Independence Group: Keeping faith with nickel
With nickel prices languishing below $10,000 a tonne compared to the end of 2010 when this key base metal was selling for nearly three times as much, you might wonder why anyone would be excited about a new nickel project. It's hardly necessary to review factors like China's growth slowdown and the fact of over-supply for the last three years, however nickel remains a vital commodity for industry. Some 2.0 million tonnes of nickel are produced and sold globally every year, of which 65 percent is consumed in the manufacture of stainless steel. Another twelve percent is used in super alloys and non-ferrous alloys.
Peter Bradford, Independence Group's Managing Director and CEO, who is driving forward with the development of the world class Nova nickel Project in Western Australia, is convinced that there are benefits building a mine at the bottom of the market, particularly when that project can be brought in at lower cost and can return a profit even at current prices. The minerals markets are cyclical by nature, and a mine with an initial ten year life like the Nova project, will certainly live through at least one peak and one trough. Thanks to a combination of smart design, canny contracting and a programme of cost optimisation, when it comes into production towards the end of this year Nova will have an operating margin of 40% even at current depressed nickel prices. The mine is slated to ship an average of 26,000 tonnes of nickel a year once it ramps up to full production next year, plus 850 tonnes of cobalt and 11,500 tonnes of copper.
Perth-based, Independence Group (IGO) was formed in 2000 initially with a focus on gold. Soon after it diversified with the acquisition of the Long nickel mine in Kambalda, Western Australia that it acquired from BHP Billiton in 2002. Independence also has a revenue stream from its 30 percent interest in the Tropicana gold project which it pegged at the time of its IPO in January 2002 and developed in partnership with AngloGold Ashanti. IGO then acquired the Jaguar copper and zinc mine near the town of Leonora in 2011.
“These are all great assets,” affirms Bradford who was appointed to lead the group early in 2014. “When I joined IGO, I immediately recognised that we needed growth assets, so we set about a strategy of identifying the best available prospects. That resulted in our entering discussions with Sirius Resources and acquiring the Nova project in September 2015. We are now focused on bringing that transaction to account and progressing construction at Nova and bringing it into production.”
Fast track to production
Progress has been fast by any standards, when it's considered that the deposit was only discovered in July 2012, only got its mining lease in August 2014 and, yet will be producing first concentrates by the end of December this year. This is a remarkable achievement for an underground mine, with all the infrastructure and construction work entailed in an operation that relies on a combination of sub-level stoping with paste fill (derived largely from tailings) and longhole echelon retreat methods. “Our rapid progress is attributable in part to the location of the orebody. From an underground mining perspective Nova is quite shallow, with the 1,000 metre long orebody positioned about 200 metres from surface down to a maximum of 500 metres,” he points out. “It is a large flat-lying orebody somewhat in the shape of a banana!”
Had it been deeper, shaft access may have been considered but given the proximity to surface the orebody is being accessed by declines which have been dug to accommodate the 60-tonne trucks that will bring out the ore. Thanks to being able to get the best contractor and the best contractor team to do the development work the pace of the development work has been better than planned with over five kilometres of development completed as at the end of May 2016, he says. “Our feasibility study projected progress rates of 50 metres a week on a single heading underground and we have been achieving 70-90 metres per week. The rock conditions are good so we have not needed to immediately install the mass of ground support originally anticipated. We have been very fortunate in being able get what we believe are the best in class contractors in Western Australia.” Underground development is the province of Barminco while GR Engineering Services has been building the processing plant and associated infrastructure under a lump sum EPC contract.
The ore will be processed in a plant with 1.5 million tonnes per annum (mtpa) capacity, comprising an open circuit SAG mill and a ball mill before separation into nickel and copper concentrates. All the copper concentrate and half the nickel concentrate will be shipped out through the port of Esperance, 380 road-kilometres to the south, the remainder of the nickel concentrate will be delivered to BHP Billiton’s Kamblada site 294 road-kilometres to the north. The site is remote, located on the Eyre highway 150 kilometres east from the small settlement of Norseman. “Given the remoteness of the site, we invested in robust infrastructure,” says Bradford. “We built a 35 kilometre sealed road to the Eyre Highway and a two kilometre sealed airstrip to make sure we can reliably bring our employees in and out on a fly-in-fly-out basis.” They are accommodated in a 492-person camp designed and built by Kerman Contracting in the space of just eight months last year, he adds.
For the moment Perth is the primary source of people but one of his priorities is to focus back on the region. Population centers like Norseman, Esperance and Kalgoorlie have many skilled people with a great deal of mining experience and he believes smaller drive in-drive-out or fly-in-fly-out operations from those towns would be cost effective. “With lower commodity prices, there's been a pullback in employment in the region, so there are skilled people available and we'd like to give them an opportunity. There are a lot of benefits to building a project at the bottom of the cycle,” he adds. “The best time to build is at the bottom of the market. All the materials and expertise needed to build the project are readily available. If we had tried to build this project five years ago we'd have been waiting in a queue at the factory to have components built and all the best people and contractors would be tied up.”
Long term sustainability
The Nova site has no mains services. To provide the project with reliable water supply and management and waste water treatment, Tristar Water of Perth was brought in. Power supply was more complex. The power provider, a joint venture between Zenith Pacific and Solea of Germany, is providing a state of the art hybrid generating station under a build-own-operate-maintain contract that means IGO will bear no capital cost. The first phase of a 14 MW diesel-fired plant was commissioned at the end of March. The second phase is expected to come on stream in October, and at the same time work will commence work on a 7MW electro voltaic solar plant. The use of solar power will save 8,000 tonnes of CO2 a year as well as more than three million litres of diesel and the associated road trains to bring it to site. In all, the power component of the Nova nickel mine will set the standard for future remote hybrid power stations. This is the first time a project of this nature in Australia has been commercially viable and not reliant on subsidies or grants.
Christmas this year will be a significant milestone for Independence Group as it celebrates first production from Nova, and as the deposit's full name is Nova-Bollinger there's no prize for guessing how Peter Bradford, his teams and contractors will toast it. But the mine's slated ten year life is far from the end of the story. The Long nickel deposit was all but exhausted on acquisition but is still productive more than a decade later, which should tell the world that IGO know how to optimise an asset. “We believe the prospects for extending Nova's life are very good,” Bradford says. “That is one of the attributes that attracted us to the project. This is the first discovery of its type in this new belt in Western Australia, and the first discovery of this style of mineralisation in the whole of Australia. It has features in common with Canadian deposits like Thompson, Raglan and Voisey’s Bay. We have opportunities to extend the mineralisation immediately around Nova, and also to look for additional occurrences further afield on the Fraser Range-Tropicana belt. This underexplored province has delivered two of Australia’s best gold and base metals discoveries in the last 10-15 years and we believe that there are more discoveries waiting to be made” So expect IGO to be very active on all these fronts.
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Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”