Soon-to-be-listed Direct Nickel aims to become one of the top five nickel producers in the world on the back of technology that vastly improves the economics of processing nickel laterite ores.

While nickel sulfide resources are becoming increasingly scarce, nickel laterite projects are best known for cost blowouts and other unforeseen difficulties - and for their relative abundance.

After more than 10 years development and little more than six months operation, BHP Billiton lost more than $US2 billion on the Ravensthorpe nickel laterite mine it sold to Vancouver-based First Quantum for $340 million early last year.

Minara Resources' Murrin Murrin mine is arguably Australia's only nickel laterite success story.

However, its processing plant has been plagued by difficulties ever since the mine opened in 1999.

The mine's future also remains unclear, especially in the context of additional cost pressures from a strong Australian dollar and day-to-day operating cash costs that can easily surpass $5.50 per pound of nickel produced.

It appears though, that the Holy Grail of unlocking the potential of more than 100 years of existing nickel supply from laterites around the world has been discovered - and extensively patented - over the past five years by privately-owned Direct Nickel.

Key investors in Direct Nickel include Canadian mining house Teck Resources, OZ Minerals and CSIRO.

A $5.4 million trial plant at CSIRO's Waterford facility near Curtin University in Perth is due to start commissioning before year-end.

Unlike the standard approach of treating laterites with sulfuric acid through a high-pressure acid leach process, Direct Nickel uses the more expensive but far superior reagent nitric acid.

Murrin Murrin's HPAL processes use concentrated sulfuric acid at 255C under pressures of up to 44 atmospheres.

However, the Direct Nickel process can do a similar job with no pressure and at pre-boiling temperatures, according to Direct Nickel founder and executive chairman Julian Malnic. He said the "crown jewel" of this technology was the nitric acid recovery system - which ensures at least 95% of the acid is recycled back into the production circuit.

An August 2010 demonstration in Charlotte, North Carolina demonstrated the recycle step at scale.

With less than 5% of the spent acid expected to end up in neutralised tailings, Direct Nickel is even planning a trial to see if it can grow grass in a tailings dump.

Direct Nickel's process treats the full laterite ore profile, with previously demonstrated recoveries of more than 95% of nickel and cobalt.

The technology eliminates the sensitivity to wet and dry laterite classifications and also offers reduced carbon emissions.

"This is the first universal process," Malnic told Australia's Mining Monthly. "Wet and dry, limonite and saprolite - it doesn't matter."

Overall the cash costs of producing a mixed hydroxide nickel-cobalt concentrate containing 45% nickel is expected to be only $1.83/lb of contained metal.



Capital expenditure costs for Direct Nickel are also estimated at $12.50/lb of annual capacity. Sulfuric acid-based plants can cost more than $35/lb.

There already is a lot of confidence in the technology working as planned. Metallurgist Graham Brock is Direct Nickel's project manager. He also held this role for the development of BHP's Mt Keith nickel sulfide mine.

Queensland Nickel's Yabulu refinery in Queensland uses the energy-hungry Caron process, earning the plant a spot in the top 50 carbon emitters in the country. Direct Nickel says its process offers fewer carbon emission than other processes, except perhaps for hydro-powered ferronickel smelting operations such as PT Inco's in Indonesia.

Malnic and Direct Nickel chief executive officer Russell Debney are known for their work in building innovative deep-sea explorer Nautilus Minerals, which Malnic founded. Moving steadily ahead beneath the radar of most observers, Nautilus has developed a marine mining system. It also is on track to become the first seafloor miner of copper, gold and zinc within a few years.

The beauty of the Nautilus business plan is that by developing specialist seafloor exploration systems and production tools, it is positioned to become a global authority in marine mining. In a similar vein, the underlying ambition of Direct Nickel is to leverage its technology to transform into a major nickel producer.

It says it has no intentions to licence the technology and that anyone wanting access must either joint venture their nickel laterite projects with Direct Nickel or become one of its cornerstone investors.

London-listed Regency Mines already has transferred half of its Mambare nickel laterite project in Papua New Guinea under a joint venture for a process licence at no cash cost to Direct Nickel.

Located 122km by road to the Panamax-capacity deep water Oro Bay port, the project covers 242 square kilometres. In 1999 Anaconda Nickel estimated that a 158sq.km area held 630 million tonnes at 0.78% nickel and 200Mt at 1.01% nickel.

The project is expected to host 5-7Mt of contained nickel and a maiden resource is due in the March quarter. Direct Nickel has flagged possible annual production there of 20,000t nickel starting in 2015.

However, Direct Nickel's big move into nickel production will take place in Indonesia. It is here that a pre-negotiated JV entity, with Direct Nickel holding 80%, is readying an acquisition strategy that will lead it to become a significant miner in the country.

Insatiable Chinese demand for Indonesia's nickel laterite ores, which can grade between 1.5-2.5% nickel, has forced the Indonesian government to mandate that license holders undertake processing in the nation - instead of exporting jobs overseas.

A Direct Nickel plant in Indonesia will offer a much-needed processing solution for laterite ore throughout the country.

Transporting the ore to the treatment plant or plants would likely be done on barges, replacing the need for rail infrastructure.

From 2017, Direct Nickel forecasts its Indonesian nickel production will hit 60,000tpa, while its total output from Indonesia and PNG will reach 180,000tpa in 2021. That is about 10% of the anticipated global supply.

Samples from more than 35 different nickel laterite deposits from around the world have been tested at the CSIRO facility in Perth. The project team will use the test plant to generate the engineering data needed for each deposit it farms into.

The last long-lead item for the construction of the plant is being built in San Francisco and is due onsite in November. First processing is expected to start in January 2012.

Each run at the trial plant is expected to go for 100 days, with the first ore coming from the Philippines, Indonesia, Australia or a Brazilian deposit discovered by shareholder Teck Resources.

Meanwhile, Direct Nickel is on track to achieve a backdoor listing onto the ASX over the next couple of months. That will come through the reverse takeover of a selected shell that is awaiting shareholder approval at an extraordinary general meeting.

Upon listing the company is expected to have a market capitalisation of $100 million. A $20 million share issue managed by Bell Potter is also on the cards, to fund ongoing drilling at Mambare in PNG, test plant operations and the Indonesian joint venture.

Direct Nickel's board has an ambitious goal of reaching a market cap of more than $1.5 billion by 2015. In their favour is the seeming inevitability that nickel production will have to come from laterite projects in the future.

"Everyone is looking to laterites as the future of nickel and stainless steel production - and we hold the best key to their processing," Malnic said.

"The sulfides are not being discovered fast enough."

This article first appeared in the October 2011 edition of Australia's Mining Monthly magazine