A giant Japanese consortium has committed to backing the development of Ardea Resources’ (ASX: ARL) Goongarrie Hub project in Western Australia’s Goldfields region – a major milestone for the nickel-cobalt operation billed by the Federal Government as “globally significant”.
Sumitomo Metal Mining and Mitsubishi Corporation have agreed to join Ardea to form an incorporated joint venture (JV) to be known as Kalgoorlie Nickel (KNPL). Management has described the decision by the Japanese companies as an “enabler” for the project and a “massive independent endorsement” for its potential.
Once in production, the company expects Goongarrie Hub to be one of Australia’s biggest nickel-cobalt producers.
Goongarrie Hub is a subset of six deposits within the company’s wider Kalgoorlie Nickel project (KNP) that features 854 million tonnes at a grade of 0.71 per cent nickel and 0.045 per cent cobalt, giving 6.1 million tonnes of contained nickel and 386,000 tonnes of contained cobalt. Outside of the Goongarrie Hub deal, it means Ardea still has more than 2 million tonnes at its disposal within its wider KNP.
Ardea Resources Managing Director Andrew Penkethman discusses Japanese Consortium Announcement
According to the pivotal agreement, Sumitomo and Mitsubishi will fund all of the project’s definitive feasibility study (DFS) costs up to an agreed budget of about $98.5 million. The two companies will also assist KNPL in optimising debt financing to earn up to a 50 per cent share in the JV, with Ardea retaining the remaining half.
The proposed JV has outlined an 18-month timeline to complete the DFS, with a positive outcome to lead to funding for the front-end engineering design (FEED), pre-commitment activities and ultimately, a final investment decision (FID) for the operation.
The Ardea team have been focused on aligning the Company with the best possible strategic partners to assist in realising the full potential of the Kalgoorlie Nickel Project – Goongarrie Hub. Sumitomo Metal Mining and Mitsubishi Corporation are high quality partners that can bring leading expertise to continue to drive the project forward.
Ardea Resources managing director and chief executive officer Andrew Penkethman
The prefeasibility study (PFS) for the Goongarrie Hub project spat out some eye-watering numbers including earnings before interest, taxes, depreciation and amortisation (EBITDA) of an extraordinary $800 million a year, which the company said could be sustained for a whopping 40 years. And the major Japanese backing makes the ink on those extraordinary figures seem even more bold.
The cash is projected to come from production modelled at about 30,000 tonnes of nickel and 2000 tonnes of cobalt a year from the open-cut mine that will exploit the shallow, flat-lying nickel laterite orebody with a strip ratio of just 1.5:1. The impressive PFS led to the Japanese consortium agreeing to fully fund the project’s DFS.
Despite the recent downturn in nickel prices, Ardea says the PFS defined direct cash costs after cobalt by-products of US$5763 (AU$8841) per tonne nickel in mixed hydroxide precipitate (MHP) over the life of the mine, which provides for a significant cash margin even at the current prices.
The Australian Government has shown its support for the struggling nickel sector by adding the metal to the list of critical minerals, giving companies access to $4 billion worth of funding aimed at promoting minerals considered vital to the world’s clean-energy transition.
Federal Minister for Resources Madeleine King said the project is a great example of collaboration between Australia and Japan and the enduring partnership between the two countries.
“This is a globally significant nickel-cobalt project that shows how Australian nickel projects can succeed economically, while also meeting the world’s best environment, social and governance standards,” King said. “The road to net zero runs through Australia’s resources sector.”
WA Mines Minister David Michael said the State Government also welcomed the commitment from the Japanese consortium, describing nickel as a “key commodity in products essential for global decarbonisation efforts”.
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