What’s the attraction of Regency Mines? Try this for a start, from chair Andrew Bell: “We’re doing drilling at Mambare and we’ve got a technology which will transform the nickel industry.”
Nickel’s a metal that’s not yet featured prominently in the post credit-crunch commodities boom, partly because in the pre-crash world it traded up to a bubble price of around $50,000 per tonne, and that looks unlikely to be matched any time soon. Not for nickel the onward march of copper, gold or silver, all of which have been bumping up against record price levels in the first half of this year. The market is also well aware that supply from major mines in Canada has recently re-started after a prolonged period of strikes and that stocks in LME warehouses have remained relatively high all year. So, although the current price of $22,845 per tonne marks a significant recovery from crash levels that bottomed out at around half that, no-one from the nickel industry’s indulging in any real flag-waving. But that could be about to change.
A new research note from the analysts at Edison puts the case very simply. There is, says Edison, “a global shortage of new, economically mineable nickel deposits”. And that has put Regency in a strong position as it shoots for an initial JORC resource at the Mambare laterite deposit in Indonesia, and awaits the outcome of the final testing on a proprietary nickel processing technology owned by joint venture partner Direct Nickel. The target at Mambare is 600 million tonnes of ore at 0.8 percent nickel, and although the drill-bit will be the ultimate arbiter as to quantity, there’s no doubt that the nickel’s there. Regency has been on the ground for some years, and before it arrived several other operators investigated Mambare too. In 1999 Anaconda Nickel took a look, and concluded that in the limonite layer alone there was 630 million tonnes at 0.78 percent nickel using a 0.5 percent cut-off, and 200 million tonnes at 1.01 percent using a more conservative 0.8 percent cut-off.
Initially, Regency followed up that work with a 4,000 metre wide-spaced drilling programme in 2008, and this showed that the mineralisation extended to depths greater than 20 metres and that beneath the limonite horizon there was also significantly mineralised saprolite ore. The plan now is to spend UK pound 2 million on follow-up infill drilling to work up the resource into JORC-standard categories. The depth of the laterite will also be determined through the application of ground penetrating radar.
That all bodes well for newsflow for Regency shareholders over the summer and into the autumn. Come winter the results from the industrial-scale testing of the Direct Nickel processing technology should also start to come through. The number crunchers at Edison reckon that this will more than half the cash costs of nickel laterite production, when set against the major established alternatives, high pressure acid leach, heap leaching, and atmospheric pressure leaching. Direct Nickel is keeping a fairly tight wrap on the precise nature of the technology, but as against its competitors it’s worth noting that the reagent has been patented, that the recoveries run at 95 percent for nickel and 85 percent for cobalt, that it’s quick, uses significantly less acid, and can take place at a low temperature and under normal atmospheric pressure.
According to the terms of the agreement with Direct Nickel, Mambare will produce 20,000 tonnes per year of nickel initially, ramping up to 60,000. Back in 2009, Aker Solutions ran the rule over the Direct Nickel process and concluded that a capital cost of $12 per pound of nickel and an operating cost of $1.84 were likely to result from its application. If the Mambare operation were to run at those levels, that would make it cheaper to run than famous mines like Murrin Murrin, Leinster and Goro.
With all that to consider, it’s no wonder Andrew Bell’s pretty excited. But he’s not one to sit on his hands when there’s a spare moment, or a dollar or two that’s not been effectively deployed. That’s why Regency also has strong positions in Aim-traded Oracle Coal, in sister company Rock Resources, and ownership of a promising-looking copper-gold prospect in Queensland, which will shortly be the subject of geophysical studies. Such diversity makes it hard to get a handle on what Regency is really worth, and the market has been marking time on the company this year, trading the shares down from a January opening price of around 7p to the current 3.8p. Drilling news and a revival in the market appetite for nickel should change that, and in the meantime it’s always possible that Andrew Bell might cut another deal. -By Alastair Ford