Australia-based Mirabela Nickel (MNB-T, MBN-A) plans to raise US$375 million in senior notes to pay debt, end its hedges and continue ramping up its sizable Santa Rita nickel mine in eastern Brazil.
The announcement comes shortly after the company updated its reserves and 2011 output estimates at Santa Rita, which now hosts 159.3 million reserve tonnes grading 0.52% nickel, 0.13% copper and 0.015% cobalt for 569,800 tonnes of recovered nickel. This update to a 2008 reserve count adds 38 million tonnes but decreases the nickel grade from 0.6% thanks to a lower overall cutoff grade.
For 2011 Mirabela plans to mine 4.9 million tonnes within 40.8 million tonnes of total material to produce 16,800 tonnes of nickel and US$36.5 million in net project cash flow. Milling at a grade of 0.5% nickel, the company expects recoveries of 64.5% and cash costs of US$5.69 per lb. nickel
The company will spend about US$50 million this year to expand milling capacity to 7.2 million tonnes a year in 2012, which will also include extra vehicles and a de-sliming circuit. In the pit, Mirabela is focusing on opening the deposit along its full strike length from north to south. The strip ratio is now 5-to-1, a drop from the previous estimate of 7.2-to-1, and expected mine life is 23 years.
Resources and cash flow numbers are based on US$11 per lb. nickel for 2011 and US$10 per lb. in 2012. In 2010 the spot price of nickel started at around US$12 per lb. then dropped below US$8.50 per lb. before eventually climbing to more than US$13 per lb. in early March 2011. The Japanese disaster sent commodity prices downwards but nickel has somewhat recovered and is trading at about US$11.80 per lb.
The Santa Rita deposit comprises disseminated nickel and copper sulphide mineralization, typically characterized by ne, granular aggregates of nickel and copper sulphide associated with chalcopyrite, pyrite and pyrrhotite, with an average thickness of 40 metres over a continuous strike length of more than 2 km.
Last year Mirabela was cleared to export nickel at the Ilheus port that sits 136 km southeast of the mine and started shipments in January to Norilsk Nickel‘s (MNOD-L) Harjavalta smelter in Finland.
The company describes Santa Rita as “the largest nickel sulphide discovery worldwide in over a decade, and is expected to be the second largest open-cut nickel sulphide mine in the world.”
Mirabela made the discovery in 2004 and commissioned the mill in 2009.
The project also hosts an underground inferred resource of 87.5 million tonnes grading 0.79% nickel and 0.23% copper. Because of the emphasis on mine ramp up, Mirabela conducted little exploration work last year.
The US$375 million in unsecured notes will be offered only to institutional buyers and are to be due in 2018. Last October the company raised US$165 million after issuing 112.8 million shares at $1.52 apiece. At the end of 2010, it had 491.5 million shares outstanding and US$76 million in cash plus US$25 million held in contingency.
Mirabela’s share price recently closed at $1.95, within a 52-week of $1.54-$2.78.
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