EXPLORATION 1997 — Nord Pacific riding high on Ramu’s nickel-cobalt potential

Investors are finally taking notice of Nord Pacific (NORPY-Q), owing to the Albuquerque, N.M.-based junior’s 35% interest in the large Ramu nickel-cobalt deposit in Papua New Guinea (PNG).

The deposit has received considerable press of late, as the remaining interest is held by Highlands Gold, a Papua New Guinean company which is currently the target of a takeover by Placer Dome (PDG-T). (At presstime, Placer had increased its stake in Highlands to 58% from 33%.) The deposit is valued at US$299-363, and Nord Pacific’s interest could be worth as much as US$100 million — a considerable sum, considering that the junior’s market capitalization is only US$60 million.

The PNG government discovered the deposit in the 1960s, and it was first developed by Nord and Mount Isa Mines (MIM). In the 1980s, MIM wrapped all its PNG properties into Highlands Gold. Since that time, the Highlands Gold-Nord joint venture has spent more than US$9.3 million exploring Ramu and, in September 1996, completed a prefeasibility study. In the central area of the property, 12,500 samples have been taken and 498 holes drilled to a depth of 50 metres.

The central area contains a resource estimated at 24.2 million tonnes of limonitic laterite material grading 0.9% nickel and 0.08% cobalt (calculated at a cutoff grade of 0.5% nickel). The greater Ramu area contains an additional 110 million tonnes of material with similar grades.

To date, exploration has delineated 22 sq. km of mineralization, and the property is described as having the potential for hosting an additional 245 million tonnes of laterite.

Development of an open-pit mine would incur a capital cost of about US$760 million. The mining rate is projected at 3.8 million tonnes per year, which would yield, on an annual basis, 32,670 tonnes of nickel and 2,770 tonnes of cobalt over a mine life of more than 20 years.

Ore will be subjected to wet screening and gravity separation, with the chromite stockpiled — a process that is expected to lift the beneficiated head grade to 1.13% nickel and 0.1% cobalt.

The wet slurry would then be pumped 78 km to the processing plant at Erima in Atsrolabe Bay. Power would be supplied by a new, 40-MW, coal-fired plant.

Plans call for the limonitic laterite ore to be processed using acid leach technology, which has been employed at the Moa Bay nickel laterite deposit in Cuba over the past 30 years.

Acid leaching

The leach plant will produce nickel hydroxide, whereas nickel cathode and cobalt oxide will be produced from solvent extraction-electrowinning. Ramu is amenable to acid leaching because the ore contains a low magnesia content, which translates into lower acid consumption and lower costs.

Total operating costs are projected at US$1.39 per lb. nickel, dropping to 67 cents per lb. nickel before cobalt credits.

By comparison, the Murrin Murrin laterite deposit in Western Australia is expected to produce 45,000 tonnes of nickel per year at a cost of US$1.60 per lb. nickel before cobalt credits. Owner Anaconda Minerals hopes to bring that deposit into production in 1998.

The Ramu joint venture will, over the next 18 months, undergo a feasibility study budgeted at US$20 million. Before production can begin (possibly as early as the first quarter of 2001), the joint venture must be granted a special mining lease from the PNG government, as is required for all large projects in the country.

The PNG government has a back-in right to acquire a 30% interest in the project. Of that amount, 25% would go to Orogen Minerals (a state-owned mining company) and 5% to landowners.

Ramu and other assets of Highlands Gold (including the Frieda-Nena copper-gold project in PNG), will be grouped together under the management of a new company, called Highlands Pacific, after Placer Dome completes its acquisition.

Hugh Leggatt, spokesman for Placer Dome, says the company acquired Highlands’ shares for US$340 million, and agreed to resell the non-gold assets for US$90 million. Highlands Pacific will be floated on the Australian Stock Exchange and has already received support from institutional investors for the transaction.