Last year Perth-based junior Jubilee Mines decided to proceed with its proposed $45 million Cosmos nickel mine near Leinster in Western Australia. At the time, some analysts described the venture as a "no-brainer", a straightforward sulphide operation amid a plethora of technically challenging laterite nickel developments.
Twelve months down the track, the no-brainer has turned out to have plenty of smarts, while the complex chemistry sets bubbling away on the laterite orebodies continue to cause excessive grief for their respective owners. Not only has Jubilee commissioned Cosmos on schedule and on budget, it has discovered a separate deposit at depth that is likely to at least double the mine's nominal three-year life.
"The past two years shows what a dedicated explorer can achieve given a little luck and sufficient financial resources to support geological ideas," said CIBC World Markets analyst, Ian Prentice, in commenting on Cosmos' rapid development.
Now both investors and customers (including Canadian nickel heavyweight, Inco) are waiting for Cosmos to deliver the goods in terms of its rated 10,000 tonnes per annum nickel output in high quality concentrates. During a recent site visit by Australia's Mining Monthly, the indications were encouraging. The plant was being commissioned using low grade transitional ore, with recoveries and head grades exceeding original expectations. By press time, the mine was starting to dig into some of the deposit's high-grade fresh ore, and the first concentrate shipments were due to leave Esperance for Canada later this month.
In other positive developments, Jubilee underpinned the further exploration and planned feasibility studies of the Cosmos Deeps discovery via a recent $5.2 million placement to Inco and entered into a new offtake agreement with Inco covering future production from the new deposit.
If all goes well, Jubilee should be able to give the go-ahead for a decline development at Cosmos early next year, paving the way for a smooth transition to underground ore production once the open-cut resource is depleted. Indeed, if current feasibility studies are favourable, Jubilee may expand the on-site concentrator to maximise nickel output during a buoyant period in terms of metal prices.
On the ground, Cosmos appeals as a compact, slick operation that has graduated quickly from its exploration project status. Jubilee sank the discovery hole at Cosmos less than three years ago, in August 1997. The company subsequently drilled out the deposit and calculated a mining reserve of 420,000 tonnes grading 7.52% nickel. After resolving native title issues, it obtained a mining lease, completed a bankable feasibility study and signed an offtake agreement with Inco for 30,000t of nickel. A $52 million debt funding package was arranged in August last year, just two years after the discovery hole.
After a 26-week construction period, ore was introduced into the processing plant in April 2000. The sulphide concentrator incorporated a conventional flotation circuit designed to treat 150,000tpa of ore for estimated output of 50,000tpa of concentrate at an average grade of 20% nickel.
Cooks Construction, which carried out a seven-month pre-strip to remove 10.5 million tonnes of overburden to a depth of 50m, has been retained as a major contractor, and will mine the deposit by conventional open-pit methods to a depth of 160m over a projected 33-month production life. Jubilee aims to maximise nickel recovery, while controlling dilution, by selectively targeting ore reserves through precision blasting and excavating techniques.
The original mine plan was predicated purely on the open-cut reserves. It is possible exploitation in the pit will be accelerated to allow Jubilee faster access to the Deeps, which start at 470m vertical depth, or roughly 300m under the design base of the Cosmos pit.
According to a recent research note by Vancouver-based Haywood Securities, exploration to date suggests a Deeps deposit of approximately 800,000t at 7.5% nickel, for a contained 74,000t of nickel. "The company estimates that the cost to develop a ramp into the deposit could be approximately $20 million," Haywood said. "The combined resources of the Cosmos and Cosmos Deeps would give the project a life of over eight years if mined at a rate of 150,000tpa."
The Deeps feasibility project was underwritten last month by Jubilee's share placement to Inco. The placement means the giant Canadian producer will emerge with a 3.4% stake in Jubilee's expanded share capital.
Jubilee's managing director, Kerry Harmanis, said Jubilee was happy to have the backing of a company of Inco's international standing. "Funds raised from the placement will ensure that exploration and feasibility studies on the Cosmos Deeps discovery will be expedited without impacting on cashflow from the recently commissioned Cosmos project," Harmanis said in a statement.
He added that the future of the Cosmos Deeps would also be secured through an agreement with Inco for the latter to also buy the first 30,000t of nickel from the Deeps on the same terms as the original offtake agreement signed in November 1998. The terms of the earlier deal were not made public, but Inco agreed to purchase all of the 30,000t of nickel-in-concentrate forecast to be produced by Cosmos over the initial three-year life of the project.
"We have also agreed to negotiate in good faith on how our companies will work together in arranging financing, or have Inco provide funding for the eventual development of the Cosmos Deeps deposit," Harmanis said.
Analysts welcomed the further involvement of Inco. "It is a real tick in the box for Cosmos Deeps," said CIBC's Prentice. "Inco have been up there and been impressed with what they've seen. Inco felt Cosmos Deeps should be accelerated. "They've looked through all the data, and believe there is at least 30,000t of contained nickel. So that is very good for the Deeps project," the analyst said.
In an interview with AMM, Harmanis said it was now "full steam ahead" on the Deeps feasibility work. "It is a bit of a strategic move, and Inco are keen to get more of our feed. It was a two-way deal. They got some stock and supported us. And we gave them the first 30,000t of metal on the Deeps, on the same good terms as we got last time. So we both won something out of that."
Harmanis said a fair proportion of the Inco cash would be ploughed into delineation drilling, with the remainder on resource statements, metallurgical studies and development planning.
"A small part of it will also go to see how we can accelerate the throughput in Cosmos to take advantage of the high nickel prices anticipated over the next 12-15 months," he said. "But if we increase the throughput, it would shorten Cosmos' life, so we have to be certain the Deeps can come on stream pretty quickly after that."
Harmanis said Jubilee was looking at various scenarios for the plant expansion. "We'll identify the bottlenecks and see how much it would cost us in each of those cases. The low case would cost maybe a few hundred thousand dollars, the mid-case possibly a couple of million. The high case would be doubling the capacity."
