Blackstone buys Xstrata stake in Norwegian nickel projects

Vancouver Blackstone Ventures (BLV-V) has struck a deal with Xstrata Nickel (XTA-L, XSRAF-O) to buy a basket of properties in the birthplace of the Norwegian nickel industry for US$15.5 million.

The properties contain 55 former mines which acted as feeder systems to the infamous Nikkelverk refinery, which is now largely dedicated to processing ore from Xstrata operations in Sudbury, Ont.

Blackstone’s game plan will be to continue drilling on the properties after acquiring all the outstanding shares of joint venture partner, and Xstrata subsidiary, Sulfidmalm, in a deal that ultimately gives Blackstone full control of the projects.

The junior hopes that by proving up reserves or taking the properties to the pre-feasibility stage, it will attract a willing buyer capable of developing the properties into mines.

“Arguably these are some of the best sulphide nickel opportunities on the planet,” said Blackstone President Donald McInnes in an interview. Blackstone shares reacted to news of the deal by rising 4 cents to 69 cents on the TSX Venture Exchange, January 15.

“For Norway, it is our intention to dramatically ramp up our exploration efforts in 2007 with the goal of having at least three drills operating by the end of March and a budget of $4.5 million,” Mr. McInnes said.

Under the agreement, Blackstone is picking up seven project areas in southern Norway. The most advanced is the Espedalen property, which is thought to contain a non_N143-101 compliant inferred resource of 312,000 tonnes, grading 2.37% nickel in the Stormyra zone. Other project areas include Vakkerlien and South Norway.

Under the agreement Blackstone can acquire all of outstanding shares in Sulfidmalm from Switzerland-based Xstrata Nickel by delivering US$15.5 million in staged payments up until the end of 2010.

The first $3.5 million is due 20 days after definitive option agreements have been signed and the deal has been approved by the TSX Venture Exchange. This will give Blackstone an initial 22% of Sulfidmalm.

Under the agreement, the payments can be accelerated at Blackstone’s option. Xstrata Nickel will retain no back in rights to any of the properties in Norway.

However, it retains the right of first refusal to purchase concentrate or products produced from the properties at prices that are at least as good as Blackstone could receive it were to sell to a third party.

One mining analyst said Blackstone is exploring in a region that exhibits geological similarities to the Voisey’s Bay nickel find in Labrador, but has suffered from under-investment in risky grassroots sulphide exploration.

Mr. McInnes said the majority of the properties that Blackstone is buying have not been tested using modern exploration methods, including geophysics and diamond drilling.