JOHANNESBURG (miningweekly.com) – JSE-listed diversified minerals explorer African Eagle would begin work on the feasibility study of the Dutwa nickel laterite project, in Tanzania, it said on Wednesday.

The company last week announced that it would raise £3,8-million to make a start on work leading to a feasibility study on the Dutwa project.

African Eagle said that the final scoping study report showed the potential upside at metal prices higher than the base case prices, and allowed the company to begin work to improve the bottom line by reducing costs and optimising revenue.

The scoping study identified several key areas where further test work and detailed study were likely to result in improvements to the bottom line or to gains in confidence.

These areas included an improved global deposit model and the potential for early high-grading. The Ngasamo resource would be drilled and incorporated into a more sophisticated global resource model and mining plan. From this, it would be possible to establish whether richer ore can be mined first, giving increased early cash flow and an improved net present value.

Further testwork also needed to be done on the ore beneficiation and project scale. African Eagle noted that the capital and operating costs of the plant would be reduced if mechanical beneficiation of the ore prior to leaching yields a smaller tonnage of richer material for processing through the plant.

Advanced leaching test work also need to be undertaken. Column and vat leach tests at bench and pilot scale would determine the best operating conditions to optimise nickel extraction, including acid concentration, residence time and temperature.

The company further noted that reagent cost reductions were also identified as another area that should be investigated. The cost of reagents, notably sulphur and lime, would be a significant component of operating costs and profitability will increase considerably if these costs are minimised.

“Transport is a substantial part of the reagent costs and ways to minimise this will be investigated, as will the availability of more local sources, particularly of lime,” African Eagle said in a statement.

More sophisticated fiscal and economic modelling was also needed. The company noted that Tanzania offered a number of tax incentives for exploration and mine development, which were not fully accounted in the scoping study’s economic model.

While the company was raising funds to address these activities and studies in order to progress the project towards feasibility, it has already committed some of its current cash reserve to start the work with further metallurgical testing having started on drill core samples at Mintek laboratories in South Africa.

“Using current metals prices and recent long-term forecast prices, the investment case for the project is very strong. The study indicates that if Dutwa were in production today, it would be making a comfortable profit,” said African Eagle MD Mark Parker.

He noted that in the context of a gold project, at current metal prices, the Dutwa nickel project was about equivalent to a nine-million ounce gold deposit in ‘metal in ground’ vale terms, and the discovery cost of $7,50/t of nickel was equivalent in value terms to a gold discovery cost of $0,35/oz. This was just one seventieth of the long-term industry average of $25/oz.

African Eagle said that as a potentially low-cost producer, the upside for the Dutwa project was considerable if nickel prices were above the $7/lb used in the base case.

Drilling at the Ngasamo deposit will start in September.

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