01-Oct-2020:  Savannah Development Update

KEY POINTS

• Mining contractor, Barminco, has safely completed the development drive intersecting the Savannah North ventilation raise.
• This lateral development work was completed safely, in-line with budget and ahead of schedule.
• Raise bore contractor, RUC Mining, has mobilised to site and is in the process of setting up.
• Back-reaming of the ventilation raise is expected to commence mid-October and scheduled for completion late in the March 2021 quarter.
• Barminco is now focussed on development to open up additional working levels in Savannah North.

Panoramic Resources Limited (ASX:PAN) is pleased to provide an update on underground development activities at its Savannah Nickel Operation (Savannah) in Western Australia.

Savannah North Ventilation Works

Mining contractor, Barminco, has safely completed the 468m horizontal underground development drive (Figure 1). The drive has been successfully connected with the vertical ventilation shaft to complete Fresh Air Raise (FAR #3) development at Savannah North.

This critical development task was completed safely, in-line with budget and ahead of schedule. Barminco will now focus on advancing the incline from the 1401 level and decline from the 1361 level, opening up additional working levels at Savannah North. These works are planned to be funded from existing cash reserves with the objective of being in a position to restart production operations from mid-2021.

Specialist raise boring contractor, RUC Mining, has mobilised to site. RUC is tasked with the FAR #3 back-reaming which is expected to be completed around the end of the March 2021 quarter. A total of 354m will be back reamed at a diameter of 3.85m. This is planned to provide sufficient ventilation to support future full-scale mining operations from Savannah North in line with the Mine Plan released in late July (refer to ASX announcement 31 July 2020). Completion of FAR #3 is also set to be funded from existing cash reserves.

--- for the figures (figures/photos 1, 2 & 3) and the rest of this announcement, click on the link above ---

[I do not hold PAN shares.  They haven't gone "down the pan" yet...  I did comment that they just might, but they're holding on tight and they haven't dropped in yet.]

About Panoramic: 

Panoramic Resources Limited (ASX: PAN) is a Western Australian company which owns the Savannah Nickel Project in the East Kimberley. Panoramic successfully commissioned and operated the Project from 2004 until 2016 before the mine was placed on care and maintenance. Following the discovery of the Savannah North orebody, the mine was recommissioned in 2018 before operations were temporarily suspended in 2020.

Panoramic has completed an updated Mine Plan for Savannah which has outlined an attractive near-term nickel sulphide mine restart opportunity. Underground pre-production development works at Savannah recommenced in August 2020. Completion of these works is expected to leave the Project in a position to be restarted in mid-2021.

15-Apr-2020:  Panoramic Resources (PAN) called for a trading halt yesterday morning, which turned into a trading suspension this morning.

Operations Update

In that update, they've announced the following:

1. Temporary suspension of operations at Savannah Nickel Mine
2. Production and cost guidance withdrawn
3. Progression of potential funding options continues

This highlights the issue when a small miner with significant debt runs into lower prices for the metals that they mine (nickel in this case).  IGO almost aquired PAN last year, but wisely pulled out when they did their due dilligence and realised what a real mess PAN were actually in.  I would suggest that the "Temporary" nature of the suspension of operations at Savannah (#1 above) will depend on whether they are successful with #3 - the funding - because they now have NO income to service their debt and their lenders would not be overjoyed by today's announcement.  It's one small step away from calling in the Administrators.  

PAN last traded at 12 cps, 74% lower than the 46 cps year-high that they reached in November.  If they ever trade again, it will likely be significantly lower than 12 cents I'm tipping, because if they are able to raise fresh capital, it will be at a much lower price than 12c.  PAN was trading at over $5/share in 2007.  Higher cost mines are always vulnerable when commodity prices fall, but it's the debt that kills these companies.  Companies like this can multi-bag IF they manage to survive, but the most likely outcome is a 100% loss.  Too risky for me.  I don't mind nickel, but I'm happy to play nickel via S32, IGO or WSA.  Currently I only hold S32 out of those three.

Further Reading:  https://www.australianmining.com.au/news/panoramic-suspends-savannah-nickel-operations-due-to-coronavirus/

By the way, while PAN do mention COVID-19 in their announcement, they are not seriously blaming the coronavirus for having to shut down the Savannah mine.  They have just mentioned that it is a mitigating factor that they have taken into consideration.  If anything, COVID-19 gives them a convenient excuse to shut down a mine that was operating unprofitably in the current nickel-price environment, in my opinion.  On the other hand, the global COVID-19 pandemic is the main reason that the nickel price is currently so low - because the global growth outlook has deteriorated along with perceived current and future demand for base metals such as nickel - so in that respect, you could say that they ARE closing down Savannah because of the coronavirus.  The distinction however is that when travel restrictions and social distancing measures are lifted or eased, it won't make much of a material difference to Panoramic (PAN).  They need a higher nickel price, and that could take more time than their lenders are prepared to give them.