AMC has an “Answer Team” team comprised of staff and public relations affiliates (Blythe Weigh) to respond to questions submitted to our web address of firstname.lastname@example.org. Our team’s intent is to provide shareholders with accurate and factual information. Price sensitive questions cannot be addressed in this forum in accordance with LSE regulatory constraints. Such information will be provided in an RNS. We look forward to your questions.
“How are the capital raising markets performing in Australia? Is this a potential source of funding for Amur and should a dual listing on the Australian Exchange (“ASX”) be considered?”
Answer Team:海南福彩网 Austex has recently reported capital fund raising on the ASX has recently declined and is now the lowest since 2015. The few successful fund raising efforts are related to the bigger market capital companies (>50 million AUD) which coincidentally have the larger sized projects. Also, the majority are associated with precious metals.
They report a total of about 37 IPO’s and relistings through 2018 have been completed and the share price is off by about 30% from that of the original share price offering. So far this year, it has been reported to Amur that there have only been two such IPO’s through April indicating that funding via ASX IPO’s remains constrained.
Over the course of time, the Company has looked at various dual listings and is comfortable with its current AIM listing.
“121 Mining Investment Conference Review”
Answer Team: Being the second 121 Mining Investment conference attended in London, it was noted that a more upbeat attitude toward mining investment has developed since the 121 conference the Company attended a year ago. This is in part due to the continual drawdown on the LMX nickel stockpile and the firming of the nickel price.
Over the course of the two day event, Mr. Paul McKay and Mr. Robin Young hosted a series of meetings with private and family office investors, mineral resource investment funds, news agencies, institutional investors, internationally recognised banks, metals traders and service provider groups. Discussions with the various groups and organisations were well received and new contacts were generated.
海南福彩网Discussions were wide ranging and based on the February 2019 Prefeasibility Study (“PFS”). Kun-Manie’s position to be a source of C1 nickel suited for Electric Vehicles (“EV”) generated informative discussions which included summaries of the technical and economic potential of the project located in Amur Oblast which has a rich mining history demonstrated by numerous existing and producing mines denoting the presence of a supportive mining jurisdiction.
海南福彩网Discussions were also concentrated on the Russian Federation’s Far East Development programme. Most Amur meeting contacts not fully familiar with the Amur story were impressed with the incentives offered by the Federation’s tax incentive programmes where substantial reductions are available to facilitate international investment in the region. The related tax benefits to be incurred during the early years of the beneficiation of the large scale and conventional sulphide flotation operation were addressed as summarised in the February 2019 PFS.
“The declining nickel stockpile inventory should be forcing the nickel price up! It is not, what level of inventory do you think we will see a breakout on the price from its $12,000 per tonne ($5.50 per pound)?”
Answer Team: Fastmarkets forecasts a nickel deficit for this year and 2020. This indicates a pervasive nickel supply deficit covering four consecutive years. This trend has resulted in a drawdown of inventories built up during and after the financial crisis.
They also report that a “normal” stock inventory tends to be around a three week supply. The nickel stock is presently around an eight week supply which is half of the 15 week supply two years ago. Recent drawdowns to secure nickel sulphate for Electric Vehicle’s (“EV”) are believed to be the reason for the recent increase in the nickel price from $10,700 per tonne ($4.85 per pound) in early January to the current price of about $12,000 per tonne ($5.50 per pound). During this period, the current stock inventory of approximately 176,000 tonnes (combined LMX and Shanghai Metals inventories) has also been reduced by nearly 45,000 tonnes from about 220,000 tonnes.
Looking forward, Fastmarkets is also forecasting nickel consumption to increase by approximately one million tonnes to a total approaching 3.0 million tonnes per annum over the next decade. Of this, about 45% will be required to manufacture EV batteries.
海南福彩网As for setting an inventory at which the nickel price will breakout, use of a three week inventory may be ok but there are other factors that will likely impact price volatility, not the least of which is the ongoing trade war between the 海南福彩网 and China.
“Were there any takeaways from the Battery Materials 2019 Conference in Shanghai, China?”
Answer Team: Robin Young was in attendance at the conference for the second consecutive year. The sessions covered a wide range of topics whilst simultaneously providing multiple networking opportunities over the course of the two day conference. Various observations and highlights included the following:
- The current demand for nickel is expected to be dominated by the stainless steel sector of the industry. Although the market is beginning to see the impact on nickel demand related to the electrification of both the transportation and grid industries. Nickel sulphate in particular is being projected to grow at double digit rates through 2030. The attendees anticipate that the nickel market will be highly volatile and that premiums of battery quality nickel will be likely. In addition, the current nickel stockpile inventory of about 180,000 tonnes seems to be continually shrinking.
- China’s subsidies related to the Electric Vehicle (“EV”) industry will continue to be reduced over the near term. Especially for vehicles that have limited ranges of less than 250 miles. Though not reflected in the current growth figures in purchased EV units in China, one could expect to see a temporary decline in total EV purchases, especially in those of limited range.
- The chemistry of the batteries used in the longer range EV’s presently is dominated by the 6:1:1 design but there is a very rapid shift to the 8:1:1 design which utilises proportionately more nickel replacing the more expensive and politically sensitive sourced cobalt. It is anticipated that the market for these longer range EV’s will not be impacted as significantly as that of the shorter ranged EV’s when considering the reduction and elimination of some of the key Chinese subsidies.
- Alternative battery chemistries were discussed. Scientifically, Mr. Young found these to be interesting and worthy of following as they develop. However, the dye has been cast and the full commitment of electrification of the transport industry is set. Multiple gigafactories have been, are being, and are planned for construction at the cost of billions of dollars. The industry is fully committed to nickel in batteries and a shift to a new design is technically and financially unlikely. Especially in light of the fact that any of these new opportunities are projected to require nearly 10 years to become fully operational, certified and placed into production on a competitive basis.
- Recycling programmes for the EV batteries are beginning to take shape. This is a long term consideration when you consider the average number of miles driven per year per car is about 10,000 to 12,000 miles and the Tesla batteries are projected to have about a 300,000 mile life. This means such a battery could have up to a 30 year life. Rather astounding. It is not yet well identified when the recycling of EV batteries will come on line and have an impact on the transportation market.
- Project financing was also a topic of discussion. A shift away from broker lead placings toward battery Original End Product Manufacture (“OEM”) supported financing is beginning to take shape. Battery manufacturers are concerned about the availability of sufficient quantities of cobalt, nickel and lithium to support the anticipated growth in EV demand. Some OEM’s are extremely concerned and have begun direct discussion with mining companies. Especially Korean and Chinese based companies.
“Is streaming an option to assist in funding us?”
Answer Team: Firstly, many do not know what streaming is and how it works. We therefore present a link to Cobalt27’s website which provides a description of what a stream is, how it works and the benefits of such a structure.
As for Amur Minerals Corporation, as we have noted in open forum presentations, this funding structure is and will continue to be on our list of potential funding options. To facilitate the implementation of such an activity, it would be best undertaken in the advent that we generate two or more potential revenue streams. In our case, that would be generating two separate salable products. These would be the generation of a copper concentrate and a separate nickel concentrate. The copper concentrate would be well suited for implementation of a copper based streaming agreement.
“The Executive Summary of the Prefeasibility Study (“PFS”) released in February of this year does not address the potential impact of debt financing of the project and you have said in various forums that a consortium of banks would be required. What is your view on getting project funding and could you provide some basic insights as to what your thoughts are on the key considerations in your search for project financing to build Kun-Manie?”
Answer Team:海南福彩网 We cannot speak on specific details regarding our discussions on project financing as it is too soon and additional work must be completed to obtain any potential final commitments from the funding source(s) which are based on a finalised operational plan. However, we have identified four areas which are interconnected and must be weighed in development of a final financing package. For the concentrate sales (offtake) scenario, these include the following considerations:
- The institutions providing funding must be assured there is sufficient access to capital allowing for a completion guarantee.
- The sources of revenue derived from the concentrate sales agreement(s) must be credit worthy and of sufficient robustness to cover the life of the credit facility.
- Geopolitical risk associated with the project’s jurisdiction (Russia in our case) and the source of revenue (likely China, Korea and Japan).
- Environmental and social perceptions and regulatory concerns which vary by nation and institution.
海南福彩网As an example, the concentrate sale option in the PFS has an initial capital cost of $海南福彩网 570 million. Depending on the source of the funds, one could see a debt to equity ratio ranging from a 50:50 to 70:30. We note in our discussions, the range of debt to equity can vary significantly by institution. Also, it is highly unlikely that there will be a single source of project financing as it is desirous to limit exposure and risk.
With regard to source nation funding where a cross border facility (two or more countries) is undertaken, we have noted differences that must be considered. For instance, we note that Chinese sourced funding typically relies upon significant offtake agreements and equity participation. Korean and Japanese funding sources tend to desire substantial portions of the initial capital be used to purchase Korean or Japanese equipment as well as acceptability of the offtake agreements and equity participation considerations. We are also examining our project’s host nation parameters, Russia.
海南福彩网We caution readers that the information above is indicative and is based on a wide range of preliminary terms and conditions derived in our discussions with various, but certainly not all, potential funding sources.
As noted above, discussions with various metals traders (offtake) also provide a wide range of terms and conditions. A final funding package must balance several variables.
““he Prefeasibility Study (“PFS”) initial capital costs total $570 million and for the Life of the Mine (“LOM”), the total is projected to be $1,064 million. Can these costs be reduced to improve the Net Present Value (“NPV”) and the Internal Rate of Return (“IRR”)?”
Answer Team:海南福彩网 Yes, these could be potentially accomplished by entering into a Lease Option for the mobile equipment fleet at the mine and the generators planned for site power creation. Also contract mining could be implemented precluding the need for capital expenditures related to the mine production.
In the case of the numbers presented above for the concentrate sale option, the initial and sustaining capital costs could be reduced if the equipment providers were to agree to this type of financing. One could potentially reap a reduction to the initial capital expenditures for the mining and concentrate haulage fleets.
海南福彩网Reduction of the capital cost expenditures and its impact on the projected NPV and IRR will be partially offset by increased operating costs. The terms and conditions will likely vary by manufacturer and it would be inappropriate to provide any projection of the impact of leasing on the NPV or IRR.
海南福彩网This option will be considered when appropriate but for now, we recommend that the PFS numbers be considered as the most representative.
“To me, use of Class 1 nickel in the fabrication of stainless steel is being wasted. With a limited number of sulphide deposits available and with almost no exploration for sulphide nickel during the last 10 years, should this inventory of nickel be exclusively used to make more environmentally compatible batteries? Do you see the potential for Class 1 nickel becoming a strategic commodity earmarked for battery use only?”
Answer Team:海南福彩网 Nickel is an integral part of everyone’s life. Last year, the world’s per capita consumption of nickel was about 0.65 kg. Of the 2.2 million tonnes of nickel consumed, only 60,000 to 70,000 nickel tonnes (2.0 million vehicles) were used in the production of batteries for the electrification of the vehicle market (“EV’s”).
海南福彩网Looking at the international light vehicle market, Scotiabank predicts about 80.0 million total units are to be sold this year with 3.3 million being EV based. Long term light vehicle sales are projected to grow by about 60% from now till 2040.
海南福彩网With a minimum amount of nickel being used in the production of the batteries for EV’s today, Bloomberg projects (by 2040) that a third of all new vehicle sales will be EV units with the remainder being the Internal Combustion Engines (“ICE”). Though EV sales will increase as a percentage of total vehicle sales, the sale of ICE based vehicles will likely continue to remain a substantial part of the world sales over the next 20 years.
Given the projection of 3.3 million new EV based vehicles sales for 2019, demand for battery quality nickel will increase by 65% based on the prevalent 6:2:2 (Ni, Li, Co) design. Currently, newly reconfigured designs are based on an 8:1:1 composition which will further increase the demand on battery style nickel starting as soon as 2020.
The exponential growth in the demand of nickel for battery production alone will most likely substantially disrupt the nickel market. Given current nickel consumption / production rates and the increased demand related to EV’s, a substantial shortfall in nickel production is projected to occur in 2025 and increase to as much as 1.8 million tonnes by 2035. To put this in context, about three new Kun-Manies have to be discovered, engineered, built and mined every year based on the 2035 projected nickel requirements.
Given the projections by various market analysts, the on-going international protectionism (trade wars), the rapidly developing electrification of grid and transportation systems, we do not envision the world’s nation states being able to establish a mutually beneficial mineral policy related to any mineral commodity such as earmarking Class 1 nickel for the EV market.
“What percent of the initial capital could be debt financed from the information the banks have been providing? What kind of institutions would be interested and are on your consideration list?”
Answer Team:海南福彩网 Obviously we would look to the institutions that have the ability and desire to fund mining projects located in Russia. As we are East Asia based and located near the largest consumers of nickel in the world, the target would be Chinese, Korean and Japanese based institutions. Institutions experienced with Commercial debt in the four areas of Sponsorship, Offtake, EPCM and Equipment are all of interest. Private Equity Funds, Sovereign Wealth Funds, Corporate (mining companies), Institutional Investors, Commodity Traders, Equipment Providers and Offtake organisations are also considerations for continued discussions.
With regard to debt financing, this will vary based on the projected nickel price (or total revenues if a Low Grade Matte is to be produced). At current nickel prices of about $6.00 per pound, there is a wide range based on our discussions with various funding institutions and the metal traders that would market the final saleable product. One could expect a range from 50% to 70% debt to equity.
“The two options summarised in the PFS indicate a “robust” project based on the parameters used by Amur. Class 1 nickel is reported to be the product for use in the EV batteries. What would have to done to make a battery product for the growing number of worldwide battery manufacturers?”
Answer Team: Delivery of battery ready nickel sulphate for use in the manufacture of Electric Vehicle batteries requires the highest quality product and must exclude any impurities. These impurities can substantially reduce battery performance and battery life.
So how do we get to a Class 1 nickel product and where do we fit in the nickel sulphate supply chain? Being a nickel sulphide project, the path is relatively straight forward and more cost effective than that of the more expensive lateritic ores. Please see the CRU figure below which depicts some of the pathways to production of battery ready nickel and where we stand in the process line.
海南福彩网The concentrate sold in an off take agreement (our toll smelt option) will be smelted to generate a matte (our second production option). The matte will be further refined to generate the Class 1 nickel product.
To produce the required high end sulfate battery product, the Class 1 nickel undergoes further processing where the nickel cathodes and briguettes are digested through an acid dissolution process creating a nickel sulphate precipitate. This nickel sulphate undergoes a purification step allowing for it to be of a suitable quality for its subsequent use in the generation of NMC of NCA battery cathodes.
“Why should investors be bullish on Kun-Manie?”
Answer Team: For more than a decade, exploration for nickel sulphide deposits has been almost nonexistent. For this reason, the source of nickel has shifted from sulphide to lateritic deposits. The growing demand for battery metals, of which Class 1 nickel is a primary component, will pay dividends to those few companies that have been exploring and are now readying their projects for development, such as Amur. With Electronic Vehicle’s becoming the norm in the near future, nickel sulphide (the primary source to Class 1 nickel) resourced companies will likely become upstream providers to the battery industry.
The exponential growth of the EV sector will substantially impact how nickel is consumed. Presently approximately 70% of nickel is consumed in the fabrication of stainless steel. Nickel consumption by the EV industry last year was only 60,000 tonnes of the world’s 2.2 million consumed tonnes. Norilsk Nickel projects that bullish nickel consumption by the EV industry will be as much as 500,000 tonnes per year by 2025 and in the longer term, more than a million tonnes per annum will be required less than five years hence.
海南福彩网The combined lack of historical exploration for nickel sulphide deposits and the accelerating growth of the EV industry (which is also increasing the nickel content in the batteries from a 6:2:2 configuration to that of an 8:1:1 ratio) is rapidly creating a potential high demand for deposits such as Kun-Manie. We have also been witnessing a near continuous reduction (nearly 50% since late 2017) in the Class 1 (required for batteries) nickel stockpiles in both London and Shanghai. Presently standing at about 200,000 tonnes, this represents about a 30 day supply.
With sulphide nickel representing about 30% of the world’s source of nickel (about 700,000 tonnes per year), it is now becoming urgent to discover and source Class 1 nickel sources to meet the electrification of the EV industry alone.
Our PFS indicates over a 15 year mine life we would generate over 500,000 tonnes of nickel. Only one year of battery supply if we were to source 2025 alone. It is incomprehensible to believe that a new Kun-Manie would have to be discovered, drilled, engineered, constructed and fully mined on an annual basis just to meet less than one year of demand for batteries alone. Especially when a insignificant amount of exploration has been conducted during the last decade creating what we believe to be a bright future for the limited number of large nickel sulphide deposits like ours.
“You have used $8.00 per pound nickel price and today’s price is really $5.89 per pound. The sensitivity analyses in the PFS say $6.16 (concentrate sale) and $4.87 (Low Grade Matte) per pound are the nickel price breakeven costs for the two options presented in this study. Based on these prices, the cutoff grade is actually higher and the tonnage of ore to be mined should be less than used in the study if the breakeven price. Shouldn’t there be two production schedules provided to reflect the lost (uneconomic) tonnes of ore due to breakeven price being lower than the $8.00 used as the long term nickel price? This would impact the economic assessment and potential of the deposit.”
Answer Team:海南福彩网 You are correct and are referring to the impact of a changing cutoff grade (COG). As metal prices, operating costs and or metallurgical recoveries vary, the COG will increase or decrease having an impact on the number of profitable tonnes that are to be delivered to the processing plant at the site.
The PFS Life of Mine Concentrate Sale only COG (combination of both open pit and underground mining considerations) is projected to be in the order of 0.35% nickel based on the $8.00 per pound nickel price. At the PFS identified breakeven nickel price of $6.16 per pound, the COG increases to 0.46% nickel.
海南福彩网We note the resource models are defined using a minimum nickel content of 0.40% which is higher than the presently anticipated 0.35% nickel COG at $8.00 per pound of nickel. It is not until the nickel price decreases to $6.97 per pound that some of the reported mining production is lost. Because we have used the 0.40% nickel grade to define the resource, there is no impact on the reported production schedule.
At the breakeven price of $6.16 per pound nickel shown in Table 1.17 of the Executive Summary, a reduction of the tonnage reported in the production schedule may be incurred. For this nickel price, the COG would be in the order of 0.46% nickel. The total tonnage of material between 0.40% and 0.46% nickel is very limited and would likely be mined as a part of mining dilution and or internal waste which cannot be selectively removed during actual mining. Hence a single production schedule was deemed appropriate for the study and the not yet included resource expansion from the 2018 drilling results will likely more than offset the potential loss of lower grade ore. It is also noted that the 2018 drilling has likely converted Inferred resource to that of Indicated and is anticipated to result in a material change in the production schedule to be derived in future resource and reserve updates.
“Building a smelter to make Low Grade Matte is reasonable with a lot of additional money coming from the other metals. You have never highlighted any market consumption numbers on copper which looks to be the next major contributor of revenue to Kun-Manie and I would like some additional information on copper demand.”
Answer Team: Projections for world consumption of copper during 2018 are around 30.6 million tonnes, up from 2017 which was 30.0 million tonnes. Copper’s primary use is related to the electrification industry consuming about 75% of all copper production. Growth in the EV market will likely increase the demand for copper to allow for construction of charging stations and the associated infrastructure for such stations.
Preliminary demand indications related to the EV market will require an increase in the annual copper production by as much of 10 to 15%. The average person consumes about four kilogrammes of copper per year and this is project to increase by about 25% over the course of the next 15 years.
海南福彩网As for the copper contribution reported in the PFS, a total of about 98,000 tonnes of payable copper is projected for recovery if we build the furnace at the rail stations located along the Baikal Amur rail line. At the current copper price of $2.90 per pound ($6,400 per tonne), this represents approximately $625 million of additional revenues.
It is also noted in the executive summary that there is the potential of generating a copper concentrate at the mine site. Should this be confirmed, we would then be able to produce this separate copper concentrate allowing for its sale into the market based on far more favourable contract smelting terms than that derived in a nickel only concentrate operation. Also, successful generation of a copper concentrate would likely increase the number of payable copper tonnes. Our PFS results for the Low Grade Matte production option have utilised $3.00 per pound of copper.
“I have not seen the use of Alternative Performance Measures and Reconciliation (“APMR”) indices before. These are not available for most mineral projects that I can find. Please provide more information on this terminology.”
Answer Team: The APMR is predominantly utilised by the mineral resource industry. It allows for the calculation of unit costs at various stages of a project. For instance, at Kun-Manie it is possible to determine typical costs to produce a pound or tonne of nickel at various stages. These calculated values allow comparison of projects which often differ significantly in relation to metal contents (average grades), unique metallurgical recoveries, varying by-product contents, country specific net profits taxes, metal royalty payments, operating costs (underground vs open pit), etc. Transportation and smelting costs also vary substantially depending on the often unique off take agreements, fees, penalties and the amount of revenue derived from varying payable metals. As these variables are unique to each mine, this approach attempts to generate a standardised set of costs allowing for a more direct comparison of operations.
海南福彩网This approach is applied to specific commodities and the calculated values allows for a way to rank projects based on the revenue source such as nickel. The approach is intended to define an all in cost. The curves also include these C1 costs based on a metals source (say laterite versus sulphide). For nickel, the C1 curve clearly demonstrates that sulpide operations are consistently lower with regard to nickel unit costs than those of lateritic deposits. It is noted that the nickel C1 curve for suphide deposits (suited for Electric Vehicle battery manufacturing) dominates the lower cost portion of the curve than that of the lateritic deposits.
“What does it take to get to the final access road design?”
Answer Team: Boots on the ground. We have already conducted the preliminary road survey reported in previous study and RNS results. We have a selected route which roughly parallels our winter ice road route using existing hydrological maps of the river system and detailed maps of the topographic terrain that must be traversed. A series of steps to be implemented includes the following:
- An independent and certified road construction company will be engaged.
- The currently defined route will be examined and modified to take into account adjustments necessary to take into account areas of potential land slide, inaccessible terrain, etc.
- Surface soil (geotechnical considerations) characteristics will be evaluated to establish road base construction requirements and stability design parameters.
- Bridge abutments must be evaluated to design appropriate access and departure points and the required support.
- River / stream flow volumetrics will be defined to allow for appropriate bridge design and water diversion considerations (culvert sizing, etc.).
- Identification of the sources of fill material necessary for valley fill crossings and areas of potential side hill cuts.
- Final road route designs are finalised and compiled for approval by the Russian Federation allowing for the allotment of road right away assignment (also identified as a linear allotment).
“Being in Russia, are the environmental standards lower than that required by a project that will be financed by a western consortium of funders?”
Answer Team: In the west, it is the Environmental and Social Impact (“ESIA”) that is compiled, whilst in Russia it is the OVOS (roughly translated to “Assessment of Environmental Impacts/EIA”). These are very similar but do differ in format and presentation. Generally, the differences between the two systems are:
- Audience: The ESIA targets public disclosure and review from the viewpoint of financial lenders. The OVOS is intended for internal Russia expert review compiled during the permitting process.
- Scope: The ESIA is a comprehensive review of all associated infrastructure elements, including access roads, power lines, water supply system, and other facilities. The OVOS considers these as separate projects.
- Technical Scope: An ESIA considers greenhouse gas emissions, noise, and OVOS is not required to cover these in the same rigorous manner. The ESIA also takes a more rigorous assessment to biodiversity and ecosystem impacts, social impact assessment and baseline studies.
- Public Consultation and Disclosure: An ESIA procedure requires preparation of non-technical summary for information disclosure whilst the OVOS does not, however recently the OVOS has implemented an increased town hall / community style presentation.
- Mitigation Measures and Management Systems: Under OVOS technical design solutions rather than management measures are considered to be mitigation measures. OVOS does not require development of environmental and social management system nor inclusion of stakeholder engagement plans.
- Environmental Standards: In the case of an ESIA, standards used to assess an environmental impact are formed based on international best practices. In case of the OVOS, national regulations are derived from the state regulatory system and do not always coincide with the international organisations’ requirements.
The standards for the two reports are very similar. In the case of Amur Minerals Corporation and the Kun-Manie project, we must compile an OVOS as we are working within the Russian Federation. Given the scale and size of the project and that financing may require a consortium of financial institutions (including western based groups), a parallel ESIA level document using the same information is likely to be compiled to meet the needs of western based organisations.
“What is an umpire lab? The last RNS (6 February 2019) has a flow chart and for the first time you talk about the “umpire”.”
Answer Team: An umpire laboratory is a third laboratory which is not related to the first (source of the original analytical results) or the second (the laboratory that generates a second set of results for about 5% of the original samples) source of the check results.
海南福彩网An umpire is used when the first and second laboratory results significantly differ. We have used an umpire laboratory in the past when certain subsets of samples differ by more than 10%. This third set of results allows us to identify which laboratory is generating the most representative results.
Historically, use of an umpire has consisted assaying of a limited number of samples and thus far Alex Stewart certified procedures have been determined to have an accuracy suited for JORC (Dec 2012) Mineral Resource Estimation.
As we approach production and we compile the mandatory Russian TEO report, we may require additional umpire work. A Russian TEO requires the two results to be within 5%.
“The switch to an 8:1:1 battery is reported to reduce the cost of an electronic vehicle. How substantial would the saving be?”
Answer Team: For your convenience, the following table presents the composition by per cent of the two batteries referred to in your question.
|Commodity||6:2:2 Battery||8:1:1 Battery|
If one examines the cost to manufacture the two batteries (per cathode kilogram of battery) using today’s metal prices for nickel (about $5.50 per pound) and cobalt (about $15.00 per pound), the 6:2:2 battery contains a total combined nickel and cobalt metal value of about $12.50. The 8:1:1 battery contains a total combined nickel and cobalt metal value of about $11.70 per kilogram of battery. Hence, the shift to the more nickel dominant battery chemistry nets a savings of about $0.80 per battery kilogram (6.5%) within the cathode only.
This simple calculation is a pure cost comparison and obviously does not include consideration of the market dynamics related to country risk of the products. The predominant market for cobalt production is the Democratic Republic of the Congo (“DRC”) whilst that of nickel is available throughout multiple countries which have substantially lower country risks.
“Last year, in the FAQ’s, you presented a summary on the stockpile inventory and related nickel prices, based on the inventory of nickel. What is your forecast now that the LME stockpile is less than 200,000 tonnes?”
Answer Team: Over the last 12 months, the LME nickel stockpile inventory has been nearly halved from about 380,000 tonnes. The Shanghai inventory has been reduced even more and is now about 14,000 tonnes. These are both very substantial reductions and the combined balance now represents from 30 to 40 days of supply (Class 1 nickel) with the current combined inventory now being at its lowest level in five years.
海南福彩网By forecast we assume you are speaking of the nickel price. Curiously, during this near six month drawdown, we have seen the nickel price decline from about $6.75 per pound to a low of about $4.75 per pound. To us, this does not make sense. Reduced inventory typically means increased prices. This may be a short term market aberration but we note that last year’s FAQ on nickel stockpile vs nickel price indicates a historical average of the about $6.88 a pound when inventories are at this level.
Long term nickel prices forecast by CRU and Mackenzie indicate increased prices over the course of the remainder of his year and even higher looking to the future. We will leave the long term nickel price prognostication to the experts.
“Why not use the lower cost zeppelins to transport the ore to the market?”
Answer Team:Once again the zeppelin concept “floats” into the discussion. Amur investigated this as an option several years ago. These do not represent a financially viable option due to their high capital cost per unit and there is no operational case that demonstrates the ability of such a fleet to maintain the production capacity required to support the planned Kun-Manie operation where about a million tonnes a year transport capability is required.
“Why was the true cost of open pit mining not considered in the 2 May 2018 calculation of the C1 cost? It has been stated that the steep ground has not been considered and this understates the C1 cost presented for the analysis that was provided.”
Answer Team:海南福彩网 This is an incorrect assumption. It was included and has been for all proposed production reported and defined in the May RNS. For the more than 12 year production case presented, a total of 207 million tonnes of open pit waste was mined to extract 41 million tonnes from the open pits. This is about five tonnes of waste to be removed to mine one tonne of open pit ore. The proposed production is shown in the Mining Production Table and all mining tonnages (ore and waste) were used in the determination of the C1 costs.
Looking beyond this May 2018 schedule of production and assuming that the pits can only be deepened and not extended along strike, then the ratio of waste tonnes mined per ore tonne will increase to mine the deeper ore. This does not mean the C1 cost per pound of nickel will increase. Simple stripping ratios cannot be used to determine the C1 cost. It is the payable pounds of nickel so if the grade is higher, it is possible that the C1 cost per payable pound could actually decrease. Again, this assumes we can only deepen existing pits and there is no expansion or discovery of ore along or between the then identified ore bodies.
Expansion in depth only is not the case for Kun-Manie. Our 2018 drill programme which linked the two orebodies of Ikenskoe / Sobolevsky and Kubuk and in the areas where Inferred resources are present (March 2018 Mineral Resource Estimate), the depths to ore are similar to that which was used to determine a significant part of the open pit C1 costs reported in May 2018. One must be careful in making broad statements on the C1 being understated until the open pit designs are finalised.
海南福彩网We also note that in June 2018, we reported RPM Global generated open pit results where the limits of the pits would change if the Inferred resource was converted to Indicated resource. The stripping ratio actually decreased when the Inferred resource was included. For convenience, we include the link to the pdf file showing the results.
In conclusion, it is not the stripping ratio alone that increases the C1 cost, it is the amount of payable metal that is mined to determine the C1 cost. In other words, it is the thickness of the ore and average grade of the ore that can be mined that determine this important metric is evaluation of all in operating costs.
The Answer Team wishes shareholders and readers happy holidays and will be returning 7 January 2019.
“Have you given up on the creation of a battery ready product?”
Answer Team:海南福彩网 The Company is evaluating the preferred pathway to revenue generation. Presently, we are evaluating the sale of concentrate or a Low Grade Matte. Both products are well suited for the generation of Class 1 nickel product which can be used in the manufacture of batteries for the Electric Vehicle (“EV”) market.
海南福彩网This means the purchaser(s) of the product will ultimately dictate what product the final smelted nickel will be used in at that time. With the anticipated growth in the EV market, a substantial amount of the Kun-Manie nickel would most likely make its way into this product.
To generate battery ready product, a sulphate nickel product must be generated. This entails the addition of additional facilities suited to convert the sulphide to sulphate. Not unlike what BHP (Nickel West) is undertaking in West Australia.
There are two pathways for the Company to get to the sulphate product. We construct a leach plant / refinery allowing nickel sulphate generation and its sale, or, we strike an agreement with end users that can undertake generation of the sulphate product from our sulphide product and its use in its captive EV market. All options are being considered.
However, the first step is obviously getting Kun-Manie into production and generating revenues at as low a capital cost as possible which will be reported within the Q1 2019 issuance of the Prefeasibility Study.
“What is the TEO report all about, is it the same as a Bankable Study?”
Answer Team: Please follow the link below, this provides an overview of the Russian mining documentation stages leading to production.
In Table 2, the third column provides the type and level of information required. We note that there is a “Preliminary TEO” which the Company completed to acquire its current “Detailed Exploration and Mine Production Licence”. The work we are speaking of now is the “TEO of Mining Parameters”. This is a much enhanced version which is similar to a Feasibility Study and includes most of the information required within a Feasibility Study and key portions are also suited for inclusion in a Detailed Engineering Study (Bankable Feasibility Study).
“Will England and Russia actually work together in developing projects? What was the mood at the Russian – British Business Forum in London held in November 2018 and was it of any benefit?”
Answer Team: This was the 4th annual Russian – British Business Forum themed “Partnership in Innovation”, the session was highly beneficial and informative to all attendees. The strength of this forum is its continuation to keep the doors of communication open between the businesses of Russia and Britain.
Such gatherings allow one to one and group communications to continue on an apolitical basis. Encompassing numerous business sectors beyond that of mineral resource and mining sector, we have provided links to the forum to provide a more informed understanding of the considerations and attitudes of the ongoing business relationships between the two countries. Please note the audio links fully cover the conference presentations which are done in either English or Russian, depending upon the speaker. The first 15 minutes of the introductory presentation provide an overview of the advancements made in the working relationship between Russia and Britain since inception of the forum.