Managing director and CEO Peter Bradford says Independence Group (ASX: IGO) has alsdo made significant strides at Jaguar, Tropicana and even Long – where current nickel operations are winding down after a golden era of investment returns, but the exploration focus is changing direction.

The company is also well positioned, having consolidated about 12,000sq.km of exploration tenements, on the Fraser Range belt, arguably one of the world’s most prospective mineral districts, and is ready to step up exploration as Nova, the beating heart of the belt, gets into stride.

“We’re doing some of the first methodical, regional exploration on a broad scale, and the aim is to understand that opportunity for further discovery,” Bradford says.

“People look at it and say that belt looks like Swiss cheese – it’s all been investigated – but the reality is Nova was only discovered five years ago and since that time commodity prices have been in the doghouse. The exploration companies that pretty much controlled the tenure out there really haven’t had access to the capital to do justice to the tenements they had.

“So the money we’re spending in FY18 is aimed at fast tracking some of that much needed exploration and discovery process.”

The Jaguar mining centre has been confirmed as a bona fide VMS camp with another significant zinc-lead discovery (Triumph) at a time when the zinc market is starting to reward its few consistent, high-margin mine producers handsomely.

Tropicana, owned 30% by Independence in a joint venture with operator AngloGold Ashanti (70%), continues to deliver strong free cash flow with production of plus-400,000ozpa of gold at AISC in a A$850-950/oz band. A strategic move into a second phase of ‘grade streaming’ – tapping higher-grade open pit reserves – will see Tropicana’s FCF surge again in FY18.

All of this has been somewhat shunted into the background as Independence has brought into the production ramp-up phase (this quarter) one of the world’s best new sources of sulphide nickel.

“We take great pride in the job we have done to bring Nova through the development phase,” Bradford says.

“We completed all of the infrastructure and processing plant, and brought this project to a successful commissioning in October 2016, ahead of schedule and on budget. We then had a delay where our contractor slipped on development, which caused us to push back the project ramp-up to nameplate capacity, relative to what we wanted to do, to this quarter.

“But even though we’ve had that bump in the road, we’re still bringing this project to nameplate capacity 12 months earlier than what we envisaged in the original definitive feasibility study. That’s an outstanding effort and for any mine globally to go through that journey of discovery to nameplate capacity in five-and-a-quarter years is an outstanding effort by all the team involved.

“To do that you need a great orebody, and you need a great mining jurisdiction, which WA is.

“Our company has always focused on, and continues to focus on, high margin assets, and Nova underlines that aspect of Independence’s differentiation case.

“We’ve also, over time, shifted our focus towards assets of greater scale and longer mine life, and we find ourselves in a position today where if you look at average mine life for our assets it’s at the longer end relative to our peer group in Australia.

“Certainly the single thing that makes great mining companies is long-life assets.”

While the security and low barriers to project delivery that make WA such an internationally well liked, and highly rated, investment jurisdiction, are a key point of difference in Independence Group’s value case relative to the few genuine, diversified mid-tiers in the global mining equity arena, its diversity is unique among ASX-listed miners of its standing (A$1.8 billion market cap this week).

“We are an anomaly in the space from an Australian perspective but also from a global perspective, and it’s part of our strategy,” Bradford says.

“The strategy is to ring-fence the company from the risks of having a single commodity focus, where one year you’re king of the hill, and the next year you’re having to lay people off and you’re losing capability from the business, and you’re not able to put the money into exploration to realise growth potential.

“Being a diversified company, the portfolio of commodities we’re producing – and the quality of that portfolio – gives us a natural hedge, which means that year on year we would have more consistent FCF than some of our peers, and be better able to build our capability and to build our growth portfolio.”

Nova has a 10-year-plus mine life on current reserves and resources (271,000t contained nickel, 113,000t copper and 9,200t cobalt); Jaguar’s life-of-mine plan has gone from 2.5 years out to five years (with a drill-out of the new Bentayga find looming); and Tropicana’s mine life has gone from 10 years to 15 years. Strong earnings from the latter has been a boon for Independence as it acquired and then set about developing Nova, and worked on opening up the Murchison base metals hub centred around the old Teutonic Bore, and newer Jaguar, mines.

“Tropicana has been a great asset,” Bradford says.

“We started the life of the asset with what we called a grade streaming strategy, which meant that for the first 2-3 years of the mine life we were delivering elevated production levels at lower cash costs.

“Like all good things that came to an end and we went back to mining the ore that was needed for the process plant and as a result of that dropped back to average LOM grade, around 2g/t.

“But in FY17 we saw a new opportunity, to elevate the waste stripping at the mine again and position ourselves for a second phase of grade streaming. So we’ve done that; we increased our waste stripping rate in FY17, took that cost on the chin. In FY18-19 we’re going to see elevated gold production at lower cash costs, and therefore we’ll see higher FCF from the asset than average LOM cash flow.”

Significant exploration investment is being made at all sites and Bradford is confident the company’s successful discovery strike rate can be maintained.

And that includes regional work at Long, near Kambalda, still yielding about 200,00tpa of ore grading 3.7-3.8% nickel as it gets towards the end of its current mining phase.

“Long has been a fantastic asset over the life of the company … that has generally run at approximately a 50% EBITDA margin, and up 2014 had generated something like $100 million of dividends, alone. To put that in context, the asset cost $15 million to buy.

“That’s a tremendous return off an asset that is now about 40 years old and any company would want to find and own another one of these.

“We are positioning ourselves to do more regional exploration on the concessions we have there, but not to look for incremental extensions of the existing orebodies. The new exploration is targeted at finding step-change opportunities – new orebodies on the Long leases – and we’re trying to move away from the conventional thinking on the geology there which has constrained some of the thought processes and exploration in the past.”

While Tropicana has been Independence’s earnings powerhouse, and Jaguar a consistent, solid contributor along with Long, Nova will be transformative for the company.

The company has completed a staggering 91km of grade control drilling ahead of full-scale underground production and is completing the final reserve and sterilisation drill-out well ahead of the time when most mines would be contemplating that scale of definition exercise.

Bradford says continuing delivery of production and earnings to guidance – and adding to its discovery hit list – would be key to Independence’s value creation efforts going forward.

“IGO has a strategy of developing high margin mines, and all of our mines meet that category,” he says.

“Nova is certainly no different. That’s what attracted us to the asset.

“At Nova we have expected LOM average cash costs of $1.50-2.00 a payable pound of nickel, and those are C1 costs. By the end of FY2018 pretty much all of the capital development for the project will be complete, and all of the grade control for the project will be complete.

“So by FY18 our C1 cost will effectively be our C3 cost.

“If you compare that with current nickel prices that leaves a very comfortable margin between spot price now and our C3 cost after FY18.

“So the cash generating potential of Nova is very, very good.”