Australian Mines Releases Sconi BFS; Next Stop Funding

Australian Mines (ASX:AUZ) is pushing to develop its flagship Sconi cobalt-nickel-scandium project in North Queensland with the release of a bankable feasibility study (BFS) for the asset.

The BFS indicates that Sconi’s three main deposits, Greenvale, Lucknow and Kokomo, could have their resources extracted and processed via an open-pit mining operation and a processing plant.

Production revenue would come in at $512 million annually over the asset’s estimated 18-year project life, with a payback period of just over five years.

The operation’s average earnings before interest, tax, depreciation and amortization are docketed at $295 million, with a post-tax internal rate of return of 15 percent and a post-tax net present value of $697 million at an 8-percent discount rate.

The project’s capital cost estimate just narrowly misses the billion range at US$974 million (including US$110 million in contingencies), with operating costs set at US$0.48 per pound of nickel.

Sconi’s life-of-mine average annual production is projected at 53,301 tonnes of nickel sulfate and 8,496 tonnes of cobalt sulfate.

Australian Mines Managing Director Benjamin Bell commented on release of the BFS, highlighting the results as financially sound for proceeding with the project.

“The Sconi BFS demonstrates robust project and financial metrics, with capital costs in-line with Australian Mines’ prediction for the processing plant, while production volumes and specifications are within the range south by our off-take agreement with SK Innovation,” Bell said in a statement.

“The project also benefits from strong annual revenues across the life of mine and a relatively short payback period,” he added.

In February, the company signed a binding offtake agreement with SK Innovation (KRX:096770) for 100 percent of the cobalt and nickel produced from Sconi over an initial seven-year period, with a six-year extension option.

Australian Mines also continues to look at opportunities to extract value from Sconi’s scandium component, with Bell saying he expects the market to continue to grow.

“Although not essential to the feasibility of the Sconi project under the parameters of the BFS, we continue to pursue research partnerships and marketing opportunities for the scandium oxide that will be produced as a by-product of the plant,” he explained.

Sconi’s construction is anticipated to create up to 500 jobs between 2019 and 2021, with over 300 full-time positions expected once the mine, processing plant and other infrastructure are in operation. They are anticipated to be up and running in 2022.

As of 10:00 a.m. PST on Tuesday (November 20), Australian Mines was up 1.67 percent at AU$0.061.

Photo courtesy of Scott Tibballs.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.