Skye Res tops up till for Exmibal redevelopment

Skye Resources (SKR-V) has closed a $32-million equity financing to fund drilling and a feasibility study on the Fenix nickel laterite project in the Lake Izabal region of Guatemala.

The share issue consists of 7.8 million units, each of which consists of a share and half a purchase warrant. They are priced at $4.10. The warrants are exercisable at $5.75 for two years and the shares are subject to a 4-month hold.

Three underwriters, led by TD Securities, are getting a 6% commission on the deal.

Inco (N-T), which operated the Fenix project (then known as Exmibal) in the late 1970s, acquired half a million of the units in the financing. Inco transferred its 70% interest in the project to Skye for a 13.9% shareholding in the junior in December 2004.

Skye will study the feasibility of mining 20,600 tonnes nickel annually, as ferronickel, with the option of doubling production using an atmospheric-pressure acid-leach process to treat limonitic material. Inco’s ferronickel plant would need to be refurbished and restarted for the initial phase of production, possibly producing 11,000 tonnes per year until an expanded ferronickel plant could be built. Skye estimated that task would take about three years from the time of a production decision.

The limonite material, which is not treatable in the ferronickel plant, is being tested at Lakefield Research using a development-stage acid-leach process. The leaching takes place at normal pressures, rather than at the high pressures of pressurized acid-leach (PAL) technologies. PAL, while scientifically sound, was a conspicuous commercial failure at Western Australian nickel-laterite projects, largely because of construction problems and metallurgical surprises from the ore.

Another atmospheric-pressure leaching process, investigated by Jaguar Nickel (JNI-T) for its Sechol nickel laterite project near Fenix, was recently shelved in favour of conventional treatment processes (T.N.M., March 18/05).

Skye proposes mining 1.3 million tonnes of saprolite material annually, with an average nickel grade of 1.86%. The plan is based on a resource estimate that includes inferred resources.

A 45,000-metre drill program is trying to upgrade inferred resources. Skye hopes to increase the size of the saprolite resource and delineate areas with higher-grade saprolite that could be selectively mined early in the life of the operation.

In October, the measured and indicated resource was estimated at 63.3 million tonnes of saprolite grading 1.84% nickel, plus 57.5 million tonnes grading 1.66% nickel in the inferred category. Resources of limonite, evaluated separately and classified as inferred, amounted to 24.5 million tonnes at 1.31% nickel and 0.1% cobalt.

The ferronickel plant would have an 80-MW furnace, and capital costs have been estimated at US$539 million, including an 18% contingency estimate. Consultants for Skye have pegged the operating cost at US$4,300 per tonne nickel (US$1.96 per lb.).

If a leach plant is approved, it would produce 20,500 tonnes nickel and 870 tonnes cobalt per year, contained in a mixed nickel-cobalt hydroxide product that graded 39% nickel. Producing that would take 1.4 million tonnes of ore annually, at an average grade of 1.67% nickel. Skye would expect to do that at an average of US$3,900 per tonne (US$1.78 per lb.) after refining charges and a US$15-per-lb. credit for cobalt.

The capital cost of the leaching plant would be about US$508 million.

The process may face considerable local opposition from the Qeqchi indigenous people, whose leaders have said development would violate post-civil-war peace agreements. They have accused Inco of pollution from the Exmibal plant and of “participating in repressive acts” by the Guatemalan government in the late 1970s.