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Cassini Resources moves toward Nebo-Babel PFS milestone with OZ Minerals

JV partners CZI and Oz Minerals aim to confirm the West Musgrave project's potential with a Nebo-Babel PFS.
West Musgrave project in Western Australia on a map
OVERVIEW: CZI The Big Picture
The large undeveloped West Musgrave nickel-copper sulphide project in Western Australia
  • A West Musgrave project PFS is expected in the June or September quarters and will focus on the Nebo-Babel nickel-copper sulphide deposits 
  • Cassini’s now 30:70 JV with OZ is expected to see the nickel-copper-cobalt project advanced through a DFS to a decision to mine for the Nebo-Babel deposits
  • OZ’s funding and development capability will hold Cassini in good stead as West Musgrave is progressed, with Cassini's share of costs free-carried until a production start
  • Cassini has a priority list of other exploration projects in WA, including Mt Squires Gold Project and the Yarawindah Nickel-Copper-Cobalt Project

What does Cassini Resources do?

Cassini Resources Ltd (ASX:CZI) (FRA:ICR) specialises in base and precious metals exploration and development in Australia. It is run by managing director Richard Bevan, a corporate leader of more than 21 years who boasts 11 years of experience chairing companies in the services and mining industries.

What does Cassini Resources own?

The West Perth company's key asset is the West Musgrave joint venture project with Adelaide-based OZ Minerals Limited (ASX:OZL) in Western Australia.

West Musgrave hosts more than 1 million tonnes of contained nickel and 2 million tonnes of contained copper in resource and is considered Australia's largest undeveloped nickel-copper project.

Cassini picked up its flagship project from mining major BHP Group Ltd (ASX:BHP) (LON:BHP) (NYSE: BHP) (SWX:BHP) (OTCMKTS:BHPLF) in 2014 and recruited OZ as a JV partner in October 2016 to fast-track development.

OZ and Cassini inked a three-stage earn-in/JV agreement which was confirmed to have reached the stage II mark last week when OZ had earned a 70% stake in the project JV by meeting a $36 million spending commitment.

Since shaking hands on their deal, the partners have progressed West Musgrave’s Nebo-Babel deposits through a positive further scoping study in November 2017.

The JV’s study showed a low-cost, large-scale open pit operation and a long mine life with the development of the Nebo and Babel nickel-copper sulphide deposits.

West Musgrave Nickel-Copper-Cobalt Project’s economics were positive, with nickel net direct cash costs (C1) costs in the lower third and copper C1 costs in the bottom quartile.

Under the study, processing capacity would be more than 10 million tonnes a year for an initial life of mine (LOM) of eight years.

Average yearly LOM production would be 20-25,000 tonnes for nickel, 25-30,000 tonnes for copper and 700-1,000 tonnes for cobalt.

C1 cost of nickel in concentrate would be US$1.30-1.60 a pound while C1 cost payable copper main would be US$0.20-40 a pound.

Pre-production capital required would be A$730-800 million to produce an average LOM after-tax average net cash flow of $120-150 million.

The after-tax internal rate of return (IRR) was 20-25% for an after-tax project payback of about 3-4 years.

Cassini and OZ started a pre-feasibility study (PFS) on the Nebo-Babel deposits in November 2017 along with a regional exploration program at West Musgrave.

The PFS is expected by the end of the June quarter of 2019 or early in the September quarter.

OZ and Cassini's JV will enable the project to be advanced to a decision to mine for the Nebo-Babel deposits, as Cassini leverages OZ’s funding and development capability.

Given the South Australian company has already reached a targeted $36 million spending commitment for its current majority earn-in to the project, OZ will continue to sole-fund the project up to a definitive feasibility study and decision to mine by free-carrying Cassini's 30% share of further spending on West Musgrave.

Once production starts, Cassini's share of future costs up to the DFS-FID milestones will fall due within five years and include principal and interest amounts.

In February 2019 Cassini and OZ unveiled positive results from a Succoth Deposit drilling program completed in the December quarter of 2018.

Significant results were: 76.3 metres grading 0.71% copper and 0.17 g/t PGE (platinum group elements) from 46.7 metres; and 92.55 metres grading 0.75% copper and 0.19 g/t PGE from 271.45 metres.

A 0.25-metre intersection of re-mobilised massive sulphide within a dolerite dyke graded 3.17% nickel, 1.41% copper and 0.22% cobalt.

Succoth deposit is a large inferred copper resource of 156 million tonnes grading 0.60% copper. It is only 13 kilometres northeast of Nebo and could supply additional feed of ore to any mining operation built at Nebo-Babel.

Future resource updates and mining evaluation at the deposit, along with optimisation work, could bring in further investment upside for Cassini shareholders.

Exploration at West Musgrave's Yappsu prospect has already identified an 80-metre zone of nickel-copper sulphide mineralisation.

Within a broader 80-metre intersection, 5.75 metres at 0.28% nickel, 0.63% copper, 0.01% cobalt, 0.30 g/t PGEs and 0.15 g/t gold was intersected from 545 metres.

Also featured was 70.25 metres at 0.48% nickel, 0.44% copper, 0.02% cobalt, 0.34 g/t PGEs and 0.08 g/t gold from 555.05 metres.

Cassini has a number of other projects, including the wholly-owned Mount Squires Gold Project once held by Western Mining Corporation (WMC), which lies adjacent to West Musgrave and the West Arunta 100%-held base and precious metals target near Lake McKay in WA.

Another project, an earn-in project known as the Yarawindah Brook Nickel-Copper-Cobalt-PGE Project, is near the Benedictine community of New Norcia northeast of Perth.

Cassini took an 80% equity stake in this project from Kalgoorlie prospector Scott Wilson’s Souwest Metals Pty Ltd for $300,000 plus options last week.

A $4.2 million placement to high-quality investors, including cornerstone investor Guangzhou Tinci Materials Technology Co Ltd (SHE:002709) chairman Xu Jinfu, in August 2018 had backed the company for its regional exploration efforts.

The tip-in saw Cassini end 2018 with $4.3 million cash as it budgeted $660,000 for expenses in the March quarter of 2019.

Earlier this month, wholly-owned Tinci subsidiary Tinci (HK) Limited contributed $7 million to Cassini's efforts with a placement, meaning Cassini is now fully funded for its regional exploration efforts.

Lithium-ion battery electrolyte manufacturer Tinci is conducting a feasibility study for the production of high-quality nickel sulphate from nickel sulphide concentrate for the battery industry.

West Australian company Cassini and its investor Tinci now plans to start potential offtake discussions for West Musgrave as the battery maker looks at potentially funding the project while OZ and Cassini also evaluate other funding options.

Cassini released its half-year accounts in March 2019 and is expected to publish its next quarterly report by the end of April 2019. 

Inflection points

  • A West Musgrave project PFS focused on the Nebo and Babel nickel-copper sulphide deposits, expected by the September quarter of 2019

  • Upcoming decisions to mine for deposits at West Musgrave and its regional surrounds

  • Results from fully-funded exploration at regional projects

  • Resource upgrades for existing deposits and resource definition work success at exploration targets

  • Success of wholly-owned projects, including Mount Squires and Yarawindah Brook

Managing director Richard Bevan highlights promise of Tinci investment

“This investment from Tinci is further recognition of the size, scale and quality of Cassini’s West Musgrave project and the development and operating reputation of our JV partner, OZ Minerals,” Cassini managing director Richard Bevan told the market two weeks ago.

“We are very excited to work together with all parties to continue to rapidly progress the project.”

Speaking to Proactive Investors that day, Bevan highlighted: “A key thing with the backing is it is small verification for us around the quality and scale of the project and what we’re doing with our partner OZ Minerals.”

 

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