ENK to use cash buffer to accelerate Acoje construction

Philippines–focused Nickel miner ENK (LON:ENK, ASX:ENK) said the money it raised from the sale of its Caldag mine in Turkey will be crucial to develop its flagship Acoje mine.

ENK sold Caldag in September for $40 million and chief executive Rob Gregory told Proactive Investors this means management can now focus solely on getting Acoje built.

“A key tenet of mining is not to dilute shareholders. By having this money we can get news out, get the work done on the feasibility study and work towards getting strategic offtake arrangements.  As we do all of that the share price will follow.”

Deals with strategic partners are another key plank of the plan as Gregory says Acoje is very amenable to project finance through forward sales and off-take agreements. 

“Watch this space for forward sales with strategic partners that will use the Nickel hydroxide product and go directly to final product type arrangement without thermal processing,” he says.

ENK has already made the decision to move away from a mixed hydroxide product to a singular Nickel hydroxide and a separate cobalt product. That has meant higher amounts paid for each product and significantly more in the case of cobalt.

Another departure is the recent decision to move away from the heap leaching pioneered by the company in its old European Nickel form and to use tank leaching instead.

Natural elements played a part with the heavy rain in the Philippines not conducive to the heap process, but it was the working capital element that also swayed Gregory.

Capital costs are similar, but tank leaching can get the Nickel out in 12 hours as opposed to months using a heap leaching process. Tank leaching is also scalable, he says, without the need for everything to be built on day one.

Recoveries have been impressive. Gregory says the tropical laterites it recovers at Acoje respond very well to its three-way leach process with 92% of the Nickel and 97% of the cobalt being recovered.

Once up and running Acoje is expected to produce 24,500 tonnes of Nickel and 930 tonnes of cobalt a year. At the moment the Acoje has a 10 year mine life, however the company has recently completed infill drilling at Acoje and is also currently drilling at its neighbouring Zambales Chromite tenement with a view to more than doubling the mine life.

For the next six months the focus will also be on completing the feasibility study and working very closely on the financing options with the aim of accelerating construction “as soon as we can”.  This will also include appointing a debt adviser and running a lot of things in parallel, he adds. 

There are no regrets over Caldag. Gregory says ENK did not want to be minority shareholder in the project, while Acoje was always seen as better in terms of grade, leachability, total resource and growth potential.

“The only difference is that Caldag was halfway through construction. All things equal we would always have gone for Acoje, “he adds. 

“It is also very, very important that we have this cash in the bank. We won’t be spending it all on the feasibility study. We will be spending between US$6-10 million to complete the study, so a lot of money will be available to help us through the financing stage.”

“And if we have to go and get some equity fund raising we will be doing at a much less dilutive level,” he adds.

The one thing Gregory does not have control of is the Nickel price, which has been hit by the substitution of cheap pig iron coming out of China.

But while he says this puts a lid on the Nickel price, the cost of laterites and high cost of sulphide also means a floor.

“On current projections of long term prices we will make a very healthy margin at Acoje” he adds.