Centaurus Metals (CTM) - 7 Rigs Turning to Expand Nickel Resource

Centaurus Metals Limited is an Australian exploration company focused on the development of the advanced Jaguar Nickel Sulphide Project, located in the world-class Carajás Mineral Province in Brazil. This Province is one of the world's premier mining addresses, hosting one of the world's largest concentrations of large-tonnage mineral deposits. 

We met with Darren Gordon, CEO and Managing Director, Centaurus Metals. Darren is a Chartered Accountant with over 25 years of experience as a senior finances and resource executive in the mining industry. He has over 12 years of experience operating in Brazil, gaining a deep understanding of the regulatory framework and operating environment for mine development in the country. 

Company Overview

Centaurus Metals was founded in 1989 and is headquartered in Australia. The company is listed on the Australian Stock Exchange (ASX: CTM). Centaurus do Brasil Mineração, Centaurus Brasil Mineração Ltda, Centaurus Pesquisa Mineral Ltda, San Greal Resources Pty Ltd., and Alianca Mineracao Ltda are the company's subsidiaries. 

Iron Ore Assets

Centaurus Metals previously focused on their iron ore projects in Brazil, in the last 2-3 years, they have transitioned towards nickel through their flagship Jaguar Nickel Sulphide Project. 

The company's iron ore assets were picked up in 2010. The resources and reserves were drilled and the company acquired environmental licenses. Following the 2014-15 drop in iron prices, the company sought to unlock the value of its assets. These iron ore projects enabled the company to add the Jaguar Nickel Sulphide Project to its portfolio. 

Centaurus Metals iron ore assets have a current NPV (Net Present Value) of $250M, however, on the balance sheet, the project is evaluated at $2M-$3M. The company is looking for partners to further develop the project. Their main focus is on nickel and the realization of the true value of their assets. 

Financial Capabilities

At the time of acquisition, the company's market cap stood at $25M-$30M. The company strongly believes that the market cap isn't the true reflection of the project's value, which is estimated at AUS$250M/year over the 13-year mine life, with strong growth projections. 

Centaurus Metals has a current market cap of $340M. This was achieved through a landmark decision to move towards an advanced nickel asset. The Carajás Mineral Province is the most prolific mineral belt in Brazil for base metals, offering attractive growth prospects for the company. 

The Deal with Vale

The Jaguar Nickel Sulphide Project was acquired through a deal with Vale, featuring a low-fronted cash, and a deferred payment structure. This deal is a Royalty stream and the company is looking to get the project up and running at the earliest. This deal with Vale is an offtake agreement. 

Prior to the deal, Centaurus Metals had an in-depth knowledge of Vale's assets. The company's exploration manager and geologist were on the ground working with other exploration projects in the Carajás Mineral Province. They understood that the asset was too small for Vale to develop and allocate capital. The Jaguar Nickel Sulphide Project has been dormant since 2010. It features a 55,000m diamond core, and an extensive database of information which enabled Centaurus Metals to explore and advance the project. 

Centaurus Metals made a $250,000 upfront payment along with swapping of a grassroots copper-gold asset located close to Vale's Salobo mine. The company is scheduled to pay an additional $1.75M to Vale going through the DFS (Detailed Feasibility Study). Once the asset initiates its first commercial production, Centaurus Metals will pay $5M with addition to royalty costs. This deal enabled Centaurus Metals to acquire the asset without a high upfront payment. 

Project Highlights

The company has carried out 40,000m-45,000m drilling at the Jaguar Project. This is in addition to the 55,000m drilling previously done by Vale. Centaurus Metals has already put out two resources, the latest resource was out in March 2021 featuring 59Mt, 0.96% nickel consisting of 560,000t nickel metal. This makes the resource globally significant when it comes to underdeveloped nickel sulphide projects. 

The company has run a base production case for a traditional nickel concentrate supply that was delivered in March. In May, a value-added study was also carried out towards the production of nickel sulphate. This project has a $1.1Bn post-tax NPV, with a payback timeline under 2 years. It features more than 50% IRR (Internal Rate of Return) of $750/lb nickel along with a $0.50c/lb sulphate premium. These are conservative estimates that are being put into the Scoping Study. 

Centaurus Metals identified a number of high-grade intercepts in the past drilling carried out by Vale. However, the spacing for the drills was 100m apart. The company focused on closing in the drilling to demonstrate the presence of mineralization and continuity. 

Through the acquisition of Jaguar Nickel Sulphide Project, the company has diversified its portfolio. An asset base nickel and iron ore projects has led to further de-risking. 

Centaurus Metals is focusing towards production and delivering the DFS along with approvals in the shortest possible time. The company's nickel sulphide project has a strong potential for scale. It features a 13-year mine life with a 20,000t yearly supply. The company continues to carry out extensive exploration and is looking to tap the underground potential at the site. The bulk of mineralization points towards an open-pit operation. The company is simultaneously working on development and exploration. 

Exploration Findings

As part of the Scoping Study, the company has stope optimizations underground. They have a total of 8 pits, out of which 4 are below the surface. The company is limited by the stopes of the resource which is 250m-300m deep.

Centaurus Metals have rigs on the ground that will enable them to step out 50m-100m. Based on the discovered mineralization, the projected mine life can be extended to more than 20 years. This will allow a significant and consistent cash flow, opening up the possibilities for further expansion or acquisition of additional projects.

Centaurus Metals has planned resource updates in Q4 2021 and Q3 2022. The latter would be included in the company's DFS on the reserve base. They currently have 7 diamond rigs on the ground along with a RC rig. An additional diamond rig is planned, which will help the company split the exploration between step-out drilling and the expansion of existing stopes. The company also has infilling planned to ensure that the entire resource is under the M&I (Measured and Indicated) category. This will allow them to bring the reserves as part of the resource update. 

Cash Position

Centaurus Metals currently has an equity of $20M and is allocating $1M/month for their drilling operations. They are optimizing the cost structures along with planning the starter pits. This restructuring is scheduled to continue until February 2022. The company is looking to add value to their asset before a capital raise for a planned Feasibility Study in 2022. 

Nickel Sulphate vs. Concentrate

In the initial phases, the company is looking towards producing nickel sulphate rather than concentrate due to cost differences. The benefit of cheap energy, manpower, water resources, and limestone for neutralization makes nickel sulphate an attractive prospect. 80% of Brazil's power comes from renewable sources, which brings down the energy costs to $0.10c/KWh. 

Choosing nickel sulphate enables Centaurus Metals to approach car and battery manufacturers directly for a strategic supply arrangement. This commodity also falls under LME (London Metal Exchange) which allows up to 25% higher margins than market prices.

To find out more, go to the Centaurus Metals Website