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Australian Mines sets 2020 development agenda milestones

Snapshot

The emerging company is on the hunt for other offtake partners committed to serving up meaningful funding support.

Australian Mines Ltd - Australian Mines sets 2020 development agenda milestones

Quick facts: Australian Mines Ltd

Price: 0.016 AUD

ASX:AUZ
Market: ASX
Market Cap: $55.12 m
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  • Sconi Cobalt-Nickel-Scandium Project is a development project in Queensland.
  • The Brisbane-registered company, which has technical operations in Perth, is seeking a binding offtake agreement and project finance for the project in the 2019-20 financial year. 
  • Australian Mines' Sconi project has prescribed project status with the Queensland Government. 
  • The company will be a first-quartile low-cost producer, according to an independent assessor. 
  • Australian Mines shipped the largest known battery-grade nickel and cobalt sulphate crystals from Australian mined and processed ore from its Perth-based demonstration plant. 
  • If an offtake party requests samples the plant may also be run in 2020 to demonstrate the quality of output.

The signing of the offtake agreement with SK Innovation for the entire cobalt sulphate and nickel sulphate to be produced from our Queensland-based Sconi project is a significant achievement and clear demonstration of the confidence in the value of this world-class project.

Australian Mines managing director Benjamin Bell

What does Australian Mines do?

Australian Mines Limited (ASX:AUZ) (FRA:MJH) (OTCMKTS:AMSLF) is a minerals developer and explorer with a flagship battery metals project in Queensland.

The first-quartile low-cost battery metals project developer, which is based in Brisbane and Perth, also has a secondary battery metals project in New South Wales.

Acknowledging short-term “headwinds” in the battery metals sector, Australian Mines said in a company update last week that it was confident of its place in a future battery metals industry.

It wrote, “Australian Mines is confident the successful development of Sconi will position it at the forefront of the battery materials industry and allow the company to take advantage of the global demand for nickel and cobalt, which are required commodities used by electric vehicle (EV) battery makers and in the storage and delivery of clean, sustainable energy sources.

“Australian Mines believes its profile as a potential low-cost, long-term supplier of battery-grade materials, operating in a low-risk jurisdiction and producing ethically-derived cobalt and nickel sulphate is an attractive proposition to global carmakers and EV battery makers.

“The board believes Australian Mines is well-positioned to be a leading supplier into this market by using industry-standard technology that builds on the knowledge gained through the construction and operation of a number of high-pressure acid leach (HPAL) plants by various companies around the world.”

Its flagship Sconi project is in the growth nickel supply area of laterite nickel projects.

Who leads Australian Mines?

The Australian company is led by managing director Benjamin Bell, a geologist and geophysicist who has 20 years of experience in the minerals industry.

The long-time managing director was educated at Curtin, Macquarie and Wollongong universities and has qualifications in business and science.

What does Australian Mines own?

The key asset is the flagship Sconi Cobalt-Nickel-Scandium Project in Queensland and a secondary asset is the Flemington Cobalt-Nickel-Scandium Project in New South Wales.

Brisbane-registered Australian Mines signed an offtake agreement for the cobalt-producing nickel operation Sconi in the final days of the September 2019 financial quarter.

South Korean global battery manufacturer SK Innovation Co Ltd (KRX:096770) will take all the cobalt sulphate and nickel sulphate produced at Sconi.

The offtake milestone had followed a period of negotiation and the satisfaction of a number of due diligence activities for the North Queensland project agreement.

Sconi is at Greenvale where 15,000 tonnes of cobalt and 327,000 tonnes of nickel were mined historically at Greenvale nickel mine and Brolga mine.

What is the business case for flagship project?

Australian Mines’ latest resource for Sconi is 75.71 million tonnes for an estimated 1.405 million tonnes of nickel sulphate, 209,000 tonnes of cobalt sulphate and 1,441 tonnes of scandium.

The Greenvale nickel deposit was put at 24.4 million tonnes in situ while the adjacent Lucknow deposit was 14.62 million tonnes.

Project developer Australian Mines had valued the project at $697 million in its November 2018 bankable feasibility study (BFS) using a net present value (NPV8) calculated at an 8% discount rate.

The after-tax internal rate of return (IRR) for the then 18-year project was 15% and a 5.2-year payback period was named at the time.

Sconi mine total capital cost estimate was put at US$974 million, inclusive of US$110 million of contingencies.

Within this estimate, processing plant capex was US$730 million, non-process capital costs were US$103 million and mine construction capital cost was US$31 million.

Speaking to strengths of the project last week, Australian Mines flagged in a company update the expected A$5 billion of free cash flow the project was expected to deliver over a now extended 30-year-plus mine life.

Expected total revenue sat at A$13.27 billion in the November 6, 2019, update while the average annual life-of-mine EBITDA was estimated at $295 million.

The expected average annual life-of-mine revenue from production was A$512 million while project payback remained 5.2 years.

What are Australian Mines’ next steps?

The company has laid out a number of financial year 2020 priorities and among these are a binding offtake agreement and Sconi project finance.

Australian Mines wrote on November 6, 2019, “Our priorities for the development of Sconi in FY2020 include pre-construction work on shared-used infrastructure and further investment in the local communities in north Queensland.

“Regular liaison with representatives of the Queensland Government will be continued to maximise the benefits of Sconi having ‘prescribed project’ status, which will facilitate the smooth and methodical development of the mine site.”

A 2020 run of the Queensland-domained company’s Perth-based processing plant is not expected but could happen if a potential offtake party expresses an interest in seeing mined and processed ore from Australian Mines.

The company wrote last Wednesday, “Following two years of test work, Australian Mines has a firm understanding of the processing flowchart for the Sconi project, as evidenced by the company making the largest known shipment of battery-grade nickel and cobalt sulphate crystals from Australian mined and processed ore at our Perth-based demonstration plant.

“Consequently, no further runs of the processing plant are scheduled for 2020 unless additional samples are requested by a future offtake party.”

Australian Mines is working to identify potential offtake partners for Sconi to make a “meaningful financial commitment to the project financing of Sconi as part of any offtake agreement.”

Any timetables for proposed agreements will be conveyed once the agreements were reached.

Inflection points

  • Offtake and financing agreement milestones
  • Significant transactions
  • In-ground valuations and company value assessments
  • Commodity sector sentiments and global electric vehicle market confidence

Australian Mines will hold its annual general meeting in Queensland on November 19, 2019, at 249 Turbot Street, Brisbane at 12.30pm Queensland time (1.30pm AEDST).

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