Advanced nickel explorer Blackstone Minerals (ASX: BSX) has announced the completion of its pre-feasibility study (PFS) for the development of the Ta Khoa downstream nickel refinery in northern Vietnam.
The study confirms a technically and economically robust hydrometallurgical refining process to upgrade nickel sulphide concentrate to produce more than 85,000 tonnes per annum of precursor battery-grade nickel-cobalt-manganese (NCM) for the lithium-ion battery industry.
Blackstone regards this as a critical milestone for the company as it demonstrates that “a very low capital intensity is required for the Ta Khoa refinery to produce class I nickel at a scale that would make Blackstone a globally significant producer”.
The PFS considers a refinery design with a base case processing capacity of up to 400,000tpa of nickel concentrate, with feedstock derived from Blackstone’s Ban Phuc disseminated sulphide orebody as well as third party concentrate feed (3PF). Although with ongoing drilling and further exploration success, the company believes this base case refinery could potentially be fed entirely by feedstock from the Ta Khoa nickel project.
“The base case refinery represents management’s view of the scale of operations that could over time, through exploration success, be supported by the company’s existing nickel sulphide mineralised landholdings,” Blackstone managing director Scott Williamson said.
“Economics have been presented assuming a 10-year life of operations, aligned with known and desired life-of-mine for 3PF concentrate sources that Blackstone aims to secure offtake.”
“Management considers the more likely scenario is that the refinery life will extend beyond 10 years,” he added.
The company said it is in talks with multiple potential partners including NCM consumers and concentrate suppliers to jointly participate in the funding of the proposed refinery.
Key PFS outcomes
Blackstone’s downstream PFS has estimated upfront project capital of US$491 million to be paid back in 1.5 years from first production.
The project is forecast to generate US$14 billion in revenue and operating cash flow of US$4.5 billion (at an average of US$451 million per year) over the estimated 10-year life of operations.
This is based on an average annual NCM811 precursor production of 85,600tpa, refined nickel output of 43,500tpa and 4,100tpa of copper by-product.
This base model is designed to process 3.9Mt of concentrate feed with a concentrate grade of 11.5% nickel, 0.3% cobalt and 1.1% copper.
The life-of-operations all-in cost has come in at US$11,997 per tonne NCM811, compared to the study weighted average forecast price on sale of NCM811 of US$16,397/t and current Shanghai Metals Market spot price of US$19,559/t NCM811.
This base case scenario would give the Ta Khoa refinery project a post-tax net present value of US$2.01 billion and a 67% internal rate of return.
“The base case PFS financial outcomes are compelling based on an NCM811 precursor price forecast that is conservative compared to current observable market rates,” Mr Williamson said.
“The internal rate of return on capital invested is exceptional for the base case, owing to very low capital intensity, a significant premium available when upgrading nickel sulphide concentrates into battery-grade NCM811 precursor and the competitive operating advantages in Vietnam, which include access to low-cost renewable hydro power.”
Blackstone said it is immediately progressing approvals to commence the next phase of definitive feasibility studies and pilot plant testing in Vietnam (to produce NCM811 precursor and ensure the product meets customer specifications).
Meanwhile, the company is working on delivering the pre-feasibility study for its upstream business unit and said it plans to continue aggressive drilling to increase the minerals resources at its flagship Ta Khoa nickel project.
Blackstone is currently targeting a final investment decision in the 2022 calendar year.
This decision to proceed with development is contingent upon several factors including future exploration success at the Ta Khoa mine and the ability to secure offtake for 3PF as well as consumer demand for battery-grade NCM811 precursor.
The company intends to construct and develop the refinery via a collaborative partnership model and plans to fund its portion through a combination of debt, equity and offtake financing.
Blackstone is targeting first production in 2024 with a ramp up to steady state operations hoped to be achieved in the 2026 calendar year.