Is it possible to predict a mineral discovery? Part 1-Nickel Sulphides
A special kind of discovery
Very few announcements get ASX speculators as excited as a credible intersect of a new nickel sulphide system. I have postulated in the past that in the same way the current or perhaps waning generation of speculators would recollect the meteoric rise of Fortescue, Atlas or other Iron Ore stocks a much older, and perhaps first modern generation of resource speculators saw fortunes won and lost in the 69-70 nickel boom. These events are very well documented in Trevor Sykes book “The Money Miners” and are forever seared into the nation’s memory. I will not re-hash everything here, but it was a wild time with lots of hopefuls listing, rallying and ultimately crashing.
I recently got an account of it from an elderly neighbor who I bump into regularly on my walks. He picked up work balancing the books at the stock market at night as there was so much turnover, regular working hours were not enough to get everything ready before the next day’s trading.
My first dash with nickel was during and following the GFC (the Great Recession to you Americans) and seeing the price drop from its lofty levels of 50k + in May 2007 to the lows of about 10k per ton in 2015 with volatility. During this time the likes of Western Areas were constantly mentioning the weak nickel market in every presentation and commenting on the macroeconomic and industry influences and dynamics that might see this change. One dynamic that regularly got a mention was the use of pig nickel in stainless steel that added an abundance of low-cost feedstock to global mills. Essentially, rather than going through the high-cost process of HPAL to recover nickel from laterites, a stainless-steel producer could buy high-grade (+2 wt. %) nickel laterite ore that normally has Fe higher that 20% (a kind of shitty iron ore in reality) and smelt it into ingots of high nickel pig-iron feedstock to refine into steel through a secondary melting and a refinement of chemistry via addition of some grade 1 nickel ingots at the end.
Nickel laterite mine New Caledonia.
Another event that characterised this period in the nickel market was BHP’s 2 billion dollar write-off of its Ravensthorpe Nickel laterite operation and subsequent sale to First Quantum for US $340 million. Wherever one looked, nothing good was going to come out of nickel and a nickel intersect was as good as a dud hole. These were times very reminiscent of today, with the ultimate culprit once again being the laterites. However, and as is always the case despite the poor sentiment for the commodity a high-quality discovery can and does move share prices.
Enter Sirius Resources (ASX:SIR) and their 2012 discovery of the Nova Bollinger Ni-Cu-Co deposit. Great accounts of the formation of SIR, the deal struck with mining legend Mark Creasy and the discovery of the deposit are given by the companies managing director Mark Bennett on the Exploration Radio podcast episodes 1, 2 and 17 here. Mark himself, also has a lot to say about what it takes to be successful as an explorer noting the importance of prudent spending and time spent in the field, a characteristic shared among many successful ore-finders.
Nova discovery presentation
The markets response to the discovery announcement (given here for your pleasure) was explosive. The price rallied from $0.057 to $0.6 and closed at $0.45 for the day. The MC went from 8.72 to 68.8 million on that first day and ultimately the company achieved a high of $4.99, under a year later.
Pentlandite and Chalcopyrite rich core from the Nova-Bollinger deposit.
I did not participate in this success and made no money from it. I read the announcement on the day of the discovery and dispassionately ignored it. Another hole in nickel, one that is not even that wide or that high-grade. It was the best nickel discovery Australia had seen for a long time or would see until the Julimar discovery 8 years later (despite the former’s recent disappointment). Some might say that Rox Resources (Camelwood and Musket) or Legends (Mawson) or Panoramic’s (Savannah North) or Azure’s (Andover Ni) or Buxton’s (Double Magic and Dogleg) or Galileo’s (Callisto) discoveries were also significant, but they all ultimately disappointed in ways that Nova-Bollinger did not.
I will go through the exploration history of some of these discoveries in technical detail to help the reader learn the terminology, processes and ultimately recognize the steps that lead up to a discovery. I will also examine what makes a good discovery and what makes a poor one and make examples of the early indications of both.
Ultimately, discoveries are rare (Ni-sulphide in particular) and missing out on the genuine large, high-quality ones can substantially impact one’s fortune as a resource speculator. As a result, I studied the Nova discovery in exhaustive detail along with subsequent discoveries, participating and profiting from some of them and ignoring others due to the red flags.
What is a nickel sulphide deposit and how are they explored?
Nickel sulphide deposits (or technically Orthomagmatic Nickel deposits) form by the creation of an immiscible sulphide melt in silicate melts of mafic or ultramafic composition where the interaction of the sulphide and silicate results in the accumulation of Ni, Cu, PGE, Co and Au in the former and the ultimate settling of the dense sulphide in suitable positions followed by their crystallization.
Massive sulphide deposits in very simple terms are concentrated on terrain boundaries and associated with large mantle tapping structures and large igneous provinces. Detailed explanations for these associations are beyond the scope of this work but for those interested, can be explored further in the videos below along with many others.
The formation of immiscible sulphide melts is complex in its controls but for the resource speculator the only points we need to consider is that during the melts formation the processes of metal scavenging vary in their efficiency. Ever seen a favorite company drill an EM conductivity target, hit massive sulphide and come back with barren pyrrhotite? I sure have, and most of the anomalies will be exactly this. Some on the other hand, will have more nickel and copper and yet others will be lousy with the stuff. This concentration of valuable metal in massive sulphide is known as its metal tenor. This will become important later.
Generally, the systems that produce high-tenor sulphides are thought to be highly active with small particles of sulphide melt disseminated throughout the silicate allowing for the maximization of surface area across which metals are concentrated.
Once our metals have been concentrated, the sulphide melt can stay in its disseminated form and crystalize into a large, low-grade metal accumulation such as that seen at the Mt Keith block cave, or the Western Mines Groups (ASX:WMG) Mulga Tank project or it can settle at the bottom of the magma chamber as massive sulphide. In the case of CHN’s Julimar we observe both massive sulphide as well as much larger zones of disseminated mineralization.
The two main subdivisions of orthomagmatic Ni-deposit considered here are the Komatiite hosted deposits such as those that spurred on the original Australian Nickel boom and the Chonolith hosted deposits such as Nova-Bollinger and Savannah. In this article we also consider the case of Julimar, which, despite being hosted in layered mafic complex displays many characteristics typical of chonolith hosted systems.
Distinctions between the two main types can run into the esoteric, but for the purposes of the investor I have constructed the table below. Geometries can vary, in addition to thickness but key to attempting to predict discovery is understanding a) their chemistry and b) geophysical response.
Simplified Komatiite vs Chonolith hosted system discriminator table.
Exploration for orthomagmatic nickel deposits is dominated by geophysics and to a lesser extent geochemistry collected via soil surveys and basement drilling such as aircore. Unlike other commodities, the exploration for nickel in deeply weathered terrains can be complicated by ultramafic rocks high-nickel concentrations in silicate minerals. Their weathering forms nickel laterite deposits but also results in the formation of geochemical anomalism unrelated to nickel sulphide deposits, as a result copper, in-addition to nickel as well as PGE are used to discriminate between anomalies.
Regional targeting for these deposits is done on the basis of geophysical methods, mainly magnetics and gravity. The gravity is indicative of deep-seated zones of mafic-ultramafic rock and the magnetics can define prospective intrusions worth investigating.
Once a suitable area and intrusions are defined and assessed using geochemistry, targeting for massive sulphides can proceed using Electromagnetic or EM surveys. Massive sulphide deposits are extremely conducive to detection via EM given their high conductivity. Nevertheless, other minerals such as graphite give high conductivity signatures leading to false positives.
Nova EM conductor
From the investors perspective there are 3 main EM (Electro-Magnetic) survey types, Airborne, Ground, and Downhole. Airborne surveys can cover large areas and are flown in lines by airplanes or helicopters. Their main advantage is the cost-effective coverage of large areas but they are the shallowest penetrating of all the methods. Ground EM surveys are slower and less efficient with regards to ground coverage than Airborne EM but can penetrate much deeper, particularly in areas lacking conductive overburden and finally, Downhole EM surveys or DHEM do not have a theoretical depth limit and can detect massive sulphide near the drillholes path, however detection is controlled by the size of the conductor and the distance between the conductor and the drillhole. As a rule of thumb, a 50 by 50 m conductor can be detected up to 50m away and a 250 by 250m conductor can be detected up to 250m away. For a detailed account of EM see the video below.
EM methods explained
With this high-level account of nickel-sulphide exploration we can attempt to answer the question of whether nickel sulphide discoveries are predictable.
Sirius Resources-Major nickel copper discovery
Disclosure: This one I missed. Not in that I did not see it happening even on the first day. I just had no idea what it was and what it meant. I notch it up to youth and hubris. Despite not making any money of this discovery I learned a lot.
The aforementioned podcasts and presentation provide an extremely detailed account of the formation of Sirius Resources the discovery and subsequent deposit details. One could even look through all of these materials and think “it was going to be a discovery” or “you would have to be blind not to have seen it coming” and despite the fact that there is truth to this, one must acknowledge that all we had to go off leading up to it was the ASX announcements, and that the series of conditions that satisfied ones interpretation of an impending discovery have been encountered many times in other announcements where drilling did not lead to discovery.
However, in this case it did and the lesson to be drawn is that one’s ability to predict discovery is never perfect, but as more and more conditions are satisfied the likelihood of success goes up.
The first mention of what was to become Nova-Bollinger came in the form of infill soil sampling over what was known as the Eye prospect. The company was originally drawn to the area due to a single GSWA soil sample and the presence of a eye shaped magnetic feature interpreted to be a dome, plug or layered intrusion, each of which would be perspective for orthomagmatic nickel mineralization. The area contained no outcrop and a soil survey across its extent delivered a sizable geochemical anomaly peaking at 568 ppm Ni and 303 ppm Cu shown below.
Eye magnetic feature
The Eye target with Ni in soils
The nickel soil anomaly was restricted to the northern and central part of the eye and the copper anomaly was coincident with the highest grade portions of nickel anomaly. A highly encouraging outcome.
At the time the Eye was one of many anomalies that the company was following up and did not even look like the most prospective. However, a small RC campaign was organized and delineated a significant zone of Ni, Cu and Co anomalism in laterite. At the time despite the presence of Cu and Co coincident with the Ni anomalism the company did not see this result as diagnostic of the enrichment being related to sulphide mineralization but importantly it could also not discount the possibility either.
Ni, Cu, Co enrichment above the Eye
A single government co-funded diamond drill hole was drilled and intersected more of the same lateritic enrichment but little encouragement in the fresh rock. It was later discovered that had this drill hole been pushed 150 meters further it would have pierced the orebody. These two drilling campaigns served to provide enough encouragement due to the widespread presence of mafic rocks, metal anomalism and a lack of a clear cause for it that Sirius followed up with a large RAB/Aircore campaign across the entire anomaly along with a ground EM survey. It was later revealed in a presentation that microscopic examinations of some of the RC chips revealed sulphide blebs made up of pyrrhotite, pentlandite and chalcopyrite, but, once again, this was not unequivocal evidence of a pending discovery.
The results that followed however, made for the most comprehensive nickel sulphide discovery case seen since on the ASX. The large EM anomaly that the survey delineated was partially coincident up-dip with a tight bullseye geochemical anomaly and critically it persisted through all the late channels indicating that it was a bedrock anomaly and not the product of near surface clays or saline groundwaters. It was also large, much larger than one would be used to in chasing small high-grade Kambalda type massive nickel sulphide shoots that hosted most of Australia’s nickel production up until that point.
The Eye target expressed in EM, Mag, Copper and Nickel soils
Soon after, another announcement appeared demonstrating further encouragement in the form of RAB and Aircore assays. These confirmed the extent of the zone of lateritic enrichment over the Eye and critically discovered high-grades of Ni and Cu near the fresh rock interface where the development of weathering related enrichment would have been minimal leading to speculation that the anomalism was related to sulphides. The company also performed another ground EM survey that further defined the conductor and stated that the perceived conductivities were in line with massive sulphide or graphite.
RAB intersects over the Eye anomaly along with the defined conductors
At this time the only thing left to do was to drill the conductor. The body of work that lead up to this point was so comprehensive in its nature that the target had multiple lines of evidence supporting the occurrence of a massive sulphide Ni-Cu-Co deposit. Certainly, the EM anomaly could have been sourced from graphite and the anomalism the product of weathering ultramafic rocks with small amounts of sulphide mineralization but in this case, it was not meant to be. The conductor was drilled, and the rest is history: Major Nickel Copper Discovery- New deposit style, new nickel province, first of 3 EM targets to be tested at the Eye.
If the discovery intersect of 3.8% Ni and 1.42 % Cu was delivered in isolation it would not have made for sufficient evidence of a large discovery but in the context of the large EM anomaly it was. Those educated on the topic knew that the center of the conductor was yet to be intersected and here the best grades and widest widths could be expected.
So, can we conclusively say that the discovery was predictable? In the authors opinion no, but in so much any discovery is predictable this one ticked so many boxes that it came as close as one could get. However, one would have had to have been following the company very very closely and interrogating the results with more than just a passing interest.
This discovery provides us with a checklist of what to look for when assessing orthomagmatic nickel explorers and prospects (presented here and populated with the Nova-Bollinger scenario). Other discoveries have occurred without all 4 conditions being filled but when considering all the lines of evidence that can point to a discovery, the more the better.
Nickel target checklist
Chalice Gold- The unknown drilling program
Disclosure: I did not pick this one up. For those that remember and will one day recount to interested grandkids among the highly anomalous events of 2020-2021 the Julimar discovery was not the no.1 thing on the news or on people’s minds. Definitely not mine. I had just bought a house at auction that I was getting ready to gut and renovate all the while trying to close on the deal while rumors of the banks stopping lending were reverberating in my head. COVID did not have me in the mood for speculation and I paid for it with this error of omission.
Chalice Gold, later to be renamed Chalice Mining due to their change in priorities is a classic rag to riches…… to rags story that may see them return to riches. The company was the darling of one Tim Goyder who was also responsible for starting Liontown Resources (ASX:LTR) of the Kathleen Valley lithium discovery and Devex Resources (ASX:DEV) that is yet to make a discovery but has seen some good uranium hits. The company was remarkably self-funded through discovery and sale of an Ethiopian gold deposit and even had an opportunity to pay a dividend. Critically, and much like Sirius its geological team included explorer of the year winners Bruce Kendall and Kevin Frost. The latter’s account of the discovery can be found here:
However, unlike the Sirius example where we were able to dissect the datasets collected over several years of exploration in the case of Chalice…… THERE IS NOTHING!!!! The only mention of the project existing was a map in a few presentations relegated to the appendix that showed Julimar as a non-key, generative project such as shown below.
Chalice Gold’s projects leading up to the discovery of Julimar
So, we can answer the topline question and say that the discovery was not predictable. You may think then, what purpose does the inclusion of this example serve in the article? Very simply it is to demonstrate that a) despite a discovery being unpredictable one can still profit from it and b) we can explore a hypothetical scenario in which the company did communicate the data ahead of drilling and asses it in the same way as the Sirius case.
So what data did the company present in the discovery announcement? Quite a lot. Firstly, they show the regional and local magnetics, that outlines a large mafic-ultramafic complex. This complex has a discrete intrusion on its SW-margin.
This discrete intrusion, discernible as a magnetic high was the target of exploration efforts that included a Moving Loop Electromagnetic survey (MLEM, a type of ground EM survey) along with subsequent soil surveys to further rank order the conductive targets. Given this information we can reconstruct the exploration process that led to the discovery.
Julimar magnetic anomaly showing conductors, soils geochemistry traverses and the drill hole locations.
1. A prospectivity and regional targeting exercise was performed with the aim of discovering discrete magnetic highs representative of mafic-ultramafic intrusions that in turn could contain massive and disseminated Ni-Cu-sulphide mineralization. Locally such mineralization was known to exist at the nearby Yarawindah Brook prospect but to be subeconomic.
2. The Gonneville intrusion was identified as being prospective and a MLEM survey was performed across it defining several strong to very strong conductors.
3. A soil survey was conducted over the defined conductors in order to further prioritize zones for initial testing.
4. RC Drilling was conducted on the conductors and the discovery hole JRC001 intersected 19m of massive sulphide with high grades of Ni, Cu, Pt and Pd.
We can also populate Nickel sulphide exploration checklist.
Had all of the information presented in the announcement appeared ahead of drilling it still would not have been conclusive evidence that a discovery was about to be made. However, it would have made for a program to keep appraised of. There are too many examples of conductors, mafics and geochemistry coinciding where no, or sub economic discoveries were made to consider this data conclusive.
Galileo Mining- Vectors respect trends
Disclosure: I did buy and subsequently sell this discovery. It kept getting better and better for several weeks and then it stagnated and began to deteriorate. I sold near the top on the downward slide.
Galileo had no explorer of the year winners on its staff, but it did share something else in common with Sirius. It had Mark Creasy as a substantial holder. The Callisto discovery was made beneath a previously identified and drilled nickel laterite deposit developed on extensive mafic sills. Fresh rock intersects in two drill holes discovered Ni-Cu-Pd-Pt mineralization that appeared to be increasing in grade towards the east. Hence, the subtitle for this discovery story. The trend between the two drill holes was forming a vector towards stronger mineralization, albeit one defined by only two drill holes was not particularly convincing.
The mafic sills the company was exploring for sulphide mineralization spread across several kilometers in strike and width. Leading up to the Callisto discovery the company was dominantly targeting the southern two sills through RAB drilling and EM surveys. Some early encouragement was encountered here when a RAB hole ended in massive sulphide with modest concentrations of Ni, Cu, Pd and Pt. But ultimately follow up drilling of EM targets produced narrow intersects of modest grade.
The Callisto discovery was announced initially as visual results from drill hole NRC266 that indicated increases in mineralization thickness and sulphide concentration. The increase in sulphide concentration was explained to mean that increases in Ni, Cu, Pd and Pt were also expected, and the company’s interpretation and expectations of higher grade were certainly warranted. The company also got a lab rush service on this section of the drillhole. Certainly, many of the signs of success were there and depending on ones risk appetite one could say that the discovery was predictable, or probable but not certain.
Section showing the two drill holes that demonstrated a vector towards stronger mineralization that was ultimately drilled
Subsequent drill holes that found stronger mineralization
For every visual intersection that is correctly reported there are 10 that overstate. Ultimately, sulphide percentages and type are required by the ASX now and that has reduced the number of visual “discoveries” being reported. For those uncertain it is best to wait for assays.
In conclusion, is it possible to predict a Nickel Sulphide discovery? The answer in my opinion is no but in some cases when all the evidence is put together the likelihood of a favorable outcome appears very high and in some cases actually occurs. Nevertheless, one must be very well versed and experienced in this orebody type, its exploration and the interpretation of the results leading up to the discovery. Even then false positives occur. The more lapse the standards that one applies and the higher the risks that one takes the more false positives that will appear.
Closing remarks
I have a hard and fast rule when it comes to nickel exploration and investing that has come about from many disappointing investments related to EM anomalies, I do not invest on their basis.
Nickel is not in vogue at the moment but one day will be again. When this happens geophysical survey providers all around the world will rejoice and helicopters dragging coils will be flying all over the country. EM anomalies will begin to appear everywhere. Most of these will be drilled and very few to none will come back with positive results. There will be barren pyrrhotite and graphite everywhere, the drilling of many will coincide with capital raisings and general disappointment. The search space for airborne EM discoverable nickel sulphide deposits is largely depleted and in such a instance I only pay attention to it in new terrains or after drilling proves up prospectivity and tenor.
Finally, a repeat of the disclaimer, nothing here is financial advice, comes with no warranty and I take no responsibility for anyone’s financial decisions.
Cheers,
CC