Massive investments demand massive returns and by any measure, Ardea Resources’ Goongarrie Hub nickel-cobalt project near Menzies in WA ticks both boxes.
The budding miner has tabled a prefeasibility study (PFS) on Goongarrie Hub, which is part of its Kalgoorlie nickel project (KNP), and the almost biblical-scale numbers contained within it will no doubt have the market meerkats sitting bolt upright today.
Ardea says its project will cost a touch more than $3.1 billion to build but, remarkably, it says the project can pay that eye-opening number down in just 3.1 years. Its PFS predicts a whopping $800 million a year in EBITDA – an incredible figure considering the company’s assertion that it will be that much annually for at least 40 years.
Management has projected production of about 30,000 tonnes of nickel and 2000 tonnes of cobalt a year from a freshly-minted ore reserve of 194.1 million tonnes averaging 0.7 per cent nickel and 0.05 per cent cobalt for 1.36 million tonnes of contained nickel and 99,000 tonnes of contained cobalt.
Ore will be sourced from conventional low-cost open-cut mines, with industry-low strip ratios from a medley of shallow nickel laterite deposits at the Goongarrie Hub, including the Scotia Dam, Big Four, Goongarrie South and Goongarrie Hill deposits, with Highway some 30km to the north and Siberia North about 30km to the south-west.
While the six deposits are the main source of ore feed for the PFS, the company also has plans to incorporate additional feed from Ghost Rocks, Siberia South and Black Range.
Ardea’s strip ratio of just 1.5:1 is also nearly enough to make a nickel sulphide miner’s bottom lip quiver, such is the characteristic of laterites that generally come in huge, flat-lying ore bodies close to surface.
The company’s nickel-rich laterite will feed into a 3 million-tonne per annum high-pressure acid leach (HPAL) and a 500,000-tonne per annum atmospheric leach (AL) circuit to produce a mixed hydroxide product (MHP) to meet the ever-growing demands of the lithium-ion battery market.
The study’s preliminary estimate suggests direct cash costs after cobalt by-products of US$3763 (AU$5652) per tonne nickel in MHP during the first five years of operation and US$5763 (AU$8657) per tonne nickel in MHP over the life of the mine.
Projects the scale of the KNP Goongarrie Hub, with a mine life measured in decades, located within a premier resource development and operating jurisdiction, are rare and are therefore globally significant, strategic assets which must be developed to help provide the essential Battery and Critical Minerals required to underpin the required energy transition, accelerate the move to electric vehicles and achieve global climate targets. Ardea Resources managing director and chief executive officer Andrew Penkethman
With surging global interest focused on developing battery and critical minerals projects that meet the highest environmental, social and governance standards in low-risk geopolitical regions, Ardea’s impressive numbers have garnered the attention of a first-class Japanese consortium – consisting of Sumitomo Metal Mining (SMM), Mitsubishi and Mitsui & Co – which has committed to funding a definitive feasibility study (DFS).
Establishing roots in the 16th century, SMM is a renowned integrated nickel-cobalt laterite development and production company with a strong focus on the production of battery materials. It has developed and successfully operates two HPAL operations in the Philippines, bringing clear synergies to Ardea as it steers towards the development of its own HPAL plant at Goongarrie Hub.
Mitsubishi Corporation, with the enviable moniker of being Japan’s biggest trading company, and Mitsui are global trading and investment heavyweights with worldwide networks focussed on building a strong and diverse core business portfolio covering the mineral and metal resources, energy, machinery and infrastructure and chemical industries. Both companies have decades of project development and operations experience around the world and in Australia.
Collectively, the trio has signed a non-binding memorandum of understanding to partner with Ardea to fully-fund a DFS, with a scope of work to be agreed on by the end of this quarter.
Dependent upon the findings of the DFS, Ardea and the consortium will work towards making a final investment decision and securing project development funding, with a focus on Australian and foreign government-backed Export Credit Agency long-tenor, low-interest rate loans.
The consortium will ultimately position for a sizable interest in a future joint venture that will develop and operate the KNP Goongarrie Hub, in addition to nailing down off-take agreements for the final in-demand battery metals.
While Ardea’s project is a nickel laterite play rather than a sulphide project, there is an increasing confidence in the market that the processing of laterites is much better understood and that the technology front has moved ahead in leaps and bounds since Andrew “Twiggy” Forrest’s ill-fated attempt to process laterites decades ago at Anaconda Nickel.
Indeed, if the world is to fully embrace lithium batteries and electric vehicles, manufacturers will need to look to laterite for nickel supply as sulphide sources dry up or fail to live up to the same economies of scale.
Ardea might be a little fish when compared to the whale-sized Japanese entities that have seen enough from the junior miner to want to get involved. But the curious pairing with the consortium of note, combined with a flow sheet that uses industry-proven technology, may well put it right in the frame to help fill the supply gap.
Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au