Western Mines: Building Australia's Next Major Nickel Resource

• Western Mines Group is a nickel exploration company focused on the Mulga Tank nickel sulphide discovery in Western Australia
• Since its 2021 IPO, Western Mines has drilled 81 holes and 36,000 meters, proving a large low-grade disseminated nickel sulphide system with potential for 3-5 million tons of contained nickel 
• Recent drilling also shows potential for shallow high-grade nickel pods of 1.5-2% nickel that could enable Western Mines to become a junior producer
• The company aims to prove up resources and advance to scoping studies to attract larger investors and strategic partners, targeting the growing demand for secure, ESG-compliant nickel sulphide supply
• With a $15 million market cap, the company believes its project compares favorably to peers and offers significant upside potential as it continues systematic exploration

As the global transition to clean energy accelerates, the demand for key battery metals like nickel is poised for significant growth in the coming years. However, sourcing adequate supplies of responsibly produced, high-quality nickel remains a major challenge. In this context, junior exploration companies with promising nickel sulphide projects in stable jurisdictions warrant closer attention from investors. One such company is Western Mines Group, an Australian explorer rapidly advancing the large Mulga Tank nickel sulphide discovery in Western Australia.

A Significant New Nickel Sulphide Discovery

Western Mines Group (ASX:WMG) listed on the Australian Securities Exchange in July 2021 to explore the Mulga Tank project, a large nickel sulphide system located in the Mulga Tank greenstone belt of Western Australia. The project areas sits under 60 meters of sand cover, which has hindered previous exploration attempts. However, historical drilling of just 12 holes intercepted nickel sulphide mineralization in 10 of them, highlighting the project's potential.

Building on these encouraging historical results, Western Mines has launched an aggressive exploration campaign at Mulga Tank. As Managing Director Caedmon Marriott explains,

Since IPO, we've drilled another 81 holes on top of that. We've drilled 35, 36,000 meters since IPO, 21,000 meters in the last 12 months.

This systematic drilling has confirmed Mulga Tank as a very large Type 2 disseminated nickel sulphide system, with potential to host a resource of 3 to 5 million tons of contained nickel.

Interview with Managing Director Caedmon Marriott

Potential for High-Grade Mineralization

While the large low-grade resource at Mulga Tank is impressive, recent drilling has also revealed strong potential for significant high-grade nickel sulphide mineralization. As Marriott notes,

We've now pretty much conclusively demonstrated this isn't just a large low-grade Type 2 disseminated system like Mount Keith. It's actually more akin to a hybrid system like the example of that in WA is Perseverance, which is 50 million tons at 2.5% nickel.

Western Mines' drilling has yielded 23 intersections above 1% nickel so far, with grades up to 4.5% nickel in semi-massive sulphides. These results suggest the presence of a high-grade component to the Mulga Tank system, which could dramatically improve the project's economics. Marriott explains,

If we can prove up pods of those, there are some of these clustering in small areas. If we can prove up shallow pods of maybe 30, 40, 50,000 tons of nickel at 1.5% to 2% in the top couple hundred meters, then that's an entirely different proposition. We can almost throw the large low-grade 2 billion capex out the window and we can become a small junior producer.

Systematic Exploration and Value Creation

To date, Western Mines has spent approximately A$9 million on exploring Mulga Tank. The company's exploration approach balances systematic step-out drilling to define the full extent of the mineralized system with targeted infill drilling to prove up high-grade resources.

As the project advances, Western Mines plans to commence metallurgical test work and scoping studies while continuing to drill out the most prospective areas. This ongoing news flow and value creation should help the company appeal to a broader base of institutional investors, particularly in markets like London and Europe where there is strong interest in battery metal projects with scale and ESG credentials.

Navigating the Path Forward

Western Mines Group is executing its exploration strategy against the backdrop of a dynamic nickel market. The company has adopted a prudent approach to capital management, conducting targeted quarterly raises to maintain consistent exploration momentum.

We do a small raise, we put 80 percent of the money into the ground, that gets us to the next level

As the project advances toward resource definition and metallurgical studies, Western Mines is actively engaging with potential strategic investors, particularly in the London market where there is growing appreciation for large-scale battery metal projects. While the current nickel market presents near-term challenges, the company's management views this as an opportunity to build value at attractive entry points.

The Investment Thesis for Western Mines

• Large, strategically located nickel sulphide discovery in a Tier-1 mining jurisdiction
• Potential for multi-million ton, long-life nickel resource with attractive geometry and metallurgy 
• Indications of significant high-grade mineralization that could enable a starter operation and greatly improve overall project economics
• Proven management team with strong nickel exploration and development expertise
• Attractive valuation compared to peer companies at a similar stage
• Exposure to the strong long-term fundamentals of the nickel market, driven by rising demand from the electric vehicle and renewable energy storage sectors

Macro Thematic Analysis:

The global shift towards electrification and decarbonization is driving unprecedented demand for battery metals like nickel. Nickel is a key component in the lithium-ion batteries used to power electric vehicles and store renewable energy, with demand expected to soar in the coming years as these technologies become mainstream.

However, the nickel market faces significant supply challenges going forward. The majority of the world's nickel production currently comes from laterite deposits in Indonesia, the Philippines, and elsewhere, which tend to be lower grade and have higher environmental and social risks compared to sulphide deposits. At the same time, there is a scarcity of new sulphide discoveries globally, particularly in stable and mining-friendly jurisdictions.

This supply gap is creating opportunities for junior nickel explorers like Western Mines that are able to define significant new sulphide resources. As Caedmon Marriott explains,

If you genuinely do want security of supply chain, supply chain tracing, ESG-compliant nickel, where on earth is the Western world going to get it from? Those projects don't leap out at you at all. We want to be on a two to three-year view. We want to be ready to be the next up-and-comer in that space, if you like.

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