News from Reuters
Canico Eyes $500 Million Cost to Build Nickel Mine
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19:39 EDT Monday, September 29, 2003
By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - Canadian mining junior Canico Resource Corp. , which owns one of the world's prized nickel deposits, said on Monday it expects to sink $500 million to $600 million into building a mine and plant at the site in Brazil.
Canico's chief executive, Michael Kenyon, said an independent scoping study, due next month, would provide a clearer idea of the capital cost of developing Onca-Puma, a big-tonnage, high-grade nickel laterite deposit whose expanding size has propelled the firm's stock by 350 percent this year.
"I don't see why the cost would be much different from Loma," Kenyon told Reuters in an interview.
Anglo American Plc's Loma de Niquel mine in Venezuela, one of the last nickel laterite facilities built, cost around $525 million, Kenyon said.
Kenyon expected operating costs to range between $1.35 and $1.60 a pound. The bottom of the range reflects the world's lowest-cost nickel laterite producers, while the upper end represents the likes of Inco Ltd.'s PT Inco facility in Indonesia.
The mine could start production in 2006 or 2007 with potential output of 50 million pounds (22,679 tonnes) of nickel a year. A possible later expansion could double production.
Nickel is one of the hottest topics in metal markets at the moment. It has jumped 45 percent in value this year on gathering expectations the next three years will show a shortage of new supply to meet growing world demand.
The market has high expectations of Canico, whose management team, previously with Sutton Resources, financed and started developing Tanzania's Bulyanhulu gold project. Sutton was later sold to Barrick Gold Corp. for $353 million.
JUNIOR FINANCING
Although successful so far at keeping its shareholders happy, Canico, as a small exploration company with a market capitalization of about $270 million, has work ahead of it securing debt finance from banks for the project.
Kenyon is just back from a trip with analysts and bankers to the project in Brazil's Para state. Canico started the wooing process early, although funding is likely to be approved only after a feasibility study is completed, in late 2004.
The 100 million tonne-plus resource offers the possibility of a two-line plant but Kenyon says there is little chance banks will finance anything more than a single line facility, expected to process 1.25 million tonnes of ore a year.
"We are just not that creditworthy major company," he said.
That said, Canico has a heavyweight in its corner. It is nearly 20 percent owned by Toronto-based Inco. The western world's biggest nickel producer sold Onca-Puma to Canico and has the right of first refusal on the property if the Vancouver-based firm puts it on the block.
Drilling results last month estimated Onca-Puma, at a 1.5 percent nickel cut-off grade, contains a total inferred resource of 104 million tonnes, grading 2.15 percent nickel and 0.11 percent cobalt.
This tripled the previous resource estimate, sending Canico's shares into orbit. They hit a new high of C$13.75 earlier this month. But on Monday the stock closed down 43 Canadian cents on the Toronto Stock Exchange at C$12.65.
($1=$1.35 Canadian)
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