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Giant PFS underpins Ardea Resources share price hike

Updated: Mar 27

Adrea Resources drilling at its Goongarrie Hub. Credit: File.

Things were looking a little stagnant for Ardea Resources on June 27 last year when its share price had slumped to a year-low 29.5 cents.

Then, on the back of a mineral resource upgrade and a mammoth prefeasibility study (PFS) for its Goongarrie Hub nickel-cobalt deposits in Western Australia’s renowned Goldfields region, the company went on a four-day tear on the ASX boards.

After sneaking up to a close of 30.5c on June 30, Ardea would soon go bang. After a brief trading halt it revealed its new project metrics and early the next week its share price had risen to 80c – a tasty hike of more than 162 per cent.

Suddenly, the Goongarrie Hub, a subset of six deposits within the company’s wider Kalgoorlie Nickel project, was gaining serious momentum after management revealed a new mineral resource estimate of 854 million tonnes at a grade of 0.71per cent nickel and 0.045per cent cobalt, giving 6.1 million tonnes of contained nickel and 386,000 tonnes of contained cobalt.

Having reached 44.5c before the trading halt, the company’s big PFS reveal on reopening on July 5 led immediately to the rise to 80c. The brief tease for investors on just how much cash the Goongarrie beast could generate clearly sparked an interest.

The eye-watering PFS outlined a resource of 194.1 million tonnes at 0.7 per cent nickel and 0.05 per cent cobalt for 1.36 million tonnes of contained nickel and 99,000 tonnes of contained cobalt. The PFS stated the project would cost a touch more than $3.1 billion to build, but remarkably, it would take just 3.1 years to pay down.

Projected production was at about 30,000 tonnes of nickel and 2000 tonnes of cobalt a year from the open-cut mine, giving an EBITDA of an extraordinary $800 million a year, which the company said could be sustained for an even more stunning 40 years.

The shallow and flat-lying nickel-laterite ore body at Goongarrie allowed Ardea to plan the mine with a very low strip ratio of 1.5:1. It contributed in part to the PFS estimate of direct cash costs after cobalt by-products of US$3763 (AU$5652) per tonne nickel in mixed hydroxide product (MHP) during the first five years of operation, bolstered further by US$5763 (AU$8657) per tonne nickel in MHP over the life of the mine.

Ardea also revealed on July 5 that it had signed a non-binding memorandum of understanding (MOU) with a Japanese consortium consisting of Sumitomo Metal Mining (SMM), Mitsubishi Corporation (MC) and Mitsui & Co. (MBK). The consortium agreed to fund the definitive feasibility study (DFS) for the project.

In December, Mitsui pulled out of the deal, but that appears to have been little more than a small bump in the road. The company says it is aiming to complete due diligence by the end of next month ahead of negotiating final binding agreements by the end of this year’s first quarter.

Management says future work is aimed at completing the DFS, making a final investment decision (FID) and securing project development funding for the Goongarrie Hub, which it believes has the potential to become a globally-significant producer of nickel-cobalt from the laterites that are essentially enriched soils.

Traditionally, downstream processing complexities associated with nickel laterite deposits have been a source of frustration for the industry, with 70 per cent of the world’s nickel resources locked away in the deposits. While the near-surface and flat-lying ores are attractive from a mining perspective, they generally have lower nickel and cobalt grades that present issues associated with developing economically-attractive processing options.

But processing technology is advancing, with high-pressure acid leach (HPAL) facilities able to separate the nickel and cobalt from the ore using elevated temperatures of some 255 degrees Celsius and pressures of about 725 pounds per square inch (psi). The choice of processing flow sheets varies from site to site, with production of intermediate products such as mixed hydroxides or sulphides favoured over a solvent-extracted metal end product.

Ardea says it plans to feed 3 million tonnes per annum of its laterite ore to a HPAL and a 500,000-tonnes per annum to an atmospheric leach (AL) circuit to produce a saleable MHP to the massive global lithium-ion battery market.

Nickel laterites are fast becoming recognised as major contributors to the clean-energy transition as the demand for nickel grows. In the past 60 years, magmatic sulphide nickel deposits have accounted for 60 per cent of the world’s nickel – but the frequency and size of discoveries are dwindling.

So, with Ardea’s mid-year share price hike essentially resulting from a massive PFS, savvy ASX investors may be looking for companies with solid deposits being lined up for the same treatment.

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