And now for something completely different...
I wasn't expecting the Spanish Inquisition over Nickel Mountain.
Back to reality, Nevsun have been releasing some great results from the Lower Timok Zone (link), we can see on the accompanying plan maps and sections that this zone is large, but deep.
Figure 1 - The Plan Map |
You can clearly see the footprint of the Lower Zone, with approximate dimensions of 1.5km wide by ~1km. To the south, we can see the smaller, but very high-grade Upper Zone.
Figure 2: The Section.... |
Figure 3: The horse chestnut---hurrah! |
We can see that there is potential to extend the known mineralization to depth, and maybe to the West, where no deep drilling appear to have has occurred beneath the Upper Zone.
However, I commented in previous posts that one of the problems at Alpala was its depth. The initial drilling didn't appear to outline a resource that was sufficiently large or high grade to support the development of a stand alone, large-scale, underground operation. Do we have the same issues at Lower Timok?
I've compiled as much data that I can find for Lower Timok, and I've also included the recent (2016-17) drilling from the high-grade Upper Zone as well, just to allow you to compare their location, depths and relative sizes.
You can download the 3D viewer file from here (link).
The first step was to evaluate the size and grade for the Lower Zone. I created a series of grade shells for Au, Cu and CuEq (I used Nevsun's CuEq calculation 1g/t = 0.7% Cu). These are all included in the Leapfrog viewer file as well as all the sections from the December 4th PR.
Disclosure:
- I haven't factored in any recoveries for Au and Cu when calculating the CuEq values
- I have not been able to find any assays for holes TC150073 and TC160073B
- These holes go through the center of the Lower Zone, and therefore my Bad Estimates (TM) are likely to be slightly low. I'll keep looking for this data,and when I find it, i'll update the model.
Here are the assumptions I used to create the grade shells in Leapfrog Geo:
- Base range = 400m - the holes are widely spaced (they may even be too wide to determine an initial inferred resource)
- Interpolant = Spheroidal
- Drift = None
- Specific Gravity = 2.7 (assuming the rocks are granitic in composition with minor sulfides)
- I applied a filter so that the Upper Zone drill-holes would not be used to create the various grade shells.
Here is an updated "officially bad estimates" (TM) for the Lower Zone:
Just a couple of observations:
If we compare my 'resource' CuEq grades and plot them against the Macquarie Reseach report on large-scale underground porphyry projects.
- There appears to be a lot of contained metal at Lower Timok,
- the majority is too low grade for an underground operation and should be considered as 'mathematical' resources.
- The overall gold content is low
- Will the concentrates contain payable amounts of gold?
At the bottom of each table I've given a tonnage and grade at various cut-off limits. I'm going to use a 1% CuEq in the following section.
Red dashed line = average grade for Lower Timok (using a 1% CuEq cut-off) = 1.28% CuEq
Blue star = cut-off value for a underground block cave operation for a brownfield operation
Green star = cut-off value for a greenfield block cave operation
Lower Timok grade vs other Block cave operations/development projects |
We can see that Lower Timok isn't quite good as a stand alone greenfield development project, but as it is adjacent to Upper Timok, with a quite robust PEA, we can considered Lower Timok to be a brownfield project, and now we see that it is high enough grade to pass the Brownfield hurdle grade.
However it isn't quite as simple as that. If we look at the recently released PEA from the Upper zone (link), and we are told:
However it isn't quite as simple as that. If we look at the recently released PEA from the Upper zone (link), and we are told:
- Initial Capex ~$US615M
- Mine Life ~15 yeears
- Mining rate ~8,900 tonnes per day
- NAV = $1.5B
If we compare this to Stage 1 for Wafi-Golpu project (link), which I think could be a good analogue to the hypothetical costs to develop Lower Timok.
You can see that I've highlighted some important values.
So, if Nevsun were looking to develop the and mine the Lower Zone, it will require significant additional CAPEX, larger milling and surface facilities (tailings and waste dumps) than proposed for the Upper Zone mine. This means that Lower Zone is a half-greenfield half-brownfield project - I'll call it an Olive Project, and that Nevsun have a couple of options:
This is my hypothetical scenario for Lower Timok
You can see that I've highlighted some important values.
- Initial Capex = US$2.6B
- Ore mined and milled = 149Mt (approximately similar to Lower Timok)
- Mine life = 28 years or approximately 15,000 tonnes per day
- First ore milled = project development time line = 60 months or 5 years
- Steady-state production = time taken to reach full capacity = 90 months or 7.5 years
So, if Nevsun were looking to develop the and mine the Lower Zone, it will require significant additional CAPEX, larger milling and surface facilities (tailings and waste dumps) than proposed for the Upper Zone mine. This means that Lower Zone is a half-greenfield half-brownfield project - I'll call it an Olive Project, and that Nevsun have a couple of options:
- Mine the Upper Zone, make lots of money and 'keep' the lower zone on their books as a large resource, but don't develop it.
- Mine the Upper Zone, and after 5 years start the permitting and development of the Lower Zone, and slowly increase the size of the surface facilities (Mill, tailings, waste dumps etc.), and bring the Lower Zone into production towards the end of mining the Upper Zone.
This is my hypothetical scenario for Lower Timok
- Initial Capex = US$1.5B (the topography is significantly easier around Timok so less earth moving, and assuming that they will use and expand on the Upper Timok surface facilities)
- Ore mined and milled = 200Mt
- Mining rate = ~15,000 tonnes per day
- Need to expand surface milling facilities by 5000-6000 tonnes per day
- Expand the flotation circuits
- I don't know how feasible this is, but it is something that Nevsun may need to consider to include as part of the development of the Upper Timok project, especially permits for expansion of tailings facilities as these may taken several years to obtain.
- Development period = 3-5 years
- Time taken to reach full capacity = 5-7 years (including development period).
- The idea is that the project would need to be developed while the Upper Zone is being mined and then Nevsun can extend the infrastructure from the Upper Zone development into the Lower Zone.
At the moment, there aren't a huge number of drill-holes into Lower Timok, and the drill hole density is still quite low (approx. 300-400m between drill-holes), but the initial data shows a robust porphyry system, that is open in a number of directions.
The initial (i.e. very bad) review suggests that it could support a medium-sized underground operation, but its development is dependent on the economics of the Upper Zone and how Nevsun/Freeport decide to develop the Lower Zone.
Will Nevsun just focus on the Upper Zone or will they factor in the development of the Lower Zone into their future decisions for the project?
Will Nevsun just focus on the Upper Zone or will they factor in the development of the Lower Zone into their future decisions for the project?
For investors, the upside could be, that if the Lower zones becomes significantly larger (e.g.>500Mt at similar CuEq grades), would Freeport step in and take out Nevsun to consolidate their ownership of a large porphyry Cu-Au deposit not owned by a major mining company?
I really loved the part of the Spanish Inquisition where the "engineer" quoted you about being a heartless bastard and wanting to short exploration! LOL! And then comparing Arizona Mining, where the issue is the postage stamp size area they get to explore and put a mine vs. Garibabli where they merely have a postage stamp sized deposit! But hey, being put in the same lot with Brent Cook can't be all that bad...
ReplyDeleteAbout Lower Timok. I really like the leapfrog modeling and bad geology numbers you've put together! Very very helpful. TC150073/TC160073B: https://www.nevsun.com/news/2016/november22/Nsu16-37-Timok-LZ-Drill-Results-from-2015.pdf.
A couple of points.
First, Upper Timok will be mined U/G as well. And I'm guessing from the bottom up. So they will have a ramp down to 1000 meters already. And part of the Lower Zone isn't very far away from that, TC160118 has over 300 meters of 1%+ copper near the top. With not a lot of other holes nearby it is open laterally so an "upper Lower Timok" zone could have a bit of legs. We already know Upper Timok has the enargite bug featuring arsenic so a blend with chalco/bornite from the Lower zone would presumably increase the marketability of the cons assuming the different copper minerals behave in the froth.
Also there is a transition zone between Upper and Lower with dominant covellite (the drill holes with .5-1% copper in the Leapfrog just below the Upper Zone, I assume). This is once again close to the Upper Zone and a possible blend option to help subdue enargite. Working through this transition zone could pay for the ramp development to the Lower zone.
Also we can perhaps make out a concentric shaped layering in the Lower Zone with similarity to El Teniente. There it's the breccia pipe periphery that concentrated copper. Here it could be stratigraphic control in different layers of volcanic pile more permissive to alteration and development of stockworks. I don't know for sure but it's possible this potential geometry isn't being reflected in your numbers. If you look at El Teniente, it's difficult to get a true appreciation of its size without the peripheral structuring of the mineralization around a largely barren core. We are used to looking at porphyries as plugs (https://www.youtube.com/watch?v=09ACPgqY88c). I'm suspecting that concentric zonation has positive implications for mine planning and economics which is one reason (of obviously many) why El Teniente works as an underground mine whereas more traditional porphyry hosted copper deposits might not.
Last but not least I note that Nevsun has fully bought out the Upper Zone and is 100% owner. I believe this includes the covellite transition zone as the demarcation from my feeble memory is 1000 meters I believe. This is good in the sense there could be a forcing of Freeport's hand sooner than later especially if staged development of the lower zone is desired either for blending or because Freeport is willing to kick in part of the Upper Zone CAPEX.
Ooopppsss... Among the stupid things I said above is they would start sublevel caving at Upper Timok from the bottom up. Not quite for reasons including "how the world actually works" plus the higher grades are at the top anyway. Speaking of which, I just looked at the cash flow and it is super-frontloaded - close to 70% in the first 4 years. Still think there could be some synergies with lower or transition zone but it's obviously just speculation as they are going ahead with feasibility on Upper zone as standalone and why not?
DeleteHellp Tom,
ReplyDeleteI'm going to answer your comments/observations paragraph by paragraph. Vox nihili
No one expects the Spanish Inquisition..... and to forgot to add some latin to the end of the paragraph to make yourself sound intellectually superior, but Cui Bono?
Thanks for the link to more data, I must have missed them when scanning through the Nevsun Press Releases. I've updated the model and numbers with the new data. It isn't complete, but it gives an idea. Barba non facit philosophum
Upper Timok - I've corrected this, teaches me to ready a PEA before commenting on it! mulgere hircum
The development of the Lower Zone will depend on Freeport/Nevsun - they may be able to use the majority of the Upper Timok development, but to develop the Lower Zone they may need a lot more additional underground development (access drives etc) and this will be too big to only go through the Upper Zone access ramp. It may be easier to build a shaft to the core of the lower zone and extend the Upper Zone ramp into the to of the Lower Zone (there is a convenient 'link' zone of moderate grade mineralization that will help).
El Teniente is a bit different (file:///C:/Users/mattb/Downloads/Lectura_4_El_Teniente.pdf). It is generally thought that the Braden Breccia is just post mineral and has stoped out the core of the ET Prophyry, but it is very useful for the underground infrastructure.
The issue at Timok Lower, is that a lot of the features that are being shown are an artifact of the the drilling.
Gaps in mineralization being caused by a lack of drill-hole data doesn't mean that it is unmineralized. So a lot of the 'features' are caused by the summarized data in the press releases.
I've corrected the ownership question - but still goes back to the fact that if Freeport/Nevsun want to develop the Lower Zone, they'll have to think about to relatively early, but I'm guessing that there still isn't enough data to make a decision. However, if they keep drilling it, it means that they are interested in it.
Very reasonable reply, though I'm still waiting for you to deploy the veni, vici, vidi. I presume ur to humble for that?
DeleteAt El Teniente the Braden pipe may have stoped out some copper but I guess my point was more about horizontal vs. vertical zonation in that it contributes to tonnage and probably economics as well, and it could perhaps do so at Timok (if such lateral continuity does exist). Using my wag app I can sort of make out a 45 degree northwest dipping 1%+ copper shell that is open both up and down plunge for lower Timok. It's about 1000m by 1000m by 300m which figures close to your TAG(tm) bad resource for the Cu-only at 1%. Maybe good continuity of this grade envelope (if it exists) could help lower the otherwise required hurdle rate, for the sake of rosy glasses wearers? If so, I'd like to see more like a 750MM tonne resource target to be mined at closer to 50000tpd (could be developed in stages). That would start to approach world class and maybe get Freeport to perk up a bit. Some work needed to get there. For upper Timok Nevsun already plans dual 5x5 meter declines ... in comparison for a projected 95000tpd peak u/g production Oyu Tolgoi will be using 5.5x6 meter dual declines, although supported by 5 shafts. Might be interesting to revisit the thought at a later point.
Hello Tom,
DeleteI'll give an easy answer - more drilling needs to be done! The copper grades seem to hold together quite well (based on the wide-spaced drilling), it would be interesting to see the distribution of Mo in the system.
Going forwards I'll probably use a 1% Cu-cut-off as Au is a very minor constituent. I included it so people can see that, even though there are a large amount of ounces, most will be unrecoverable.
I'll have to check to see at what depth ramps become inefficient, I was told that it was around 500m, where shafts become more efficient and economical to use for moving ore and waste.
Yes I think the 1% Cu shell would be reasonable as it appears to be more-or-less continuous based on drilling to date. This is porphyry not sulfide so should not have the same Au recovery issues as Upper Timok, that said it would be conservative to treat the gold just as a bonus.
DeleteRamps can exceed depths below 1000 meters depending on the mining parameters, e.g. Bendigo. With conveyor systems and u/g crushing becoming more commonplace (El Teniente, Oyu Tolgoi) this will only increase in the future. Depth isn't the only consideration, orientiation of the ore body as well (why ramp can make sense for lateral zones at El Teniente, Oyu Tolgoi, and possibly at Timok). Also if Timok does have a 1% Cu grade shell plunging at around 45 degrees as I surmise then that would be positive for a ramp vs. shaft. Even with a main decline, however, there probably could be some shafts, e.g. for waste and supplemental ore removal. Any required shafts could perhaps be raise bored (instead of sunk) from a lower ramp level near the bottom of Upper Timok at a significant savings in time and cost.
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