My sincere apologies for not replying to your message earlier. I touched base with Jim and the Exploration Manager of SBR over coffee when they flew into my neck of the woods. I was certainly appreciative of their time. I left the conversation with a renewed sense of optimism; that the acquisition of Sherlock Bay was a real company maer, that it provided the company with a clear path to production, and that the management were focused on making that happen.
Needless to say that the conversation was focused more on providing context and supplementary information on the releases made to date. They never discussed economics of Sherlock Bay, as this was going to be communicated via their scoping studies to be released over the following months. Thank you for providing those back of envelope feaso's Q, i let you read the below and you can judge for yourself the economics.
For the benefit of all shareholders, I will try to share what was discussed. Importantly, Im not a geo, just a shareholder keen on delivering some good news on this company! This conversation was a while ago, so Il do my best to touch on the discusssion points. Firstly Il get Namibia off first and discuss Sherlock Bay;
Kaskara: SBR was pretty keen to investigate Kaskara further. The adits dug into the Kaskara Hill was tested by SBR a few years ago, and they were pretty stunned by the grades and quantity of minerals (more importantly Vanadium) which existed. Unfortunately due to safety, they were unable to venture further deeper into the adits and test further into the mountain. The existence of Vanadium and weathering is common in Tsumeb type sulphide deposits in Namibia. So this got them pretty excited.
It should be mentioned that Vanadium has received a lot of interest recently due to the increased demand from emerging nations (inc China) increasing requirements of the metal in their rebar (steel reinforcement). My understanding is China’s construction industry uses almost half the amount of Vanadium in their rebar compared to countries like US/Aus. Putting aside the increased demand from construction, the increasing use of vanadium redox batteries further underpins the demand in this metal moving forward….Vanadium, the once wondrous industrial metal, is now emerging as a critical environmental metal for the renewable energy sector…and that is putting a lot more interest behind prospects like Kaskara which may yield a substantial tonnage of V in the weathered portion of the deposit. Furthermore SBR where keen to get Kaskara drilled to test the possible parental sulphide at depth, but hesitated due to the high cost that was involved. More to come from this..
Border/Toggenburg/Guchab:
The focus here was to get Mining Leases, and potentially form a JV to monetise the assets. Those applications were advancing..
I remember an old conversation with our old friend Matt Painter. He really believed that with supportive metal prices, Border/Toggenburg could yield a profitable / higher tonnage deposit via benefication due to the lack of impurities present like silica. "You don't need to make metal on site', he said..it wasnt a sexy asset, but the high Zn/Pb recovery rates achieved from low cost benefication can make it really work...With tonnages from Border / Toggenburg and East of the Pavian Trend...this could be a serious tonnage Zn/Pb asset..
Sherlock Bay (70% SBR):
Background; The previous explorer did all the heavy lifting, spending millions of $$ and years on the deposit.
The previous explorer provided boxes and boxes of documents to SBR to go through, as well as soft copy documents. They essentially got 2004 Jorc standard, progressed through to an advance level of BFS study (stopped at undertaking bulk sampling for the Bio Heap process). They got all regulatory approvals and Native Title approvals..
There was an incredible amount of drilling undertaken within the first 250 metres. This proved up 36,000+ Tonnes of Ni resource under the ‘Measured’ category under the current 2004 Jorc resource. This amount of Ni should generally become open-pittable..
Action SBR will take moving forward; Firstly, the company has engaged companies to undertake surficial studies for Conglomerate Gold. The explorers in the area (and next door) are pretty keen to get control of highly prospective countryside like the Sherlock Bay tenements..certainly more to come in this space..
In regards to SBR advancing Sherlock Bay Nickle deposit, the first priority is to convert the current 2004 Jorc resource to 2012 Jorc Compliance. Under ASX rules, SBR cannot refer the current resource as a ‘resource’ unless it is 2012 Jorc Compliant (other than when they first announce the acquisition). This process should take a few months only as it is merely a ‘desktop exercise’..i.e. they are pretty confident they can get a qualified person to sign off on the conversion given the extensive exploration to date (without further drilling/exploration).
This deposit is relatively shovel ready. They have no intention of spending more money on drilling, as they have a considerable resource as is and is focused on monetising the deposit (bringing it to mine ready and ultimately mine it out).
Once SBR provides a 2012 Jorc compliant resource, it will move towards undertaking Scoping Studies. Those Scoping studies are likely to publicise the following;
A mining plan that;
- 12 years @ 2mT of Ore
- With the first 4 to 5 years open pit and the remainder as bulk underground mining. The depth of the open pit will be determined by the (i) strip ratio moving down, (ii) the prevailing Ni, Cu, Cobalt prices (which in the last 10 years have done very well – Cobalt has tripled!). Note the previous explorer apparently had the Cobalt metal as a ‘net cost’ of the mining programme, as prices were 1/3 what they are now, and the smelters charged a cost to remove this metal out of the concentrate...nowadays is a very important revenue source!!
- There is confidence that the opex should be relatively low compared to peers, please read further...Note that the low opex potentially achievable supports the open pit depth to go down even further then the previous explorer envisaged...providing further upside..
- Produces Ni Sulphate. This is important an important note because of the below;
Nickel Sulplate will be the natural product produced in solution from the Bio-Heapleach process. This product achieves a premium price to the Ni Concentrate prices being achieved (or Ni metal being attained net of smelting fees). This is because the Lithium Battery market needs Ni Sulphate for the manufacture of lithium batteries. Further this is the market that is experiencing higher demand from the electric car / portable electronic devices and green energy revolution. Sherlock Bay is well positioned to naturally produce this product.
Currently, a Ni miner who wants to produce the more higher valued Ni Sulphate would need to add Sulphuric Acid to their Nickel concentrate to attain the Ni Sulphate solution product (at cost and time).
- Bio Heap Leach Process
After the ore is dumped on mats (to form a ‘heap’), Sulphuric Acid is added to get the pH to around 3, then a bacteria is added to ‘attack the sulphides’ so that Ni Sulphate is removed from the sulphide ore. The Ni Sulphate comes out in solution form, for it to be converted to a crystalised form ready for the lithium battery market. This can all be done on site. This is a proven / lower cost method that has been improved over time. Given the suitability of the ore to be processed via this method, lower grades of Ni could readily be economically extracted. The Bio Leach process takes around 11 months to form Ni Sulphate solution..
- Bio Heap Leach technology/process has advanced over the last few years...
The Bio Heap process requires less sulphuric acid nowadays due to advancements in the process. Currently the heap needs a pH of around 3 (note the previous explorer was requiring around -1 pH and as such required more sulphuric acid to be poured on the heap). The reduction in Sulphiric Acid from advancement in the bio heap leach process means that the end product Ni Sulphate solution requires less treatment/cleaning. This means that ultimately the opex cost has come down to this technology advance.
- Capital Costs
Due to the project producing a crystalised Ni Sulphate end product (rather that the Ni Concentrate product), the electricity demands are far lower. There will not need to be an ‘Electrolysis Plant’ (I may have got the name wrong!! :P ) that is heavily power consuming and expensive to build on site (as you require a heavier power generator / transmission). As such the power demands are far lower, and a solar power, battery and diesel generator may suffice for the heap leach pumps etc..
The plant will need an Fe converter (I may have got the name wrong again!), heap leach ponds and pumps etc..
The capital costs are expected to be lower than what the previous explorer suggested (Australasian Resources forecasted around $20mil in their incomplete BFS).
Due to the economics that they are forecasting, and the quantum of cashflows from the minerals they can extract, the <$20mil capex number is quite small in the big scheme of things and they were very confident of securing bank funding to fund the capex after bankable feasibility studies were completed.
Furthermore, given the quite large Cobalt resource, and the supply and demand economics for the mineral (60%+ is sourced from politically sensitive DRC whom have been known for the use of child labour), battery manufacturers (inc auto and portable electronic device manufacturers) are heavily incentivized to lock in supply contracts with miners of cobalt. We didnt touch on this at the meeting, but I thought I share my toughts on this..
Conclusion; Is this economical? The managers believe it is, certainly at current metal prices (notwithstanding that the prices of the metals insitu is forecasted to improve due to the battery market), but stopped short of saying how economical. The scoping study will shed more light which should come out in the months ahead…
They were confident that the grade continues down strike and remains untested. Once the mine started they would continue to drill to expand the resource and ultimately mine life, with some money put towards other assets (i.e. Kaskara in namibia)..
Sherlock Bay Nickel represents an incredible ‘company making’ asset for SBR, it is shovel ready, with millions of dollars and years spent on this deposit to date..
The SBR managers were eager to inform the market the economics of Sherlock Bay, but needed to convert the deposit to 2012 Jorc compliance first.. they were keen to get this going, get scoping studies out, move to BFS and ultimately turn SBR into a miner..
The tone in the air was that the current share price did not represent the underlying assets and oppurtunities of the company. Over time, as the market was more informed, and they progressed to releasing scoping studies, they were confident that the share price would more correctly reflect the underlying assets. They reassured me that they have no intention of diluting the share register at these prices with Share capital raisings.
GLTA, any questions on the above please let me know. Otherwise, if you have any questions of the reliability of the above please direct your questions to SBR.
Sutto
SBR Price at posting:
1.7¢ Sentiment: Buy Disclosure: Held
