Great article below with plenty of comments from Mark Bennet....Enjoy
Nickel lumberjacks in the WA outback, eh? Tuesday, 25 September 2012
CANADA, famous for its lumberjacks, cold beer and beavers, is also a big shot in nickel mining. Now it looks like a cousin of some of the country’s famous deposits may have been unearthed in Western Australia. The Metal Detective, By Stephen Bell
After a mostly dismal year, nickel has proved to be a surprise bolter in the past month, gaining roughly 12% as confidence rises that base metal demand will pick up if the various global stimulus packages gain traction.
Even staid old Mincor Resources, often seen as a dead-end stock in recent years, has enjoyed a 70% share price rise this month.
But Mincor’s timely run has been dwarfed by Sirius Resources.
Sirius’s shares have eased a little in recent days, not surprising after the stunning 40-fold increase in two months on the back of its 70%-owned Nova nickel-copper discovery, halfway between Norseman and Balladonia on the western fringes of the Nullabor Plain.
Nova, described by some brokers as the most exciting WA discovery since AngloGold unveiled Tropicana, is a 10 hour-plus drive from Perth and much further from the land of the Maple Leaf. But Canada kept cropping up in the Metal Detective’s recent conversation with Sirius CEO Mark Bennet, who showed a few broking firms around Nova late last week.
The Fraser Range complex, including Nova, is more similar to Canada’s bountiful nickel belts than those hosting current Australian mines, Bennett said.
“We picked a target that looked like something in Canada, drilled it and found something that looks like something in Canada,” he said, referring to the July discovery hole.
“In terms of the scale, it is much more like these big Canadian deposits than the typical Australian ones.”
Canada’s deposits “tend to be lower grade” – 2-3% nickel, rather than the 5-10% you get in some Aussie high-grade finds like Cosmos and Flying Fox – but also tend to be an order of magnitude bigger than the local ones, Bennett said.
Geologically, Sirius resembles deposits now being worked at the Thompson nickel camp in Manitoba (Vale), the Raglan mine in Quebec (Xstrata), and Voisey’s Bay in Newfoundland and Labrador (Vale).
“In terms of how it was deformed and cooked up, Nova it is very similar to Thompson,” he said.
“And as for the sulphide mineralogy, the nickel and copper ratio, and the cobalt and PGE levels, it is very similar to Voisey’s Bay.
“So it has got all the hallmarks of being that style of thing, although we can’t say whether it will be that scale.”
Not only does Nova have the potential to be large, it comes in decent-sized chunks, suggesting it might be amenable to bulk-mining techniques.
In the heart of the deposit drilled to date, one section extends 300m down dip and thickens to 35m, “which is like a 10-storey house”, Bennett said.
“So each hole we drill has the potential to add huge tonnes.”
Of course, how many tonnes is the billion-dollar question for punters, who have flocked into the stock on the back of management pedigree (Bennett and Sirius’s joint venture partner Mark Creasy are former prospectors of the year) and the generally broad hits.
Patersons Securities says Sirius could eventually fetch $5.80 a share, based on back-of-the-envelope estimates of the potential in-ground metal, and pricing multiples awarded to the likes of Sandfire Resources for its DeGrussa copper deposit.
Of course, there is plenty more water to flow under the bridge for Sirius as it prepares to begin drilling another electromagnetic “conductor” at Nova in a matter of weeks.
If the Canadian model holds true, investors shouldn’t hold their breath for mega-rich pods in the Cosmos mould.
“The grades we have so far are more like Kambalda,” Bennett said.
“But what’s attractive about it is for every 4% of nickel you get 2% of copper as well, which has a huge impact on the economics.”
Given the comparisons with Canada’s nickel heartland, it might not be too long before the likes of Vale or Xstrata are knocking on the door of Sirius’s Balcatta office.
But, aside from an “informal” approach from a major company inquiring about getting first dibs over Nova’s concentrates, there has been a “wall of silence” from other miners, Bennett said.
That’s not surprising, given the first hole only struck pay dirt two months ago. An initial resource estimate won’t be forthcoming until the first half of next year.
But if Nova keeps on looking as though it should have lumberjacks and beavers climbing over it, it must only be a matter of time before the Canadian gorillas come knocking.
SIR Price at posting:
$1.92 Sentiment: LT Buy Disclosure: Held
