With the nickel price down at below US$10,000 per tonne at the start of the year work on the Mambare nickel laterite project in Papua New Guinea was temporarily suspended as owner Regency Mines sought, understandably, to conserve cash.
Last week, though, nickel spiked through US$20,000, and after showing signs of growing strength all year. In that context it’s not surprising to learn that the shutdown at Mambare was short lived, and that not only has Regency been hard at work drilling up what it believes might be the largest nickel laterite deposit in the world, but it’s also been getting friends in China to undertake testwork on leaching the metal out of the ore.
The idea, says Regency chairman Andrew Bell, is to avoid having to use high pressure acid leaching (HPAL) to get the metal out.
It’s not out of the question, but there are some obvious reasons why you wouldn’t want to do it, he explains. “We might treat the ore with HPAL. You get all the nickel out with HPAL, but because you have to build a US$2 billion plant to get it out it creates a lot of perceived risk”. He’s not wrong with a market capitalization of less than £4 million, the idea that Regency is going to participate in a US$2 billion HPAL project at this stage in its development would stretch the credulity of even the most liberal minded investor.
So, in Beijing the General Research Institute For Nonferrous Metals has been experimenting with a variety of leaching methods for the limonite section of the ore, and has reported that the best recoveries are delivered by chemical granulation in column leaching. The Research Institute managed to extract over 78% of the nickel contained in Regency’s limonite ore, and over 50% of the cobalt, though it also stated that the addition of a pre-treatment stage might increase recoveries still further, as well as boosting iron recoveries. Some progress there then, though given that the leaching period is specified as 110 days, hardly electrifying.
Perhaps that’s why Andrew Bell chose to save the latest drill results from Mambare for a separate announcement, although when this came the company’s shares traded steady at 0.95p and showed no sign of recovering the small amount of ground they’d given up following the announcement of the leaching results. The drill results were respectable to say the least, but more importantly the data they present allows for a certain amount of hypothesizing about the likely size and value of any economic portion of Mambare. There’s no doubt that Mambare’s big, but how much of it can be mined for profit by Regency or anybody else still remains open to question. Of the three drill lines reported from Mambare so far none have delivered an average grade of over 1% nickel in either the underlying saprolite or in the upper limonite. But within that wider average specific results give grounds for real encouragement. Thus, from a hole at the eastern end of the second drill line, the company returned 0.81% nickel and 0.07% cobalt from 14 metres of limonite, and 2.28% nickel and 0.05% cobalt from 9.4 metres of saprolite.
It’s a similar picture elsewhere, leading the company to talk of zones of “high-grade mineralization” in press releases. All in all, for a first pass at Mambare, it’s not a bad result. Andrew Bell reckons Regency has now “opened the window a crack on something very large”. Just how large won’t be known in detail for many a year, but it’s interesting to throw a few numbers around. On the basis that on its 20 kilometre by seven kilometer licence Regency may be able to prove up a 550 metre by 1,500 metre area of mineralization that shows a grade of greater than 1.5% nickel at a thickness of 15 metres, then the total contained nickel would add up to over 370,000 tonnes, or over US$6 billion worth of the metal in today’s money. Talk of HPAL suddenly looks more reasonable, even if that is assuming a fair amount.
There’s lots of work to be done yet. For one thing, the drill spacing on this first pass was fairly wide, so many assumptions will have to stay inferred at this point, supported, it’s true, by data gleaned from ground penetrating radar. The company needs to zero in on those potential high grade areas, and it needs eventually to show a working model for a mine. But saying that, there’s always the possibility that Regency will walk forward with a partner, or even hand the baton on to someone else – for the right price, of course. Andrew Bell is giving nothing away when he says, “I don’t think there’s ever been a time when we didn’t have some sort of discussion going with someone on Mambare. But the thing that’s been a bit of a stumbling block has been the lack of data”. The company is chipping away at that stumbling block at a fairly rapid rate now, following on from the downtime earlier in the year, and more drill results are pending. The second half of the year could prove to be a very interesting time.