Impala to earn in on Ambatovy (June 06, 2005)

Dynatec (DY-T) has found its partner to develop the large Ambatovy nickel-laterite project in central Madagascar, in the person of South African platinum producer Impala Platinum (IMPUY-P).

The deal between Dynatec and Implats will see each take a 50% interest in the project, with Dynatec retaining operation of the mine and plant in Madagascar and Implats expanding its existing refinery in Springs, South Africa, to handle nickel and cobalt sulphides from Ambatovy.

Implats’s admission ticket is a US$50-million contribution to Dynatec’s equity portion of project financing, and the company will also guarantee US$170 million of the project debt for Dynatec. The partners are in discussions with prospective third partners, who would come on board for a 25% interest, diluting Dynatec and Implats to 37.5% each. Dynatec would receive any payment from a third partner, which would most likely be a nickel consumer rather than a producer. On that logic, Japanese industrial conglomerates have been suggested by some analysts as prospective partners in the project.

Implats and Dynatec will revise the current feasibility study on Ambatovy, based on the new plan to refine metal at Springs. Implats pays for that revision, budgeted at US$60 million, with US$30 million of that credited as part of its US$50-million defrayment of Dynatec’s contribution to the project.

The new development plan would mean a scaled-down plant at Toamasina, Madagascar’s major Indian Ocean port. Laterite ore from two open pits at Ambatovy and neraby Analamay would be transported as a slurry in a 195-km pipeline to Toamasina, where it would be leached and the nickel and cobalt precipitated as a sulphide containing 55% nickel and 4% cobalt. That product would be shipped to Springs, where it would be turned into nickel and cobalt powders, using Sherritt reduction processes.

The modifications at Springs would be made to an existing base metal refinery that currently produces 17,000 tonnes nickel and 7,000 tonnes copper from smelter mattes, upstream from Impala’s precious metal refinery.

Previous feasibility work released in February had suggested that the project, estimated at US$2.25 billion, could save US$330 million by shipping to a separate refinery, and that its operating cost — estimated at US$3,650 per tonne of nickel, or US$1.66 per lb. before byproduct credits — could be reduced by about US$730 per tonne.

Ambatovy has reserves of 125 million tonnes grading 1.04% nickel and 0.1% cobalt, and the feasibility study designed the operation to produce 60,000 tonnes nickel and 5,600 tonnes cobalt annually.