INSG Environmental & Economics Session

Bruce Wedderburn

27th April 2010

INSG April 2010 Malachite Process Consulting

Industrial Minerals
 Agenda

Laterite hydromet options

HPAL
Heap leaching
Capital and operating costs
Economics
Technology trends

INSG April 2010 Malachite Process Consulting

 Laterite Hydromet Options

Caron process (Reductive roast)

High pressure acid leach (HPAL)
EPAL (Amax) (HPAL & AL)
Atmospheric leaching (AL)
Atmospheric chloride leach (ACLP)
Direct Nickel (atmospheric) (DN)
Sulphation atmospheric leach (SAL)
Heap leaching (HL)

INSG April 2010 Malachite Process Consulting

 HPAL Process

Existing Operations
Moa Bay (Sherritt)
Murrin Murrin (Minara)
Cawse & Bulong (S/D) (Norilsk)
Coral Bay (SMMC)
Ravensthorpe (S/D) (BHPB)
Committed Projects
Goro (Vale Inco)
Ambatovy (Sherritt)
Ramu (MCC)
Taganito (SMMC)
Planned Projects
Gladstone, Vermelho, Weda Bay, Moa Bay expansion

INSG April 2010 Malachite Process Consulting

 Heap Leach

Committed Projects
None

Well Advanced Projects (Demonstration Plants)

Yuanjiang - China (Yunnan Tin Group)
aldag - Turkey (European Nickel)
Murrin Murrin (Minara)
Niquel do Piau (Vale)
NTUA Greece (Larco)
Acoje Philippines (Rusina)

Early Development Projects

At least 10 projects in early stages of development

INSG April 2010 Malachite Process Consulting

 HPAL Failures

Bulong
Never achieved design throughput of 9 ktpa
Significant gypsum scaling
Operating costs exceeded sales revenues
Operating costs - 300% over initial estimates
Capital costs - 100% over budget
Comments:
Was a demonstration plant and never
commercially viable
Direct SX technology was a failure

INSG April 2010 Malachite Process Consulting

 HPAL Failures

Cawse
Never achieved design production of 9.2 ktpa
Beneficiation circuit was a failure
Operating costs exceeded sales revenues
Operating costs - 200% over initial estimates
Capital costs - 100% over budget
Comments:
Was a demonstration plant and never
commercially viable
Simplest flowsheet failed due to ore upgrading

INSG April 2010 Malachite Process Consulting

 HPAL Failures

Murrin Murrin
Never achieved design production of 45 ktpa
Actual capacity probably 32 to 34 ktpa Ni
Major plant modifications required
Operating costs - 400% over initial estimates
Capital costs - 100% over budget
Comments:
Cash flow positive at opex of US$4.97/lb Ni
Write-off of capital and Glencore support
Brownfield expansion via heap leaching

INSG April 2010 Malachite Process Consulting

 HPAL Failures

Ravensthorpe
Never achieved design production of 50 ktpa
Only achieved 35% of design (BHPB - May 08)
Major failure of beneficiation circuit
Operating costs never disclosed
Capital costs - 100% over budget
Comments:
HPAL, AL & back-end circuit never proven
Major modifications required to front-end
Plant sold to First Quantum Minerals

INSG April 2010 Malachite Process Consulting

 HPAL Successes

Coral Bay
Achieved design rates within 14 months
Expanded plant capacity to 22 ktpa in Apr 09
Operating costs never disclosed
Capital costs <10% over budget
Comments:
Low capital intensity of US$10/lb Ni
No acid plant and mixed sulphide production
Engineering undertaken by SNC Lavalin
SMMC has good in-house nickel experience
Learnt from mistakes made in WA
INSG April 2010 Malachite Process Consulting
 HPAL Costs

Plant Capital Capital Operating

Project Country Capacity Costs Intensity Costs
tpa Ni US$m US$/lb Ni US$/lb Ni

Moa Bay Cuba 30,000 N/A N/A $3.12/lb

Murrin Murrin WA 32,000 $1,300m $18/lb $4.97/lb

Taganito * Phil 30,000 $1,300m $20/lb N/A

Ramu * PNG 30,000 $1,430m $22/lb N/A

Ravensthorpe WA 50,000 $2,800m $28/lb N/A

Goro NC 60,000 $4,300m $33/lb $1.15/lb

Ambatovy Madag 60,000 $4,500m $34/lb $0.77/lb

* HPAL costs to intermediate product All public domain costs

INSG April 2010 Malachite Process Consulting

 HPAL Costs (Normalised)

Plant Capital Capital Operating

Project Country Capacity Costs Intensity Costs
tpa Ni US$m US$/lb Ni US$/lb Ni

Moa Bay Cuba 60,000 N/A N/A $3 - 4/lb

Murrin Murrin WA 60,000 $2,000m $15/lb $4 - 5/lb

Taganito Phil 60,000 $3,100m $24/lb $4 - 5/lb

Ramu PNG 60,000 $3,400m $26/lb $4 - 5/lb

Ravensthorpe WA 60,000 $3,200m $24/lb $4 - 5/lb

Goro NC 60,000 $4,300m $33/lb $4 - 5/lb

Ambatovy Madag 60,000 $4,500m $34/lb $4 - 5/lb

All HPAL costs to LME nickel All public domain costs

INSG April 2010 Malachite Process Consulting

 Heap Leach

Why heap leaching?

Brief history

Demonstration plants

HL capital and operating costs

INSG April 2010 Malachite Process Consulting

 Why Heap Leaching?

Positives
Process both limonite & saprolite
Process far less complex than HPAL or AL
Lower capital intensity

Negatives
Heap permeability is critical
Sensitive to mineralogy
Iron chemistry
Acid consumption

INSG April 2010 Malachite Process Consulting

 Heap Leach History

Nickel laterite heap leaching R&D commenced in

early 1990s at NTUA in Greece
NTUA undertook column leaches on Greek laterites
Greek laterites consist mainly of hematite and the
nickel is contained in chlorite
Amenable to heap leaching with minimal acid
consumption
BHP, WMC and others undertook R&D commencing
in mid to late 1990s

INSG April 2010 Malachite Process Consulting

 NTUA - Greece

Demonstration Plant
Built a small demonstration plant at Larco mines
Process consists of:
Heap leaching of laterite ore at ambient temperature
Purification of the leach liquor by hydrolytic precipitation
Removal of Fe, Al and Cr
Simultaneous SX of Ni and Co using the Cyanex 301
Stripping of the loaded organic by Ni spent electrolyte
Co extraction over Ni and Co using the Cyanex 272
Stripping of the loaded organic by Co spent electrolyte

INSG April 2010 Malachite Process Consulting

 NTUA - Greece

INSG April 2010 Malachite Process Consulting

 NTUA - Greece

INSG April 2010 Malachite Process Consulting

 NTUA - Greece

INSG April 2010 Malachite Process Consulting

 Balkan Laterites (Greece)

INSG April 2010 Malachite Process Consulting

 Balkan Laterites (Albania)

INSG April 2010 Malachite Process Consulting

 Balkan Laterites (Turkey)

INSG April 2010 Malachite Process Consulting

 Commercial Operation

Infrastructure development commenced in 2006

Forestry permits approved in February 2009

Heap leaching expected to commence in mid 2010

Full production of 20 Ktpa Ni & 1.2 Ktpa Co in 2011

Capital cost of US$428m

INSG April 2010 Malachite Process Consulting

INSG April 2010 Malachite Process Consulting
INSG April 2010 Malachite Process Consulting
INSG April 2010 Malachite Process Consulting
INSG April 2010 Malachite Process Consulting
 Two products
First Nickel Product (FNP)
34% Ni, 1-1.2% Co, <2% Mn
Second Nickel Product (SNP)
24% Ni, 0.8% Co, <8% Mn

Potential customers
Nickel refineries Nickel product
Smelters

All mixed hydroxides to be sold to JXTC, following termination of the

BHPB off-take agreement, to facilitate 100% debt financing by
Chinese banks

INSG April 2010 Malachite Process Consulting

 Economics 2006 2010
Production (Ni in mixed hydroxide) tpa 20,400 20,400

Construction Cost US$m 238 277

Long-term Ni Price US$/lb 4.25 6.00

Capital Intensity US$/lb 5.57 6.12

Cash Operating Cost US$/lb 1.41 3.49

NPV (10% discount) US$m 180 207

IRR % 23 20

Total Capital Cost US$m 300 428

Source: European Nickel Updated: AGM Presentation 29 Mar 10

INSG April 2010 Malachite Process Consulting

 Demonstration Heap

Ore crushing completed by end Dec 09

Mix of saprolite & limonite

3,000 tonne heaps to be constructed

Heap to be stacked to commercial heights

Rain coats to be installed to control water balance

INSG April 2010 Malachite Process Consulting

INSG April 2010 Malachite Process Consulting
INSG April 2010 Malachite Process Consulting
 Economics 2010
Production (Ni in mixed hydroxide) tpa 24,500 Ni

Construction Cost US$m 423

Long-term Ni Price US$/lb 6.00

Capital Intensity US$/lb 7.84

Cash Operating Cost US$/lb 3.10

NPV (10% discount) US$m 375

IRR % 28

Total Capital Cost US$m 498

Source: European Nickel Updated: AGM Presentation 29 Mar 10

INSG April 2010 Malachite Process Consulting

 Murrin Murrin

Growth Targets

400,000 tpa of scats under leach

Ore is being leached together with scats

Current pad capacity yields 2,000 tpa Ni

Heap Leach infrastructure sized for 10,000 tpa Ni

Currently reviewing growth plans including HL

INSG April 2010 Malachite Process Consulting

 Murrin Murrin

INSG April 2010 Malachite Process Consulting

 Murrin Murrin

INSG April 2010 Malachite Process Consulting

 Murrin Murrin

INSG April 2010 Malachite Process Consulting

 Nquel do Piau - Brazil

Demonstration Plant
Vale constructed a demonstration plant in northern state of Piau in
Brazil
GRD Minproc awarded contract in 2008 for front end engineering
study comprising
Flowsheet development,
Engineering for crushing, infrastructure and
Nickel bearing solution metallurgy,
Capital and operating cost estimates.

Completion of basic engineering planned for 2009

Commercial production estimated for 2012 with a capacity of
36,000 tpa Ni

INSG April 2010 Malachite Process Consulting

 Nquel do Piau - Brazil

INSG April 2010 Malachite Process Consulting

 Nquel do Piau - Brazil

INSG April 2010 Malachite Process Consulting

 Heap Leach Costs

Plant Capital Capital Operating

Project Country Capacity Costs Intensity Costs
tpa Ni US$m US$/lb Ni US$/lb Ni

Acoje Philippines 24,500 $498m $9.20/lb $3.10/lb

aldag Turkey 20,400 $428m $9.50/lb $3.49/lb

NiWest WA 13,100 $340m $11.80/lb $2.49/lb

Canegrass WA 20,000 $650m $14.70/lb $2.67/lb

Wowo Gap PNG 20,000 $860m $19.50/lb $2.74/lb

Jump-up Dam WA 10,000 $510m $23.10/lb $6.39/lb

Heap leach capital costs to intermediate product

INSG April 2010 Malachite Process Consulting

 Economic Comparison

Parameter HPAL HL

Nickel Production (LOM) tpa 55,700 32,800

Cobalt Production (LOM) tpa 4,100 640

Capital Cost US$m $3,750m $950m

Capital Intensity US$/lb Ni $30.5/lb $13.1/lb

Cash Cost (exclude by-products) US$/lb Ni $4.59/lb $3.58/lb

Cash Cost (include by-products) US$/lb Ni $3.86/lb $3.39/lb

NPV (10% real, non geared) US$m ($2,160)m $220m

IRR (real, post tax) % 1.6% 17%

Capital Payback (from free cash) Years N/A 7 years

INSG April 2010 Malachite Process Consulting

 Technology Trends

FeNi Smelting
Well proven & low risk technology
Capital costs - recent escalation
Operating costs energy dependent
Requires high grade ore feed
Ore Calcining
Been considered previously
Not demonstrated or proven
Roasting / magnetic separation of interest
Unlikely to compete with Ni pig iron
Ore upgrade for smelter - possible application

INSG April 2010 Malachite Process Consulting

 Technology Trends

Ni Pig Iron
Well proven & low risk technology
Environmental emissions major concern
Low capital cost access by small players
High operating costs
Switch from blast to electric furnaces
Ore suppliers under cost pressure
Export of ore from Indonesia to cease
To remain a swing producer Ni price dependent

INSG April 2010 Malachite Process Consulting

 Technology Trends

HPAL
Proven technology but high technical risk
Commercial risk high capital exposure
Operating costs significantly higher
Capital costs rapid escalation
Only affordable by major companies
Project economics questionable
Future developments will be influenced by
success of Goro, Ramu, Ambatovy & Taganito

INSG April 2010 Malachite Process Consulting

 Technology Trends

Atmospheric Leach
Technology has not been demonstrated
Possible niche applications
Combined HPAL & AL possible
Capital costs are high ~80% of HPAL
Operating costs are similar to HPAL
Project economics questionable
Unlikely to succeed unless there is a step change
in costs

INSG April 2010 Malachite Process Consulting

 Technology Trends

Heap Leach
Technology is currently being demonstrated
Ore type critical for heap permeability
Site specific conditions important
Acid key capital and operating cost driver
Operating costs lower than HPAL
Capital costs significantly lower than HPAL
Offers market entry by small companies
Will take time to achieve widespread acceptance

INSG April 2010 Malachite Process Consulting

 www.malachiteconsulting.com

Bruce Wedderburn

April 2010

INSG April 2010 Malachite Process Consulting

Industrial Minerals