Mincor’s strong feasibility study points to comeback for former $1b nickel darling

Plus, Chalice and Alkane do the business with the drill bit, Bellevue and Red 5 show there is still money for good projects and Tietto hits visible gold.

It’s not a great time to be laying out a company’s future in the form of a definitive feasibility study.

But at least in the case of nickel stock Mincor (ASX:MCR) it can be said the DFS has confirmed robust economics for its planned restart of its Kambalda operations, with first production pencilled in for the December quarter next year.

The DFS was based on an initial 5-year operation producing an annual average of 14,000t of nickel in concentrates at an AISC of $US3.13/lb ($A4.47/lb). Capital intensity – capex is $68m - for the scale of production is as low as you can get.

EBITDA was estimated to total $585m based on consensus pricing of $US7.14/lb nickel and an exchange rate of US70c, all of which is very interesting for a stock that last traded at 49.5c for a market cap of $163m.

That’s particularly so when it’s remembered that the targeted production level in the Kambalda restart case is not all that far off the 16,000t achieved back in 2007 when Mincor was a $1 billion company.

Mind you, the nickel price averaged $A17.28 in the 2017FY.

That compares with the current Aussie price of $A8.55/lb, with the fall in the dollar from last (calendar) year’s average of US69c to US60c only partly softening the blow of the COVID-19 inspired 20% fall in the US dollar nickel price from last year’s average.

But then again, the robust nature of the restart plan with its life of mine AISC of $A4.47/lb means the project would do okay at current prices, and would positively thrive at consensus thinking around long-term prices.

It also needs to emphasised that Mincor is not simply turning old mines back on, and that the 5-year life of mine is only the starting point. The greenfields Cassini discovery accounts for 56% of the planned production at an impressive expected cash cost of $US1.90/lb ($A2.71/lb).

Cassini continues to grow in scale as well, with a recent intersection of 17.6m at 5% nickel sitting outside of the mineral resource boundary used in the DFS.

Always the most volatile of the metals, the type of nickel Kambalda produces is plugged in to the battery materials supply for electric vehicle revolution. In the wake of COVID-19 crisis, some are suggesting the EV revolution will stall.

But others believe the transition to the greener mode of travel will in fact be accelerated once COVID-19 is out of the way.

Everyone will come out of the current health crisis with a sense that the world needs to become a cleaner place, with clean-green being interchangeable. Governments and carmakers know that.

Iron ore baron Andrew “Twiggy” Forrest also knows that.

He has been a steady buyer of Mincor in recent weeks, increasing his stake to 13.78%. It has been part of his broader push in to the metal - 17% of Poseidon (ASX:POS) which popped 20% higher on Thursday to 3c on an interesting massive nickel sulphide hit at its Black Swan project, and his recently arrived at 5.89% stake in Panoramic (ASX:PAN).

Chalice & Alkane

It was argued here last week that game changing exploration results will always trigger a strong response regardless of short-term despair in the market like that being endured now thanks to COVID-19.

The examples used were Chalice (ASX:CHN) and Alkane (ASX:ALK), both of which were in trading halts last Friday pending the release of drilling results from the Julimar nickel prospect in the case of Chalice, and from the Boda porphyry gold-copper discovery in the case of Alkane.

Neither disappointed, with Chalice since taking off from its pre trading halt price of 16c to 50c, and Alkane marching from 55c to 64c.

Chalice’s spectacular performance was its reward for the first hole at Julimar returning what Chris Baker at Bridge Street capital described as an extraordinary intercept – a massive sulphide zone of 13m at 3.15% nickel, 1.19% copper, 8.85g/t palladium and 1.09g/t platinum from 48m.

Julimar has been the subject of vanadium exploration interest in the past but not nickel, making the discovery a real coup for Chalice.

Comparisons are being made with IGO’s Nova deposit in the Fraser Range (Julimar differs by having the high-grade platinum group metals), and given there are more high-priority EM targets to be tested, thoughts have turned to Chalice having uncovered a new nickel province.

There is a lot more work to do and a second hole on a separate EM target did not return anything significant, as people with expertise in these things pretty much expected for reasons they alone understand.

Still, as the share price strength demonstrates, the early money is that Chalice is on to something special at the intrusive complex, all of 70km northeast of Perth.

It means it now has two district-scale opportunities on its hand, the other being its hunt for another Fosterville/Bendigo beneath cover to the north of Bendigo in Victoria where it is has had success with high-grade hits on virginal ground.

Chalice is ready for the push at Julimar and the on-going program in Victoria as it is holding $23m in cash and investments, worth about 8c a share.

Meanwhile, Alkane’s share price might not have raced ahead like Chalice’s but it has to be said the drill results it reported on Monday from its Boda discovery were also in the extraordinary category. The 1.16km hit grading 0.55g/t gold and 0.25% copper from 75m was impressive enough.

But what really excited was the hole including a 96.8m hit from 768m grading 3.97g/t gold and 1.52% copper. As Alkane’s CEO Nic Earner put it, intersecting a high-grade zone within a large and consistent body of mineralisation are the key attributes “needed to show this has the potential to be a future mining operation.’’

More work to do, with any mining operation years off, which might explain the low-key share price response.

Alkane is a $354m company on the strength of its existing gold production interests in NSW and its Dubbo zirconia/rare earths project. It is doubtful if there is anything in the share price yet for the Boda discovery, even though there clearly should be.

That will be of interest to Newcrest (ASX:NCM) which owns the Cadia mine near Orange some 110km to the south. Cadia is Newcrest’s best asset and it seems unlikely it wouldn’t want to add Boda to the fold if, as most suspect, Boda shapes up as another bulk cave porphyry opportunity.

Bellevue & Red 5

Raising funds for quality development projects is not a problem, notwithstanding all of the gloom around COVID-19.

And those with quality projects under their belt which need funding to keep up the momentum are doing the sensible thing with their funding needs – go hard and go early.

Sure it’s disappointing having to wear the dilution at a time of depressed share prices. But the alternative of having a stalled project on your hands should the fallout from COVID-19 be prolonged would be a worse outcome.

All that is why Bellevue is pulling in $26.5m from a placement at 30c a share. It was a thin 7.7% discount to the last sale price of 32.5c and in a demonstration that it was well received, Bellevue is now trading at 41c.

The funding is about what the market was expecting the company would need to maintain the pace at its namesake gold project where a maiden indicated resource estimate, from the overall resource of 2.2m oz at 11.3g/t, is expected in the June quarter, and where drilling continues to grow the resource base.

Macquarie has a 12-month 91c price target on the stock, another indicator of why quality projects get supported independently of broader market mayhem. A $2,700/oz Aussie gold price is not hurting either.

Red 5 (ASX:RED) is another that has decided to go hard and to go early, with reports it was out to raise $125m at 18c, a 23% discount to its pre-placement price of 23.5c.

It’s all about maintaining momentum at its 4.1m/oz King of the Hills’ project where a pre-feasibility study pointed to an initial 10-year project producing 140,000oz annually at an estimated AISC of $1,167.

Tietto

Tietto (ASX:TIE) was one of the best performed West African gold juniors last year on the strength of the unfolding story at its (growing) 2.1m oz Abujar gold project in Côte d’Ivoire.

In early February this year, it was a 29.5c stock, reflecting expectations that a 3m oz gold resource at Abujar would be in the bag by year-end, based on (on-going) impressive drilling results.

It was underdone at 29.5c given a high-grade core at Abujar points to the potential for a super-quick payback on an eventual mine development. But it is now back at 21c a share.

What’s interesting now though is that tucked away on the second page of recent drilling update on Abujar was the news that drilling had started at the Gamina prospect, immediately north of Abujar.

It has a 4.5km untested strike-length and has been the subject of extensive large-scale mining by garimpeiros.

Tietto disclosed that the first two holes at Gamina had intersected “visible gold.’’

Assays are pending. Enough said.