Centaurus Metals to prioritise nickel concentrate for Jaguar project

Centaurus Metals (ASX: CTM) has made a strategic decision to focus on the promising nickel concentrate opportunities available to it with an update to its ongoing feasibility study work for the Jaguar nickel project in northern Brazil.

The company has reacted quickly to the rapid decline in the global nickel market conditions over the past few months, with the Centaurus board electing to focus on an initial nickel concentrate-only project as it finalises the Jaguar feasibility study.

Current studies suggest taking this direction will have a significantly lower capital cost compared to an integrated project and will ensure Jaguar remains robust and able to deliver strong financial returns throughout the commodity price cycle.

Centaurus has also received positive feedback identifying a growing level of off-taker interest in new concentrate supply, reflecting concerns over the longer-term reliance of the current amount of nickel flooding the market from Indonesia.

Managing director Darren Gordon said the company had elected to adopt a phased approach to the Jaguar development after taking into consideration the current supply/demand issues in the nickel market.

“The changes we have seen in the nickel space in recent months cannot be underestimated,” he said.

“While we think nickel prices have overshot on the downside and could rebound much quicker than some market forecasts suggest with supply growth now slowing significantly, we also want to be prudent.”

“A lower capital expenditure concentrate project, with lower technical risk and a lower cost of capital in the current market, delivers a better outcome for our shareholders.”

Top-tier nickel project

Mr Gordon said Jaguar remains one of the top three nickel sulphide development projects in the world with nearly one million tonnes of contained nickel.

“We anticipate Jaguar will become an increasingly important source of low carbon nickel supply, particularly for the western electric vehicle battery industry.”

With its focus on the concentrate opportunity, Centaurus has decided to defer parts of the feasibility study relating to a fully-integrated downstream nickel sulphate project.

It confirmed the development of a downstream refinery might be considered when market conditions improve.

Delivering maximum value

“Centaurus’ focus has always been on delivering maximum value from the Jaguar project by minimising, where possible, equity dilution and risk for existing shareholders,” Mr Gordon said.

“Given the recent changes in the nickel market, the board considers that the pursuit of a larger, more capital-intensive downstream project with heightened technical risks is not consistent with this objective at the current time.”

“The decision to defer the downstream component of the study was not taken lightly, however ongoing weakness in the nickel market […] means that an alternate development pathway needs to be adopted.”

“The board firmly believes that an initial concentrate-only approach at the project will deliver outcomes that are consistent with its core objectives of maximising value, minimising equity dilution for existing shareholders and achieving the best possible risk-adjusted returns.”

Much of the work for a feasibility study on the concentrate project has already been completed as part of the existing workstreams and will remain as currently designed.

It is expected the revised study will now be delivered by the end of June 2024.