European Nickel (LON:ENK, ASX:ENK) will have to switch its attention to the Acoje nickel project in the Philippines, after it suspended the development of the Çaldağ project in Turkey.
The company had reached an advanced stage with Çaldağ, it had project financing arranged and the only thing holding up proceedings was the re-issue of a forestry permit. It has now decided to put the project on care and maintenance, suspending development until the permit is received.
Consequently, the off-take deal with BHP Billiton (LON:BLT, ASX:BHP, NYSE:BHP & BBL) has now been terminated by mutual agreement.
“We cannot tread water indefinitely at Çaldağ until the permit is re-issued, and the board believes that our efforts and resources are better deployed at Acoje in the meantime," managing director Rob Gregory said.
European Nickel will now fast track the Definitive Feasibility Study (DFS) for Acoje.
“Whilst we are disappointed that, despite repeated assurances, the forestry permit for the Çaldağ project has yet to be re-issued, we do have an equally viable alternative project in Acoje which has the potential to be significantly larger and longer life than Çaldağ,” Gregory added.
First it will start up the heap leach trial facility during the first quarter of 2011. The Çaldağ technical team will be transferred to Acoje.
The company highlighted that a significant amount of the metallurgical information from Çaldağ is readily transferable to the Acoje DFS.
Work on the DFS initially began in March 2009, but now it will become much more important.
An earlier Pre-Feasibility Study (PFS) confirmed that Acoje was an economically viable nickel heap leach project - with a base case considering a 24,500 tonne per annum operation and a 10 year mine life.
“Acoje offers attractive project returns, based on the PFS, as demonstrated by the project's NPV of US$586 million, at a discount rate of 10% and an project IRR of 37.2% using a long term nickel price of US$7 per pound and cobalt at US$10 per pound,” the company stated.
It stressed that there is significant potential to extend the mine life, by upgrading the JORC Inferred resource up to the indicated category.
European Nickel said it would reassess the two projects once Çaldağ’s permits have been received. A decision will be made with consideration to the progress made at Acoje whilst Çaldağ is on care and maintenance.
It emphasised that Çaldağ’s processed nickel product is an extremely high grade concentrate, with a contained metal value of around 35%.
Even though the BHP off-take has been terminated, the company highlighted that a number of other parties have an interest agreeing a new off-take deal. It is expected that negotiations will begin once the forestry permit has been received.