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Glencore is set to fund the Kolosori Project in the Solomon Islands, a flagship asset of Australian nickel explorer Pacific Nickel Mines (ASX: PNM).
The Kolosori Nickel Project is a direct shipping ore (DSO) nickel operation that’s expected to start producing late 2023, with a nameplate annual capacity of 1.5 million tonnes of nickel ore
“Glencore’s Letter of Commitment to provide an up to US$22m senior secured debt facility for the Kolosori Nickel Project is an important milestone for the development of the Project,” said CEO Geoff Hiller.
He believes the US$22 million facility will be sufficient to meet the project’s pre-production funding requirements. An initial drawdown of US$3 million is expected to take place to support further development works at Kolosori .
Glencore wants offtake too
In parallel, Glencore has entered into a six-year offtake agreement for 100% of Kolosori's production.
The price received will be linked to agreed 1.5% DSO Nickel benchmarks and adjusted for nickel and moisture bonus and penalty payments, according to the announcement.
In February, Pacific Nickel Mines completed a Definitive Feasibility Study for the project, with key takeaways including:
Pre-production capital expenditure of US$18.6 million
Production of up to 1.5 million wet metric tonnes of DSO per annum
Base case mine life of 3 years, expanded case of 5 years and 8 months
Average nickel grade of 1.57% over the life of mine
Post-tax NPV of US$64 million under the base case, US$83 million in the expanded outlook
Total operating costs of US$31 per wet metric tonne of ore
Capital payback period of less than one year.
It’s worth noting that Pacific Nickel Mines has a market cap of around $28 million. The base case NPV is about A$95 million, while the expanded case is about US$123 million based on current exchange rates.
Targets for growth
In the near-term, Pacific Nickel Mines is seeking to increase the mine life of the project by converting current inferred resources of approximately 2 million tonnes into indicated resources.
There are also exploration targets of between 2.5 million and 4 million tonnes at nickel grades of 1.2% to 1.6%, which have been identified in the proximity of the project.