A case study for a Greenfield investment
Fact – our reality is we’re living on a relatively small planet with a finite amount of reserves and a growing human population that wants an increase in their standard of living.
I think we would all agree that the planet's booming population and rising standards of living are going to put unprecedented demands on supply.
Here’s something else to think about – when was the last time you heard of a major mining company actually finding a deposit? Think about that for a few minutes.
Well it rarely happens – juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines, that is their place on the food chain. They already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.
But how does a junior find a quality project to acquire and how does an investor find that quality junior – the one with a project so good it sticks head and shoulders above the rest, the one that is screaming to have money spent on it, the one junior with the project so damn good you need to have a piece of it? Well it boils down to people, the network of contacts you’ve built – people who trust you and are willing to work with you and of course a huge amount of due diligence.
Nickel Tenor – Ni concentration in 100% sulphides.
In nickel exploration you look for nickel tenor, which is a reflection of how much nickel you know is in the sulfides as a percentage of that sulfide. If you have nickel tenor of 6% and you have 50% sulfide in your deposit, you are going to have 3% nickel – you know the grade, you know the outcome if you hit sulfides and that outcome is usually fairly consistent.
Kryolitselskabet Øresund (A/S-KØ) *drilled 119 holes between 1965 and 1972, totaling 6,287 meters for an average hole depth of 53 meters. All but six of these holes were drilled with a portable *Winkie drill. Most of this drilling tested exposed sulphide mineralization and shallow electromagnetic (EM) anomalies directly associated with exposed mineralization – this equates to about $3 million worth of drilling in today’s dollars.
*Fred Wink designed the Winkie drill in the mid 1970’s and it’s the core drilling rig of choice for drilling in remote locations such as high mountains, deserts, arctic tundra or dense jungles. The main reason for this is because the drill weighs only 180 pounds, has the capacity to drill 475 feet, and can be carried by pickup truck, mule, helicopter or two men into the most difficult terrain.
Most of the Kryolitselskabet Øresund core still exists and is being protected in dry space by the Danish government. Falconbridge and Cominco have both looked at the core and Falconbridge did a study on the nickel tenor in 2000.
This chart shows the sulphur and nickel values for drill core samples from throughout the belt.
The chart shows you, in regards to the nickel, that when the sulfide component is high the nickel component is also high (the dashed line shows the general trend) – if we were looking at a low-grade nickel environment the slope of the dashed line would be much flatter.
According to the work done by Falconbridge, samples across this entire belt, 15 km wide by 70 km long, have sulphide nickel tenors averaging 6% to 8%.
When looking for a nickel deposit, or even better a nickel camp, you need to have evidence of a large long-lasting magmatic event, and then you can start looking for nickel tenor. In this case the shear size of the belt indicates we are dealing with a large event. Now we also have evidence that high grade nickel mineralization is associated with it.
This is the evidence I needed to see to convince myself this project needs money spent on it.
But there’s more to this unfolding story than yet revealed and the untold part makes it an even better project for this author’s money.
Why, if Kryolitselskabet Øresund, Falconbridge and Cominco were working this nickel belt – considering the drill results they did have – didn’t they stay? They knew about the grade, they knew about the size of the project, but they left it for our junior to claim.
The answer is simple – they didn’t have quality time domain electromagnetic (EM) targets and they weren’t there for five million tonnes. They were looking for ten or more fifteen million tonne deposits and they needed an EM signal telling them they were there.
Fortunately for us the most they could get was a 2-line EM conductor, which might suggest 100 or maybe a 200m strike line – so they left, they just could not see the targets they needed to see to justify staying and spending more money.
Today’s helicopter SkyTEM system has a much higher signal to noise ratio than the old fixed wing survey flown would have had and a helicopter can better maintain the required altitude above the ground to maximize detection of geophysical signals. The fixed wing GeoTEM system was also often forced to fly at a low angle to strike and well above (sometimes double or more) the necessary ground clearance due to the rugged terrain – a helicopter system is able to hug the terrain and survey perpendicular to strike. Parts of the project were flown in 2011 and three high priority targets were identified.
This spring our junior is going to fly the southern part of the project using helicopter TEM. A drill program is planned for the summer months.
If they do hit sulfides they will use down hole probe technology – you lay wire on the ground roughly 300m in diameter with your drill hole in the center, you send a little tool down to the bottom of the hole, then pull it up. It records any evidence of a conductive body within that 300 m diameter – the 150m all around the hole.
Our exploration advantage today is threefold;
- We know there is high-grade nickel, we have drill assays and can use these known mineralized areas to identify other mineralized areas
- We’ll have much better targeting because of today’s modern helicopter SkyTEM system
- We have the down hole probe technology to tell us whether there’s more sulfides anywhere around that drill hole
What about the overall market? Do we have to worry about that? Well ask yourself why you would invest in this company? One word – Discovery.
It’s this author’s opinion that this is a green fields early stage exploration stock and that a discovery of the magnitude we’re looking for, a 100% owned nickel camp, will make whatever market conditions we face inconsequential.
It isn’t a nickel story, it’s a discovery story. But it isn’t just a discovery story, this is a belt story, and it’s not just a belt story, it’s a belt story with all of this evidence in a politically secure jurisdiction on tide water across from the big processing facility that Inco was forced to build inNewfoundland.
That facility could be waiting for our junior’s feed.
You’re looking at an opportunity where this company, if it makes a discovery, will own the neighborhood, and I point out that if you look back at Voisey’s Bay how much money was made in all of those neighborhood plays.
Except there won’t be a neighborhood play because we own it all.
I’ll say it again – we own the neighborhood. That’s exactly right. So therefore, the upside on this is bigger than any opportunity you’ve seen, and I challenge anybody to show me an upside the size of aSudbury.
Laterites v Sulphides
What about the laterites coming on? They say the laterite technology is finally going to work. Well we’ve heard that for 20 years. Nickel sulfides are here to stay and nickel prices are solid – RBC Capital Markets forecasts nickel growth at 9.5% in 2012, 10.3% in 2013, and trend growth of approximately 5.0% thereafter.
My take on the laterites was that the reason that people are chasing them and trying to develop them was because nobody was finding sulfides, but that does not mean that sulfides are gone. It just means that they are harder and harder to find. The easier ones have all been found so they had to develop something else. But for anybody that finds a sulfide deposit today the technology’s there. It’s the old standby. It’s a sulfide deposit. It’s going to work, it would be a hugely important discovery.
Nickel Sulphide Deposits
Magmas (magma is a mixture of molten rock, volatiles and solids that is found beneath the surface of the Earth – Lava is the extrusive equivalent of magma) originate in the upper mantle and contain small amounts of nickel, copper and PGE. As the magmas ascend through the crust they cool as they encounter the colder crustal rocks.
If the original sulfur (S) content of the magma is sufficient, or if S is added from crustal wall rocks, a sulphide liquid forms as droplets dispersed throughout the magma. Because the partition coefficients of nickel, copper, iron and Platinum Group Elements (PGE) favor sulphide liquid these elements transfer into the sulphide droplets in the magma. The sulphide droplets sink toward the base of the magma because of their greater density and form sulphide concentrations. On further cooling, the sulphide liquid crystallizes to form the ore deposits that contain these metals.
Currently, the majority of today’s nickel is produced from sulphide deposits, as it is easier and cheaper to mine and process than lateritic ore. However known sulphide deposits are getting depleted, ore grades are falling and new discoveries are scarce.
There are two main types of nickel sulphide deposits. In the first, Ni-Cu sulphide deposits, nickel (Ni) and copper (Cu) are the main economic commodities – copper may be either a co-product or by-product, and cobalt (Co), Platinum Group Elements (PGE) and gold (Au) are the usual by-products.
The second type of deposit is mined exclusively for PGE’s with the other associated metals being by-products.
Nickel sulphide deposits can occur as individual sulphide bodies but groups of deposits may occur in areas or belts ten’s, even hundreds of kilometers long. Such groups of deposits are known as districts. Two giant Ni-Cu districts stand out above all the rest in the world: Sudbury Ontario, and Noril’sk-Talnakh, Russia.
The most important platinum-rich PGE district in the world is the Bushveld Complex, South Africa. The second PGE district in importance is the Noril’sk-Talnakh district, which is exceptionally Palladium (Pd) rich as a by-product of its Ni-Cu ores.
Nickel laterite deposits
Nickel laterite deposits were first discovered in 1864 by French civil engineer Jules Garnier in New Caledonia – commercial production started in 1875. New Caledonia’s laterites were the world’s largest source of nickel until Sudbury Ontario’s sulphide deposits started production in 1905 and totally dominated global production for the next 70 years.
Eighty-four million tons, or roughly 60 percent of global available nickel is in laterite deposits – a deposit in which weathering of ultramafic rocks has taken place. The initial nickel content is strongly enriched in the course of lateritization – under tropical conditions fresh rock weathers very quickly. Some metals may be leached away by the weathering process but others, such as aluminum, iron and nickel can remain.
Typically nickel laterite deposits are very large tonnage, low-grade deposits located close to the surface. They tend to be tabular and flat covering many square kilometers. They are most often in the range of 20 million tonnes and upwards, with some examples approaching a billion tonnes of material.
Laterite deposits usually contain both an upper dark red limonite (higher in iron and lower in nickel, magnesium and silica) and lower bright green saprolite zone (higher nickel, magnesium and silica but lower iron content). Due to the different quantities of iron, magnesium and silica in each zone they must be processed differently to cost-effectively retrieve the nickel.
Most nickel sulfide deposits have traditionally been processed by concentration through a froth flotation process followed by pyrometallurgical extraction
Laterite saprolite (higher nickel, magnesium and silica but lower iron content) orebodies are processed with standard pyrometallurgical technology.
However a laterite limonite zone is higher in iron and lower in nickel, magnesium and silica, which means using High Pressure Acid Leaching (HPAL) technology.
HPAL involves processing ore in a sulphuric acid leach at temperatures up to 270ºC and pressures up to 600 psi to extract the nickel and cobalt from the iron rich ore – the pressure leaching is done in titanium lined autoclaves.
Counter-current decantation is used to separate the solids and liquids. Separating and purifying the nickel/cobalt solution is done by solvent extraction and electrowinning.
There aren’t any nickel names left. Once Inco went, who do you invest in if you want nickel? And that’s why that chart I mentioned a few pages back, the nickel tenor one that goes on a perfect diagonal right up the line between the two axis to get to 6% to 8% nickel tenor is so important. You know if you’ve got sulfides you’ve got economic grade. That’s huge.
Mine production of many different metals is showing a number of similarities:
- Slowing production and dwindling reserves at many of the world’s largest mines
- The pace of new elephant-sized discoveries has decreased in the mining industry
- There hasn’t been a new technology shift in mining for decades – heap leach and open pit mining come to mind but they are both decades old innovation
Increasingly we will see falling average grades being mined, mines becoming deeper, more remote and come with increased political risk. Extraction of metals from the mined ore will become increasingly more complex and expensive.
Every country needs to secure supplies of needed commodities at competitive prices yet supply is increasingly constrained and demand is growing. This is our reality – we’re living on a relatively small planet with a finite amount of reserves and a growing human population.
Quality greenfield junior exploration plays like Our Junior should be on every resource investors radar screen. Is this junior on yours?
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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 400 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.
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Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
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