Savannah Feasibility Study

Cautionary Statement

There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised.

To view the Savannah North Feasibility Study Presentation, please click here

Project Background

The Savannah Nickel Project is located 240km south of Kununurra in the East Kimberley region of Western Australia, and consists of a nickel sulphide orebody, underground mine, process plant and associated infrastructure. Panoramic was formed in 2001 for the purpose of developing Savannah. Panoramic successfully commissioned the Savannah Project in late 2004, and over a twelve year period, Savannah milled 8.5 million tonnes at an average grade of 1.29% nickel, 0.65% copper and 0.06% cobalt to produce 1.22 million tonnes of concentrate containing 94,600 tonnes nickel, 53,000 tonnes copper and 5,000 tonnes cobalt. In FY2016, Savannah achieved a record year with 9,845 tonnes nickel, 6,011 tonnes copper and 476 tonnes cobalt in concentrate produced.  The Savannah Project was placed on care and maintenance in May 2016 pending a sustained recovery in the US$ nickel price.

Savannah North was discovered in February 2014, when drill-hole KUD1525, targeting the interpreted fault offset of the main Savannah orebody, intersected 89.3m @ 1.60% Ni, 0.76% Cu and 0.12% Co (refer to the Company’s ASX announcement of 18 February 2014).  Resource drilling commenced in early 2015, and in October 2015 the Company released the maiden Savannah North Mineral Resource estimate of 6.88 million tonnes at 1.59% Ni for 109,600t Ni (refer to the Company’s ASX announcement of 1 October 2015).

In January 2016 the Company released the results of a Scoping Study on the maiden Savannah North Mineral Resource estimate, which indicated a positive economic outcome given the production, revenue and cost assumptions modelled (refer to the Company’s ASX announcement of 27 January 2016).

In February 2016, the Company resumed underground drilling at Savannah North with the purpose of infilling and converting areas of Inferred Resource to Indicated category, while also testing for extensions to the Resource both up dip to the east and down dip to the west and north.  The program was completed in July 2016 and culminated in the release of an upgraded Savannah North Mineral Resource estimate of 10.27 million tonnes at 1.70% Ni for 175,100t Ni, 74,400t copper and 12,700t cobalt in August 2016 (refer to the Company’s ASX announcement of 24 August 2016).

Study Scope

The Savannah FS commenced in July 2016.  The scope of the Study was to evaluate the technical and financial viability of recommencing operations at Savannah, based on mining the remaining Savannah orebody plus the Savannah North deposit.  The Base Case for the Study assumes no material changes to recent Savannah mining and processing practices and that the operation continues to produce a bulk Ni-Cu-Co concentrate sold under similar terms as the current contract with Sino/Jinchuan, which expires in April 2020.

Summary

The Savannah FS demonstrates that mining of Savannah North significantly extends the mine life at the Savannah Operation with globally competitive cash costs and minimal pre-production capital requirements.  The key physicals from the Savannah FS are summarised in Table 1.

Feasibility Study Table 1 - Resource and ProductionThe Mineral Resources quoted in Table 1 are for the entire Savannah Project (Savannah, Savannah North and Copernicus), and have been previously reported by Panoramic (refer to the Company’s ASX announcement of 24 August 2016).

 

The Savannah FS is based on mining the remaining Ore Reserve at Savannah, whilst developing across to the Savannah North deposit. Access to Savannah North will be via decline from the existing Savannah decline at the 1440 Level to the Savannah North 1380-1360 level.  Access development from Savannah to first ore at Savannah North is scheduled to take approximately nine months, with full production from Savannah North reached 15 months after commencement of development.  Mining of Savannah North is proposed to be via conventional long-hole open stoping with paste fill, at mining rates between 0.7–0.9 Mtpa ore (average 0.8Mtpa over life of mine).  At the scheduled rates, production can be maintained for 10 years based on the proposed mine plan.

Processing is through the existing Savannah plant to produce a bulk Ni-Cu-Co concentrate targeting a concentrate grade of 8% Ni. Processing recoveries over life of mine are expected to average 87% Ni, 96% Cu and 90% Co, based on historic Savannah plant performance.  Metal in concentrate production is forecast to average 9,700t Ni, 5,000t Cu and 670t Co per year with 99,200t Ni, 51,500t Cu and 6,900t Co in concentrate produced over life of mine.

The Savannah FS forecasts a low up-front capital investment of only $20 million to resume production.  The low restart cost is due to the mine development already in place to access existing Savannah ore and the existing mobile equipment fleet, processing plant and supporting infrastructure at Savannah being kept in good condition under care and maintenance since the suspension of mining operations in May 2016.

Forecast average operating cash costs of US$3.30/lb Ni (payable nickel basis after by-product credits) over the life of the project are in the second quartile of the industry cost curve.  Table 2 summarises the financial outcomes of the Savannah FS at various US$ nickel prices and a flat US$:A$ 0.736 exchange rate.

Feasibility Study Table 2 - Fin SummaryAs part of the Savannah FS, Panoramic has identified a number of opportunities which could add significant additional value to the Project, including:

  • Future Resource growth – less than 35% of the potential 2km mineralisation footprint has been tested by Resource drilling. Priority areas for potential resource additions include east and west extensions to the Upper Zone in close proximity to proposed development;
  • Mine planning and scheduling – detailed review of alternative stope shapes, cut-off grade, and scheduling to lower unit costs, increase production rates and/or improve mined grades;
  • Mining productivity – information management utilising latest technical innovations, waste backfill and haulage, shaft versus decline haulage, driverless trucks, hybrid electric/diesel vehicles;
  • Product optimisation – improved Ni concentrate grade and recovery through fine grinding and circuit reconfiguration. Opportunity to produce split Ni/Co and Cu concentrates;
  • In-country smelting – assess the amenability of Savannah North concentrate for matte production via mini-smelting technology (e.g. top submerged lance);
  • Power – the Savannah FS is based on utilising the existing diesel fired power station. Alternative power options may include solar, gas or a hybrid, which may offer more favourable power costs;
  • Contractor services – rationalise the number of services currently provided by contractors (e.g. camp services, power generation, concentrate haulage, inbound freight, underground mining services, core drilling); and
  • Employment and procurement – utilise local employment and service providers where possible.

These opportunities will be assessed as part of the next phase of optimisation work.