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Rusina Mining

Rusina Mining is cashed up and knuckling down

Rusina Mining (‘Rusina’) reminded investors this week that unlike many junior mining companies, cash is not an issue. Rusina Mining (50%) and DMCI Mining (50%) - a subsidiary of Philippine-listed construction company DMCI Holdings (PSE: DMC) - have a Direct Ship Ore (‘DSO’) agreement whereby DMCI is responsible for all funding, mining, grade control, rehabilitation, road and port developments, and the marketing and sales obligations of 5 million tonnes of ore over 5 years. In the last quarter, three shipments totalling 160,418 wet metric tonnes (‘wmt’) grading 1.7% nickel, were shipped into the DSO market in China, helping Rusina to boost its cash and receivables balance to A$10 million, from A$7.3 million a year ago.

Rather than employ its own mining fleet, build a port, and market and ship the ore, MD Rob Gregory, CEO of Rusina Mining, chose to joint venture the project with experienced Philippine operator DMCI. The price – 50% of the profits – represents a good deal, for two reasons: firstly, it eliminates Rusina's need to find capex. Secondly, it utilises DMCI's mining skills, personnel and contacts – DMCI provides the workforce and absorbs more than its fair share of operating risk. However, this deal is only for 5 million tonnes over 5 years – 10% of the Acoje laterite resource. It puts bread on Rusina's table but it is not the long-term future.

Rusina’s decision to vend out 50% of the project appeared to be a shrewd move after it confirmed this week that temporary furnace closures in China, ahead of the Olympics, would result in a forecast of only 100,000 wet metric tonnes for shipping in the current quarter. Shipments are expected to pick up again after that, however, and the partners are also in discussions with potential buyers in Japan and Australia.

The shipping alliance is just the first project of several in a flourishing partnership with DMCI. Also in the pipeline, Rusina and DMCI are fast-tracking a feasibility study to process further Acoje laterite ore, to the tune of 5-6,000tpa of nickel metal. This is a very different project, using DMCI's nearby Semirara coalmine to fuel a calcine kiln, and probably even an electric arc furnace. The idea is to create and ship an intermediate product. Ultimately, if it goes ahead, Rusina will enjoy a free carry of 40%.

Rusina's challenge will be to provide saprolite ore at a consistent grade of 1.7% or better. The end product would be an added-value nickel/iron product in one of several forms, depending upon which of four processes is finally adopted.

This week, in its quarterly update, Rusina confirmed that DMCI is fast-tracking the feasibility study of the ferronickel facility, so that implementation of the first phase can begin as soon as possible. DMCI added that they are looking for a suitable property near Acoje, and are in talks with technology partners. Also, in the quarterly update, Rusina confirmed that a pre-feasibility study into heap leaching Acoje Ore, in partnership with European Nickel (AIM: ENK), is now 70% complete and should be finalised by September. European Nickel is spending up to US$10 million on the study in return for a 40% stake in the project, leaving Rusina with 40% and DMCI with 20%.

As a rule, inexpensive heap leach technology doesn't work well for laterites, but tropical high-clay laterites seem very amenable to the process technology jointly owned by European Nickel and BHP Billiton (ASX & LSE & NYSE: BHP), which Gregory describes as “world-leading”. Meanwhile, work on Acoje’s Chromite and Platinum Group Metals (Rusina 80%) has returned mixed results. The collection of lumpy ferrochrome by a local workforce is “growing slower than anticipated”. The slow start was blamed on the sporadic nature of the ore. DMCI has since sent in additional machinery to assist the local miners and the first shipment of a bulk sample should be ready “soon”.

Delays were also reported for drill results on the PGM, nickel sulphide and chromite exploration campaign, and Rusina also confirmed that it was seeking a third party who could advance the project.