IGO to record impairment against nickel assets in strategy shift
IGO has been undertaking a strategic review in an attempt to revaluate its resources.
Giga Metals (TSXV: GIGA) has issued a prefeasibility study for its Turnagain nickel project in northern British Columbia showing it will need stronger metal prices to increase profitability.
Turnagain, a joint venture with Mitsubishi Corp. holding 15%, has a net present value (NPV) of $574 million at a 7% discount rate and an internal rate of return (IRR) of 11.4% using a long-term nickel price of $9.75 per lb., Giga said in a release on Friday. Nickel has fallen from $14.15 per lb. in January to $8.60 per lb. this week.
The 30-year open-pit mine would cost $1.9 billion to build and annually produce 35,244 tonnes of 18% nickel concentrate and 2,064 tonnes of 1.1% cobalt concentrate with operating costs of $3.85 per lb. of nickel concentrate.
“The study allows the company to advance discussions with potential strategic investors,” Giga CEO Mark Jarvis said in the release. “The Turnagain project has a low-risk flow sheet that will consistently and predictably deliver a high-grade, high-quality concentrate similar to concentrates successfully treated by nickel processing companies for decades.”
Giga is anticipating nickel concentrate being in greater demand for mixed hydroxide precipitate used in electric vehicle batteries as the green energy transition gathers pace.
However, the study mapped a scenario with nickel at $8.29 per lb. and the project generating an after-tax NPV of $21 million with a 7% discount rate and an IRR of 7.2%.
The price of nickel has fallen this year because China’s economic stimulus has disappointed the market, S&P Global Market Intelligence said in a report. It forecasts that the price on the London Metals Exchange will decline from $22,214 per tonne ($10.08 per lb.) this year to $20,000 per tonne ($9.07) in 2025 before rising to $22,000 per tonne ($9.98 per lb.) in 2027.
Giga’s study also showed nickel at US$11.22 per lb. would see Turnagain generate an after-tax NPV of $1.1 billion and an IRR of 14.9%.
In the Giga study, Benchmark Minerals Intelligence forecasts a long-term nickel price of $21,500 a tonne ($9.75 per lb.) while the 20-year inflation-adjusted average price would be $26,700 per tonne ($12.11).
Nickel demand will rise to 7.6 million tonnes a year by 2040 from 4.6 million tonnes now, and 3.3 million tonnes or nearly half will be for batteries, Benchmark said. The demand growth requires about 120 new nickel projects producing 38,000 tonnes annually by 2040 before accounting for declines in existing operations, it said.
Turnagain, located near Dease Lake, BC, about 700 km north of Prince Rupert, holds 950.5 million tonnes grading 0.21% nickel, 0.01% cobalt, 0.02 gram lead per tonne and 0.02 gram platinum per tonne for 1.95 million tonnes contained nickel, according to the study.
A srtip ratio of 0.41, a setback from the Turnagain River and trolley-assist and autonomous hauling will lessen impact on the environment, the company said. The project would sequester carbon dioxide and transform tailings management into a permanent carbon mineralization facility, it said.
Vancouver-based Giga says it’s had positive engagements with the Tahltan and Kaska Dena First Nation, on whose traditional territorial lands the project lies.
The project will need to upgrade the Boulder access trail along 78 km from Highway 37 and extend BC Hydro’s 287 kV northwest transmission line by 160 km to the site. The access route is shared with other potential projects, minimizing impacts if multiple projects in the area proceed, Giga said in the study.
“We see a nickel project like Turnagain with low carbon intensity in a stable jurisdiction has a key role to play in the future of the nickel industry, in particular for the battery industry,” Kota Ikenishi, general manager of Mitsubishi’s Battery Minerals Office, said in the release. “We look forward to Turnagain’s potential to be further verified in works ahead.”
