Western Areas (WSA-T, WSA-A) has received final consent from Australia’s Environment Ministry to start building a mine at its high-grade Spotted Quoll nickel deposit and the company expects production will begin in March or April next year.
Construction of site infrastructure will start immediately and the company expects prestripping to start in October.
Spotted Quoll is the company’s second high-grade nickel mine after Flying Fox, 6 km to the south. Spotted Quoll hosts resources of about 2 million tonnes averaging 6.2% nickel containing 125,500 tonnes of nickel to a vertical depth of 650 metres.
The ore reserve for the open pit is 386,000 tonnes grading 5.1% nickel for contained nickel of 19,900 tonnes. Production is targeted at 8,500 tonnes nickel in 2010 and 9,800 tonnes nickel in 2011.
Deep drilling is under way to test for extensions to mineralization. So far, drilling 600 metres downdip below the current resource has intersected more high-grade nickel sulphides in a similar geological setting to the existing resource. Drill-hole WBD 157W3 intersected 1.7 metres of 4.6% nickel at a vertical depth of 1,000 metres, or 1,500 metres downdip from surface.
The intersection in hole WBD- 157W3 is based on a preliminary analysis of diamond-drill core using a Niton portable XRF analyzer and requires confirmation by formal laboratory assays.
Western Areas discovered Spotted Quoll, about 400 km east of Perth, in the Western Nickel Belt at Forrestania, in October 2007.
The Australian-based nickel sulphide explorer’s Flying Fox mine is one of the highest-grade nickel deposits in the world.
Total reserves at Flying Fox are estimated to be 2 million tonnes grading 4.7% nickel for contained nickel of about 92,090 tonnes. In the first full year of production at Flying Fox, the mine produced 8,000 tonnes of nickel.
Spotted Quoll already surpasses Flying Fox in size, even though the current limit of drilling is only equivalent to the bottom of the Flying Fox T1 deposit.
Site work was to start in September at Spotted Quoll with the construction of a haulage road, a 33-kilovolt main powerline, a dewatering system and communications.
First ore production will coincide with the completion of the Cosmic Boy nickel concentrator in March or April of next year.
Cash costs are estimated to be less than US$2 per lb. nickel in concentrate. Total life-of-mine capital cost, including surface infrastructure, is estimated at A$36 million ($33.45 million).
The 150-metre-deep open pit represents only 16% of the total contained nickel in the current mineral resource. A feasibility study is in progress for a substantial underground mine, which is planned to be accessed from the open pit.
A site for the decline portal has already been defined and underground development is expected to start in early 2011.
In Toronto at presstime, Western Areas traded at $4.75 per share. The company has a 52-week trading range of $2.01-5.80 and 179 million shares outstanding.
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