Pure Minerals Ltd (ASX:PM1) and wholly-subsidiary Queensland Pacific Metals Pty Ltd (QPM) have received positive results from an updated pre-feasibility study for the Townsville Energy Chemicals Hub (TECH Project) in North Queensland.
The revision of the December 2019 PFS includes the addition of a high purity alumina (HPA) refinery and optimisation work to reduce gas and water consumption and consequentially, operating costs.
Pure Minerals managing director John Downie said the update confirmed that the TECH Project had the potential to deliver excellent economic returns and remain financially robust in downward price cycles.
He said: “The Updated PFS demonstrates that the TECH Project can be a significant supplier of battery chemicals, generating robust financial returns with soft commodity prices and excellent financial returns in stronger commodity cycles.
“The strong economics for the TECH Project will appeal to offtakers and strategic investors who are seeking to support projects that can delivery certainty of supply at all times.
“It has only been 10 months since the acquisition of QPM by Pure Minerals and in that time the team has accomplished many milestones including the A$2.55 million CRC-P grant, conditional granting of land in Townsville and the completion of this PFS.”
Shares have been up to 25% higher with an intra-day high of 1.5 cents.
Key physical outputs
Battery manufacturers and ultimate end-users are seeking long-term, reliable supply of battery chemicals, produced with environmentally and socially sustainable practises and the company is confident that the TECH Project can meet these objectives by becoming a significant supplier of nickel sulphate, cobalt sulphate and HPA.
The updated PFS includes a plant design life of 30 years with a ramp-up period of 12 months and around 565,714 tonnes of ore produced per annum.
The estimated ore grade and production is:
- 26,398 tonnes per annum of nickel sulphate grading 1.60% nickel;
- 3,097 tonnes per annum of cobalt sulphate grading 0.18% cobalt;
- 327,665 wet metric tonnes per annum of hematite grading 46.6% iron;
- 20,079 tonnes per annum magnesia grading 3.02% magnesium; and
- 4,007 tonnes per annum of high-purity alumina (4N HPA) grading 1.69% aluminium.
The company confirmed that the recovery of aluminium into HPA could be maintained at 77.4%, in line with the February 2020 scoping study.
TECH Project location
Capital costs and financial analysis
In order to incorporate the addition of HPA production into the Updated PFS, increased confidence in operating and capital cost parameters was required.
Based on a capital payback period of 4.3 years, the company determined that the capital and operating costs include a capex ex-contingency of $554 million, contingency of $96 million and operating expenditure of $163 million per annum.
QPM also ran a financial analysis of the PFS using previous study estimates and current spot prices.
The incorporation of the HPA refinery has increased the EBITDA (steady-state) from $124 million to $211 million (spot case) or $261 million (base case).
It also increased the post-tax NPV from $0.57 billion to $1.08 billion (spot case) or $1.47 billion (base case) and the post-tax IRR from 20.1% to 24.9% (spot case) or 30.7% (base case).
The base case reflects macro assumptions previously assumed when preparing the December 2019 PFS and the February 2020 HPA Scoping Study and the spot case utilises the underlying commodity and exchange rate spot prices as at March 31, 2020.
Work was also completed to optimise the iron hydrolysis section of the processing flowsheet, utilising vapour compressors to pressurise and re-use the steam generated in the first two stages of iron hydrolysis.
Rectifying columns are also incorporated to produce pure steam for recompression and produce a nitric acid stream with significant concentration that can be reused without further absorption steps.
The advantages of this optimisation work are:
- A 31% decrease in gas consumption;
- Reduced cooling water demand resulting in a 60% reduction in water usage; and
- Greater efficiency with respect to nitric acid recycling.
On top of the cost savings associated with lower gas and water consumption, the task of securing supply of these consumables is expected to be easier for QPM at lower volumes.
Next steps and COVID-19 impacts
The next steps are to complete the pilot plant test-work, DFS and obtain all required development approvals but the company expects this will be delayed as a result of COVID-19.
Downie said: “In these trying times, we look forward to continuing to advance the TECH Project and delivering value to our shareholders.
“It is an exciting time to be involved in energy innovation and battery technology will define the future of renewable energy.
“Lithium-ion battery technology, utilising high purity nickel and cobalt sulphate and HPA is dominating the electric vehicle and energy storage future.
“We envision the TECH Project to benefit significantly from that future.”
QPM has updated the indicative schedule through to obtaining a final investment decision to consider a nominal 3-month disruption from COVID-19.