By Michael Montgomery—Exclusive to Nickel Investing News
Investors may be unfamiliar with awaruite, a nickel-iron alloy, a naturally occurring stainless steel. This metal may enable steel producers who make stainless steel alloys below the cost of standard pure nickel projects.
Peter Bradshaw, CEO of First Point Minerals Corp. (TSXV:FPX) spoke with Nickel Investing News about the company’s aim to start producing awaruite, a mineral composed of approximately 75 percent nickel and 25 percent iron from its Decar project in British Columbia. For steel manufacturing, awaruite could prove advantageous, both environmentally and economically.
Nickel Investing News (NIN): Many investors may not have heard of naturally occurring stainless steel or nickel-iron alloy. Can you explain how this mineral is formed?
Peter Bradshaw (PB): We are the first in the world to look into commercial production of this nickel-iron alloy although it has been known by academics for well over 100 years. This mineral occurs in certain ultramafic rocks which initially formed on the ocean floor in many parts of the world. These ultramafic deposits typically contain about 0.25 percent nickel, but the nickel was held in the silicate lattice of rock forming minerals and to extract it would not be economic or practical. However, during subduction of this ultramafic during mountain building the metamorphic process resulted in the breakdown of the original minerals liberating the nickel. The nickel commonly goes back into new minerals. However, under very specific conditions, with the right pressure, temperature and chemistry, some of the nickel combines with iron to produce awaruite, a natural, stable, high-grade, nickel-iron alloy.
NIN: What is the most economical method of extraction for this type of mineral?
PB: As a result of this process the mineral is disseminated, which on occasion can be over a very large areas, which is one of the keys for its economic importance. The grade is such that you can only make a mine that is a bulk tonnage or open pit, or that has low-cost-per-tonne-production cost. It is very similar in this respect to a porphyry copper mine, or a porphyry molybdenum mine, which are also relatively low value per tonne. When the extent of the mineralization is such that you can mine plus or minus 50,000 tonnes per day, that’s what makes those mines work. Our mine would be a direct analogy to those types of mines in that respect. However the mineral is very magnetic and quite dense, so separation is by very straight forward magnetic separation followed by a gravity upgrade if warranted. In this respect they are potentially simpler than porphyry mines that use flotation.
NIN: These deposits contain no sulfur, which environmentally is a very positive factor for the deposit. Are there any other benefits to the lack of sulfur in the ground?
PB: Because it has no sulfur, we can potentially sell the product directly to a steel mill. There is no need to send it to a smelter unlike you would with the flotation product of copper, molybdenum or nickel sulfide deposits. To separate the nickel from the sulfide takes about 20 percent of the total value. The lack of sulfur also makes mining much more environmentally friendly. Sulfur plus rain water equals acid, virtually every mine has it, there are good engineering ways around it, but it costs money. We avoid that expense as well, reducing our capital and operating costs.
NIN: Talk to us about your partnership with Cliffs Natural Resources. What does the partnership bring to the table?
PB: With our most advanced property, ‘Decar’ in British Columbia we are partnered with Cliffs Natural Resources Inc. (NYSE:CLF), a fortune 500 company, who has been mining iron ore for 100 years. The new president of Cliffs has been moving to diversify the company’s operations into other metals essential to the steel industry and steel alloys. Currently Cliffs has 51 percent ownership of the Decar Property. Cliffs has the option to move to 60 percent by producing a preliminary economic assessment (PEA), and go up to 75 percent by producing a bankable economic feasibility. We would then have 25 percent participating interest, and a 1 percent net smelter return. As we are the first company to move on a nickel-iron alloy property, and we need the support of a much bigger company to give us the credibility, the financial muscle and technical muscle and Cliffs is an ideal partner.
NIN: While your Decar project is still in an early stage of development can you comment on the expected cost of production?
PB: We are still in an early stage, so our numbers are still the back of the envelope. A good comparison to our property’s potential production costs are porphyry copper deposits in British Columbia. The average cash production costs of the porphyry copper mines in BC are around $7.00 per pound. The cash value of First Point’s recovered nickel grade of 0.11 percent at Decar is around $18.00 per pound. Normally you would like the value to be twice the production cash costs, and Decar appears to more than meet this hurdle. On this basis we estimate that our Decar property may well have better economics than the porphyry copper in BC.
NIN: What are the comparisons to the average costs of producing pure nickel?
PB: The average worldwide production cost for nickel coming from sulfide deposits is around $3.00 per pound of nickel, while for laterite deposits the costs are typically much higher from about $6.00 to $9.00 per pound but some run higher. Historically all the worlds nickel came from sulfide deposits but not enough have been found to meet demand so companies started to mine laterites. Currently about 70 percent of the known world reserves for nickel are ion laterite deposits so properties like Decar would appear to be a very attractive alternative. Cliffs is now managing the project and we expect them to have a JORC 43-101 inferred resource estimate to be ready by Q1 2013, and the full PEA by Q4 2013.
NIN: It is safe to assume that steel mills will be your target customer?
PB: Steel mills that produce steel with nickel content, i.e. stainless steel will be the prime customers. The use of stainless steel is expanding. Stainless is used in a wide variety of products, from building and construction, cutlery and medical appliances, and transport. It is also being used in high end products such as solar and wind power projects, and high performance jets engines. The advantage for us is we avoid smelter costs, environmental costs, and we are selling a product that directly fits into the supply chain.
NIN: What are Frist Point’s strategies for discovering new deposits going forward?
PB: Ron Britten, VP of Exploration and co-founder with me of First Point has put together a team that has the expertise to look for this unique mineralogy. You can’t find visible traces of the mineral on the surface. For example if you were to look for nickel sulfides, a clue would be rusty rock or gossans, because sulfides and rain water equal rust. However, this is natural stainless steel, so it doesn’t rust. Also many ore bodies have large alteration haloes because they are formed by hydrothermal fluids that change the color and chemist of the rock. This has no alteration halo because of its style of formation. The breakthrough with our Decar property was finding the nickel-iron alloy and recognizing it over a large area. We are currently exploring in 8 different countries, using the first mover advantage looking for the low hanging fruit.
I, Michael Montgomery, hold no positions in the companies mentioned in this article.