Nickel, cobalt: Karora drops Dumont to focus on gold

In late-July 2020, Karora Resources (previously RNC Minerals) finalised the sale of its remaining 28% stake in the Dumont nickel project to two private funds advised by Waterton Global Resource Management (Waterton). As a result, Waterton now wholly owns the advanced stage nickel-cobalt-PGM deposit located in Quebec, Canada.

Waterton initially brought into Dumont in March 2017 through the acquisition of a 50% stake in the project for US$22.5M (C$30M). At this point, RNC and Waterton also each committed US$17.5M to help advance the project. RNC’s stake was subsequently reduced to 28% in Q3 2018.

Karora received C$10.7M in cash for the sale, although it retains the right to receive a portion of future proceeds of any sale of the project (or other monetisation event) up to a maximum additional payment of C$40.2M. The deal provides Karora with cash to invest in its gold mines and projects in Western Australia.

Roskill View

Dumont represents one of the largest undeveloped nickel deposits globally, with the benefit of significant cobalt and PGM by-product credits.

Contained nickel in selected projects

Source: Roskill’s Cobalt, Nickel & Manganese Mining Project Analysis report (Dumont is one of the 10 primary nickel projects covered in the study)

Furthermore, its nickel mineralisation is hosted within a sulphide orebody, which is in contrast to many nickel projects globally which are lateritic in nature and often situated in more environmentally sensitive, and less protected, jurisdictions.

An updated feasibility study on the project, released in Q4.2019, outlined a 30-year operation utilising conventional open pit mining to produce 33ktpy nickel (in concentrate) increasing to 50ktpy after later expansion. The initial capital cost of the project was estimated at C$1.36Bn, plus C$0.80Bn for the expansion. Ore will be processed onsite to produce a nickel concentrate containing appreciable amounts of cobalt and platinum and palladium. The base case scenario outlines that the concentrate will be sold to a Chinese roaster, but this option would result in a loss of value from the contained cobalt and PGMs. Instead it may be beneficial to process the concentrate via conventional smelting or other suitable process to realise the value from the cobalt and PGMs. Under this second option, Roskill expects cobalt to account for less than 2% of the net revenue of the asset (based on a long-term cobalt price of US$27.50/lb). As such, the project is strongly geared towards the nickel price.

Roskill’s Nickel (16th Edition) and Nickel Sulphate (3rd Edition) reports were published in April/May 2020 and forecast trends in supply, demand and pricing over the next decade. Roskill’s NEW Cobalt (16th Edition) report is due for publication in September 2020. Click to download the brochure and sample pages for each report, or to access further information.

Roskill’s Cobalt, Nickel & Manganese Mining Project Analysis report has reviewed the plans of developers evaluating greenfield projects that could contribute to supply in the 2020s. The study aims to help readers understand the potential of new sources of raw materials in these complex commodity markets.

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This article was written by Brian Ziswa. Please get in touch below if you wish to discuss further:

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