Nickel usage is at an historic inflection point due to the rising impact of Electric Vehicle (EV) penetration of the automobile market. EVs require Lithium Ion batteries, and nickel is a major component of these batteries. Projections based on announcements by national governments and automobile manufacturers have the demand for nickel to supply the battery market rising to 2 million tonnes per year by 2030; the entire nickel market today for all uses is 2 million tonnes per year. Serious shortages of class one nickel are projected to start early in the 2020’s.
This graphic is from a recent presentation by Vale, the Brazilian mining giant that is the largest producer of nickel in the world. Less than half of all current world production is of class 1 nickel, meaning nickel that can be economically purified to greater than 99% nickel. In other words, more than half of current production cannot be used for the battery market, but is only suitable for making stainless steel.
Nickel for batteries is only 3% of the market today, but that is forecast to rise to half of a much larger market by 2030. Where will all this nickel come from? The easiest way to make class one nickel is from sulphide nickel orebodies such as our Turnagain deposit. Another, more difficult route is by processing limonite deposits using High Temperature, High Pressure Acid Leach (HPAL) technology.
Undeveloped limonite resources are plentiful, as the above graphic from a recent Bernstein analysis illustrates. However, exploitation of limonite relies on HPAL, and in the entire history of mining, no technology has destroyed more capital than HPAL. The technology is energy intensive and tricky. Ramp up (and debugging) times for new HPAL projects are typically 3 to 4 years.
Next to limonite, the largest category of undeveloped nickel resources capable of producing nickel for the battery market is low grade, open pittable sulphide nickel deposits such as Turnagain.
Froth flotation and smelting, used in purifying sulphide ores, are older and much more reliable technologies than HPAL. Typical ramp up time for new sulphide projects is six months.
Incentive prices for both types of project are estimated to be between U.S. $9 and $11 per pound of nickel by most pundits. However, Sherritt estimates the incentive price for new HPAL projects at between $13 and $22 per pound, based on actual capital costs of HPAL projects built in the last ten years. The incentive price is the commodity price necessary to incentivize any given project to get built with an acceptable rate of return on capital.
The Turnagain project is very well positioned to get built during the coming boom in nickel prices. The project is competitive with HPAL projects financially and uses less risky technology. Turnagain is also competitive with its large sulphide peers because of a surprising fact: the Turnagain deposit is only 185 million years old, whereas most of its peers are more than 1 billion years old.
What does this mean? The older a deposit is, the more the original minerals become altered. The alteration products provide challenges to the metallurgical recovery of metals, and this negatively affects recoveries. The alteration products also complicate the mine’s “flow sheet”, requiring additional processing such as “desliming circuits” and “magnetic separation” circuits. These are technologies that work, but the more complicated the flow sheet, the higher the technical risk.
The Turnagain project has a simple flow sheet. The following diagram is from the December 2011 Preliminary Economic Assessment (PEA) prepared by AMC Mining Consultants (Canada) Ltd.:
The simplicity is a competitive advantage. Our goal is for Turnagain to be among the first large nickel and cobalt projects built in the 2020’s.