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Albidon turns to Jinchuan link
Allan Seccombe
Posted: Fri, 08 Dec 2006

[miningmx.com] -- NICKEL explorer Albidon will make full use the connections that China’s largest nickel company Jinchuan has to source machinery and equipment that could accelerate the Munali nickel project in Zambia, CEO Dale Rogers said.

Albidon, which is listed in Sydney and quoted on London’s AIM, has set a first concentrate target of mid-2008 and full production of 8,600 tonnes of nickel in concentrate in 2009 at a cash cost of $2/pound.

Jinchuan has signed an offtake agreement over the life-of-mine and future expansions at Munali with Albidon. The estimated revenue of the agreement is worth between $2.5bn and $3bn.
Jinchuan is a huge organisation
The financing requirement of $100m, including $35m of working capital, has been secured, as has the critical offtake agreement, Rogers said.

“For us it’s about execution: building it and get it up and running as fast as we possibly can,” he said. “The advantage Jinchuan has is that it is a huge organisation that has roots that go deep into China, into manufacturing, equipment supply, logistics, manpower, trades, you name it.”

“So certainly, if we can leverage off that we will,” he told Miningmx in an interview in Johannesburg. “It’s a concept that has been raised (with Jinchuan).”

Rogers declined to be drawn on how much sooner the Munali project could come into production, saying such cooperation on the project would maintain the integrity of the production target dates.

Numis Securities analyst John Meyer warned that any delays in commissioning would be critical in cash flow terms and interest charges could escalate until revenue is generated from sales.

Numis has a “buy” recommendation on Albidon and has a target price of 103 pence.

So far there were no indications that the project costs and dates would not be met, he said.

Other nickel projects, like BHP Billiton’s $1.8bn Ravensthorp, have run over time and over budget. The 50,000 tonnes/year Ravensthorp has seen its capital costs soaring by 64% and the date pushed back by a year. CVRD’s 60,000 tonne/year Goro will cost $1bn more than the original $2bn price tag and will take a year longer than first thought.

“The first things we’ll source are things like the mills, crushers and filtrations circuits. We’re out sourcing now and that includes sourcing through China,” Rogers said, adding the Jinchuan connection was proving valuable.

There is every likelihood that Munali will be expanded beyond its current capacity, something that would be relatively easy and inexpensive to do by tacking on more parts to the modular concentrator.
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Jinchuan will aggressively grow refined nickel output to 150,000 tonnes by 2010 from 100,000 now.

The key to expanding production is finding more nickel at the Munali intrusion, where currently just the 109,000 tonnes of nickel have been delineated at the Enterprise resource.

“That’s a big step change. I think you can deduce from that they’re keen to get more nickel,” Rogers said.

More exploration is underway on the 2.5km long and nearly a kilometre wide intrusion.

“There’s every chance we’ll find more. We haven’t really explored at depth. It’s economically better to do it as the mine develops,” he said.

Under the Jinchuan agreement, the Chinese company will provide $20m of subordinated debt finance as well as buy $5m worth of Albidon shares. Albidon has already raised $35m towards the Munali project. It has some capital in the bank.

The remaining capital is almost secured. Albidon will mandate senior debt lenders before year-end and begin drawing down on the funds in the second quarter of 2007.

Rogers, who has been in the nickel industry for more than 20 years, was bullish on the nickel market.

“I’m not prone to hyperbole, but I must say I’ve never seen conditions like these. Ever,” he said. “Supply hasn’t risen to match demand and it’s difficult to see where that’s going to change for several years, at least until the end of the decade.”

Among the reasons for the shortfall in supply are the lack of exploration and a real lack of success in finding sizeable sulphide deposits, which are very difficult to find.