HPAL: Upping The Pressure - gigametals.com

1 HPAL: Upping The Gabb Director, SalesMarch 2018 Introduction TomymindthereisadisconnectbetweentheEV-i nspiredoptimismthathasledtorenewedintere stinnickellateriteprojectsprocessingviaH PAL( ,MLX),andtherealityofbuildingandoperatin gthem. ThereisnodoubtthatthedawningoftheEVmarke twillsignificantlybenefitnickel(sulphate ) SimilartoourGoldPOXreviewlastyear,thispr esentationreviewstheexperienceofallgloba lHPAL nickeloperationsaswellsomeoftheprojectde velopers. Keypoints: ,butit ~1,600kPahigherthaninPOX(+54%),withtempe ratures+37oC(+17%).CapexaveragesUS$49k/t Ni. , ,MurrinMurrin,Goroetc. >80%inyeartwo. , Laterites Overthelast15yearstheemergenceofNPIhasse ensupplyfromlateritesgrowfrom~40%to~65%a ndthistrendissettocontinue DepositFormation:Lateritesareformedbywea theringofolivine-richultramaficrocks,res ultinginnickelaccumulation(andtypicallya nassociatedcobaltenrichment) ,saprolite( ,highMg,lowFe,lowCo)andlimonite( ,lowMg,highFe,highCo).

2 Forexamplelookingattypicallateriteprofil es: Lateriteweatheringgenerallyrequiresatrop ical,humidenvironment,andthusthemajority ofdepositsareconfinedtotheequatorialbelt ,dominatedbyIndonesia,thePhilippines, ( ,Brazil,Madagascaretc)aregenerallymuchol der. Oxideandsilicatedepositsarethemostpreval entwithclaydepositsrepresenting~10% ,thekeyfactorinalldepositsaretheproporti onsofiron,magnesiumandsilica, I vs. Class II nickel Thoughclearlyinitsinfancy,thegrowthinimp ortanceofbatterydemandshouldnotbeunderst ated,particularlyasbatterychemistrybecom esincreasinglynickelweighted. GMRcurrentlyforecastsEVdemandexceeding10 0ktpain2022,sostillsmallina> >70%ofexistingnickelsupplywhichisunsuita bleforEVsanditseemsincreasinglyclearwewi llseeabifurcationofnickelpricing. LookingatthecurrentsplitbetweenClassIand ClassIIproducts: Asthechartbelowillustrates, , NorilskBatterygradenickelincreasinglydem andsnickelsulphateandintheabsenceofexpen siveconversioncoststhatmeans>70% , , GMR, adapted from NorilskLaterite Processing Options ,andmuchofthatisoffshoreaftersellingDSO.

3 ~44%isproducedasNickelPigIron,~36%asFerr onickel, : NickelPigIron:Historically,therewaslittl e/nomarketforDSOlimoniteore, (nowannualising~7 Mtpa).CurrentNPIproductionaccountsfor~58 0ktofglobalnickelsupply(~28%) ,NPIhasimposedapriceceilingonnickel. Ferro- nickel :Highergradesaproliteoresare generallyexportedtoJapaneseFeNismelters, thoughsomemediumgradeoreisalsoprocessedi nChineseNPIsmelters(RKEF).Oreisblendedto achievetherightSiO2/MgOratio, , ,recoveriesofcobaltaregenerallypoorandit isnotsuitableformostlimoniteores. LookingattheoptionsthroughthelensofNicke lAsiawhoprocessavarietyoflateritesintheP hilippines: Hydrometallurgical?AsisthecaseforNickelA sia(CBNCandTHPAL), Pressure Acid Leaching HPAL isthemostwidelyadoptedtechnologyforproce ssinglowergradelimoniteores,particularly giventheCaronprocessisnolongerseenasecon omic.

4 Itrepresents>10%ofglobalnickelsupplyandg iventhegrowingdemandfornickelsulphate(an dcobalt),itsshareisexpectedtoincreaseint hefuture. Thoughtheback-endofplantsdifferbasedonwh atproductisrecovered,thecoreofalloperati onsisgenerallythesame,namely: Slurryisreactedwithsulphuricacidintheaut oclavetoleachnickelandcobalt,onaverageat 255oCand4,500kPa,+17%and+54% (mostlyironoxide),beforeacidneutralisati onandsulphideprecipitation. Asidefromnickelgradesthemainconsideratio ninHPAL istheamountofacidconsumingagentsintheaut oclavefeed, (whichreprecipitatesashematite,regenerat ingacid), : Acidconsumption(kg/t)=55+ (Mg)+ (Al),oronaverage260-400kg/tatexistingope rations. Thisequationdictateswhyyouwantanautoclav efeedwhichisgenerallysub5%Mg,largelyprec ludingsaprolitefeeds. Alternatives?DirectNickelcontinuestobein vestigated,thoughsolutionsarehighlycorro sive, ,AtmosphericLeaching(andEPAL) Operations Atanaveragescoreofbelow7/10it sfairtosaythehistoryofHPALisn ,capexandopexblow-outs,slowramp-upsandad epressednickel(andcobalt)markethavecontr ibutedtomostoperationsstrugglingtooperat eprofitably.

5 Lookingatcapacityovertime:7 Source GMRS ource GMR. OperationStart-EndDesign ProductionProcessingPlantHPALA utoclavesTempPressureDiameterLengthNiAci dGMR ScoreMoa195937ktpa Ni, , Murrin199945ktpa Ni, , Ni, , Ni, , Bay200524ktpa Ni, , Ni, , Ni, , Ni, Ni, , Ni, , rdes201410ktpa Ni, , POX (Gold)N/AN/ ,907kPaN/AN/AN/AN/A9/10 Ramp-Up Risks Onaverageittakes~4yearstoachieve80%ofnam eplateproductioncapacity, HPAL plantramp-upsovertime: $ ,ithasrequiredafurther~US$ NotablefailuresincludeBulong, srevisedcapacityonrestart(ifonlytemporar ily),itnevermetBHP/Comet GMR. Excludes Moa & G rdes. Capex & Opex Capex:AveragecapitalintensityhasbeenUS$4 9k/t,thoughrangingfromUS$16k/ttoUS$92 ( ). Opex:Mostproducersdonotreportunitcosts(e speciallyduringramp-up),butMoaisthelowes twithaUS$ , US$/lbNicashcosts(net): :9 Source GMR.

6 Excludes working capital requirements. Multi project years are unweighted averages. - Mining, Processing & Refining - Mining, Processing & Refining & Cobalt Asthepreviousslideillustrated,theriseinc obaltpriceshassignificantlyreducedHPALby -productcosts,abenefitwhichnon-HPAL lateriteoperationsdonotfeel( ).Thatmeansifweareinasustainedbullmarket forcobalt,thentheHPAL costbasehasbeenfundamentallylowered. Manyprojectsarealreadyreactingtothis Forexamplewe : Buttheyremainnickelprojects:Asitstandsat onneofcobaltisworth6xatonneofnickel, ,attheendofthedaytheseremainnickelprojec ts. Lookingatnickelresourcesglobally(includi ngthemajoritythatdon treportcobaltgrades):10 TickerProjectTonnes (kt)NiCoTonnes (kt)NiCoCut-off changeARLK algoorlie797, , Ni to CoCLQS unrise109, , NiEq to CoMLXW ingellina182, ,900?

7 Ni to CoPGMO wendale33, , 300ppm Sc to CoAfterBeforeSource GMR. CobaltStreams?Anumberofproducershaverepo rtedlybeenconsideringsellingastream,fore xampleValeisreportedlylookingatsellingaU S$500 MstreamatVoisey CleanTeq et al. UnderstandablyHPAL sAgataswitchedtoaDSOdevelopmentandEramet sWedaBaytoapyrometallurgicaloption(fromA L). ThoseremainingincludethelikesofVermelho, Pomalaa, : Capex:AtUS$41k/tCLQcapexseemstoolowtous, eventhoughitexcludesanumberofsupportingi nfrastructurecosts(gaspipeline,fleetetc) .US$ Opex:CLQforecastsUS$ ,whichifyoucompareitto2016operatingcosts elsewhere( ), ,in-linewiththelikesofMoaandRamu,butexpe ctednickelgradesaremuchlowerthananything currentlyinoperation( ). Ramp-Up:11 ProjectsNameplate ProductionHPAL CapacityAutoclavesCapexIntensityNiMgOAl2 O3 AcidResourceSunrise19ktpa Ni, $ $41 < at Ni, CoWingellina40ktpa Ni, $ $50 at Ni, CoSconi5ktpa Ni, at Ni, CoGoongarrie15ktpa Ni, at Ni, CoMymaincritiqueofCLQistheirramp-upproje ction:44%inyearoneand84%inyeartwoappears optimistic, GMR.

8 Reviewing HPAL Operations12 Moa (50% Sherritt, 50% Cuba) History:Moawastheworld , Ore-type:Miningisfocusedontheeconomicall yviablezone,knownastheLB( limonitabalance ),definedaswherenickelexceeds1%andironex ceeds35%.Belowthelimonitelayer(whichisge nerally3-6mthick),nickelgradesarealsohig hintheunderlyingsaprolite, ,whichonlyhasrightstominelimonite,hascom pletedmininginpartsofitsconcessions,leav ingthenow-exposedsaproliteavailabletomin ingbyothercompanies(whoarelookingatstart ingaferronickelprocess). , Capex:N/A. Autoclaves:Four(arrangedvertically).Oper atingconditions255oCand4,500kPa. OperatingHistory:13 KeyTakeaway:ThefirstHPAL operation, GMR. Cawse (100% Wingstar) History:CentaurbroughttheCawseprojectint oproductioninlate1998andwhilearelatively successfulinitialramp-up, ,thenNorilskacquiredOMGroup ,thenin2014 Wingstaracquiredit.

9 Ore-type:Thoughthereissomesmectite(nontr onite), , (thoughOMGlaterclosedtheSX-EQandproduced aprecipitate).Anexpansionto4 Mtpa(45ktpaNi) Capex:US$234 Mfor9ktpa(US$26k/t). , , OperatingHistory:14 Source GMR. Note operating statistics were not reported under OM/Norilsk ownership. KeyTakeaway:Fairlysuccessful, (100% Wingstar) History:In1998 PrestonResourcesacquiredtheWestAustralia nBulongprojectoffResoluteforA$ ,acidsupplyissuesandmountinglossesprecip itatedacollapse, , (stillclosed)project,nowcalledAvalon. Ore-type:Nickelandcobaltmineralisationis predominantlyassociatedwithsmectiteclays (nontronite), ,withacidconsumptionthehighestofallHPAL plantsat>500 , (~ ). ,anditadoptedthemostinnovativedownstream processofthethreesecondgenerationproject s(sequentialdirectSXforCo&Ni,withfinalre coveryofeachbyEW).

10 Capex:~US$160 Mfor10ktpaNi(US$16k/t). , , , OperatingHistory:15 , GMR. Murrin Murrin (100% Glencore) History:BuiltbyAnaconda(Forrest),theMurr inMurrinplantinWesternAustraliahadafairl ytortuouscommissioningleadingeventuallyt oAnaconda sdebtrestructureandrecapitalisation, Ore-type:Highestnickelandcobaltenrichmen tiswithinasmectitezone, , , ,from2016 , comprehensivere-optimisationoftheorebody andmineplan . ,45ktpaNi, Capex:US$ sUS$29k/tatdesigncapacity,ormorelikeUS$3 3k/tofde-ratedcapacity. Autoclaves:Fouroperatingat255oC,4, , OperatingHistory:16 (CleanTeq)thelackofback-upsystems,surget anksandredundancymeasuresimpactstothisda y, , GMR. Coral Bay (SMM 54%, Mitsui & Sojitz 18%, 10% Ni Asia) History:Since1977 NickelAsia s(60%)RioTubamineinthePhilippineshasbeen miningsaproliteore, ,reachingdesignrateswithin15months.