Previously focused on the Asian nation of Myanmar, Mallee Resources has refocused its efforts about 8000 kilometres south, in the mining-friendly jurisdiction of Tasmania.
Historically, the Apple Isle has been marked by frequent and well-reported conflict between environmentalists and industry.
But as Mallee Resources chief executive John Lamb points out, Tasmania has a long and storied mining history, with the state in effect divided into accepted mining zones and the environmentally sensitive regions.
The state’s resources sector employs 5200 people and last year produced $2.8 billion of minerals (60 per cent of the state’s total exports).
“Given the state uses 100 per cent hydro and wind power, there is no better place to start a mine than in Tassie from and ESG [environmental, social and governance] point of view,” he says.
Mallee is also striving to prove the old resource sector lore that the best way to make money out of a mine is to buy it second hand.
Or, in Mallee’s case, third hand.
In early June Mallee won WA Supreme Court approval to buy the Avebury nickel mine from the administrator of its owner, Allegiance Mining.
In late June Mallee shareholders approved the deed of company arrangement (DOCA) to affect the purchase, for circa $86 million in cash and shares and $23.2m of reimbursable expenses.
The company has now launched a $20 million to $70 million capital raising to fund the re-opening of Avebury, which has been in care and maintenance for the last 13 years.
The purchase marks a major directional shift from Mallee – formerly known as Myanmar Metals – which last year sold its 51 per cent stake in the Bawdwin copper project in the former Burma for $US30 million.
Eight kilometres out of Zeehan on Tasmania’s west coast, Avebury is in the centre of Tasmania’s mining province that includes the Renison Bell, Rosebery and Savage River projects.
But Avebury has been subject to the ownership pass-the-parcel syndrome typical of the mining sector.
The rich underground nickel sulphide deposit was discovered by CRA (now Rio Tinto) in 1997. The project was the passed on to Allegiance, which defined a maiden resource in 2002 as part of a $201 million development splurge.
In 2008 Allegiance (and Avebury) was acquired by Zinifex for $888 million. Zinifex was then acquired by OZ Minerals, which commissioned the mine.
Production lasted for nine months before the global financial crisis sparked a 68 per cent plunge in the nickel price, rendering the mine uneconomic. The mine has been in care and maintenance since 2009.
Eventually Avebury was offloaded by OZ Minerals’ new owner, the Chinese group MMG. But MMG had bigger fish to fry – notably its $5 billion Las Bambas copper mine in Peru – and in 2016 the project ended up in the hands of Dundas Mining Pty Ltd (now in liquidation).
Lamb says Mallee settled on Avebury after kicking the tyres on more than 150 projects globally. It was no stab in the dark: Lamb had run the Rosebery mine for MMG and became familiar with Avebury, where he undertook drilling and other work.
Lamb says he’s often asked why such a great asset was only mined for nine months – and the answer is that the three previous owners lacked either the money or intent to operate the mine
“We are the first people ready willing and able to run it. Despite the fact is been sitting there for 13 years it has never had a fair go.”
He says Mallee will reap the benefit of 8500 metres of underground development and a 900,000 tonnes per annum processing plant.
The fully-permitted operation is also close to the Emu Bay railway, which will may be used to transport the material to the Port of Burnie export facility.
The JORC-compliant nickel sulphide resource grades 29.3 million tonnes at an average 0.9 per cent nickel, translating to 264,000 tonnes of contained metal.
Management believes the mine can be “properly” re-started for a modest $30 million.
Mallee has $31 million of cash in the bank, but the capital raising will fund further development including decarbonisation study, expanded accommodation and a plan to ‘de bottleneck’ production.
The mine is already running a day shift to build up stockpiles, with the 900,000 tonnes a year processing plant due to be commissioned in the current quarter.
Fully renewable power aside, Lamb adds the project incorporates several ESG features, including backfilling waste rock into the mined underground areas. This reduces the need for a tailings dam.
He describes Avebury’s condition as brand new – or thereabouts.
“It’s the cleanest mine site I’ve ever seen; everything is shiny and neat and clean and that makes it a very attractive place to work at.”
It also helps that the nickel price has soared beyond $US20,000 ($29,400) a tonne, compared with under $US10,000/t at the depths of the global financial crisis.
Once again: there’s an ESG angle: traditionally used in stainless steel, nickel increasingly is being acknowledged as a crucial ingredient to improve the performance of electric vehicle batteries.
Industry forecasts suggest the nickel supply and demand will move from a balanced position now, to more than 4 million tonnes of demand and under 3.5mt of supply in 2026. The market for ‘class one’ nickel sulphide – as used in batteries – is even tighter.
For those who are wondering, the company has no association with the Mallee region: Lamb says the company simply wanted a moniker that was “as un-Myanmar and Australian as you could get.”
To preserve the company’s current ASX ticker of MYL, it also had to start with M.
“Our logo is also a stylised mallee flower, which is as tough and resilient a species as you can find,” he says.
“We hope that we can tap these characteristics as we develop what will be Australia’s next nickel sulphide project.”
Mallee Managing Director John Lamb presented at last Friday’s (05/08/22) Hidden Gems webinar. If you missed it, HERE is the link.
