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Feature Story
Date : Aug 27, 2003
Jubilant Team At Canico Resources Reckon They Are Close To Developing A World Class Nickel Mine At Onca-Puma.
The last time Minews met Michael Kenyon and Jonathan Rubenstein of Canico Resource Corp was in April 2002 At that time the Canico share price was around C$3 and they were not finding it too easy to raise funds for the Onca -Puma nickel project in Brazil. This year things have changed significantly as it has become clear that it is a world class deposit and the shares are now over C$12. There is no intention here of Minews trying to reinvent himself as a share tipster, but just to point out the pace at which things are moving in the mining sector, and particularly in nickel. As Our Man in Oz pointed out today, “Nickel is fascinating. Reminds me of the 66-68 nickel boom which started with a strike at Sudbury, and helped launch WMC at Kambalda.” Nothing new about a nickel boom then, but it also points up the shrewd timing of the Canico team who previously made squillions at Sutton Resources which they built up from a market capitalisation of around US$15 million back in 1990 to the US$325 million paid by Barrick Gold three years ago.
A year or so later they agreed to acquire Onca -Puma from Inco and when last in London were in the process of raising the necessary C$22.5 million to exercise the option. As a result Inco was going to end up with an 18 per cent interest in Canico and two directors on the board. The big Canadian nickel producer had discovered Onca- Puma in the 1970s, but had clearly not given it much priority as when Canico acquired it the near surface deposit had only advanced as far as having an inferred resource of 50 million tonnes grading 2.3% nickel and 0.90% cobalt. However it is worth pointing out that this could warrant a mine with a forty year life producing over 25,000 tonnes of nickel a year from what was claimed as the highest grade undeveloped nickel mine in the world.
Not a bad start , and it gets better as s scoping study carried out in 1997 had assumed that the deposits could be exploited using conventional smelting technology. This was not just guesswork as Inco had done plenty of metallurgical testwork and has agreed to process and/or market all nickel products and also put its technical expertise, which is great, behind the project. Canico’s plan in April 2002 was to start drilling by mid year and complete a bankable feasibility study by the end of 2004. First, however they had to get the money together to exercise the option. This was eventually achieved in February this year when two placements at C$3.31/share raised C$25.2 million and the deal was completed.
Four months later Canico announced that it had drill tested about 17 kilometres of the prospective 20 kilometre strike length of the Onca ridge. The results had confirmed that the mineralization at Onça was thicker, more continuous and considerably more extensive than previously estimated. The new inferred resource calculations have now been announced nad have been the driving force behind the share price in recent weeks. At a 1.5 per cent nickel cut-offgrade the Onca resource is now 69.85 million tones grading 2.12% nickel and 0.123% cobalt and at Puma there are estimated to be 34.6 million tones at 2.21% nickel and 0.07% cobalt. The total inferred resource at the two nickel laterite deposits is therefore 104.4 million tones grading 2.15% nickel and 0.105% cobalt which is well above most expectations
The Onca estimate is based on the results of 485 diamond drill holes and the revision to the Puma estimate is based on the results of an additional 24 diamond drill holes west of the main Puma ridge. This new resource estimate will now be used in a scoping study which should be completed later this year. This will be aimed at establishing order of magnitude parameters for building and operating a nickel mine at Onca-Puma prior to the full feasibility study. At the moment an appropriate cut-off grade has yet to be established for use in mine planning and financial modeling, and this, together with considerations such as strip ratios and mineral chemistry will be important factors in the study.
Ten drills are currently at work on Phase 2 infill drilling at Onca-Puma, which is to be completed on a 100 metre grid. Bulk sample material from a number of excavated pits is being readied for metallurgical pilot plant testing in Norway which is scheduled to begin in November. An initial environmental impact study has been completed and a full study is in progress so it is fair for Michael Kenyon, the CEO of Canico, to claim that a lot has been achieved at Onca -Puma in a short time. His plan is to turn it into a world class nickel producer and the shares are reflecting the odds on him achieving this with Inco at his shoulder.
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