Australian Mines unveils positive bankable feasibility study for Sconi cobalt-nickel-scandium development

Australian Mines (ASX: AUZ) has released its bankable feasibility study supporting the commercial development of its wholly-owned Sconi cobalt-nickel-scandium project in North Queensland.

The metals explorer today emerged from a trading halt to reveal the results of the independent study, which confirmed that mineral resources contained within the three main deposits of the project – Greenvale, Lucknow and Kokomo – could be extracted and processed on “commercially attractive terms” through open pit mining operations and an on-site central processing plant.

Australian Mines managing director Benjamin Bell said the project was now “well on track to move to the next stage in project funding negotiations”.

“Almost two years ago to the month, we reset the strategy at Australian Mines and set out to evaluate and acquire at least one advanced technology metals project in Australia, looking for the right project that was a genuine near-term development prospect,” he said.

“The Sconi BFS demonstrates robust project and financial metrics, with capital costs in-line with Australian Mines’ prediction for the processing plant, while production volumes and specifications are within the range sought by our offtake arrangement with SK Innovation.”

“The project also benefits from strong annual revenues across the life of mine and a relatively short payback period,” Mr Bell added.

The project metrics

Sconi’s proposed development is based on three pits and a 2 million tonne-per-annum processing plant, with an 18-year mine life and average annual revenue from production estimated at $512 million.

The total capital cost of the project has been estimated at US$974 million, with the processing plant expected to take up the biggest chunk of expenditure at US$730 million. The payback period has been calculated at 5.2 years.

The study has also proposed that 90% of the ongoing annual operational expenditure be with local businesses from the surrounding region and 80% of the planned operational workforce be managed on a drive-in, drive-out residential roster from the nearby communities of Greenvale and Charters Towers.

According to Australian Mines, construction of the project would create up to 500 jobs from 2019 to 2021, followed by more than 300 full-time positions once the mine, plant and associated infrastructure are in steady-state operation.

In addition, the proposed development plan is expected to result in significant flow-through investment in regional infrastructure including accommodation, telecommunications and road upgrades as well as a 24/7 medical facility.

Automotive industry applications

Mr Bell said he looked forward to implementing the “next steps on the path towards production of what are increasingly in-demand and essential commodities for the manufacture of lithium-ion batteries used extensively in electric vehicles and energy storage applications”.

In February, the company inked a binding offtake deal with South Korea’s SK Innovation for 100% of the cobalt and nickel to be produced over an initial seven-year period to supply their global electric vehicle battery manufacturing plants.

Mr Bell said Australian Mines was also continuing to seek research partnerships and marketing opportunities for the scandium oxide that will be produced as a by-product of the plant.

“We believe the scandium market will continue to grow due to its potential applications for alloys used in the automotive and aerospace industries, where it can deliver lighter components without comprising on strength,” he said.

CFO appointment

Last week, the company announced it had appointed former Fortescue Metals Group (ASX: FMG) finance group manager Marcus Hughes in the strategic role of chief financial officer.

Mr Hughes had worked for the major iron ore producer for eight years and has previous experience providing critical financial analysis and specialist tax advice for companies including mining giant Rio Tinto (ASX: RIO).

Mr Bell said the company had been systematically building the depth of its executive management team over the past 12 months.

“[Mr Hughes’] specific skills in the implementation of project financing and equity raisings will be invaluable as he takes on a lead role finalising negotiations and executing a suitable financial package for the construction of the Sconi project,” he said.

Mr Hughes will commence his role on 3 December 2018.