The Conversation (0)
Queensland Pacific Metals Ltd (ASX:QPM) (“QPM” or “the Company”) is pleased to announce the results of its Advanced Feasibility Study (“Feasibility Study”) for Stage 1 of the TECH Project and a Scoping Study for Stage 2 expansion of the TECH Project.
Highlights
- Advanced Feasibility Study on Stage 1 TECH Project complete, facilitating formal commencement of debt funding with potential lenders and providing guidance to investors.
- Scoping Study on Stage 2 TECH Project expansion also complete.
- The studies highlight the strong financial metrics of the TECH Project:
- Nameplate production of:
- Lowest quartile operating cost (after co-product credits) on nickel cost curve
- Stage 1 development capex estimate of A$1.9b + contingency allowance compares well with the 2020 Pre-Feasibility Study estimate of A$650m, considering a 2.7x plant scale increase and global equipment cost inflation over the past two years.
- Capital estimate prepared by recognised engineering firm Hatch with support from other key vendors and consultants.
- Debt financing due diligence process, lead by advisors KPMG, will commence immediately and which will include:
- NAIF – Strategic Assessment Phase completed;
- Export Finance Australia – conditional commitment received of A$250m;
- K-Sure – formal expression of interest to participate on terms similar to Export Finance Australia; and
- Other export credit agencies and commercial banks who have provided formal expressions of interest.
- Feasibility Study presents the strong financial metrics of the TECH Project, which has already secured offtake agreements for 100% of nickel and cobalt sales for the life of the project with General Motors, LG Energy Solutions and POSCO, all three of which are also shareholders of QPM.
- Capex estimate has been undertaken at a peak in global inflation and equipment pricing – advice from key vendors is that they are seeing the cost of manufacturing reduce significantly, which will assist QPM when it is time to place formal orders.
- Ongoing work on some aspects of the TECH Project to improve estimate accuracy and value engineering initiatives to implement identify capex savings will take place over the next few months in parallel with the debt financing process.
Stage 1 Overview and Financing Strategy
Stage 1 of the TECH Project has been designed at a nameplate capacity to process 1.05m dmt (1.6m wmt) per annum. Key assumptions and operating parameters are detailed in the tables below.
The capital estimate for Stage 1 of the TECH Project currently sits at an accuracy range of –15% to +24% and is presented in the table below.
QPM and its debt advisors KPMG have made significant progress to date on procuring debt funding for the TECH Project:
- NAIF – Strategic Assessment Phase completed;
- Export Finance Australia – conditional commitment received for A$250m;
- K-Sure – formal expression of interest to participate on terms similar to Export Finance Australia; and
- Other export credit agencies and commercial banks who have provided formal expressions of interest.
As part of QPM’s ongoing discussions with these debt financiers, the Feasibility Study is sufficiently advanced to commence formal due diligence with an Independent Technical Expert (“ITE”). This body of work will begin imminently in parallel with QPM continuing to undertake engineering work on certain aspects of the plant to improve accuracy. These aspects primarily concern the KBR engineering package, which includes iron hydrolysis, aluminium removal and nitric acid recovery and recycle. QPM, Hatch and KBR are working as an integrated team to optimise the design and minimise technical risk in these areas. In addition, value engineering (cost reduction) initiatives will also be undertaken across the Project.
Contingency in the capital estimate has currently been assumed at 10%. Following the KBR engineering package work and value engineering, a detailed contingency estimate will be undertaken using the standard Quantitative Risk Assessment methodology.
In preparing the capital estimate, QPM believes it has been undertaken at the peak of global manufacturing pricing. This is based on discussions with key equipment vendors who are seeing significant reductions in international producer price indices.
Click here for the full ASX Release
This article includes content from Queensland Pacific Metals, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
QPM:AU
Ramp Metals: Battery Metals Exploration Company Focused on Mining Assets in Saskatchewan
Ramp Metals (TSXV:RAMP) specializes in battery and base metals, particularly nickel and lithium with three properties, two situated in Northern Saskatchewan, Canada, and one in Nevada, United States. The company's Rottenstone SW Claims is situated along a geological structure that historically yielded the highest-grade nickel and platinum group elements (PGE) in Canada. Rottenstone exhibits similarities to the Nova-Bollinger nickel-copper mine in Western Australia, which was discovered by Sirius Resources and ultimately sold to IGO Limited for AU$1.8 billion. The Nova-Bollinger mine had an estimated resource of 13.1 million tons (Mt) grading 2 percent nickel, 0.8 percent copper, and 0.07 percent cobalt.
Ramp Metals' fully permitted drill program in 2024 consists of four drilling locations with eight holes. The current drill program is focused on testing two of these targets. The first target is positioned at the anomaly within the center of the claims and falls within the "Rottenstone Eye" structure. The second target is an anomaly located outside the eye structure, approximately 3 kilometers east-southeast from the first location. To date, Ramp has successfully drilled four holes for a total of 1,180 meters.
The striking similarity between Rottenstone and Nova-Bollinger mine is encouraging and the appointment of Dr. Mark Bennett, the discoverer of the Nova-Bollinger deposit, as a strategic advisor, reinforces Ramp’s belief in the potential of the Rottenstone property. Bennett has over three decades of experience in establishing mines, and played a key role in multiple discoveries, such as the Wahgnion gold mine, the Thunderbox gold mine, and the Waterloo nickel mine, in addition to the Nova-Bollinger nickel-copper mine. Along with Bennett, Ramp Metals has also appointed leading geologist Scott McLean, a 35-year veteran in the mining industry, as its strategic advisor.
Company Highlights
- Ramp Metals is a battery and base metals exploration company with a focus on exploring high-grade nickel-copper-PGE in Northern Saskatchewan. Ramp intends to uncover the next major discovery essential for driving the green technology movement.
- The company has three properties covering a total area of 20,000 hectares. Of these, two are located in Northern Saskatchewan – Rottenstone SW Claims and Peter Lake Domain (PLD). The third property is located in Nye County, Nevada.
- The company’s flagship project Rottenstone SW property is situated adjacent to a northeast-southwest geological formation connected to the renowned Rottenstone Mine. This mine yielded 40,000 tons of high-grade nickel-copper-platinum group elements (PGE) and gold ore, with grades averaging 3.28 percent nickel, 1.83 copper, and 9.63 grams per ton platinum-palladium-gold.
- The geophysical program at Rottenstone highlights striking similarities with the Nova-Bollinger mine in Australia owned by Sirius Resources, which was eventually sold for AU$1.8 billion.
- Dr. Mark Bennett, founder of Sirius Resources who oversaw the development of the Nova-Bollinger mine, is a strategic advisor to Ramp Metals.
This Ramp Metals profile is part of a paid investor education campaign.*
Click here to connect with Ramp Metals (TSXV:RAMP) to receive an Investor Presentation
Nickel Price Update: Q1 2024 in Review
Oversupply from Indonesia
Lackluster pricing in the nickel markets is largely the result of the metal's ongoing oversupply position. The largest factor is the continued elevated production rates from Indonesia, which maintains its position as the global leader for the metal. The country produced 1.8 million MT of nickel in 2023, according to the USGS's latest Mineral Commodity Summary, representing half of global supply.
The country’s production has climbed exponentially over the past decade, and this was exacerbated by government initiatives that placed strict limits on the export of raw materials to encourage investment in production and refinement.
In an email to the Investing News Network, Exploration Insights Editor and Analyst Joe Mazumdar wrote, “The growth in EV production and the escalating demand for nickel in batteries prompted the Indonesian government to mandate increased local refining and manufacturing capacity from companies operating in the country.”
Data from S&P Global Market Intelligence provided by Mazumdar showed results of the mandates saw an estimated US$20 billion flowing into the industry in early 2023, with another US$10 billion in undisclosed funding, much of it originating from China.
Despite the lower quality of material coming from Indonesia, the investment was made to shore up supply lines for Chinese battery makers and earmarked for electric vehicle production. However, EV demand has waned through 2023 and into 2024 due to the high-interest rates, range anxiety and charging capacity, increasing nickel stockpiles and contributing to an ongoing oversupply situation.
A report on the nickel market provided by Jason Sappor, senior analyst with the metals and mining research team at S&P Global Commodity Insight, showed that short positions began to accumulate through February and early March on speculation that Indonesian producers were cutting operating rates due to a lack of raw material from mines, which helped push the price up.
The lack of material was caused by delays from a new government approvals process for mining output quotas Indonesia implemented in September 2023. The new system will allow mining companies to apply for approvals every three years instead of every year. The implementation has been slow, which was exacerbated by further delays while the country went through general elections.
The nickel market found additional support on speculation the United States government was eyeing sanctions on nickel supply out of Russia. However, base metals were ultimately not included in the late February sanctions. The price began to decline through the end of March as Indonesian quota approvals accelerated.
Production cuts from western producers
According to data from Macquarie Capital provided by Mazumdar, nickel prices slumping below the US$18,000 mark has made approximately 35 percent of production unprofitable, which would jump to 75 percent if the price were to fall below US$15,000.
Mazumdar indicated the pricing challenges have led to cuts from Australian producers like First Quantum (TSX:FM,OTC Pink:FQVLF) and Wyloo Metals which both announced the suspension of their respective Ravensthorpe and Kambalda nickel mining operations. Additionally, major Australian nickel producer BHP (ASX:BHP,NYSE:BHP,LSE:BHP) is considering cuts of its own.
Nickel price, Q1 2024.
Chart via the London Metal Exchange.
French territory New Caledonia’s nickel mining industry is facing severe difficulties due to faltering prices. The French government has been in talks with Glencore (LSE:GLEN,OTC Pink:GLCNF), Eramet (EPA:ERA) and raw material trader Trafigura, who have significant stakes in nickel producers in the country, and has offered a 200 million euro bailout package for the nation. The French government set a March 28 deadline for New Caledonia to agree to its rescue package, but a decision has not yet been reached as of April 11.
Earlier this year, Glencore announced plans to shutter and search for a buyer for its Koniambo operations, which it said has yet to turn a profit and is unsustainable even with government assistance. For its part, Trafigura has declined to contribute bail-out capital for its 19 percent stake in Prony Resources Nouvelle-Caledonie and its Goro mine, which is forcing Prony to find a new investor before it will be able to secure government funding. On April 10, Eramet (EPA:ERA) reached its own deal with France for its subsidiary SLN’s nickel operations that would see the company extending financial guarantees to SLN.
The situation has exacerbated tensions over independence from France, with opponents of the agreement arguing it risks the New Caledonia's sovereignty and that the mining companies aren’t contributing enough to bailouts of the mines, which employ thousands of New Caledonians. Reports on April 10 indicated that protests have turned violent.
While cuts from Australian and New Caledonian miners aren’t expected to shift the market from a surplus, Mazumdar expects it will help to maintain some price stability in the market.
“The most recent forecast projects demand (7 percent CAGR) will grow at a slower pace than demand (8 percent CAGR) over the next several years, which should generate more market surpluses,” he said.
Government intervention
In an email to INN, Ewa Manthey, Commodities Strategist at ING, suggests this places western producers in a challenging position to affect the market, even with cuts to production.
“The recent supply curtailments also limit the supply alternatives to the dominance of Indonesia, where the majority of production is backed by Chinese investment. This comes at a time when the US and the EU are looking to reduce their dependence on third countries to access critical raw materials, including nickel,” Manthey said.
This was affirmed by Mazumdar, who said the US is working to combat the situation through a series of subsidies designed to encourage western producers and aid in the development of new critical minerals projects.
“The US Inflation Reduction Act (IRA) promotes via subsidies sourcing of critical minerals and EV parts from countries with which it has a free trade agreement or a bilateral agreement. Indonesia and China do not have free trade agreements with the US,” Mazumdar said.
He went on to suggest that the biggest benefactors of this plan would be Australia and Canada, but also noted that with prices remaining depressed multi-billion dollar projects would face headwinds to get off the ground.
Green nickel
One way to encourage western production has been creating a separate price scheme with the creation of a green nickel market that plays into western producers' focus on environmental, social and governance (ESG). Green nickel is defined as a low-carbon product that produces less than 20 MT of carbon dioxide per MT of production.
The oversupply of lower-grade laterite has pulled prices down across the board, including for higher-grade and more environmentally friendly sulfide projects like those in Australia and Canada. This has led to the suggestion of premium pricing for green nickel; however, this hasn’t gained much traction on the London Metals Exchange (LME).
“There is little evidence that a premium for ‘green nickel’ producers or developers has much momentum although an operation with low carbon emissions may have a better chance of getting funding from institutional investors in western countries,” Mazumdar said.
Even though there might not be much interest in green nickel on the LME, there have been some vocal proponents like Wyloo’s CEO Luca Giacovazzi. He sees the premium as being essential for the industry, adding the industry should be looking for a new marketplace if the LME is unwilling to pursue a separate listing for green nickel.
The calls for a premium have largely come from western producers that incur higher labor and production costs to meet ESG initiatives, which is happening less amongst their counterparts in China, Indonesia and Russia.
Western producers were caught off guard early in March as PT CNGR Ding Xing New Energy, a joint venture between China’s CNGR Advanced Material (SHA:300919) and Indonesia’s Rigqueza International PTE, applied to be listed as a “good delivery brand” on the LME. The designation would allow the company, which produces Class 1 nickel, to be recognized as meeting responsible sourcing guidelines set by the LME.
If it is approved, which is considered to be likely, this would be the first time an Indonesian company would be represented on the LME. However, there has been pushback from western miners who have noted that production in Indonesia faces a range of ESG and responsible resourcing challenges.
Investor takeaway
Nickel is a critical metal for the production of batteries to be used in EVs. Generally, battery-grade nickel is processed from the higher quality raw material produced from sulfides, but more recently Chinese production has turned to lower quality laterites. While batteries made from laterite nickel have lower energy density, their cost is also much lower, which may provide key cost savings for EV buyers.
However, with lingering inflation and high interest rates globally, demand for EVs has fallen off over the past two years, which has in turn reduced the demand for nickel.
Meanwhile, despite some slow down due to the approval process, high supply rates from Indonesia have continued into 2024 and there doesn’t seem to be cuts on the horizon from the nation.
These factors have led to a drop in profits and curtailments from large nickel operations in western nations, and made companies unlikely to pursue the construction of new projects in the near term.
“Looking ahead, we believe nickel prices are likely to remain under pressure, at least in the near term, amid a weak macro picture and a sustained market surplus,” Manthey said.
The continued surplus in the market may provide some opportunities for investors looking to get into a critical minerals play at a lower cost, but a reversal may take some time.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
