The Munali Nickel Mine in Zambia first came across the radar of Consolidated Nickel Mines (CNM) in 2014 when it was struggling in care and maintenance under Chinese owners Jinchuan Group. Sensing the opportunity to take on a high potential asset, CNM quickly began discussions with Jinchuan and signed a lease and royalty agreement to become owner operators of the mine for a 20-year period. “In 2015 we had the deal financed through CE Mining – a British-based private equity fund,” says CEO Simon Purkiss. “They put in funding to maintain the care and maintenance while we de-risked the project, as it had previously been saddled with high costs and other issues.” However, over the last four years CNM has transformed the fortunes of the mine and is poised to restart operations at Munali in the first quarter of 2019.
After taking over the mine, CNM conducted extensive evaluation and study work in order to put together a sustainable restart plan. First and foremost, the company revisited the geological foundations at Munali as the previous owners had used the wrong geological model, which contributed to uneconomic operations when the nickel price fell in 2008.
Re-designing the mine
A new geological model was developed by CNM along with the defining of a new JORC resource of 6 million tonnes at 1% nickel in 2015. Next, the company changed the mining method to suit its improved understanding of the geology at Munali.
“The previous owners were using longhole open stoping as the mining method, but we changed that to a cut and fill method. The deposit is 50 metres thick in some areas, with very good grades of up to 4% nickel on the footwall, so one of the things we wanted to ensure was that we got full extraction and grade control. The cut and fill process lends itself to those.”
This new mining method has resulted in a considerable reduction to operating costs at the site, making it more resilient to the lower nickel price environment of the last decade. In fact, CNM has succeeded in bringing production costs down to around US$8,000 per tonne of nickel.
In October 2018, CNM announced it would soon be restarting operations at the Munali mine after securing $30 million in financing from a Shanghai-listed mining firm called Chengtun Mining Group, who first invested in CNM five months earlier. CNM secured a further $10 million as an offtake loan with Transamine who secured the offtake from Munali for a four-year period.
The majority of the $40 million finance package was spent on new equipment such as a DMS plant and a PGM concentrate flotation circuit along with the refurbishment of the processing plant, Purkiss reveals. “The plant had been standing for eight years and needed some repairs. We also needed to take the decline down another level to start the cut and fill going back upwards.”
Meanwhile, CNM welcomed three non-executive directors from Chengtun to the management team to accommodate its new partnership with the Chinese firm. In recent years, Chengtun has developed expertise in African mining and is close to completing a copper-cobalt refinery in the DRC.
“Chengtun have been very supportive partners and are focused on battery metals, so they saw us as a key part of their battery strategy. They took equity for $30 million, representing about 33% of the company.”
CNM has also made sure it remains highly attuned to the rapidly developing battery metals market and has even conducted preliminary test work on its nickel concentrate with the intention of potentially moving into nickel sulphate or metal production.
First nickel production
The first quarter of 2019 is set to be a landmark period for CNM as it targets first nickel concentrate production from the Munali mine. “This is a major development for us because we will finally move from a cash draining environment to a cash flow positive environment.
“Until now we have had to rely on raising funds to keep everything running and in care and maintenance. Our latest estimations show that we should be cash flow positive by March or April this year, so it’s a major step forward for us.”
A ramp-up phase will follow later in the year and conclude in the third quarter, by which point the facility will deliver 60,000 tonnes of ore per month. By the end of 2019, Munali will have produced 25,000 tonnes of nickel concentrate with 50,000 tonnes of nickel concentrate targeted for 2020 and onwards.
CNM’s other key objective in early 2019 centres on the construction of a dense media separator (DMS) plant, which will become the first such facility built on Zambian soil. The DMS plant will improve recoveries and head grades from 1 to 2%, making it an invaluable addition to the infrastructure at Munali.
“I am actually looking at the DMS plant at the moment, its quite a massive beast and is pretty much on target for commissioning by the end of the year,” Purkiss reveals.
“Consulmet, the DMS team out of South Africa have also been great throughout their work on the DMS plant and PGM flotation circuit. They’ve designed a very nice plant that we will be commissioning very soon. Also, our shareholders CE Mining have been very quick decision makers and possess strong mining credentials that we can draw from.
“It is a busy time with a rapid ramp up of people and we are fortunate to have been able to recruit a very good team from the mines in the Copperbelt. In addition, we are introducing modern management reporting systems such as accounting package Acumatica and a fantastic reporting system, InPhase, that allows us to drill down into the data, again a first for Zambia.”
Corporate social responsibility
The Munali mine is located in a rural farming region of Zambia around 75km South of the capital Lusaka. As a result, an unfortunate but necessary outcome was the relocation of around 50 households from inside the mine area, equating to a community of 400-500 people.
During the last two years of Munali being in care and maintenance, CNM built 50 new households around 23km away from the mine for the displaced communities, along with a modern school for 500 pupils and a large rural health clinic.
“We also attempted to re-establish the livelihoods of the local people. They are predominantly farmers, so we planted fields and provided seeds, livestock, tractors and diesel. However, we didn’t want them to become dependent on us as we currently only have a seven-year mine life, although we are confident that more ore exists below the 500 metres we have drilled to.”
Therefore, CNM established an independent association to support social development projects in the region beyond the current mine life at Munali. The Musangu Foundation aims to harness private sector investment, particularly from the mining sector, to provide local market-based solutions.
“From the local community point of view, they have benefitted from the projects we have carried out, and they are also appreciated by local politicians. Overall, we have very good relations with our neighbours,” Purkiss summarises.
CNM has also made sure to employ as many workers from the local community as possible, despite education levels being fairly low throughout the rural region. However, the firm hopes that the various social development projects it has overseen across the region will help to improve levels of education over time. CNM also intends to eventually have a 100% Zambian nationals team running the operation.
In the short term, the aim is to ensure operations run smoothly at the Munali mine during its first year of production since 2011. Beyond this, CNM plans to explore further opportunities to invest in distressed nickel mines across the Southern Africa region.
“We are a private company at the moment, but CE Mining is a fund that requires an exit over the next five years. Therefore, we are looking at listing on one of the exchanges sometime later this year when we have embedded this operation and have a positive cash flow.”
With a year of nickel production at the Munali mine and a potential IPO to look forward to in 2019, CNM is entering a new cash flow positive phase that could provide the foundations for sustained growth in the Southern African nickel space.