Company Overview – Sirius Resources is an explorer formed in August 2009 when current MD and CEO, Mark Bennett, and major shareholder, well known and successful prospector Mark Creasy joined forces. The company’s flagship project and company maker is Nova-Bollinger with a discovery hole in conductor 1 of 4m of high grade nickel and copper sulphides – 3.8% Ni and 1.4%Cu – as predicted by the EM model. Nova is located within the Fraser range joint venture (70% Sirius), some 200km east of Kalgoorlie. The Nova-Bollinger development is a world class, low risk nickel copper project. It is set to produce 28ktpa of nickel from 2016, sitting well with the bottom quartile of cost curve with US$2.22/lb cash costs. The 15mt resource at 2.2%Ni and 0.9% cu underpins at least a 10 year mine life. Beyond Nova-Bollinger, Sirius continues to offer attractive exploration potential not only with further nickel/copper targets within its Fraser Range JV prospects but also in gold.

Analysis – The 1H FY14 result is not a focus while SIR remains in pre development. The Nova-Bollinger DFS remains on track for mid-year and we expect development work to commence in 2H. SIR acquired Creasy’s 30% interest in the project in February, a shareholder meeting is scheduled for May to approve the transaction and issue of 70.6m shares to Creasy (lifting his interest from 17% to 35%). SIR reported a $9m loss on higher share based payments. The cash balance of $104m is up from $41 million in June due to the $84m placement in October.


Nova Bollinger Mineral Resource (Source – Company Reports)

SIR, the exploration story of 2012, has now progressed its Nova nickel-copper deposit into a world class prospect. The Nova scoping study suggests a $471 million development producing 28ktpa nickel in concentrate and 11ktpa copper in concentrate from FY17. We expect cash costs of A$2.22/lb and all in costs of A$3.24/lb, the lowest of all ASX nickel companies. The Nova deposit is a relatively shallow dipping , thick (up to 70m) Ni-Cu ore body that sits within 450m of natural surface. $113m in preproduction underground infrastructure will reach the base of the deposit, limiting further vertical development  and keeping sustaining capital at $10m/year. Nova has competent ground conditions , making it amenable to bulk scale stoping. The Nova deposit has formed within an intrusive magmatic environment, is copper rich and has a high tenor. Identification of feeder structures at Nova suggests that this intrusive system could develop into multiple nickel bearing lenses.


Conceptual Site Layout (Source – Company Reports)

A definitive feasibility study is due to be released in late June 2014, at which point we expect financing to be arranged. The SIR scoping study was based on a 10 year mine life that consumes 95% of the Nova-Bollinger resource. We have a positive view on near mine exploration success once underground drilling programs commence from 2016. We expect SIR will make a commitment to develop the Nova project following a positive outcome from the DFS in mid-2014. Ground conditions at Nova are expected to very good with no faulting identified and competent host rocks. The deposit is up to 70m thick and extends at a very low dip angle, meaning stoping can be very large without risking dilution.  The Nova – Bollinger ore bodies contain both nickel and copper mineralisation in massive, brecciated and disseminated sulphides. Nova’s formation and geological characteristics appear similar to the large Canadian nickel deposits in particular Voisey’s Bay.


Latest Mine Design (Source – Company Reports)

Nova is a nickel sulphide deposit that formed with an intrusive magma flow around 1,300 million years ago. The ore body plunges from near surface and levels at a depth of 450 metres underground where it thickens to as much as 70 meters. Sirius has a 70% interest in the Fraser Range Joint Venture with the other 30% held by prospector Mark Creasy. Mark Creasy recently sold his 30% stake in the Nova exploration  and mining leases to SIR for A$28m cash, 70.6m new SIR shares and a 0.5% net smelter royalty on production from future discoveries within the exploration lease. SIR released the Nova scoping study in September 2013, with positive project economics from a 1.5Mtpa underground operation producing separate nickel and copper concentrates over a 10 year mine life. The scoping study assumed first concentrate production in mid-2016, a total project capital cost of $471m and $104m in sustaining capital over the life of the asset. One of the main financial outcomes from the scoping study was projected Nickel revenue of A$4.6 billion over the life of the asset and projected net cash flow of A$2.8 billion over the life of the asset. The main operating outcome was 1.5Mtpa underground mine using conventional sub-level stoping.


Sulphide being retrieved from SFRD0259 (Source – Company Reports)

The Nova deposit is interpreted to be hosted by a sill like intrusion of gabbroic rock, possibly part of a larger mafic intrusive system. SIR continued testing the strike extent of the sill, knowing that sulphides in these intrusion related systems can pond to form lenses. This exploration technique proved to be successful with drilling identifying the Nova lens and later the Bollinger lens. We highlight the prospectivity of the area for additional discoveries below the 300 meters penetration depth of surface EM. SIR continues to develop and test regional targets within the Fraser Range. The proposed mining approach at Nova is an underground operation with decline access for personnel and haulage. First ore is due to be mined in June Quarter 2016 with the 1.5Mtpa nameplate capacity rate targeted by September Quarter 2017.


SIR Daily Chart (Source – Thomson Reuters)

Sirius is developing the world class Nova-Bollinger nickel/copper project in Western Australia. Scale, grade, costs, metallurgy and product quality all contribute to what will in our view be a high quality, financially very robust mine. Cash costs will be bottom quartile and it will likely be a top 10 nickel sulphide producer globally. We expect to see the project advance materially through 2014, moving into construction in the second half of the year. We will be putting a BUY on the stock at the current price of $2.51.

---

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.
Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).
The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.
Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.
The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide.