Despite challenges in the nickel market, the June quarter was a positive one for Lunnon Metals Ltd with its gold program delivering promising high-grade, shallow results at Lady Herial and Hustler prospects of the Foster-Baker (FBA) Project near Kambalda in Western Australia and delivering updated mineral resource estimates (MRE) for the Baker and Foster South deposits.
The company continues to monitor external factors affecting the Western Australian nickel sector. Following BHP (ASX:BHP) Group’s decision to place its nickel division into care and maintenance until at least February 2027, Lunnon Metals plans to explore alternative processing solutions, including accessing other district concentrators or constructing a new facility, potentially in collaboration with other local Kambalda nickel companies.
Lunnon’s decision to review and reduce exploration activities in the March 2024 quarter led to much lower exploration costs during the June quarter.
With a cash balance of A$22 million as of June 30, 2024, the company is in a strong position to add value to its asset base, particularly in gold, while maintaining significant leverage to any improvements in nickel prices and market conditions.
Focused on gold potential
Lunnon Metals managing director Edmund Ainscough said: "With our nickel drilling program complete at Baker and Foster, it has been pleasing to turn our minds back to gold given the highly prospective ground the company holds in the heart of one of Australia’s best gold belts, the +15-million-ounce St Ives gold camp.
“The early high-grade drilling results are extremely encouraging and the team is focused on advancing this gold potential as quickly as possible. If successful, this will mean that the company not only maintains, but hopefully grows, its healthy cash balance and thus is on the surest possible footing when the time is right to turn its substantial nickel portfolio to account.
“In that regard, during the quarter, we received approval from the Western Australian Government to commence mining at Baker, another major de-risking milestone.
"We are now primed to pull the trigger on that investment decision at a time of our choosing, when both the market sentiment and our share price truly reflects the intrinsic value of our existing 113,600 tonnes of nickel metal at typical high Kambalda style grades.
“In respect to the broader nickel sector, I’m proud of the swift action we took to reduce costs early in 2024 but our thoughts are with all the employees, both our own and those of other Australian nickel companies, whose employment has been negatively impacted in the first six months of 2024. BHP’s decision to temporarily suspend its nickel operations until February 2027 was eventually announced on July 11, 2024.
“During this protracted process, it was pleasing to see both State and Federal representatives from all sides of politics recognise the importance of nickel’s contribution to Australia’s plans for its critical metals industry.
“Lunnon Metals now looks forward to demonstrating that the robust and resilient economics of its nickel and gold portfolio will enable the company to enjoy a bright and independent future.”
Looking ahead
Alongside its quarterly review, Lunnon provided a look at what can be expected in the September quarter.
It has planned reverse circulation drilling for the current quarter to follow up on the shallow, high-grade results at Lady Herial. If this gold-focused program succeeds, an initial MRE may be reported, paving the way for open pit optimisation work to define a potential economic open pit.
The ongoing pre-feasibility study (PFS) for the Baker and Foster projects continues to explore options for processing Kambalda Nickel Project production. During the June quarter, the company held discussions with other key nickel players in the region to investigate various processing alternatives.
Lunnon listed several significant developments expected during the current September quarter:
- An update on the combined PFS activity for the Foster/Baker project, including the revised 2024 resource estimate for Baker.
- Results from the ongoing gold-focused program at Lady Herial and other nearby targets in the Foster area.
- The gold portfolio at FBA will be evaluated for the potential for mineralisation similar to the Father’s Day Vein in the Lunnon Sediment rock unit at the Beta Hunt mine, that is around 15 kilometres north of FBA and owned now by the merged Karora Resources and Westgold Resources entity.
- Lunnon expects to release a first-time MRE for Foster's 40, 50, and 60 surfaces, which was deferred in FY2024 due to workforce reductions.
- Updates on targeting improvements in the Long South Gap area, leveraging machine intelligence for better targeting accuracy.