Bellzone Mining’s (BZM) decision to move ahead with revamping its Kalia project has worried investors amid concerns the project's economics don't stack up.
The miner wants to produce ferronickel through the new project, despite nickel prices remaining low.
Investors have jumped ship, dragging the share price down 29% to 0.22p.
Bellzone is aiming to rework the former iron ore project as a ferronickel operation as it tries to fight back from a long period of financial distress.
Bellzone's announcement today reveals a range of economic scenarios for the project based on different nickel prices.
If the nickel price remains approximately $10,617 per tonne - close to the current metal price - the internal rate of return (IRR) will be a mere 10%.
Most companies wouldn't bother to develop an asset unless there was at least 15% IRR. The metric is used to evaluate the attractiveness of an investment.
If the nickel price increased in value to $13,271 per tonne, Bellzone's project IRR would be 18.8%, while a further rally to $15,925 would result in a stronger IRR of 27.2%.
Nickel rallied in 2011 after Indonesia banned the exports of unprocessed ore, creating a supply squeeze.
In 2015, a slowdown in China caused a slump in nickel prices as the country uses approximately half of the world’s nickel, while weaker growth in Asia also hit demand for nickel.
Last month investment bank Macquarie said nickel prices had strengthened once more in response to fears of supply disruptions from the Philippines due to potential mine closures.