Mustang moves on to feasibility for Maskwa nickel project

A prefeasibility study for Mustang Minerals‘ (MUM) Maskwa open pit nickel project in Manitoba proposes building a 2,750-tonne-per-day open pit mine that would produce an average of 9.2 million lbs. of nickel in concentrate per year.

Mustang says it will do a full feasibility study as well as apply for a mine permit.

The news sent shares up 19% today, or 9, to 57 each on a trading volume of 1 million shares.

Capital costs in the study are projected at $123 million, which includes a $10.6 million contingency, while the undiscounted pre-tax operating profit is $285 million with a peak single year pre-tax earning of $63 million.

It’s estimated that the project could generate a pretax internal rate of return of 19.4% and has a net present value of $62.2 million at an 8% discount rate. Operating costs would be $39.54 per tonne milled while cash costs for nickel were projected to be $2.77 per lb. of nickel.

On top of the nickel, the study projected that Maskwa could produce significant amounts of copper, cobalt, platinum and palladium.

Proven and probable reserves were derived from the company’s measured and indicated resource of 10.2 million tonnes grading 0.6% nickel, 0.12% copper, 0.105% cobalt, 0.38 gram palladium per tonne and 0.1 gram platinum per tonne.

Reserves were estimated at 7.11 million tonnes grading 0.64% nickel, 0.13% copper, 0.01% cobalt, 0.37 gram palladium and 0.1 gram platinum, using a cutoff grade of 0.2% nickel.

Mustang has since completed additional drilling around the proposed pit area as well as sampled around some historical holes, which it will use in an updated resource for the feasibility study.

The study suggests a two-phase open pit that would have an average strip ratio of 10.8 to 1. During the first phase the strip ratio was estimated at 5.5 to 1.

Ore would be processed by standard grinding and flotation. Recovery rates were predicted at 72% for nickel, 81% for copper, 71% for cobalt, 82% for palladium and 47% for platinum.

A nickel price of US$10 per lb. was used for the first two years of the project, assuming production could b hedged while the long-term nickel price was estimated at US$8 per lb.

Recent infill sampling has demonstrated the potential to find more minable mineralization in the hanging wall of the pit and in the main zone. The study suggested further drilling to confirm this.

Mustang also noted that it will consider supplying open pit feed from the Mayville M2 deposit, which has an indicated resource of 21.9 million tonnes grading 0.2% nickel and 0.48% copper, containing 94.3 million lbs. nickel and 232 million lbs. copper.

The Maskwa project is 100%-owned by Mustang but is subject to a 1% net smelter returns royalty held by a third party.