JOHANNESBURG (miningweekly.com) – Nickel miner Western Areas on Friday announced that it would buy the Cosmos nickel complex, in Western Australia, from Glencore subsidiary Xstrata Nickel Australasia Operations.
The acquisition would provide Western Areas with substantial additional exploration upside and a potential second mining operation, which would complement its existing Forrestania nickel operation, MD Dan Lougher commented.
“The Cosmos nickel complex is an excellent, prudent and low-cost investment, which is consistent with our brownfields acquisition strategy,” he said.
Western Areas would pay A$24.5-million for the Cosmos nickel complex, which is located in the world-class Agnew Wiluna nickel belt, which has an endowment of more than nine-million tonnes of nickel.
Operations were suspended at Cosmos a number of years ago. Historical production from the complex was about 127 000 t of nickel at an average grade of 5.0%.
Western Areas believed the complex had “substantial exploration opportunities” in areas which remained largely untested and said it was planning a 24-month exploration programme for the site.
There was also the potential to establish an underground mine at the undeveloped Odysseus high-grade deposit hosting a total mineral resource of 7.3-million tons at 2.4% nickel, containing 174 000 t nickel.
Included in the transaction is significant on-site infrastructure and material, such as a 450 000 t/y concentrator, a semi-autogenous mill, which could be used at any of Western Areas’ potential development projects, including mill expansion scenarios at Forrestania and a large accommodation village, which would support an early start-up.
Lougher commented that the acquisition was consistent with Western Areas’ growth strategy and given the company’s successful exploration credentials and its “agile and lean” approach to projects, Western Areas’ skill sets would be appropriately used.
He added that Western Areas believed that it acquired the project at the correct stage of the current commodity cycle.
“We have now significantly increased our exposure to upside through substantial additional high-quality development and exploration opportunities, as the nickel market is expected to move into a tighter demand and supply balance over the coming years.”
Lougher said that the company’s exploration programme at Forrestania would be unaffected, with the replacement and addition of reserves being a key focus for its near- and long-term organic growth pipeline.
Lougher further pointed out that Western Areas’ balance sheet was in a strong position and, once debt-free from July this year, together with ongoing cash flow generation, the company expected to be able to support dividends for shareholders, while maintaining capacity to fund a ramp-up of exploration activity and drive organic capital improvement projects.