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LionOre capex rockets
Allan Seccombe
Posted: Tue, 12 Sep 2006
[miningmx.com] -- PURE nickel producer LionOre will spend $482m to develop its nickel extraction plant known as Activox at its Tati mine in Botswana, 114% increase of what it told the market last June, LionOre MD Peter Breese said on Tuesday.
The total cost is $620m, including a 12m tonne per annum (tpa) dense media separator, a 25,000 tpa Activox refinery and $24m for power infrastructure. Three quarters of the funding has been raised in South Africa.
Two of the biggest contributors to the $482m capital cost projection at the Activox plant are a 35% increase in input prices of steel and copper components and putting systems in place to make the Activox process “bullet proof” or fail safe, Breese told a media briefing in Johannesburg.
A second autoclave has been included into the full-scale Activox plant at the cost of an additional $40m and surge capacity has been
introduced at a cost of $20m for example.
LionOre has also upped its planned production capacity to 25,000 tonnes from 17,000 tonnes before.
Activox is proprietary technology that LionOre says does away with the need for an expensive smelter and is a more environmentally friendly way to extract base metals from sulphide concentrates. A test plant has been operating at Tati for two years.
“The company appears to have done a good job at a reducing the technical risk of start-up of the commercial scale plant,” Fraser Phillips from RBC Capital Markets said in a research note.
The Activox technology, which uses an ultra-fine concentrate in an autoclave where water, oxygen, pressure and heat ensure a recovery rate higher than 90%, has meant that LionOre can effectively mine and treat low-grade ore bodies.
LionOre has four such bodies, three of which are amongst the world’s five largest nickel deposits. LionOre has mines in Botswana, South
Africa and Australia.
LionOre plans to produce 90,000 tonnes of nickel a year by 2012 from Tati, its 50% owned Nkomati Nickel in South Africa and Honeymoon Well in Australia.
Falconbridge, the target of a $17bn takeover by Xstrata, produced roughly that amount of nickel a year. LionOre will be one of the few pure nickel investment opportunities if and when Inco is taken over by Brazil’s CVRD.
Activox will use 70 MW of electricity, a sizeable ask in Botswana where the country’s entire use is 400 MW.
“The Botswana government has come to the party and they’ve given us a guarantee of that power supply,” Breese said.
LionOre’s projected cash cost per recovered pound of nickel at the Activox plant is $1.69, far below the industry average of $3 to $3.80. LionOre is currently producing nickel via third party smelting and refining agreements at $2.60/pound.
“We know that at $1.69 we are the most competitive nickel producer in the
world,” Breese said.
Breese says the company has enough ore to keep it busy for at least 10 years and is in no rush to buy deposits in the current market environment where the nickel price is fetching a very high $13.30 a pound ($29,305/tonne).
LionOre is prepared to become involved in pool and share agreements where other companies bring in deposits and supply concentrate and LionOre will provide the Activox technology.
“There are a couple of things we are looking at, but it’s pretty much a cursory glance. It’s very early stages still,” Breese said.
Tati will grow its platinum group metal (PGM) output at Tati from 55,000 ounces currently to 100,000 oz by 2012. The palladium to platinum ratio is 80:20. The PGM concentrate is sent to Nikkelverk in Norway for recovery. Nikkelverk produces some 500,000 oz of PGMs a year.
Tati will produce 22,000 tonnes of nickel from third quarter 2009, along with 15,000 tonnes of copper and 500 tonnes of
cobalt.
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