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LionOre approves $620m Tati expansion
David McKay
Posted: Thu, 10 Aug 2006
[miningmx.com] -- LIONORE swiftly responded to the disappointment of its failed $650m bid for Falconbridge's Nikkelverk refinery approving on August 9 a $620m expansion to double nickel production from its 85% owned Tati mine in Botswana.
The remainder of Tati is owned by the Botswana government.
The bulk of the expansion, over which LionOre has been picking for months, will be on building a base metals refinery ($482m) and a dense media separation (DMS) plant ($114m). The refinery employs LionOre's patented technology known as Activox.
Activox is a form of hydrometallurgy that may slice up to three quarters off the capital cost of conventional pyrometallic smelters, estimated at about $1bn. When combined with development of the DMS plant, LionOre will be able to treat lower grading nickel ores.
In the case of LionOre, Activox and the DMS plant will double the reserves
of Tati's Phoenix mine to 111.6 million tons estimated to contain 331,000 tons of nickel, the company said.
The Activox project also nearly doubles annual production from Phoenix to about 22,000 tons, LionOre said. Total payable nickel production over the life of mine increases five-fold to a total of 236,000 tons, it said.
The project life of mine of Phoenix is estimated at 11 years but could be extended to 20 years if combined with the development of the nearby Selkirk mine. LionOre announced on August 8 that Selkirk contained a large disseminated sulphide body, the kind of deposit Activox has been designed to treat.
Funding for the project will be split between internal cash flow and debt. Negotiations with banks are in progress, LionOre said. The company reported a cash balance of $206m as of end June.
However, the project announcement contains a massive increase in capital spend over initial estimates.
LionOre said in April that the Activox
project alone could cost between $330m and $350m building in a 15% escalation related to inflation-related cost increases such as skills, steel and equipment on previous capital estimates.
Commenting on the capital spend, LionOre said: "This benchmarks competitively at a capital cost in the range of $11 to $12 per annual pound of nickel equivalents on a greenfield basis."
"Today marks an exciting and defining moment in LionOre's history as we embark on our transformation into a major vertically integrated nickel producer," said Colin Steyn, LionOre's president and CEO.
Commissioning of the DMS to be completed in mid-2008 while the Activox refinery would be completed the following year. Full nickel metal production is expected in the third quarter of 2009.
LionOre says it can nearly triple total group nickel output to between 80,000 tons to 90,000 tons/year by 2011 by using Activox. A supply deficit of 400,000 tons of nickel could develop by 2015
assuming no new project developments.
“Successful implementation of this technology has the potential to lift LionOre from its current position in the top ten of the world’s nickel producers into the top five by the early part of the next decade,” said John Meyer, an analyst for UK-based Numis Securities in a note dated March 7.
Tati Nickel is forecast to produce 13,500 tons of nickel in the 2006 financial year.
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