- Australian Mines (AUZ) has flagged a potential cost hike as it looks to produce a new kind of material from its flagship Sconi Project in Queensland
- The battery materials developer has announced the results of a scoping study to work out the economic viability of producing precursor cathode active material (P-CAM) products from Sconi
- If Australian Mines moves forward with the development of the P-CAM plant, it would replace a planned nickel and cobalt sulphate crystallisation circuit
- The result would be an increase of almost $105 million in development costs and of $47 million in annual operating costs
- However, the result would be higher sales revenue from P-CAM products compared to sales revenue from nickel and cobalt sulphate products
- Australian Mines now plans to begin a more detailed pre-feasibility study (PFS) at Sconi to further assess the viability of a P-CAM facility at the project
- Shares in Australian Mines are trading grey at 1.9 cents each this morning
Australian Mines (AUZ) has flagged a potential cost hike as it looks to produce a new kind of material from its flagship Sconi Project in Queensland.
The battery materials developer recently commissioned a scoping study for the project to work out the economic viability of producing precursor cathode active material (P-CAM) products from the mine. This is a type of material used in the development of lithium-ion batteries.
Specifically, Australian Mines said is looking to produce P-CAM products from Sconi for the nickel-cobalt-manganese (NCM) batteries chemistries used across the electric vehicle industry.
The company has tested the production of NCM 525, NCM 662 and NCM 811 from the project over the past year.
The type of product is specified by the ratio of its chemical composition — NCM 811, for example, is made up of 80 per cent nickel, 10 per cent cobalt and 10 per cent manganese. NCM 622 is made up of 60 per cent nickel, 20 per cent cobalt and 20 per cent manganese, and so on.
While Australian Mines has successfully completed the test work to produce these products from the Sconi Project, the recent scoping study suggests a decision to produce these valuable materials could come with some major development and production costs.
High costs, high rewards?
If it goes ahead with the decision to produce P-CAM products from Sconi, Australian Mines would build the P-CAM production facility as an alternative to a planned nickel and cobalt sulphate crystallisation process outlined in a 2018 bankable feasibility study (BFS).
The cost of developing this nickel and cobalt sulphate crystalliser circuit, according to the BFS, would be around $49 million. The recent scoping study suggests a P-CAM facility would cost $153 million to build — an increase of almost $105 million in capital cost estimates.
Moreover, operating costs for the P-CAM facility would be $46.8 million compared to $5.8 million for the nickel and cobalt sulphate crystalliser areas.
Yet, with higher costs would come higher returns: Australian Mines said an independent pricing report for P-CAM product forecasts an average of US$16,500 per tonne (around A$21,300 per tonne) for NCM 811 and US$18,800 per tonne (around A$24,200 per tonne) for NCM 622 for the duration of Sconi's mine life.
This is compared to an average of US$3684 per tonne (around A$4748 per tonne) for nickel sulphate and US$15,540 per tonne (around A$20,000 per tonne) for cobalt sulphate.
Australian Mines would expect to produce around 25,700 tonnes of NCM 881 per year and 4800 tonnes of NCM 622 per year, compared to 46,800 tonnes of nickel sulphate and 7000 tonnes of cobalt sulphate.
Based on these figures, AUZ would expect around US$514 million (roughly A$662 million) in annual sales revenue from these P-CAM materials per year versus US$281 million (roughly A$362 million) in annual sales revenue from nickel and cobalt sulphate.
What's next?
Australian Mines said based on the results of the scoping study, the company now plans to begin a more detailed pre-feasibility study (PFS) at Sconi to further assess the viability of a P-CAM facility at the project.
As far as offtake deals go, Australian Mines assured investors the potential to change course and build a P-CAM facility will not impact ongoing offtake negotiations.
Inversely, the company said the focus on P-CAM is a reflection of the nature of current talks with potential offtake partners.
Either way, there has been little reaction to today's news from investors today, with AUZ shares trading grey at 1.9 cents each as of 10:10 am AEST.
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