Brazil nickel developer Centaurus Metals’ hard and soft infrastructure advantages – not the disadvantages reflected in its discounted market value relative to peers in Australia – can help the company deliver a “world class and cheap” project in the heart of Brazil’s Carajas mining province, an analyst has said after a recent site visit.
“We cannot understate the advantage of a non-western, highly-skilled staff base, which allows the company to recruit its 92 existing staff – approaching 300 with contractors – and drives just one-month assay turn arounds,” Sprott Capital Partners’ Brock Salier said in an update after the visit.
“The low-cost hydropower and a devalued Brazilian real place Centaurus better to execute, in our view, than western peers, where capex inflation is crushing economics bottom up, and lack of staff, or even accommodation for staff, is neutering even good management team’s ability to execute.
“However, given the jurisdiction is driving an enterprise value/inventory about one-tenth of Australian one-asset producers, with more upside for less asset risk, we suggest Centaurus’ nickel deserves a premium, not the up-to 90% discount seen against domestic peers.”
ASX-listed Centaurus is advancing definitive feasibility study (DFS) work on Jaguar, including a 90,000m drilling program with up to 16 rigs, pre-development and financing activities after completing a circa-A$72 million equity raise that left it with about $80m in the bank. The DFS is expected to be finalised in the second half of this year and the company has a 2024 production target for Jaguar. Centaurus recently hired former Wiluna Mining Corp major projects manager, Wayne Foote, as its general manager operators to oversee the DFS and then relocate to Brazil full-time to run the project.
The company updated its mineral resource estimate for Jaguar to 80.6 million tonnes grading 0.91% nickel (54% indicated), for 730,700t of contained nickel, at the end of 2021.
Sprott has Centaurus pegged as the “only plus-500,000t contained nickel, sub-$500m capex, pittable [surface] nickel sulphide junior globally” with an “on-hydro straight-to-metal nickel” play expected to deliver industry-leading CO2 intensity and hydroxide sales to the expanding electric vehicle market.
With its high metal inventory value and positive early study results supporting “the fiscal upside”, Salier said his site visit was more about understanding risks. On that score, he gave the project a pass with “no flaws found on our site visit”.
“Our overall impression was excellent infrastructure supportive of achieving targeted schedules, [with] more nickel coming … in the 2022 second-half mineral resource estimate from both pits [and] substantially more underground feed,” he wrote.
“The soft aspects were also positive, being an available cost-effective skilled workforce given the many mines on the belt, unlike western peers, and an active permitting process moving through milestones. The availability of permits and rigs to drill with 92 staff and about 300 contractors is tangible evidence of pace against domestic peers, as much as the desire to push the project forward quickly with nothing to hide.
“Centaurus couldn’t be better placed being on infrastructure but just far enough from population centres to have little to no relocation requirement, yet benefiting from nearby mines and Amazonia tax breaks.
“Lying just north of the massive Onca Puma ferro-nickel plant, and in the same area as the enormous S11D, Salobo and Sosego mines points to the ability to permit, and the existing skills base … with the best demonstration of infrastructure being the low grades of these assets; [for example] Salobo’s 36Mtpa run-of-mine comes at just 0.4% copper and 0.3 grams per tonne gold, far from jungle grades.”
Centaurus shares are up about 24% year-to-date at A$1.36, capitalising the company at A$575 million. The company also recently started trading in the US on the OTCQX platform to increase its exposure to North American retail investors.