Glencore is backing one of the next ASX nickel producers

Wed 05 Apr 23, 10:45am (AEST)
Nickel rocks with little miner figurines
Source: iStock

Key Points

  • Glencore plans to provide a debt facility of up to US$22 million for Pacific Nickel Mines
  • The company's Kolosori Nickel Project to start production in late 2023 with 1.5m tonnes annual capacity
  • Glencore also entered into 6-year offtake agreement for 100% of Kolosori's production

Glencore is set to fund the Kolosori Project in the Solomon Islands, a flagship asset of Australian nickel explorer Pacific Nickel Mines (ASX: PNM).

The Kolosori Nickel Project is a direct shipping ore (DSO) nickel operation that’s expected to start producing late 2023, with a nameplate annual capacity of 1.5 million tonnes of nickel ore

“Glencore’s Letter of Commitment to provide an up to US$22m senior secured debt facility for the Kolosori Nickel Project is an important milestone for the development of the Project,” said CEO Geoff Hiller.

He believes the US$22 million facility will be sufficient to meet the project’s pre-production funding requirements. An initial drawdown of US$3 million is expected to take place to support further development works at Kolosori . 

Glencore wants offtake too

In parallel, Glencore has entered into a six-year offtake agreement for 100% of Kolosori's production.

The price received will be linked to agreed 1.5% DSO Nickel benchmarks and adjusted for nickel and moisture bonus and penalty payments, according to the announcement.

In February, Pacific Nickel Mines completed a Definitive Feasibility Study for the project, with key takeaways including:

  • Pre-production capital expenditure of US$18.6 million

  • Production of up to 1.5 million wet metric tonnes of DSO per annum

  • Base case mine life of 3 years, expanded case of 5 years and 8 months

  • Average nickel grade of 1.57% over the life of mine

  • Post-tax NPV of US$64 million under the base case, US$83 million in the expanded outlook

  • Total operating costs of US$31 per wet metric tonne of ore

  • Capital payback period of less than one year.

It’s worth noting that Pacific Nickel Mines has a market cap of around $28 million. The base case NPV is about A$95 million, while the expanded case is about US$123 million based on current exchange rates. 

Targets for growth 

In the near-term, Pacific Nickel Mines is seeking to increase the mine life of the project by converting current inferred resources of approximately 2 million tonnes into indicated resources.

There are also exploration targets of between 2.5 million and 4 million tonnes at nickel grades of 1.2% to 1.6%, which have been identified in the proximity of the project.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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