Queensland Pacific Metals: Positioning for Growth in Clean Nickel Production

• Queensland Pacific Metals (QPM) is developing the Townsville Energy Chemicals Hub project located south of Townsville, Australia.
• QPM plans to import high-grade nickel laterite ore from New Caledonia and process it using the direct nickel process, producing battery chemicals for lithium-ion batteries, alongside other products.
• A significant portion of the operating cost is related to energy input, with energy costs accounting for between one-quarter and one-third of the overall operating costs.
• QPM recently acquired the Morinbo gas project, providing a secure and relatively low-cost energy supply. The gas supply comes from some of the world's highest-grade metallurgical coal mines.
• The North Queensland gas pipeline, which used to supply the now shutdown Queensland Nickel Refinery, will be utilized to transport the gas. The pipeline has ample capacity for QPM's needs.

About Queensland Pacific Metals

Queensland Pacific Metals (QPM) is an Australian company developing the Townsville Energy Chemicals Hub (TECH) project located near Townsville on the northeast coast of Australia. QPM plans to process high-grade nickel laterite ore imported from mining partners in New Caledonia using a new processing method called Direct Nickel. This will produce high purity battery chemicals like nickel and cobalt sulfate to supply the growing lithium-ion battery market.

Interview with Dr Stephen Grocott, MD & CEO, and Duane Woodbury, CFO of Queensland Pacific Metals

Strategic Gas Supply Acquisition

A key recent development for QPM was the acquisition of the Moranbah Gas Project from Anglo American. This provides QPM with a secure, low cost source of natural gas which will supply approximately 30% of the power needed for the TECH project. The gas comes from coal mines in the Moranbah fields that currently flare or vent the majority of their gas. QPM will capture this gas, reducing greenhouse gas emissions from the coal mines and providing fuel for the TECH facility.

The Moranbah fields currently produce around 10 petajoules of gas per annum, most of which is supplied to a nearby ammonium nitrate plant. By increasing gas capture, QPM will be able to supply more fuel to the Townsville Power Station and generate electricity to sell into the grid during peak demand periods. This provides an additional potential revenue stream for QPM.

Advantages of the TECH Project

The TECH project has several key advantages compared to competing nickel projects:

• Located in Australia, a tier 1 mining jurisdiction with strong environmental and social governance standards. This positions TECH well to supply clean nickel and cobalt to North America and Europe.
• Relatively low capital intensity compared to high pressure acid leach (HPAL) projects in Indonesia and elsewhere.
• Long-life, high grade nickel laterite ore supply secured from established miners in New Caledonia with decades of experience and rehabilitation practices.
• The Direct Nickel process developed by QPM's technology partner Clean TeQ is more efficient and has a lower environmental impact compared to traditional nickel processing.
• The Moranbah gas supply provides low cost, secure onsite power generation.

Path to Production

QPM is currently in the development and financing stage for the TECH project. Key upcoming milestones include:

• Ongoing refinement of capital and operating cost estimates, expected to be completed around September-October 2022.
• Finalizing project financing plan and securing debt and equity commitments. Targeting 50-60% financed by debt.
• Completing value engineering and detailed engineering with key equipment partners like Siemens, Andritz and Primetals.
• Reaching a final investment decision in 2023 to commence construction and development activities.
• Targeting first production of nickel and cobalt sulfates in 2025.

Conclusion

With advantaged access to low-cost gas supply, a tier 1 mining jurisdiction, strategic partnerships, and a technology tailor-made for battery chemicals production, QPM is positioning itself as a leading supplier of clean class 1 nickel and cobalt to automakers and battery manufacturers.

The TECH project checks all the right boxes for ESG-focused institutional investors seeking exposure to the electric vehicle supply chain. While QPM still faces challenges typical of a development stage company, such as securing full financing and constructing on time and on budget, the company has assembled an impressive package of strategic partners to help mitigate project risks.

The next 6-12 months will prove pivotal as QPM aims to finalize engineering studies, financing packages and offtake agreements on the path to a final investment decision. During this critical de-risking phase, QPM appears undervalued relative to the long-term cash flow potential from TECH. Nickel-focused investors with a 3-5 year time horizon should keep a close eye on QPM as it works towards becoming Australia's next major nickel producer.