Australia Mines Offers Nickel-Cobalt Exposure With Three Promising Projects In Australia
Mar. 21, 2018 1:06 PM ET|15 comments| About: Australian Mines Ltd. (AMSLF), Includes: AEOMF, ARRRF, CBBHF, CTEQF, ECSIF, FTMDF, GMRSF, RNKLF
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Australia Mines has three cobalt projects. Sconi is arguably Australia’s most advanced cobalt-nickel-scandium project.
The Sconi resource estimate has 54,500 tonnes of contained cobalt with exploration upside. The Sconi project has recently secured 100% cobalt and nickel off-take.
At current valuation investors are getting Flemington and Thackaringa almost for free. Flemington is already showing good potential.
This article first appeared in Trend Investing on February 22, 2018; therefore all data is as of that date.
Australian Mines [ASX:AUZ] [GR:MJH] (OTCPK:AMSLF) - Price = AUD 0.10, USD 0.10
Australian Mines 100% own three nickel-cobalt projects in Australia:
The flagship Sconi cobalt-nickel-scandium laterite project in Greenvale North Queensland.
The Flemington cobalt-scandium-nickel project in NSW next to Clean TeQ's Sunrise project.
The Thackaringa Cobalt Project next to Cobalt Blue
Note: The Company also 100% owns the Marriotts Nickel Project in Western Australia. This project is on hold for now with a small nickel sulphide resource so not discussed further. You can read more here.
Note: Australia Mines are optioned to acquire 100% of Flemington. Also the company has a Perth demonstration plant which they state "will produce saleable cobalt sulphate and nickel sulphate for validation by SK Innovation in March 2018 & scandium oxide samples for other interested off-take parties."
Australian Mines projects location map
Sconi cobalt-nickel-scandium laterite project
The company states that Sconi is "Australia’s most advanced cobalt-nickel-scandium project", and "our flagship Sconi Project is one of very few large ore bodies of its type in Australia."
The Sconi project resource
The current JORC Resource for Sconi, was announced on 31 March 2017.
The combined nickel and cobalt mineral resource for the project is 89-million tonnes at 0.58% nickel and 0.06% cobalt for 514,000 tonnes of contained nickel metal and 54,500 tonnes of contained cobalt. The total scandium resource at Sconi is 12 million tonnes, at 162 parts per million of scandium for 2,989 t of scandium oxide. Sconi is still open with exploration upside.
Infrastructure and access
The Sconi project has excellent road access and about 250 kilometers direct to the Townsville Port. The project has access to local electricity, water, and a workforce.
Stage and the SK Innovation off-take deal
The company states "all relevant mining and environmental licences are in place for development of a mining and processing operation at Sconi."
The company announced this week a great 7 year (with 6 year extension option) (?binding) off-take deal with South Korean battery maker SK Innovation for up to 12,000 tonnes per year [tpy] of cobalt sulphate and 60,000 tpy of nickel sulphate. Reuters reported:
The agreement is contingent on Australian Mines obtaining financing for the project by the end of 2018 and for mining to start before the end of 2020. Australian Mines said the agreement also includes an option for SK Innovation to buy up to 19.9 percent of its ordinary shares.
This de-risks the project further.
Note: The trading halt pertains to some issues with the SK Innovation ?binding off-take announcement, and with the latest company presentation.
The Sconi Pre-Feasibility Study [PFS] was based on a throughput estimated to deliver an annual average production of 3,010 tonnes of cobalt sulphate, 24,420 tonnes of nickel sulphate and 77 tonnes of scandium oxide for at least the first 20 years. The Bankable Feasibility Study [BFS] is assessing scenarios which include "trebling" the volumes produced annually from the ore body. The market is keenly awaiting their BFS in June 2018.
As a guide the Clean TeQ PFS result was a post-tax NPV 8% of US$891m (A$1,187m) and a 25% post-tax IRR (based on production of 18,730tpa of contained nickel metal equivalent and 3,222tpa of contained cobalt metal, nickel at US$7.50/lb and cobalt at US$12.00/lb, LOM 20+years). The Sconi BFS should be significantly higher if they do use the higher production volumes and higher cobalt prices. The best interim guide for CapEx is CleanTeQ's CapEx of US$680m (A$906m) for their similar Sunrise project. Australia Mines is planning to use the expensive High-Pressure Acid Leach [HPAL] and solvent extraction [SX] processing methods needed for laterite ores.
2018 should therefore see several catalysts for the Sconi project and a stock price re-rating if we see a great BFS and especially if they secure project financing.
The Flemington cobalt-scandium-nickel laterite project
Flemington is still in the early stages of defining a potential resource.
The Flemington maiden resource was 2.7 million tonnes of ore at 0.101% cobalt, 403ppm scandium, for 2,744 tonnes contained cobalt.
The company states:
The initial cobalt Mineral Resource release for the project identified 89 million tonnes of ore at an expected average feed grade of 0.11% cobalt and 0.80% nickel, with opportunity to significantly increase this given the existing Resource covers only 1% of the interpreted prospective host geology.
A scoping study has been done resulting in a NPV 8% of AUD 225m, CapEx AUD 74m. Clearly the PFS and later studies will improve significantly on this.
The company is currently working to define the resource and achieve permits, with a PFS to follow in later 2018 (an earlier PFS only included scandium). Flemington is seen as a mid-term project for the company.
Flemington location map and tenements (next to Clean TeQ)