Nonconventional nickel hopeful touts 'game changing' deposit

31st January 2012 By: Matthew Hill

TORONTO (miningweekly.com) – A Vancouver-based explorer is hoping to dig up naturally occurring stainless steel at its Decar Project in north-east British Columbia, and aims to have a preliminary economic assessment (PEA) on what could be “game changing” for the nickel industry by year-end.

First Point Minerals, listed on the TSX-V, stumbled onto an awaruite deposit while hunting for gold 15 years ago.

What partners Ron Britten and Peter Bradshaw found instead was a deposit of ferronickel, widely disseminated in small, but visible grains.

At the time, nickel was trading at $3.50/lb, so after doing some basic economics the partners realised that mining it would not be profitable, so they packed all the information they had into a file.

Nickel prices surging past $20/lb in 2007 was enough to prompt Bradshaw and Britten to dust off the old file, and start work on the Decar property.

Since then, their work has been enough to generate interest from the biggest US iron-ore producer Cliffs Natural Resources, which signed an agreement to earn up to 75% of Decar. The Cleveland-based miner also bought a 17% stake in First Point.

Cliffs has already earned 51% of the project – two years ahead of schedule – and will lift this to 60% on publishing the year-end scoping study.

Taking the project through prefeasibility will then earn Cliffs a 65% stake, and completing a full feasibility study gets it the full 75%.

Before bringing Cliffs on as a partner, Bradshaw said the company had tried, and failed, to perk the interest of conventional nickel miners, who did not understand the project.

“We’re a bit of a bastard,” he quipped to Mining Weekly Online.

“We don’t really fit into the nickel space, we don’t really fit into the iron-ore space.”

In fact, the company fits into both, as the awaruite deposit at Decar contains 75% nickel and 25% iron-ore, grading at around 0.11%.

Though the grade appears low compared with the around -1.5% average Sudbury’s mines have, Decar’s ore does not contain sulphur, and therefore does not need to be smelted.

And therein lies the potential: Bradshaw is hoping the PEA will prove First Point and Cliffs can mine Decar in a bulk-tonnage operation, then crush and grind the rock, put it through magnetic separation, and sell it directly to a steel mill.

The costs? “It will probably be very similar in price to the sulfide deposits,” said Bradshaw, though the PEA will provide a better idea.

Most sulfide producers in Canada produce at cash cost levels between $3.00/lb to $3.50/lb, which he said should be achievable at Decar, though hastening to add that this is based on what it costs to mine nearby copper porphyry deposits.

The base case scenario the company is looking at outlines a 44-million-pound-a-year nickel operation, generating over 1% of the world’s nickel production, from a 300-million ton deposit.

But Bradshaw said First Point will announce a resource at Decar in four to six weeks, which he is hoping will be “appreciably bigger” than that.

Asked whether First Point could become a takeover target for Cliffs, he said “we’re very cognizant of that”, adding they had a standstill agreement, whereby the iron-ore miner cannot lift its ownership beyond 17% until the last day of 2013.

In the meanwhile, First Point aims to build the company’s value by furthering its other nickel-iron alloy properties in Canada and globally.

The company’s Wale property, also in British Columbia, is showing particular promise, said Bradshaw. The company also has properties in Australia, and other countries.

Last week, the junior announced the appointment of James Gilbert as president and CEO, with Bradshaw taking up the new role of nonexecutive chairperson.

Gilbert was most recently CEO of Minera S.A., a privately owned mining investment company.

Cliffs is also hunting for ferronickel alloy deposits on the island of Newfoundland with its partner Altius Minerals.

Shares in First Point gained 6.5% on Monday to close at $0.65, giving the company a market value of C$59-million.