Nickel

Content maintained by Yanis Miezitis

• Nickel
• Resources
• Accessible EDR
• JORC Reserves
• Exploration
• Production
• World Ranking
• Industry Developments

More than 80% of nickel production is used in alloys. When alloyed with other elements, nickel imparts toughness, strength, resistance to corrosion and various electrical, magnetic and heat resistant properties. About 65% of world nickel output is consumed in the manufacture of stainless steel, which is used widely in the chemical industry, motor vehicles, the construction industry and in consumer products such as sinks, cooking utensils, cutlery and white-goods.

Australia's Economic Demonstrated Resources (EDR) of nickel decreased by 13.8% from 24.0 million tonnes (Mt) to 20.7Mt in 2010 as a result of mining companies updating their resources. About 84% of Australia's EDR is in 15 deposits. Australia's EDR of nickel can be subdivided as follows:

• About 27% of Australia's EDR comprise Reserves as defined under the Joint Ore Reserve Committee (JORC) Code.
• About 32% is made up of published JORC Code compliant Measured and Indicated Resources in operating mines, in deposits being developed for mining and in deposits which have published scoping/feasibility studies with positive results.
• The remaining 41% of Australia's EDR are in deposits with Measured and Indicated Resources of similar tonnage, grade and ore type which are being mined elsewhere in Australia, but have not completed a scoping/feasibility study.

Western Australia (WA) retains the largest nickel resources with 90.8% of total Australian EDR. New South Wales (NSW) is the second largest with 4.8%, followed by Queensland (Qld) with 3.9% and Tasmania (Tas) with 0.5%. The EDR in WA comprises both sulphide and lateritic deposits, while EDR in NSW and Qld are associated with laterite deposits.

Subeconomic Demonstrated Resources, which accounted for about 8.1% of total Identified Resources, decreased from 9.9% during 2010. The Paramarginal Resources decreased from 3.0Mt to 2.4Mt, while the Submarginal Resources decreased from 1.9Mt to 1.3Mt in 2010. WA has 67.6% of the subeconomic nickel resources.

Inferred Resources decreased from 21.2Mt to 19.4Mt in 2010. WA maintained its dominant share of Australia's Inferred Resources with 92.3% followed by NSW with 2.9%.

Currently, all nickel EDR is accessible for mining. At the rate of production in 2010, Accessible Economic Demonstrated Resources (AEDR) of nickel is sufficient for about 122 years.

About 27% of AEDR is made up of Joint Ore Reserve Committee (JORC) Code Reserve. The remaining 73% of EDR represents resources assessed by Geoscience Australia from the Measured and Indicated categories of industry reported mineral resources, as defined under the JORC Code and other classification systems used by companies not listed on the Australian Stock Exchange.

Total JORC Code Reserves of nickel are adequate for 32 years at current rates of production.

Expenditure on nickel-cobalt exploration for 2010 as reported by the Australian Bureau of Statistics, was $235.7 million, an increase of 26.5% on 2009. WA attracted most of this expenditure with $227.8 million.

All of Australia's nickel production in 2010 was from WA and amounted to 170 kilotonnes (kt), up from 165kt in 2009, as reported by the Australian Bureau of Agricultural and Resource Economics and Sciences. The value of all nickel products exported was $4.008 billion. Australia was the world's third-largest producer behind Russia and Indonesia, accounting for 10.8% of estimated world mine production of nickel.

Based on figures published by the United States Geological Survey and the latest Australian resource figures, world economic resources of nickel increased to 75.6Mt in 2010 from 68.6Mt in 2009. Australia's share of world economic resources of nickel was 28.4% in 2010. It remained the largest holder of economic resources followed by Brazil (11.9%), New Caledonia (9.7%), Russia (8.2%) and Cuba (7.6%).

Russia was the largest producer with 265kt (16.8%), followed by Indonesia with 232kt (14.7%), Australia with 170 (10.9%) and Philippines with 156kt (9.9%).

During 2010 the nickel price continued to recover from the 2008/2009 global financial crisis from an average of US$18 439 a tonne in January 2010 to US$26 035 a tonne in April 2010 before retreating to US$24 111 a tonne in December 2010. The average price for nickel in 2010 was about US$21 800 a tonne, an increase from about US$14 700 in 2009 (London Metal Exchange cash prices). In its annual report for 2011, BHP Billiton stressed the importance of the Chinese market on global demand and prices for all mineral commodities, including nickel. During 2010, China represented 59% of global seaborne iron ore demand, 39% of copper demand, 38% of nickel demand, 41% of aluminium demand, 42% of energy coal demand and 10% of oil demand. China's requirement for these commodities has been driving global materials demand for the past decade.

The major sulphide nickel mines, which are owned by BHP Billiton's Nickel West, continued operating at Leinster, Mount Keith and Cliffs north of Kalgoorlie, WA. Smaller sulphide nickel mines continued to be operated by Xstrata Nickel Australia Pty Ltd, Mincor Resources NL, Panoramic Resources Ltd, Western Areas NL and Independence Gold NL. Minara Resources NL's Murrin Murrin lateritic nickel mine also continued to operate. In February 2010, BHP Billiton sold its Ravensthorpe operation to First Quantum Minerals Australia Nickel Pty Ltd which announced in October 2010 that it would recommission the mine in the second half of 2011. First Quantum began production of nickel at Ravensthorpe in October 2011.

Nickel sulphide deposits

BHP Billiton's has reported that, its WA operations produced 170 500 tonnes of nickel during 2010 with most sourced from the Mount Keith, Leinster and Cliffs mines. Production was up from 113 400 tonnes in 2009. Nickel production is affected increasingly by restrictions in hydrogen supply at Nickel West's Kwinana refinery, which is resulting in an increasing proportion of nickel matte being exported to overseas customers.

Most of the nickel ore treated at the Kambalda, Leinster and Mount Keith concentrators is smelted at the Kalgoorlie nickel smelter into nickel matte containing about 66% nickel. The mill and concentrator at Kambalda are supplied with third party ore and produce concentrate containing about 13% nickel. About 43% of the nickel matte was sold to overseas customers during 2009/10 compared with 60% in 2010/11. The nickel matte not sold overseas was refined at BHP Billiton's Kwinana nickel refinery to produce London Metal Exchange (LME) accredited nickel briquettes, nickel powder and other intermediate products such as cobalt-nickel-sulphide. The Kwinana nickel refinery has a capacity of 65 000 tonnes per annum (tpa) of nickel metal. BHP Billiton reported that a new hydrogen plant is being built at its Kwinana refinery and is expected to be completed in the second quarter of 2012.

OJSC MMC Norilsk noted in its annual report for 2010 that there was no nickel production from any of its Cawse, Black Swan, Lake Johnston, Waterloo and Honeymoon Well projects in WA. During 2010 the company was investigating the possibility of preliminary enrichment of the ores processed at the Lake Johnston operations and Tati Nickel in South Africa. The Lake Johnston operations 500 kilometres east of Perth, WA, include the Maggie Hays mine which re-opened in 2011. The company investigated options for adapting existing nickel processing facilities at Cawse for the use of a new hydrometallurgical technology. The plant was expected to be reoriented towards the processing of sulphide feedstock from Norilsk's Australian sulphide nickel deposits. Norilsk is planning to produce a nickel hydroxide with a nickel content of about 50%, which bypasses smelting by directly refining the semi-product. The use of this technology is expected to reduce the costs of refined metal. It also reported that exploration expenditure in Australia in 2010 was minimal with spending mainly on geophysical and geochemical surveys in the Lake Johnston area and drilling and geophysical work on Honeymoon Well. The company reported that its capital investments in Australia in 2010 amounted to US$10 million spent on the acquisition of a power plant for the Cawse enrichment plant and to finance the restart the Lake Johnston operation.

Xstrata Nickel Australasia operates the Cosmos nickel project in WA made up of a concentrator at Cosmos and mines at Alec Mairs, Tapinos and Prospero. Another operation, the Sinclair mine, which has its own concentrator, is about 100 kilometres southeast of the Cosmos operations. Xstrata announced in its 2010 Annual Report that metal in concentrates produced in 2010 from the Cosmos operation, amounted to 16 961 tonnes nickel, 687 tonnes of copper and 245 tonnes of cobalt¹. Total ore milled in the period increased by 10% to 383 293 tonnes. The concentrate is transported by truck to the coastal town of Esperance and shipped to the Xstrata nickel smelter in Sudbury, Ontario.

Western Areas NL nickel mine at the Flying Fox deposit in WA produced 8097 tonnes of nickel in concentrate in 2009. Western Areas reported that, by the end of 2010, the main decline at Flying Fox had advanced to 1073 metres below the surface and was well advanced into the T5 orebody. The planned decline development reached the base of the T5 orebody during the March quarter of 2011. Open cut mining at the company's Spotted Quoll deposit advanced to a depth of 100 metres and open cut mining is expected to be completed by the March quarter 2012. The company also announced that stage one of a feasibility study for the underground operation at the Spotted Quoll deposit was completed during December 2010 and indicated promising financial returns with a mine life of eight years. All ore mined at Spotted Quoll is treated at the Cosmic Boy concentrator, which was upgraded during the first half of 2010 to a capacity of 550 000tpa. The nickel concentrate from the Cosmic Boy plant is delivered under off-take contracts to BHP Billiton in Kalgoorlie and to the Jinchuan Group in China.

During 2010, Panoramic Resources Ltd's underground mine operation at Savannah in WA produced 6661 tonnes nickel, 3626 tonnes copper, and 364 tonnes cobalt. Nickel concentrates produced at the Savannah plant are contracted for sale to the Jinchuan Group in China. In 2010 Lanfranchi (WA) produced 10 264 tonnes of nickel and 851 tonnes of copper. Panoramic Resources has commenced work to optimise production from three production nickel channels in the Lanfranchi area (Helmut/Deacon, Schmitz and Lanfranchi) and has discovered additional nickel mineralisation down plunge from the Helmuth South deposit. Feasibility work has commenced also on the Cruickshank Orebody, six kilometres northeast of the Lanfranchi operations. The ore from the Lanfranchi operation is processed at the Kambalda nickel concentrator owned by BHP Billiton.

Mincor Resources NL nickel production for 2010 was reported under two groups of operations in WA, They are the North Kambalda operation made up of the Otter Juan, Coronet, McMahon and Mincor's 70% interest in the Carnilya Hill mine. The operations yielded a combined production in 2010 of 3973 tonnes of nickel, 367 tonnes of copper and 70 tonnes of cobalt. The Southern Kambalda operations produced 3988 tonnes of nickel, 382 tonnes copper and 73 tonnes cobalt, from the Mariners and Miitel operations.

Independence Group NL reported total production for 2010 of 9483 tonnes nickel and 652 tonnes copper from its McLeay, Victor South, Moran and Long mines in WA. The first ore was mined in the first quarter of 2010 from the newly delineated Moran deposit.

Fox Resources Ltd continued metallurgical testing for a possible local indigenous bacterial heap leaching operation to treat nickel and copper resources from the Radio Hill mine and the nearby Sholl deposit in WA. In mid-2010 the company announced updated Indicated and Inferred Resources of 4.22Mt at 0.65% Ni and 0.76% Cu for its Radio Hill mine. An Indicated and Inferred Resource of 5.78Mt at 0.54% Ni and 0.67% Cu was also reported for the Sholl B2 deposit. In September 2011², Fox Resources released a preliminary scoping study, revised from March 2011 for its heap leaching project. The heap leaching operation is expected to have a net present value of $73 million (8% discount rate) and an internal rate of return of 31% over the nine year life of the mine. The project is estimated to produce a net operating cash flow of $125 million with project revenues of $815 million over the initial mine life.

During 2010, Minmetals Resources Ltd commenced an extensive technical study of the Avebury mine in Tas to assesses options for possible restart of operations in the future³.

Lateritic nickel deposits

The annual production for 2010 from the Murrin Murrin lateritic nickel plant in WA operated by Minara Resources Ltd was 28 378 tonnes nickel and 1976 tonnes cobalt. The company continued drilling and scoping studies on the viability of processing ore from the Mount Margaret-Marshall Pool lateritic nickel deposits as a feed for the Murrin Murrin operation. Minara Resources' capital program for 2010 focused on completion of key projects which were causing a bottleneck, including the high density slurry project (increasing ore leach throughput) and adding the sixth autoclave and second flash vessel in the nickel reduction area of the plant. Additionally, during the 2010 September quarter, development of the Murrin Murrin East orebody commenced which is expected to improve the delivered grade of nickel to the plant over the next five to eight years. Minara is planning to lift its nickel production to between 33 000 and 37 000 tonnes of nickel metal. In October 2011, Minara Resources was taken over by Glencore Investment Pty Ltd and was removed from listings of the Australian Securities Exchange.

First Quantum Minerals Australia Nickel Pty Ltd acquired the Ravensthorpe lateritic nickel operation in WA from BHP Billiton in February 2010. In a media release on 3 November 2011, First Quantum reported that

• The plant is performing well and ramping up as planned towards commercial operations before the end of 2011.
• First production of nickel contained in mixed hydroxide was achieved on 4 October 2011.
• Re-constructed plants consistently achieving design throughputs.
• Both Atmospheric Leach and Pressure Acid Leach plants have been brought on line.

First Quantum Minerals is planning to produce 39 000tpa of nickel metal for the first five years and 28 000tpa for the remainder mine life of about 30 years.

The NORNICO project (Qld) is owned by Metallica Resources Ltd and includes five key nickel laterite deposits at Greenvale, Lucknow, Kokomo, Minnamoolka and Bell Creek. NORNICO's combined resource base of Measured, Indicated and Inferred Resources stood at 49Mt at 0.81% Ni, 0.09% Co, using a 0.7% Ni equivalent cut-off grade (Ni equivalent is calculated using Ni% + 2Co% when the resource was estimated in early 2011). Metallica Resources currently is conducting studies into the feasibility, permitting and mineable resource, as well as ongoing detailed metallurgical testwork and scandium market development. In April 2011, Metallica decided to change NORNICO's development strategy from a 180 000tpa heated atmospheric acid leach process to a conventional high pressure acid Leach (HPAL) process with its own acid-power plant at greatly increased feed rates. A specialist Brisbane based engineering firm, Ausenco Vector, is preparing an analysis for a HPAL processing facility with acid and power plant sited on the Greenvale minesite. Mining studies are focused on defining the optimal mineable resource base to underpin a 20 year mining and processing operation, currently envisaged to be in the 500 000 to 1milliontpa range. There has been significant customer interest in the company's potential to become a scandium producer.

Metals X Ltd completed the first phase of a feasibility study for the Wingellina lateritic nickel deposit in WA in mid-2008 and confirmed a project concept for the construction of a nickel and cobalt operation producing approximately 40 000tpa nickel and 3500tpa cobalt with an initial mine life of 40 years at an operating costs of less than US$3.50/lb of nickel after cobalt credits. Based on a nickel price of US$20 000, cobalt price of $45 000 and an exchange rate of US$0.85, the estimated after tax net value of the project was $3.4 billion. In July 2010 Metals X signed a Mining Agreement with the Ngaanyatjarra Land Council for the Wingellina project. The agreement is subject to regulatory approvals and a mining lease being granted. It is also awaiting completion of final water, environmental and the majority of its technical studies⁴.

The previous partner (Vale Inco) in Heron Resources Ltd's Kalgoorlie Nickel Project (KNP) in WA withdrew from the project in July 2009 after spending $34.5 million on feasibility studies. Vale Inco completed a pre-feasibility study on four lateritic nickel deposits of the KNP project and Heron released a summary of the results in February 2009. That summary stated that the study investigated a project sized for up to 36 000tpa of nickel intermediate product with a mine life of 34 years. A high pressure acid leach operation was considered to be the best leaching technology with nickel and cobalt extractions of 96% nickel and 93% cobalt. Cash operating cost was estimated to be US$4.42 a pound of nickel (including cobalt credits) and the capital cost was estimated to be US$1.5 billion. Heron Resources completed further metallurgical studies and a detailed mining study which considered optimising individual pits and the sequence for mining. This study evaluated the project performance over three production rate scenarios of 2.5Mt (Vale Base Case), 3.75Mt and 5Mt a year of leach feed. The company announced on 7 July 2011 that it had entered into a collaborative research agreement with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) to undertake a detailed mineralogical and metallurgical study of the ore types at the KNP.

The Barnes Hill project in Tas is a joint venture between Metals Finance and Proto Resources and Investments Ltd which owns the tenements. The project is based on a lateritic nickel deposit located in northeast Tas and has an Indicated Resource of 5.674Mt of ore grading at 0.820% Ni and 0.060% Co. The Indicated Resource includes a Probable Reserve of 3.956Mt at 0.840% Ni and 0.060% Co. In addition, the Barnes Hill deposit has an Inferred Resource of 933 000 tonnes at 0.770% Ni and 0.059% Co. Metals Finance has the right to earn a 50% equity interest in the project through the completion of flow sheet designs, engineering and feasibility studies, procuring the funding required for implementation of the project and bringing it into production. When production starts, Metals Finance will be the operator for the joint venture.

1. Xstrata plc, 2011. Preliminary full year results 2010. 80pp.
2. Fox Resources Ltd, 2011. Quarterly activities report for the period ending 30 September 2011. 18pp.
3. Minmetals Resources Ltd, 2011. Bigger, stronger and ready to grow. 2010 Annual report. 166pp.
4. Metals X Ltd, 2011. Annual Report 2011. 126pp.