Magna Mining PEA update hikes return five-fold for Crean Hill nickel project

An updated preliminary economic assessment (PEA) for Magna Mining’s (TSXV: NICU) Crean Hill project near Sudbury, Ontario, bumps its internal rate of return more than five times to 129% compared with the initial study last year.

The new PEA, released Tuesday, pegs pre-production cash costs for the nickel-copper-PGE project at C$27.7 million, down from C$81 million in the initial study, and gives the underground mine a base case post-tax net present value (at an 8% discount) of C$194.1 million and a 13-year mine life.

“A low capital approach of establishing a new surface portal will provide quick access to the resource, allowing us to offset capital costs with early revenues,” Jeff Huffman, chief operating officer, said in a release. “The project timeline has been derisked by having environmental permits approved and in-hand, as well as more detailed stope planning and sequence optimization.”

The update comes just over one year after its predecessor and almost six months after Magna inked a toll-milling agreement with Vale (NYSE: VALE). It would send initial production from Crean Hill to Vale’s nearby Clarabelle mill.

Stock uptick

Magna shares gained 2.6% to C$1.18 apiece on Tuesday morning in Toronto, valuing the company at C$201.1 million. Its shares traded in a 52-range of C$0.37 to C$1.35. 

The study assumes metal prices of $8.50 per lb. nickel, $4.00 per lb. copper and $13.00 per lb. cobalt. Also factored in are $900 per oz. platinum, $1,000 per oz. palladium and $2,150 per oz. gold.

Pre-production capital could be paid back within the first year of commercial production, which would be preceded by a 15-month period of advanced exploration, Magna said. Cash costs from that period could be paid back within the second year of commercial production.

The average production rate is estimated at 2,200 tonnes per day, including 1,650 tonnes of higher-margin primary feed and 550 tonnes per day of lower grade feed.

Historic shaft uses

Initial mining is to happen by ramp access through a new surface portal and the eventual re-establishment of the historical Number Two shaft for personnel access and hoisting. The site hosts a past-producing mine that operated between 1900 and 2002 under various owners including Inco and Vale.

Crean Hill’s underground portion hosts 14.5 million indicated tonnes grading 0.96% nickel, 0.84% copper, 0.03% cobalt, 0.88 gram per tonne platinum, 1.02 grams palladium and 0.54 gram gold, according to a resource from 2022. Inferred resources measure 1.1 million tonnes at 0.61% nickel, 0.46% copper, 0.02% cobalt, 0.64 gram platinum, 1.09 grams palladium and 0.21 gram gold.

Its open-pit portion hosts 16.7 indicated tonnes at 0.53% nickel, 0.49% copper, 0.02% cobalt, 0.48 gram platinum, 0.37 gram palladium and 0.25 gram gold. Inferred resources total 430,000 tonnes at 0.43% nickel, 0.49% copper, 0.02% cobalt, 0.29 gram platinum, 0.14 gram palladium and 0.07 gram gold.

Total contained metal is estimated at more than 500 million lb. nickel, 450 million lb. copper, 650,000 oz. platinum, 675,000 oz. palladium and 385,000 oz. of gold. Magna bought Crean Hill, formerly known as Denison, in August 2022 for C$16 million when it acquired Lonmin Canada.