- The in-house Underground Analysis (UA) of the Kun Manie deposits highlight potential for the development of underground mining operations at Flangovy and Kubuk.
- Changes to the mining method and a respective recalculation of potentially mineable tonnages may increase the life of mine to 15 from previously envisaged 11 years in an open pit only scenario at 6mtpa rate.
- EBITDA estimates using a combination of open pit and underground production climbs 19% to US$1.4bn versus US$1.2bn in the open pit only scenario (both estimates use US$7.5/lb (US$16,530/t nickel price).
- The latest economic study based on EBITDA optimisation of pit shells using the current mineral resources concluded:
- Open pit production may be derived from Maly Kurmkon, Vodorazdelny, Ikenskoe/Sobolevsky and Kubuk deposits for a total of 46.2mt at an average grade of 0.61% Ni and 0.16% Cu.
- The majority of this material is contained in the mineral reserves category.
- Underground production to be sourced from Flangovy (26.3mt) and Kubuk (17.8mt) for a total of 44.1mt at average grade of 0.55% and 0.16% Cu.
- Flangovy and Kubuk tonnages will need further verification through in-fill drilling as all of the material is currently contained in the inferred mineral resources category.
- The drilling is not expected to start before the mining license is granted.
- Preliminary studies of Flangovy and Kubuk deposits including the mineralization thickness, grades and orientation show a potential for the devolpment of reverse room andpilar retreat (RRPR) and long hole retreat (LHR) mining systems.
- Underground mining costs are estimated at US$11.88/t of rock including development.
- The revised study allows for a significant reduction in the stripping ratio (2.8x from 5.1x) and an 35% increase in potentially economically mineable tonnages using underground mining method as opposed to open pit only (90.2mt v 66.8mt).
- We provide a breakdown of cost assumptions used in the study below (change in assumptions to “Open Pit only” scenario are highlighted in green):
| Cost assumptions |
2014 |
OP (Q1/15) |
OP+UG (Q1/15) |
|
| Mining cost | per t ore |
6.2 |
9.6 |
7.8 |
| – per t of material |
1.50 |
1.58 |
1.58 (OP), 11.88 (UG) |
|
| Processing and tailings | per t ore |
14.5 |
10.5 |
10.5 |
| G&A | per t ore |
2.3 |
2.2 |
2.2 |
| Transport (mine to rail) | per t ore |
2.7 |
1.7 |
1.7 |
| Smelting (incl transport) | per t ore |
12.7 |
12.1 |
12.1 |
| Smelter penalties | per t ore |
3.8 |
3.8 |
3.8 |
| Total | per t ore |
42.1 |
39.9 |
38.0 |
| Strip ratio |
3.1 |
5.1 |
2.8 |
|
| Production | ||||
| Throughput | mt |
4.0 |
6.0 |
6.0 |
| Processed grades | ||||
| Ni |
0.56% |
0.55% |
0.55% |
|
| Cu |
0.16% |
0.16% |
0.16% |
|
| Payable production per annum | ||||
| Ni | Kt |
12.4 |
18.3 |
18.3 |
| Cu | Kt |
2.9 |
4.3 |
4.3 |
| Total cash costs (post Cu by-products, ex royalties), $/t |
12,164 |
11,664 |
11,047 |
|
| $/lb |
5.5 |
5.3 |
5.0 |
|
| Copper price (SPA adjusted) |
6,000 |
6,000 |
6,000 |
|
| Source: Company, SP Angel | ||||
- The management is currently testing the economic viability of constructing and operating a smelter for monetising valuable by-products contained in the Kun Manie concentrate assumed to be nil-paid by the toll smelter.
- Toll smelter is currently assumed to pay for 70% of contained nickel, 50% of copper and 0% for contained cobalt, platinum and palladium.
- The company is also updating its estimates on the capital cost of infrastructure, mining and processing operations.
SP Angel Conclusion: Adjusting the production schedule for a combination of open pit and underground mining methods may potentially yield sizeable economic benefit and increase the mine life of the project. Lower stripping ratio at planned four open pit operations bring operating costs ( down (US$5.0/lb using updated 2.8x waste-to-ore ratio v US$5.3/lb at 5.1x). Furthermore, tonnages previously estimated uneconomical to develop using open pit mining techniques show potential of being added to the mining plan in the latest conceptual study if recovered by underground mining. These preliminary in-house economic studies will need more technical data to verify the results including more drilling at Flangovy and Kubuk which account for nearly 50% of the respective production plan, but they do offer an insight into Kun Manie copper/nickel project potential.
We are looking forward to the Company’s update on development capital costs of Kun Manie which should provide an update of the project NPV.
* SP Angel act as Nomad and broker to Amur Minerals
** An SP Angel analyst has visited the Kun Maine licenses in Russia
