Nickel Ore
Send this article to a friend
Print this page

» ARM, LionOre to expand Nkomati nickel
» LionOre capex rockets
» LionOre to win tax breaks for Tati
» Ridge exploring LionOre option
» Albidon weighs up Activox


Bank funding not critical for LionOre
Allan Seccombe
Posted: Fri, 10 Nov 2006

[miningmx.com] -- BANK financing of nickel producer LionOre's Activox project at Tati is not absolutely necessary because it has a healthy chunk of cash on its books and the Botswana nickel project will generate sufficient money, said LionOre Africa MD Peter Breese.

LionOre Africa, a subsidiary of Toronto, London and Australia-listed LionOre, is negotiating with banks for a $250m to $300m loan and those talks will continue, said Breese.

“The way the cash flow is looking we most probably don’t need the money but it makes sense to get the money to carry on with our growth. We are still negotiating for between $250m and $300m,” Breese told Miningmx.

“We have enough money as a company in our bank and in terms of our forward cash flows that we don’t need bank finance. We have lots of other growth ambitions as an organisation even after the Activox project so it makes more sense for us to carry on with the process of borrowing $250m to $300m,” said Breese, who has been appointed as LionOre's chief operating officer.

LionOre is speaking to six banks and expects to receive final term sheets in December. An agreement will be signed before the end of January, he said.

By the end of September, LionOre has $280m in cash.

LionOre has the Tati nickel project in Botswana where it will spend R620m to double nickel output to 22,000 tonnes a year over the 11-year life of mine.

The group produced 19,361 attributable tonnes in the nine months to end-September at a cost of $3.78 a pound.

Tati produced 3,543 tonnes of payable nickel in the third quarter, eclipsing the 2,333 tonnes in the second quarter. It has cash costs of $2.87/pound. Nickel prices averaged $13.24/pound in the third quarter.
Free news alerts: click here to subscribe
Key to the project is the Activox proprietary refinery technology. It will allow the company to exploit low-grade nickel deposits at a fraction of the cost of conventional technology.

Breese told reporters in September 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 $2.87/pound.

The total cost of $620m, includes a 12 million tonne per annum (tpa) dense media separator for $114m, a 25,000 tpa $482m Activox refinery and $24m for power infrastructure.

The dense media separator will be commissioned by mid-2008 and the Activox Refinery by the third quarter of 2009. Full production is forecast for third quarter 2009.

LionOre said in a management discussion and analysis document this week that LionOre is unlikely to issue equity to raise funding for the Activox project.

"At current projections of nickel production and nickel prices over the next two years, the project could be funded by internally generated cash," the document said.

The company has run a pilot plant testing its Activox technology. It has plans to roll it out to its 50/50 joint Nkomati nickel project in South Africa with African Rainbow Minerals. A feasibility study into Activox at Nkomati will be completed by mid-2007.

“We consider it unlikely that a decision would be made to proceed with a second site before Tati achieves commercial production,” Fraser Phillips from RBC Capital Markets said.