In 2021 you completed a Value-Add Scoping Study on your flagship Jaguar Nickel Sulphide Project in Brazil. Tell us some of the highlight numbers this study produced, both in terms of potential production and project economics.
The Scoping Study demonstrated that the Jaguar Project can produce more than 20kt pa of nickel-in-sulphate for more than 13 years at a low C1 cash costs of $3.29/lb, positioning the project as one of the most significant new nickel sulphide projects anywhere in the world with outstanding financial returns and sector-leading ESG credentials.
The Scoping Study was based on a conservative nickel price of US$7.50/lb with a US$0.50/lb sulphate premium, which resulted in a Post-Tax NPV8 of A$1.11B with a 52% IRR. At this nickel price, the project has a 1.8-year payback for the estimated US$288M development capital.
If we ran the same study at the current spot price of around US$11.00/lb Ni price, the Post-Tax NPV8 increases to A$2.58B with a 102% IRR, demonstrating the robust nature of the project and strong leverage to the nickel price, which has a favourable outlook.
What product are you looking to produce at Jaguar and what are your expectations for the market for Class-1 nickel feedstocks?
Jaguar will produce a Class-1 nickel sulphate product designed to feed into the strongly growing electric vehicle (EV) market. Despite recent volatility in global markets, the market for higher purity Class-1 nickel remains extremely tight and the demand outlook is strong. As global stockpiles have diminished, significant new discoveries have become rarer and major new projects have been slow to come online.
We expect that these fundamental macro drivers will be conducive to further gains – especially towards the middle of this decade when demand from the EV sector really ramps up. That’s when a long-life project like Jaguar, with a Tier-1 resource currently estimated to contain over 730kt of nickel metal, will really come into its own.
You currently have a number of drill rigs on site – what is the aim of your current drill campaign and what are you plans for updating your Mineral Resource Estimate to underpin a Definitive Feasibility Study?
We have 15 rigs on site – 13 diamond and two RC. We are close to finishing the resource development in-fill programme which has focused on converting Inferred resources to Measured and Indicated within a large pit shell. This will in turn underpin the Ore Reserve estimate that is set to be delivered as part of DFS. Our target is to have more than 500kt of contained nickel metal in the Measured and Indicated categories.
Once this in-fill drilling is complete, the rigs will shift to resource growth drilling, testing the down-dip, down-plunge, and extensional limits of the resource.
Importantly, the Scoping Study showed that underground operations will add significant value to the project and that the current stopes are limited only by the base of the resource model. As such, any extension of mineralization below the current resource limits is expected to deliver new resources that will eventually be incorporated in the underground mining inventory and add to the mine life.
The RC rigs on site will also shift their focus from project sterilization drilling to greenfields exploration drilling to target new near-surface discoveries that may contribute to establishing additional open pit satellite sources and also to eventual mine life growth.
Take us through some of your recent results you released from resource definition drilling at Jaguar Central, Jaguar South, and Jaguar Northeast.
We are extremely pleased with how the resource definition drilling programme is progressing, with the ongoing drilling continuing to de-risk the project by demonstrating the continuity of the mineralization within the cornerstone Jaguar deposits.
At Jaguar Central the in-fill drilling continues to return high-grade, shallow intersections like 46.0m at 2.17% Ni from 108m and 49.3m at 1.20% Ni from 32m, giving us a lot of confidence that the early stages of a future mining operation at Jaguar can support robust capital payback on the project.
We also continue to see great results from our step-out drilling such as 8.0m at 5.38% Ni from 442m at Jaguar South and 30.7m at 1.00% Ni from 447m at Onça Preta, pointing to continued resource growth.
The company puts a big emphasis on being a low carbon producer of battery grade nickel sulphate. How important are low carbon emissions for potential buyers of your products and what steps are Centaurus taking to ensure you keep your carbon emissions to the minimum?
At 4.69t of CO2/tonne of nickel equivalent, the Jaguar Project will be one of the lowest carbon emission projects in the nickel industry.
The low carbon footprint is driven by the relatively high-grade nature of the planned mill feed and the fact that 80% of the power in Brazil is generated from renewable sources (principally hydro and solar). There is an expectation that, once in operation, Jaguar’s power requirements could well be met from 100% renewable sources, which would further reduce emissions.
Furthermore, as part of the DFS, Centaurus is looking at process route improvements, including partial oxidation of the concentrate, that can reduce pressure and temperature conditions and requirements for residue neutralizing material, which is expected to contribute further to a reduction in GHG emissions.
As the market moves forward, we see strong potential for a “green premium” in the nickel market with nickel sulphate products with low carbon footprint – such as the product we expect to produce at Jaguar – expected to be in high demand from the battery makers and OEMs and therefore also likely to attract a green premium.
Talk us though some of the advantages of developing a project in Brazil.
Brazil, and specifically the infrastructure-rich Carajás Mining Province, is an outstanding location for a mining project with easy access to established mining communities, federal highways, rail and national grid power (running +80% renewables). As noted above, but certainly worth stating again, there is an expectation that, once in operation, Jaguar’s power requirements will be met from 100% renewable sources.
Projects are supported by the local communities who see real returns from royalty income – with 65% of the government royalty going back to the municipality where the project is located.
Further, operating in the Carajás means the project can access a 15% effective tax rate for first ten years of operations (SUDAM Program).
We believe that Brazil is a renewable powerhouse and this will come to be recognized more and more by the global mining community
From an environmental and mining approval perspective, the approval processes are clearly defined. The well-established Mining Regulation and Tenement System and transparent environmental approvals system with Terms of Reference issued for EIA allow companies like Centaurus to work through the approval process with confidence.
We believe that Brazil is a renewable powerhouse and this will come to be recognized more and more by the global mining community as they look for new opportunities.
What are the next steps for the project? What are the key milestones you are hoping to reach in 2022?
We will continue with 15 rigs on the ground and expect to deliver an updated Mineral Resource by the end of Q3 this year. The rigs will then swing into step-out and exploration mode to work on resource growth and new discoveries for the second half of 2022 and start of 2023.
The Q3 MRE will underpin the DFS and maiden Ore Reserve Estimate that is planned to be delivered in Q1 2023.
More than 3.5t of ore has been delivered to Australia and has been processed ready for hydrometallurgical pilot test work that will start in July. This work will again support the DFS and produce the nickel sulphate product that will be used for marketing. With this we are targeting the completion of offtake in Q4 2022.
We plan to have the public hearings for the project and site visits by SEMAS (state environmental agency) in Q3 2022 and expect the first phase of the environmental licensing approvals process completed in Q4 2022.
With the completion of the DFS and once all licensing and financing is complete, we expect to make a Final Investment Decision towards the end of Q3 2023.