Canny copper and nickel plays pay off

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 24 Jan 2012   Posted by admin


DIVERSIFIED base metals developer Fox Resources has signed a non-binding Memorandum of Understanding (MoU) with Chinese co-operative Jiangxi Jiangli Sci-Tech to develop Fox’s Radio Hill and Sholl nickel-copper bacterial heap leaching project in WA.
Under the MoU, Jiangli will provide Fox $30 million to fund the initial phase of the project and other associated activities at the Radio Hill mine.
On August 25, Fox announced the preliminary economic results of a revised scoping study undertaken at Radio Hill and Sholl.
According to the revised study, Fox plans to mine six million tonnes of mineralisation containing weighted average grades of 0.59 per cent nickel and 0.79 per cent copper. Fox acquired the Radio Hill nickel project, 35km from Karratha, for about $1 million in 2002, during a period of low nickel prices.
The company began production of nickel and copper concentrate in 2004. However, in 2008, the project was placed on care and maintenance following adverse movements in commodity prices. Fox interim chief executive officer Laurie Chew said the signing of the MoU and its formal documentation was a very significant milestone in returning Radio Hill to production.
“It confirms the potential of the project and reflects the culmination of many months of hard work optimising processes,” Mr Chew said.
“With the proposed funding arrangement now under way, we can look forward to the commencement of construction to develop the bacterial heap leaching project. “We’re very pleased to have Jiangli’s support and look forward to working co-operatively with them in the future.”
An initial scoping study released in March this year claimed that the project would generate total revenue of $867 million, with a net operating cash flow (NOCF) of $157 million. It also estimated it would produce a net present value (NPV) of $95 million (at an 8 per cent discount rate) and an internal rate of return (IRR) of 39 per cent.
The company’s revised study stated it would instead provide total revenue of $815 million during the nine-year life of the mine, a NOCF of $125 million, NPV of $73 million (at an 8 per cent discount rate) and a 31 per cent IRR.
Mr Chew said the company’s revised figures reflected changes in the market. “The project remains sound, with compelling economics despite changes in the external market which have led to a marginally lower NPV and IRR,” he said. “However, if modelled against market conditions when the initial scoping study was released, it is clear that the revised version is more robust.”
The revised study has outlined a new processing route that will deliver improved economics and lower technical risk. The new route – which will use water-soluble sulphide to selectively precipitate copper and nickel sulphides – is a more viable option than the previously considered ion exchange process. It will also produce a more attractive end product that can easily be incorporated into most refineries and smelters.
Fox intends to build the larger of the two planned heap leaching pads first, which will result in more metal being recovered earlier in the project, shorter leaching time and some deferred capital expenditure. The company said the revised study  had partially offset recent challenges with adverse exchange rate and commodity price fluctuations. In August, Fox began renewed discussions with potentialofftake partners and progressed efforts to obtain construction           financing to advance the project.
“We are now looking at a more conservative process and one we believe will be more marketable to potential off-take partners,” Mr Chew said.

 

By Kate Christou


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