Royal Nickel considers downstream options for Dumont

Preliminary test work on a 1-kg sample of concentrate from Royal Nickel‘s (RNX-T) Dumont nickel project in Quebec demonstrates that there is potential to use alternate and significantly cheaper processing options to produce a high-grade ferronickel product, the company says.

The Dumont concentrate can likely be used to produce a high-grade ferronickel at 55% to 60% nickel content using downstream roasting and reduction processes, which compare favourably to typical ferronickel products containing 15% to 40% nickel produced through traditional smelting and refining.

“It really is a breakthrough for us,” Tyler Mitchelson, the company’s president and chief executive, said in a telephone interview. “Our cash costs in the original scoping study were around US$3.86 per lb., and 30%, or about $1.18 of that, were smelting and refining charges, so we should be able to lop off a significant amount of cost.”

Mitchelson adds that the roasting and reduction processing option also offers the potential to provide higher recoveries – for example, 98% to 99% of the nickel in Dumont concentrate, compared to the 90% to 93% typically paid by smelters.  

Concentrate from the Dumont deposit 25 km northwest of Amos in the Abitibi mining camp is “ideally suited” for the roasting and reduction process, because its nickel and iron content is expected to be relatively high. Grades of other metals such as copper and cobalt are expected to be relatively low, and impurity levels for elements such as phosphorus, arsenic and other impurities are also expected to be low, the company explained in a press release earlier this month.

“The deposit itself produces a high nickel concentrate – around 35% – plus fairly high iron content and very low impurities,” Mitchelson explains. “We have very little by-product like copper, cobalt and platinum group metals, which is excellent in generating ferronickel. You can’t really do that with a Sudbury concentrate, for example, because typically the raw concentrate is two-for-one nickel to copper. It’s a little too much copper to produce ferronickel for the steel industry.”

Roasting and reduction also gives the company a lot more flexibility in terms of partnership opportunities, because there are a number of arc furnaces already operating in such Asian countries as China, Korea and Taiwan.

“There are typically five or six smelters in the world [two in Sudbury, a couple in China and Brazil and one in Finland] that you would have to negotiate with to process your concentrate, so this opens up the number of partners,” Mitchelson says. “It’s a fairly simple process and a lot of these furnaces exist all over, so it’s fairly minimal capital investment and gives us the ability to talk to a lot potential partners out there.”

With high-grade concentrate and a rail line right at the property, the company’s ferronickel doesn’t have to be produced in Quebec, Mitchelson explains, adding that the company expects to complete a scoping study on the alternate processing option before the end of the year, and has hired Ausenco to estimate the downstream processing option’s capital and operating costs, as well as assess the economics of building a stand-alone facility to process all, or part, of the concentrate.

At the same time, Royal Nickel is pushing ahead with its planned prefeasibility study for the mine and mill, which is anticipated next month. “We knew we had a great project, and our prefeasibility study will also evaluate a traditional smelting and refining process,” Mitchelson says. “We wanted to make sure we had a good case for the traditional route. But we also felt there were alternatives, so we’ll continue on with a bit more test work for the scoping study.”

Based on a National Instrument 43-101 compliant preliminary economic assessment completed in September 2010, the Dumont project has an after-tax net present value at an 8% discount rate of US$1.1 billion. That number was based on a planned 100,000 tonne-per-day operation and production of over 64,000 tonnes of nickel per year on average over the life of the operation.

At presstime Royal Nickel traded at 77¢, within a 52-week range of 55¢-$2.99 per share.

Matt Murphy, an associate analyst at UBS Investment Research, has a 12-month target price on the stock of $2.10 per share.