Golden Mile Resources (ASX: G88) shares are up 146% today on the announcement of very high nickel levels at the Quicksilver project. That nickel values are high is an interesting addition to the nickel content of the project but that's not, not really, what the share price rise is about. Instead there's a possible reduction in the amount of capital that will have to be taken off us shareholders out here to bring the project into production. This obviously increases the value of the project but in a slightly unexpected way - we've got to put less in rather than this being a proof that more will come out.
The announcement itself: “Spectacular Intersections of 28m at 2.34% Nickel & 0.109% Cobalt within the Resource Outline including intercepts of up to 4.14% Ni and 0.421% Co
Golden Mile Resources Limited (“Golden Mile”; “the Company”; ASX: “G88”) is pleased to announce that PQ diamond drilling for Stage 3 Metallurgical testwork on the 100% owned Quicksilver NickelCobalt deposit “Quicksilver” has intersected very wide zones of high-grade nickel mineralisation within the existing Resource.” What is not being said is that there is some massive, or even large, change in the amount of nickel there is thought to be in that mountain. There might be, that's true, but that's also not the important point.
Golden Mile Resources share price from ASX
This is the important part of the announcement: “The results indicate that we have a
significantly higher-grade zone within the overall Resource with the potential of disseminated nickel mineralisation within the untested primary zone. This may provide an opportunity for direct transportation and shipping of high-grade zones of the orebody to provide early cash flow while constructing the beneficiation plant and accelerating project timelines”
Step back and think about the process for a moment. To mine the nickel we've got to dig up the rock - obviously - then we've got to concentrate up (“beneficiation”) the nickel bearing material before we ship it off to a refiner. That requires a large and fairly expensive plant. We're not going to build a refinery here, that's much too expensive. But we do need to build the beneficiation plant. That requires capital, the only place capital comes from is us shareholders in Golden Mile.
OK, but now they're saying that some parts of the deposit - some parts - are rich enough that we can just dig up the rock and send it straight to the refiner. We don't have to wait for the beneficiation plant. And, maybe, some of the money from selling to the refiner can be used to finance that beneficiation plant that we'll still need to exploit the rest of the deposit.
It could well be that this very rich ore will increase the amount of nickel that can be extracted, likely it will. But the real story here is that shareholders are likely to have to put less capital in to get the whole project rolling. That's good and that's what has really caused that 150% jump in the G88 share price.