Mincor feeds growing investor hunger for ‘green’ nickel
And speaking of hunger, is St Barbara about to consume Kin and kick-start a regional consolidation?
The nickel price has rallied hard since the setback earlier in the year which was triggered by news from China’s Tsingshan that it had plans to get into the battery materials space by converting a portion of its nickel pig iron (NPI) production in Indonesia into nickel matte.
Hooray for them as there is unlikely to be a Western end-user likely to touch the stuff given the energy intensity involved in making NPI in the first place, and then using yet more to arrive at a suitable nickel matte.
Our nickel sulphide nickel companies need not have worried, as is borne out by nickel’s strong rally of late. The metal has bounced 7.5% higher in the last month to $US8.42/lb which, in turn, is some 34% higher than last (calendar) year’s average of $US6.26/lb.
So it stands to reason that the market’s appetite for decent nickel exploration results has also taken a turn for the better. That is doubly so when exploration results with game-changing potential are reported.
That’s just what that Mincor (MCR) has achieved from its Kambalda project where it is pursuing a dual-focussed strategy of returning as a nickel producer come early next year from existing deposits/mines, as well as pursuing exploration upside.
The push to return as a nickel producer is going well. But interest in the stock this week was all about its recently started drilling program in an untested 1.1km zone between the Long mine and the Durkin North deposit (beneath the Durkin workings at the Otter Juan mine) at its Northern operations.
Because the mines were previously owned by others, the 1.1km zone separating them has never been drill-tested despite historical production at Long/Otter Juan of 818,000t of nickel and despite the known 900m horizontal separation between the two old-timers.
Mincor used to compare the zone to the Korean peninsula’s demilitarised zone (DMZ) because of the lack of drilling. Now it prefers to refer to the zone as the (potential) Golden Mile of Nickel (GMN). Despite the imperfection of using imperial rather metric nomenclature, the GMN is showing early signs of living up to its name.
That’s because the second diamond hole in the recently started underground drilling program in the GMN has returned what Mincor called an “exciting” massive sulphide intersection (generally taken to mean somewhere between 8-14% nickel).
Best to wait for assays (two weeks), and the intersection was only 0.5m. But it does stand as proof of concept that the GMN does contain high-grade nickel, raising the prospect of Mincor being able to add to is overall resource base to make its return as nickel producer a long-lived affair.
Some of that came through in Mincor’s 10% share price gain to $1.13 in Thursday’s market.
Could it be the long expected consolidation of Leonora’s gold riches is finally about to happen?
While it has long been expected, the consolidation never got going because the company that was meant to spearhead it – St Barbara (SBM) – headed offshore instead of looking in its own backyard for easy growth.
But St Barbara is doing that now, plonking down $25.3m or 16c a share for a 19.78% stake in Kin Mining (KIN).
Kin was mentioned here back on May 28 when it was 13c on the strength of exciting exploration news pointing to the potential for it to grow the resource base at its Leonora gold project from 1.23Moz to 1.5-2Moz in quick fashion.
Reaching that sort of target would allow Kin to revive its ambitions to get cracking with either a standalone development or a toll treatment agreement with one of the many hungry treatment plants in the region.
One the hungriest of those is St Barbara’s Gwalia mill. St Barbara has been calling on third party ore to fill the mill and the move on to the Kin register goes down that pathway, unless of course it makes Kin’s project its own with a follow up takeover bid.
If does go down the takeover route, St Barbara will be paying more than 16c a share as that undervalues the existing resources as it is, let alone the potential for the Kin project to grow to the 1.5-2Moz range.
Striking toll treatment deals and a consolidation move like that on Kin has become a necessity for St Barbara.
Its ageing and ever-deepening Gwalia mine at Leonora struggles nowadays to get its ore to the surface, leaving the Gwalia mill under-utilised, something reflected in a series of production downgrades, the latest being to 150,000-160,000oz at an uncomfortable cost $1,815-$1,950/oz.
But St Barbara (finally) has a revival plan for Gwalia, one that it really should have embarked upon back in 2018/2019 when the Aussie gold price turned on all the lights in the WA gold scene with its charge through A$2,000/oz. Instead, St Barbara went racing off overseas for big ticket acquisitions.
The revival plan comes after St Barbara put together resource additions on its own ground that can displace third party ore at Gwalia (600,000oz at Harbour Lights and 1.4m ozs at Tower Hill). That has provided the base for St Barbara to set about planning to increasing mill capacity at Gwalia from 1.2mtpa to 1.7mpta, or maybe even build a new 2.4mtpa mill.
It wouldn’t have to stop there, given the volume of resource ounces in the Leonora region at Kin and other third party projects.
As things now stand, St Barbara plans to get production back to 215,000-240,000oz annually by FY2025. Again, why stop there?
Apart from Kin’s project, there are a number of other advanced gold projects within easy trucking of the Gwalia mill.
They include the 944,000 oz Apollo Hill project of Saturn Metals (STN) located about 60km south-east of Leonora, and the 1.6m oz Ulysses project of Genesis Mineral’s (GMD), 30kms south.
And then there is Red5’s (RED) King of the Hills project some 28km north of Leonora. But it’s too late for St Barbara as it is Australia’s next big gold mine, with Red5 cracking on with a $226m development for a first gold pour in the June quarter next year.
The planned 150,000oz annual production rate is based on a 2.4m oz reserve (4.1m oz resource) that Red5 has put together since acquiring the project from Saracen in 2017, with Saracen having picked it up from … wait for it …St Barbara in 2015.
It was a former ore supplier to the Gwalia mill.
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One of Australia’s leading business journalists, Barry FitzGerald, highlights the issues, opportunities and challenges for small and mid-cap resources stocks, and most recently penned his column for The Australian newspaper.