To Slow Down Or To Charge Forward? – That’s The Question Now Facing Starfield Resources
By Chris Cann
minesite.com
The next fortnight is an important one for Canadian-focused and Toronto-listed Starfield Resources. In that time the directors will review the third quarter financials due to be published next week and plot a path forward for their single-project company. Working in their favour is the 44.2 million tonne Ferguson Lake nickel-copper-cobalt resource that is still open in several directions and has an underlying platinum-palladium deposit. The company has been reporting regular good news from trials of the environmentally friendly and cost-saving hydrometallurgical process earmarked for Ferguson Lake. Most recently the company added the discovery of a diamond and diamond indicator minerals to its credentials, returned from samples taken from within the same 3.2 million hectare Ferguson Lake holding. On the downside, and working against the directors is a shallow financing pool barely deep enough to wet their feet.
Starfield is in the throes of putting together its feasibility study for Ferguson Lake. At the moment the plans are based around a 6,000 tonnes per day operation, mining ore from the Main West Zone and the West Extension. Initially, 1.8 million tonnes will be mined from an open pit before mechanised cut and fill underground mining commences at both deposits simultaneously. Starfield has been spending its money on upgrading its resources to reserves and trialling the hydrometallurgical process that will produce nickel, copper and cobalt as LME-grade metal along with sulphuric acid, a hydrogen sulphide gas, hematite and gangue material. It is also likely that the company will mine and process the platinum deposit which lies just 50 metres below the massive sulphide base metals deposit. The resulting platinum and palladium will be produced initially in a sludge. Though nickel and copper prices have declined since the scoping study results on Ferguson Lake were first published in March, a rise in the price of sulphuric acid and a decline in the Canadian dollar have actually improved the initial rate of return and the pre-tax cash flow previously forecast. The company is now looking at a 34.3 per cent IRR and cash flow of C$697 million. The net present value of the project at a 15% discount is C$1.7 billion.
But after spending C$20 million on exploration drilling alone last year, continuing the expensive engineering work needed to prove the hydrometallurgical process, and with only C$17 million in cash as at 31st August last year, Starfield is facing the very real prospect of having to slow down its feasibility work to preserve cash. “In the last six months the markets have made us realise that we will have to extend when we’ll have our feasibility done,” says investor relations chief Connie Anderson.
“We’ve been offered money”, she explains, with the caveat that: “we won’t do that to our shareholders”. Starfield has fallen from its mid-2008 high of C$1.25 to its current levels of around C$0.255. “We’re always looking at partners or mergers”, Anderson adds, though. “We’re looking at all sorts of options because we really don’t want to sit back and do nothing – we’d like to keep it going.” If the financing options available in the near-term don’t appeal and the company decides to take its foot off the pedal until the share price returns to a level that might better facilitate a share placement, the feasibility would most likely be ready in early 2010 rather than the end of this year as initially predicted.
Weighing on the directors’ minds when they allocate financial resources will be the diamond discovery made in the centre of Starfield’s Ferguson Lake holding, an area which geophysical work had previously identified as prospective for diamonds. Over 2005 and 2006, 1,100 widely spaced till samples were taken from Ferguson Lake with only 12 per cent of those so far processed. Within that 12 per cent were TDS5-125 and TDS5-126, which, respectively, contained a significant number of indicator garnet grains and a small diamond consistent with the screen size. “We would dearly love to at least put a couple of exploration drill holes in that area this year,” Anderson says. “We do have a couple of drills up on site so if we do want to do that we’re ready.” |
