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Some Nickel For Your Thoughts

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Nickel Mining

 

Within the nickel industry, the recent developments around Glencore-backed Horizonte Minerals indicate that it’s time to examine the broader implications of these green agenda challenges.

The significant budget spike for the Araguaia project in northern Brazil highlights the financial and operational hurdles facing nickel mining ventures in 2024, especially in environmentally sensitive and logistically complex regions like the Amazon.

The escalation in costs now amounts to a whopping 87% increase in CAPEX to $1 billion. That’s way up from an initial estimate of $537 million, underscoring the volatility and unpredictability the mining sector continues to deal with as geopolitical pressures trigger global market volatility.

This situation is exacerbated by the global downturn in nickel prices, most recently driven by an influx of inexpensive battery metal exports from Indonesia.

“Nickel mines and projects are struggling after a flood of cheap exports from Indonesia sent prices of the metal used in stainless steel and batteries tumbling about 45% since the start of 2023. Budget blowouts and long delays appear to be getting worse in the mining industry generally amid heightened social and environmental scrutiny, more red tape, harder-to-reach deposits, inflation, and pricier capital.” – Nickel woes worsen for Glencore-backed miner as budget jumps 87%

The impact of these lower prices is twofold: it squeezes the profit margins of mining projects and makes securing additional financing even more challenging.

Red Tape Puts Nickel Operations in the Red

Horizonte Minerals’ predicament is a microcosm of the broader challenges confronting the mining industry. These include increased environmental and social scrutiny, which often translates into more stringent regulatory requirements and longer approval processes. Additionally, the industry is grappling with chronic inflationary pressures, higher capital costs, and the logistical challenges of accessing more remote and technically challenging deposits.

The case of Horizonte Minerals illustrates the critical importance of financial planning and risk management in large-scale mining projects. The need for a “full financing solution” and the ongoing negotiations to restructure company debt highlight the precarious balance between project viability and financial sustainability.

For stakeholders in the nickel market, including investors, policymakers, and environmental advocates, the troubling developments at the Araguaia mine project, serve as a cautionary tale for green mineral players. They underscore the necessity for robust due diligence, practice, and promotion of sustainable mining processes, and the need for innovative financing strategies to navigate the complex economic landscape of the modern mining world in 2024 and beyond.

Horizonte’s Araguaia project is a Tier 1 nickel laterite mining project being developed in the state of Pará, Brazil. The operation is regarded as Brazil’s next major ferronickel mine and one of the biggest undeveloped saprolite nickel projects in the world.

Horizonte Minerals fully owns the tier-1 mining project, currently backed by investment firms La Mancha and Orion. Araguaia is projected to have a lucrative mine life of 28 years. The feasibility study of the ferronickel project was completed in October 2018 and the construction license was granted by the State Environmental Agency (SEMAS) of Para in January 2019.

The situation at Horizonte Minerals is a clear indicator of the evolving dynamics within the mining sector, where financial, environmental, and operational challenges intersect. So now let’s set our Resource Erectors industry radar to the north to see just what’s at stake in a typical nickel mining enterprise.

Nickel Mining Projects in Brazil

FPX Nickel and the Baptiste Nickel Project

The Baptiste Nickel Project in British Columbia represents an ambitious endeavor by FPX Nickel to develop a greenfield, long-term, open-pit, nickel mining operation. So what’s at stake?

  1. Project Overview and Costs: The pre-feasibility study (PFS) completed in September 2023 outlined an ambitious project with an initial capital cost of $2.18 billion. The Baptiste project, with a projected mining life of 29 years, underscores the long-term investment in nickel mining in the region.
  2. International Collaboration: A memorandum of understanding signed with the Japan Organization for Metals and Energy Security and Prime Planet Energy & Solutions, a Toyota and Panasonic joint venture. Finalized in September 2023, the memo emphasizes the global interest in nickel for its critical role in EV battery and consumer electronics production. The partnership aims to share expertise and explore strategic business structures, highlighting the project’s strategic importance to the new global “green economy”.
  3. Product and Production: The Baptiste project is set to produce awaruite concentrate, making up 93% of its total nickel production. This focus on awaruite concentrate positions the project uniquely in the nickel market, with the rest of the production consisting of mixed hydroxide precipitate as a coproduct. Awaruite is a metallic nickel-iron mineral (Ni3Fe) with strong magnetic properties, named after the place it was first identified in 1885 in Awarua Bay, New Zealand.

Conventionally, nickel is obtained from sulphide or laterite deposits. These deposits require mineral concentration at mine sites followed by energy-intensive smelting and/or primary refining processes, resulting in nickel-rich intermediate products.

The key differentiators of awaruite in the green-leaning nickel industry are its magnetic properties and low sulphur content. Those characteristics mean that the nickel can be collected magnetically, without reagents or chemicals, and that the concentrate produced at the mine does not require downstream smelting.

  1. Location and Geology: Located in the Nechako region, about 90km northwest of Fort St. James, the Baptiste project is contained within the Decar Property, a spread that spans 247km² and is solely owned by FPX. The area’s geology is notable for its Cache Creek terrane, with mineralization occurring in serpentinized ultramafic rocks, an ideal site for nickel mining.
  2. Reserves: As of September 2023, the proven and probable reserves are estimated at 1.48 tonnes, with a grade of 0.13% magnetically-recovered nickel, highlighting the significant nickel resources available for extraction.
  3. Mining and Processing Methods: The project is planned as a large-scale open-pit operation utilizing truck and shovel methods. Phase 1 will start with a nominal ore processing rate of 108 kilotonnes per day, expanding in Phase 2. The mining strategy involves pushback phases first to the north, then to the south, for ongoing efficient extraction.
  4. Infrastructure: Significant infrastructure plans include a new bridge for improved access, a 155km-long power transmission line for the required 145MW of power initially (plus an additional 74MW later), and a water pipeline from Trembleur Lake. These infrastructural developments are crucial for the project’s success and sustainability.
  5. Contractors and Consultants: Renowned heavy industry firms like Ausenco Engineering, Knight Piesold, Onsite Engineering, and Carisbrooke, are all involved in various aspects of the Baptiste nickel project. Contributing to the project from design to resource estimation, the project benefits from expert insights across different heavy industry domains.

As the mining industry moves forward in 2024 and beyond, it will be essential to monitor how companies like Horizonte Minerals and FPX adapt to these challenges. The strategies they employ; win, lose, or draw, could set precedents and provide valuable insights into how 21st-century mining projects are financed, developed, and operated in the future, especially in regions with significant environmental and social challenges to overcome.

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