BC Iron's founder Mike Young.

BC Iron's founder Mike Young.

Cassini Begins Drilling at West Musgrave

Issue 96, September 2014

“We’re currently entering a period of flux,” says Richard Bevan, managing director of Cassini Resources, the latest company to buy into a rapidly changing nickel landscape in Western Australia.

Alongside Glencore and Lundin Mining, Cassini, valued at A$35m ($32m), is one of very few companies to have capitalised on the current round of divestitures by mining majors, paying A$250,000 in April for BHP Billiton’s West Musgrave assets.

Immediately north of Australia’s gunbarrel highway, the portfolio includes a 1.5m tonne nickel resource and the Succoth copper discovery, made by BHP last year. West Musgrave fell below BHP’s development threshold, but Cassini has remodelled the project as a smaller and higher grade mine.

“They were looking at 446m tonnes at 0.33 per cent nickel. We’re looking at the resource as 33m tonnes at about 0.73 per cent nickel and 0.6 per cent copper. Whereas BHP were aiming at a 50m tonne per annum plant, we’re probably looking at 3 to 5m tonnes, so it’s smaller scale but improves the economics because the grade is higher and the cap-ex is less. That’s the guts of how we’re looking at the asset.”

Backed by BC Iron founder Mike Young, in-fill drilling by Cassini began last week. A further $10m and a 2 per cent royalty is payable on production, expected by Bevan in 4 to 5 years, meaning Cassini bought the project for the upfront cost of a “modest" drilling campaign.

West Musgrave sits c.1,000km from the Nickel West smelter, also being offloaded by BHP. Glencore reportedly dropped out of the bidding in July, but is now seen as being “in the box seat” for the asset. Analysts at UBS expect any buyer to consolidate surrounding smelter feed, extending the life of the asset and deferring its closure costs, estimated at over $1bn.

Cassini first bid for West Musgrave 2 years ago, but was told it was not for sale. “The advantage to buying assets off majors,” one Perth-based investor in Cassini says, “is that they only tend to sell at the bottom.”

“That’s the guts of how we’re looking at the asset.”


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