All images: Mincor Resources.
BY REUBEN ADAMS
FORMER nickel mid-tier Mincor is back in the game, pouring first gold at its 71,700oz – and growing – Widgemooltha Gold Project in late July. The low-capex operation will help bankroll the rapid development of the miner’s world-class Kambalda nickel portfolio, with a major exploration push currently underway. The Australian Mining Review speaks with Mincor chief executive Peter Muccilli.
Q. You’ve experienced nickel’s incredible highs and the subsequent, challenging lows as part of the Mincor team. How has this rollercoaster ride helped shape your approach as chief executive and the current Mincor strategy?
The sharp falls in the Australian nickel price, which hit decade lows in March 2016, resulted in Mincor staging down its operation from July 2015 and ultimately placing the mines on care and maintenance in February 2016.
At the time the combination of declining reserve grades at our Kambalda operations and historically low nickel prices meant we simply could not generate sustainable cash-flows.
It’s important to remember that a number of high-grade Australian nickel sulphide mines were still generating healthy cash flows at the bottom of the price cycle – i.e. the Long and Flying Fox mines.
While Mincor historically had enjoyed reserve grades of over 3.5 per cent nickel for long periods of time, our reserve grades were steadily declining leading up to February 2016.
In light of these challenging conditions, the company had already reset its cost base and devised a plan to re-establish sustainable nickel sulphide production once the price cycle turned. This plan was based on building quality Ore Reserves to ride through the future highs and lows of the market.
It is worth pointing out that Kambalda is a world-class high grade nickel sulphide district which historically produced 1.6 million tonnes of contained nickel in ore over a 50 year period.
One consequence of the breakup and sale of WMC nickel mines to various parties, which sparked the resurgence of nickel mining in Kambalda in the early 2000’s, was that there has been very little greenfields nickel exploration in the region for over a decade.
All the new players, including Mincor, focused their exploration expenditure on near-mine targets, so they could extend the reserves and mine life of their newly-purchased operations.
In the longer run, this has led to the near-total depletion of quality reserves in the district and, despite the district’s enormous potential, a dearth of new discoveries.
Since 2000, Mincor has targeted and successfully consolidated nearly all of the prospective ground in Kambalda for shallow nickel sulphide mineralisation, as well as acquiring some handy gold assets.
We now believe that we have an exceptional opportunity to leverage off our existing nickel Resource and Reserve inventory and to build a high-quality nickel Ore Reserve.
We are committed to exploring targets as one of the important pillars in achieving our plan of delivering sustainable nickel production for the future.
The recent Cassini resource drill-out, where we followed up on a discovery that had been made back in 2015 but never pursued, is a great example of this strategy in action.
In February 2016, Mincor was always confident the nickel prices would one day recover, but the scale and rate of that recovery was predicted by most nickel commentators to be modest and likely to unfold over many years.
At the time LME stockpiles were at historical highs and stainless-steel supply was continuing to grow from ferro-nickel producers treating nickel ores from Indonesia and the Philippines.
Although the company always felt it had a significant nickel option, the backdrop of a potential prolonged low nickel price enabled us to progress a counter-cyclical low CAPEX opportunity by developing the Widgiemooltha Gold Project.
Gold prices have been on a sustained price upturn and this has re-rated the value of our gold assets.
The project is on track to generate cash flows this quarter by mining a series of shallow pits, supported by a toll processing agreement.
Q. Can you provide a short history on the Widgiemooltha discoveries? How does it feel to see the nickel/gold growth strategy you put in place in 2016 begin to pay dividends?
An analysis of historical regional exploration expenditure at Widgiemooltha shows that levels of greenfields exploration activity since the 1960’s were intermittent and linked to the commodity price peaks.
Yet when there were sustained periods of regional exploration, the area has yielded significant discoveries.
The Anaconda/ CRA JV discovered the Widgiemooltha Redross, Wannaway and Widgie 3 Mines in 1967 – 1971. WMC found the Miitel and Mariners Mines in the 1990’s.
As mentioned earlier, since Mincor has been at Widgiemooltha we had also allocated more than 90 per cent of our drilling budgets to extensional exploration at our existing mines.
The ground package containing the Cassini prospect was the last package we acquired. The Cassini discovery in early 2015 was made during a period of sharp and sustained nickel price falls.
The discovery attracted little interest at the time, when it was becoming clear our mines were under strain and investment sentiment towards nickel was extremely negative.
As a result, all discretionary exploration – which included Cassini – was “temporarily suspended” in July 2015 as the company turned its efforts to managing its mines.
Fast track to 2018.
The hard work by our employees and contractors to advance the Widgiemooltha Gold Project is now paying off.
A few years ago, the Widgiemooltha Gold Project was a regional gold asset with little value assigned to it; now it is an active mining operation which is poised to generate cash flows.
The Widgiemooltha Gold Project will contribute near-term cash flow towards the broader development of Mincor’s Kambalda gold and nickel assets.
With the return of a positive nickel price outlook, the company has active nickel programs underway to progress the exploration and development of its nickel assets to take advantage of the forecast growth in the nickel market over the next few years.
Q. Is there opportunity to substantially increase WGP production life beyond the initial 2.5 years?
The Company believes that through exploration, there is clear potential to expand Reserves and extend mine life at Widgiemooltha, as well as excellent prospects for establishing gold Mineral Resources at North Kambalda.
At the WGP there are numerous shallow high-quality intersections yet to be captured in the Mineral Resource inventory and the mineralisation remains open along a highly prospective 5.5km long shear corridor.
The WGP and North Kambalda are unique as the ground remains lightly explored for gold as it has been held by nickel-focused companies since the 1960’s.
We have only just scratched the surface of its potential.
Further consideration is now being given to how best to realise the full underlying value of the company’s gold assets for the benefit of our shareholders.
Q. The company has stated that the 2016 BFS’ at Durkin North and Miitel provided a clear path back to production once nickel prices recovered – which they have. What other boxes need to be ticked ahead of Mincor’s return to nickel production?
In March 2016 the company completed Feasibility Studies showing 28,000 nickel tonnes in Reserves.
The FS also identified several opportunities to enhance the start-up economics of the project. We believe there is plenty of upside at Durkin North to improve the grade and project economics with further mining studies, which we intend to do.
Just as important is to opportunity to extend these studies to include the available Mineral Resources located at Ken/McMahon as part of a greater Kambalda mining study where Resources are located close to existing capital development.
Mincor is committed to carrying out extensional drilling at Ken/ McMahon in the coming months.
In February 2019 our very workable processing contract with BHP Nickel ends, so we’ve got some decisions to make in respect of securing a processing route before mining can commence.
However, we believe there are multiple attractive opportunities in this regard and, the enhancement studies and extensional exploration well underway, we see the potential for a lot more nickel to be mined both at North Kambalda and the Widgiemooltha Dome.
Q. You accelerated your return exploration with a $10m placement and SPP capital raising to fund nickel drilling on your portfolio. What prompted you to green light this drilling campaign?
With the sharp upturn in the nickel price in the last 12 months and positive market fundamentals, the company undertook a successful capital raise to underpin a major new exploration push at Kambalda.
Exploration drilling and geophysical programs commenced in late February 2018 and we have already successfully tested a number of targets in our portfolio – including Cassini, Southern Widgiemooltha Dome and Bluebush.
Q. How significant were the most recent drill results at Cassini? Is it a potential company-maker?
The quality of intersections achieved at Cassini within the CS2 channel says a lot about the potential quality of this emerging high-grade asset.
Well-developed profiles of massive sulphides are the key value drivers to Kambalda mines. So far, the CS2 channel has been drilled over a plunge length of just 600m plunge and to a 400m vertical depth.
We are now working on establishing a Maiden Resource for the project this quarter. The channel is completely open down-plunge.
The geological setting of Kambalda nickel deposits is well understood and resides within long-lived lava channel structures.
The Cassini CS2 channel is no exception. In nearly all cases, the true value and scale of the mineralised channel within the major Kambalda nickel mines was not realised for many years – and the starting Ore Reserve was often only a fraction of what was ultimately mined.
Once a Maiden Resource is established for the Cassini project, Mincor will begin a scoping study of the project to assess the technical and economic viability of mining and to optimise the ongoing step-out extensional exploration and resource definition work.
Q. There was a mention of lithium potential in Mincor’s tenements in 2017. Are there plans to follow this up in the near future, or is your focus firmly on Widgiemooltha and proving up further nickel resources?
Mincor is carefully considering how best to progress its lithium potential for the benefit of its shareholders.
However, our focus is clearly on progressing our high-quality nickel assets while generating cash-flows from our emerging gold business.
