Jervois to acquire SMP nickel & cobalt refinery in Brazil; concentrate from Idaho for refining, cobalt metal back to US

Jervois Mining Limited will acquire 100% of the Sao Miguel Paulista nickel and cobalt refinery (SMP Refinery) in the Brazilian State of Sao Paulo from Companhia Brasileira de Alumínio (CBA) (an investee company of Votorantim, one of the largest industrial conglomerates in Latin America).

SMP Refinery has annual refined production capacity of 25,000 metric tonnes of nickel and 2,000 metric tonnes of cobalt and is currently on care and maintenance.

Jervois currently is a cobalt company with nickel and copper exposure, with mining assets in Idaho, Uganda, and Australia. Jervois intends for the SMP acquisition to transform it into a vertically integrated producer when the Idaho Cobalt Operations (ICO) commences commercial production. Specifically, Jervois will use SMP to refine concentrate from ICO, and return cobalt metal to the United States.

Jervois intends to be capable of supplying refined nickel and cobalt products to customers across a range of industries including specialty stainless steels, nickel and cobalt superalloys, cathode precursor, lithium-ion battery and electric vehicles manufacturers.

Jervois will initially lease SMP Refinery from CBA, providing Jervois access to undertake a Feasibility Study (FS) for a restart. Subject to Jervois’ Early Termination Right up to September 2021, the lease shall continue until closing of Jervois’ acquisition of SMP Refinery, which is subject to the satisfaction of usual condition precedents and is expected to occur by December 2021.

Sao Miguel Paulista nickel and cobalt refinery

Jervois will acquire 100% of SMP Refinery for R$125.0 million cash (US$22.5 million at current exchange rates), payable in tranches:

  1. R$15.0 million (US$2.7 million) cash as a deposit by 30 December 2020. Refinery Lease commences upon receipt by CBA of Deposit Payment. Should Jervois elect to exercise its Early Termination Right, Deposit Payment will be forfeited and no further tranches will be payable. On Closing, Deposit Payment shall be applied to the purchase price for SMP Refinery. Jervois will fund Deposit Payment via cash reserves.

  2. R$47.5 million (US$8.5 million) on Closing.

  3. R$25.0 million (US$4.5 million) on the earlier to occur of: SMP Refinery meeting certain production thresholds (average of 125mt per month of contained refined nickel and/or cobalt); or 30 June 2023.

  4. R$37.5 million (US$6.75 million): on 30 June 2023.

Background. SMP Refinery is a nickel and cobalt electrolytic refinery designed and constructed by Outotec that commenced operations in 1981. The facility is located in an industrial zone in São Paulo, Brazil. It was placed on care and maintenance by CBA in 2016, when CBA also placed its Niquelandia mine and processing plant in Brazil on care and maintenance due to prevailing market conditions at the time. Niquelandia provided the SMP Refinery with nickel carbonate. SMP Refinery’s production capacity was 25,000 metric tonnes per annum (mtpa) of refined nickel cathode and 2,000mtpa refined cobalt cathode.

SMP Refinery utilises a sulfuric acid leach to dissolve nickel and cobalt from delivered intermediate products. The leached nickel and cobalt are subsequently separated using solvent extraction (SX) and impurity removal stages to produce final electrowon (EW) nickel and cobalt metal. In addition to nickel and cobalt electrolysis, the flowsheet and site encompasses leaching and neutralization, nickel purification, crystallization and evaporation, cobalt extraction, utilities, cutting and packing, electrical, maintenance, an industrial waste-water treatment plant and a sodium sulfate crystallization building.

In parallel to processing nickel carbonate intermediate from Niquelandia, SMP Refinery also successfully processed a range of third-party materials including nickel carbonates (from Yabulu in Australia), mixed hydroxide product (MHP) (from Ravensthorpe in Australia and Goro in New Caledonia) and cobalt hydroxide (from the Democratic Republic of Congo, DRC). In its last years of operation, approximately 20-30% of metal production was sourced from third-party suppliers outside Brazil. Nickel and cobalt recoveries averaged 99% and 96%, respectively, over SMP Refinery’s operating life.

Nickel and cobalt products. SMP Refinery produced electrolytic nickel with 99.9% purity, exceeding the base specification required by the London Metal Exchange (LME). This product was historically used in premium applications such as superalloys, specialty stainless steels, electroplating and batteries. SMP Refinery broken cobalt cathodes were also of high quality and historically used in superalloys and batteries. Nickel and cobalt cathodes were sold under the brand Tocantins and have an established customer base in key regions of demand today: the United States, Europe and Japan.

CBA has also undertaken a scoping study with a leading international engineering firm specializing in base metal refineries, to assess the potential conversion of the facility to nickel sulfate production, for modest capital expenditure. Nickel sulfate is the current physical form utilized in the preparation of cathode precursor materials by the lithium-ion battery supply chain.

Jervois has not included this conversion into its current development plans. Off-take and partner negotiations with cathode precursor, lithium-ion battery and electric vehicle manufactures under non-disclosure agreements continue.

SMP Refinery restart scenarios. Jervois has assessed in detail three operating scenarios during its due diligence. The scenarios are designed based on filtration and management of waste limitations based on SMP Refinery’s existing production capacity and flowsheet of 25,000mtpa and 2,000mtpa of refined nickel and cobalt cathode respectively.

  1. Idaho Cobalt Operations (ICO) concentrate only: 2,000mtpa refined cobalt

  2. ICO concentrate and cobalt hydroxide: 8,000mtpa refined cobalt

  3. ICO concentrate and MHP: 10,000mtpa refined nickel and 2,300mtpa refined cobalt

Jervois’ preliminary capital estimates range from R$75 million (US$13.5 million) up to R$150 million (US$27.0 million) for SMP Refinery to restart across the above three operating scenarios.

ICO concentrate pre-treatment. During its due diligence, with regard to ICO concentrate, Jervois assessed implications at SMP Refinery both for processing (including impurity removal and physical handling constraints) and also waste generation. Prior to leaching at SMP Refinery, ICO concentrate must be either roasted (to remove sulfur) or processed via a pressure oxidation autoclave (POX).

Jervois has undertaken careful assessment in defining both roaster and POX business cases, including feed preparation, materials handling properties, base metal extraction, gold extraction and overall metal recovery, free acid and neutralent required, reagent consumption, thickener and filtration physical properties and impact on SMP product quality.

The ICO Bankable Feasibility Study (BFS) scope was expanded to include an assessment for a dedicated roaster of cobalt concentrate in Blackfoot, Idaho. This was supported by bench level testwork at SGS Lakefield Oretest (SGS) in Sudbury. Testwork specific to ICO concentrates also verified the calcining requirements through pilot scale testing of segregated concentrate.

Sighter testwork completed to date has confirmed satisfactory cobalt extraction in an atmospheric leach, analogous to the existing process flowsheet at SMP Refinery. M3 Engineering (M3) based in Tucson, Arizona, prepared capital and operating cost estimates to BFS level of accuracy (+/- 15%). Capital costing for a roaster plant in Idaho processing cobalt concentrate from ICO was US$17.1 million with operating costs of approximately US$1.00/lb of contained cobalt.

As part of the refinery restart FS, Jervois will now assess the alternative of situating a roaster in Brazil. While Blackfoot has access to competitive energy costs, skilled labor at competitive rates, gas pipeline, high quality water, existing road and rail infrastructure connected to major sealed roads with access to port facilities, capital and operating costs will be reduced by constructing a roaster adjacent to SMP Refinery in Brazil.

Calcining of a bulk concentrate has been considered and can be developed to a BFS level with an additional pilot test to confirm present assumptions based on bench roasting by Xstrata Process Support (XPS), a subsidiary of Glencore, in 2018.

In parallel to the roaster base case, Jervois developed a POX alternative flowsheet for the integration of sulfide concentrate into SMP. POX has a higher capital cost but has benefits on metal recovery and operating costs. It would also act as an effective debottlenecking initiative, increasing nickel in MHP processing capacity at SMP up to 20,000mtpa from the 10,000mtpa outlined above in operating scenario (3).

The ICO refinery scoping study undertaken by Wood was based on POX technology providing Jervois with the relevant design and costing for a plant in the United States based upon ICO cobalt concentrates, to assist it in same for a plant in Brazil. POX is typically applied to refractory gold ores and base metal sulphide concentrates as an alternative to roasting and/or smelting technology. The technology is robust, well understood and commercially proven. Preliminary POX sighter testwork was progressed at SGS Perth Western Australia with satisfactory results.

Jervois expects to make a final decision on whether to utilize a roaster or POX during Q4 2020, following negotiations with third-party concentrate suppliers. If the current plan to utilize a roaster is retained, a further decision will be made on the location of the facility.

Jervois is also considering a revised development plan at Jervois’ Nico Young nickel-cobalt heap leach development in Australia, to a mixed hydroxide product (MHP), suitable for processing based on the existing SMP flowsheet, resulting in estimated capital savings of A$200 million from the prior Nico Young NI 43-101 Preliminary Economic Assessment.

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