Email from MD Ben Bell, page-2

Email 2: regarding Sam Broom's opinion on Sconi


From Sam..

I’ve taken a glancing view of AUZ and their deposit is certainly interesting, particularly given its proximity to CleanTeq’s Syreston deposit. I’m not a huge fan of their Sconi deposit, but Flemmington could be interesting with some more drilling.

Also, you’ve gotta realize that what makes or breaks these projects isn’t grade or “Ni-Co” ratio’s – that’s marketing gimmick. All important is metallurgy which affects the processing route (i.e. HPAL vs atmospheric leach etc), which in turn greatly affects CAPEX and OPEX. Acid consumption and logistics are extremely important – won’t matter if you have a 1.5% Ni and 0.02% Co deposit if you have to truck acid in from 500km away.


Hope that helps.

Cheers,
Sam Broom

.........................................



(Ben replied... )


Just quickly ...


The statement about Sconi being second to Syerston is not an AUZ statement. Rather it is what Macquarie stated in their analyst report from earlier this year. March I think?


Given Macquarie Bank's large team of experienced resource analysts, I am confident that this statement about Sconi being a close second is probably correct.


And regarding the comment about acid consumption and logistics, the Sconi project is less than 250km by road to the Townsville Port. Syerston and Flemington are about 400 kilometres to the nearest port. So from a logistics point of view Sconi is superior to most of the laterite nickel - cobalt projects in the market.


And finally, metallurgy. The extension of the Sconi ore body was successfully mined and processed by BHP for about 20 years. (The mine was called Greenvale). So BHP spend about two decades refining the processing of the Sconi-equivalent mineralisation to a point where the processing of this ore has probably been optimised to within an inch of its life.


And also we have tried atmospheric leaching. Everyone has. It just doesn't work. Take ardea's announcement of last week. If my memory serves correct, there expect to use 1 tonne of acid to treat one tonne of ore in a proposed atmospheric leaching operation.


Acid currently costs USD250 per tonne


If you assume a nickel grade of 1%, each tonne of ore would contain USD110 of nickel (I trust my maths is correct?)


So acid costs alone is more than double the value of the metal. Sure, they will recycle some acid but they still need to factor in mining costs etc.


That is why AUZ is going down the Pressure acid leach route. The capex is higher, but we can likely produce a pound of nickel for less than half the current market price. And if we can make money at times like this when the market price of nickel has been soft, just imagine how much we could make it nickel prices strengthen over the coming years as predicted.


Kind regards


Ben