Asian Mineral shelves Vietnamese nickel project

Market conditions, higher export tariffs and lack of capital are preventing Asian Mineral Resources (ASN-V, AIERF-o) from developing the first nickel mine in Vietnam.

Asian Mineral has suspended work at the Ban Phuc project site, 180 km northwest of Hanoi, until it can sort out the problems. The company was aiming to commission

the underground operation in the second quarter of 2009 and expected to produce 4,000 tonnes of nickel and 2,000 tonnes of copper in concentrate over the first five years of operation.

Asian Mineral president Collin Ellison says he is disappointed about the suspension.

“But prudence dictated that we suspend development and conserve enough of our remaining financial resources to give us time to deal with various issues and to continue our financing efforts.”

According to an update in early September when shares were trading at around 90 apiece, Asian Mineral had not yet found a source for the remaining $45 million needed to complete the project. At that time, the company had about $14 million in cash. Total capital costs were estimated at $81.5 million.

Shares hit a new 52- week low in early October, falling 20% or 7 to 27 apiece on a volume of 9,000 shares. The company reached its 52-week high of $2.25 last October.

The company had been making solid progress but news of increased export tariffs, now set at 20%, up from 5%, also put the project’s economics into question.

Asian Mineral said it was trying to initiate a dialogue with the government about the tariffs, aimed at ensuring more downstream processing, calling the increase “counterproductive” to Vietnam’s minerals industry.

While development is suspended, Asian Mineral says it will work on resolving the financing and tax issues.

“We still have a robust project that lacks only the ingredients of financing and the resolution of the Vietnamese issues,” Ellison says.

In addition, the worst typhoon in 34 years has caused mudslides, leaving parts of the project site inaccessible and causing damage to some construction equipment. The extent of the damage is un- known but the company expects some of the costs will be covered by insurance.

Ellison says the company was prepared for occasional weather interruptions but that the storm at the end of September caused more damage than expected.

Even though Asian Mineral is suspending the project, Ellison says it will still clean up access roads and project equipment at the site.