Queensland Pacific Metals Ltd (ASX:QPM) traded higher on entering into a binding supply agreement with Société Le Nickel (SLN), a subsidiary of Eramet group, for the supply of 1 million wet metric tonnes of nickel ore per annum from New Caledonia.
The purchase of limonite ore by QPM is mutually beneficial to both parties, as there are limited consumers of pure limonite ore globally.
Encouragingly, the company’s TECH Project in Townsville offers a long-term solution to processing limonite with SLN’s New Caledonian mines having large quantities of in-situ limonite that needs a processing solution.
Looking ahead, QPM and SLN have also agreed to continue to explore other partnership opportunities regarding additional ore supply and potential TECH Project participation.
Shares were as much as 16% higher intraday to $0.15 with almost 13.7 million changing hands while QPM's market cap is approximately $223.75 million.
“Significant de-risking event”
QPM managing director Stephen Grocott said: “I am delighted to enter into this agreement with SLN who operate world-class mines in New Caledonia.
“I believe this is just the start of a long-term relationship that will be very beneficial to both companies.
“This milestone is a further significant de-risking event for QPM and the TECH Project. I would also like to thank the Government of New Caledonia for their support of the TECH Project in granting this export approval to SLN.
“New Caledonia, and the world, is awash with limonite resources that remain undeveloped – the successful commercialisation of the TECH Project will be a game changer for these deposits and their ability to form part of global, sustainable nickel production.”
Agreement summary
On February 15, 2022, the Government of New Caledonia approved an increase in the annual nickel ore export quota of SLN.
Notably, this increase includes the supply of up to 1 million wmt of nickel ore per annum to QPM for a period of five years with a five-year extension, subject to mutual agreement.
The execution of the agreement and New Caledonian Government approval follows on from a Memorandum of Understanding entered into between SLN and QPM in April 2021.
As part of the agreement, SLN and QPM have also agreed to explore other partnership opportunities regarding additional ore supply and potential TECH Project participation.
Key terms of the agreement
Strategic benefit
While the DNi ProcessTM can treat the entire laterite ore profile, QPM is targeting limonite ore specification of 1.6% nickel and 0.18% cobalt.
The global seaborne nickel ore trade is almost exclusively saprolite ore, which sits below the limonite ore body layer.
The saprolite is used to produce nickel pig iron and ferronickel operations and can’t be easily, cheaply or sustainably converted into battery-grade nickel and cobalt sulphate for lithium-ion batteries.
Saprolite ore miners either avoid areas with a high proportion of limonite or have to mine through the limonite and stockpile or treat it as overburden, creating significant inefficiencies.
By exclusively purchasing limonite ore, QPM delivers a strategic benefit to any counterpart it deals with.