision to build a highly profitable and long-life heap leach nickel cobalt operation, producing nickel (initially as MHP) at a rate of around 10,000 tonnes per annum for a project life of around 20 years.

North Queensland Nickel Cobalt (NORNICO) Project

NORNICO includes over 2,000 square kilometres of contiguous tenements covering prospective and under explored ground in the Greenvale Nickel Province. NORNICO is located approximately 300 kilometres from BHP Billiton’s Yabulu Nickel Refinery, northwest of Townsville.

The project includes several drilled nickel-cobalt laterite deposits (Bell Creek, Minnamoolka, and Kokomo), one scandium deposit and has considerable exploration potential for additional nickel-cobalt laterite deposits as well as nickel-cobalt-platinum group elements-sulphides, base metals and gold mineralisation.

Metallica Minerals is currently undertaking metallurgical testwork on NORNICO laterite deposits (initially focusing on Bell Creek, Minnamoolka and Lucky Break) to define the amenability of the various ore-types to produce a nickel-cobalt intermediate product via heap leach processing.



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Beach Petroleum

Horizon Oil