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MINING | Consolidated Nickel Mines
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CONSOLIDATED NICKEL MINES Restarting the Munali Nickel Mine in Zambia
MINING | Consolidated Nickel Mines
The Munali Nickel Mine in Zambia first came across the radar of Consolidated Nickel Mines (CNM) in 2014 when it was struggling in care and maintenance under Chinese owners Jinchuan Group. Sensing the opportunity to take on a high potential asset, CNM quickly began discussions with Jinchuan and signed a lease and royalty agreement to become owner operators of the mine for a 20year period. “In 2015 we had the deal financed through CE Mining - a British-based private equity fund,” says CEO Simon Purkiss. “They put in funding to maintain the care and maintenance while we de-risked the project, as it had previously been saddled with high costs and other issues.” However, over the last four years CNM has transformed the fortunes of the mine and is poised to restart operations at Munali in the first quarter of 2019. After taking over the mine, CNM conducted extensive evaluation and study work in order to put together a sustainable restart plan. First and foremost, the company revisited the geological foundations at Munali as the previous owners had used the wrong geological model, which contributed
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MINING | Consolidated Nickel Mines to uneconomic operations when the nickel price fell in 2008.
Re-designing the mine A new geological model was developed by CNM along with the defining of a new JORC resource of 6 million tonnes at 1% nickel in 2015. Next, the company changed the mining method to suit its improved understanding of the geology at Munali. “The previous owners were using longhole open stoping as the mining method, but we changed that to a cut and fill method. The deposit is 50 metres thick in some areas, with very good grades of up to 4% nickel on the footwall, so one of the things we wanted to ensure was that we got full extraction and grade control. The cut and fill process lends itself to those.” This new mining method has resulted in a considerable reduction to operating costs at the site, making it more resilient to the lower nickel price environment of the last decade. In fact, CNM has succeeded in bringing production costs down to around US$8,000 per tonne of nickel. In October 2018, CNM announced it would soon be restarting operations at the Munali
The majority of the $40 million finance
mine after securing $30 million in financing
package was spent on new equipment such
from a Shanghai-listed mining firm called
as a DMS plant and a PGM concentrate
Chengtun Mining Group, who first invested
flotation circuit along with the refurbishment
in CNM five months earlier. CNM secured a
of the processing plant, Purkiss reveals. “The
further $10 million as an offtake loan with
plant had been standing for eight years and
Transamine who secured the offtake from
needed some repairs. We also needed to take
Munali for a four-year period.
the decline down another level to start the cut and fill going back upwards.”
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Meanwhile, CNM welcomed three non-
“Chengtun have been very supportive
executive directors from Chengtun to the
partners and are focused on battery metals,
management team to accommodate its new
so they saw us as a key part of their battery
partnership with the Chinese firm. In recent
strategy. They took equity for $30 million,
years, Chengtun has developed expertise in
representing about 33% of the company.�
African mining and is close to completing a copper-cobalt refinery in the DRC.
CNM has also made sure it remains highly attuned to the rapidly developing battery
MINING | Consolidated Nickel Mines
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metals market and has even conducted
March or April this year, so it’s a major step
preliminary test work on its nickel
forward for us.”
concentrate with the intention of potentially moving into nickel sulphate or metal
A ramp-up phase will follow later in the year
production.
and conclude in the third quarter, by which
First nickel production
point the facility will deliver 60,000 tonnes of ore per month. By the end of 2019, Munali
The first quarter of 2019 is set to be a
will have produced 25,000 tonnes of nickel
landmark period for CNM as it targets first
concentrate with 50,000 tonnes of nickel
nickel concentrate production from the
concentrate targeted for 2020 and onwards.
Munali mine. “This is a major development for us because we will finally move from a
CNM’s other key objective in early 2019
cash draining environment to a cash flow
centres on the construction of a dense media
positive environment.
separator (DMS) plant, which will become the first such facility built on Zambian soil. The
“Until now we have had to rely on raising
DMS plant will improve recoveries and head
funds to keep everything running and in care
grades from 1 to 2%, making it an invaluable
and maintenance. Our latest estimations
addition to the infrastructure at Munali.
show that we should be cash flow positive by
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MINING | Consolidated Nickel Mines
“First nickel production is a major development for us because we two from yearsa ago will “About finally move cashthe draining environment to a cash flow idea was floated to pivot positive environment” – Simon Purkiss, CEO
from being an iron ore exporter to a local steel producer. The idea was that we would build a steel mill in front of the iron ore deposit.”
“I am actually looking at the DMS plant at
mines in the Copperbelt. In addition, we are
the moment, its quite a massive beast and is
introducing modern management reporting
pretty much on target for commissioning by
systems such as accounting package
the end of the year,” Purkiss reveals.
Acumatica and a fantastic reporting system, InPhase, that allows us to drill down into the
“Consulmet, the DMS team out of South Africa have also been great throughout their
data, again a first for Zambia.”
circuit. They’ve designed a very nice plant that
Corporate social responsibility
we will be commissioning very soon. Also, our
The Munali mine is located in a rural farming
shareholders CE Mining have been very quick
region of Zambia around 75km South of the
decision makers and possess strong mining
capital Lusaka. As a result, an unfortunate
credentials that we can draw from.
but necessary outcome was the relocation of
work on the DMS plant and PGM flotation
around 50 households from inside the mine “It is a busy time with a rapid ramp up of
area, equating to a community of 400-500
people and we are fortunate to have been
people.
able to recruit a very good team from the
Resource Global Network During the last two years of Munali being in
as possible, despite education levels being
care and maintenance, CNM built 50 new
fairly low throughout the rural region.
households around 23 km away from the
However, the firm hopes that the various
mine for the displaced communities, along
social development projects it has overseen
with a modern school for 500 pupils and a
across the region will help to improve levels
large rural health clinic.
of education over time. CNM also intends to eventually have a 100% Zambian nationals
“We also attempted to re-establish the
team running the operation.
livelihoods of the local people. They are predominantly farmers, so we planted fields
In the short term, the aim is to ensure
and provided seeds, livestock, tractors and
operations run smoothly at the Munali mine
diesel. However, we didn’t want them to
during its first year of production since 2011.
become dependent on us as we currently
Beyond this, CNM plans to explore further
only have a seven-year mine life, although we
opportunities to invest in distressed nickel
are confident that more ore exists below the
mines across the Southern Africa region.
500 metres we have drilled to.” “We are a private company at the moment, Therefore, CNM established an independent
but CE Mining is a fund that requires an exit
association to support social development
over the next five years. Therefore, we are
projects in the region beyond the current
looking at listing on one of the exchanges
mine life at Munali. The Musangu Foundation
sometime later this year when we have
aims to harness private sector investment,
embedded this operation and have a positive
particularly from the mining sector, to
cash flow.”
provide local market-based solutions. With a year of nickel production at the “From the local community point of view, they Munali mine and a potential IPO to look have benefitted from the projects we have
forward to in 2019, CNM is entering a new
carried out, and they are also appreciated
cash flow positive phase that could provide
by local politicians. Overall, we have very
the foundations for sustained growth in the
good relations with our neighbours,” Purkiss
Southern African nickel space.
summarises. CNM has also made sure to employ as many workers from the local community
j
Published by Anderson Murray Media Ltd
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