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Impala to Study $2.25 Billion Madagascar Nickel Plan
(Update2)
May 26 (Bloomberg) -- Impala Platinum Holdings Ltd., the world's second-largest platinum producer,
agreed to consider a $2.25 billion nickel and cobalt project in Madagascar with Dynatec Corp., as it
struggles to expand its platinum business.
The project, which involves digging a mine in the African island nation and a refinery east of
Johannesburg, may produce 60,000 metric tons of nickel a year and 5,600 tons of cobalt, Impala
said in a statement to Johannesburg's Stock Exchange News Service today. A decision will be made
by the end of this year.
Impala's ability to expand in South Africa, the site of the world's biggest platinum deposits, has been
limited by the dominance of bigger rival Anglo American Platinum Corp. An expansion in Zimbabwe,
where the second-largest deposits lie, has been slowed by that country's worst-ever economic crisis.
Nickel is mined as a byproduct of platinum extraction.
``They've got some issues in Zimbabwe,'' said Leon Esterhuizen, an analyst at Investec Securities in
Johannesburg. ``The obvious thing for them to do is to expand into a metal which they already
produce.''
Shares in Dynatec rose 16 Canadian cents, or 13 percent, to C$1.38 as of 12:27 p.m. Toronto time,
giving the company a market value of C$289 million ($228 million). Impala shares in New York rose
20 cents, or 0.9 percent, to $21.55, valuing the company at $5.74 billion.
At current metal prices the project would generate sales of $1.3 billion a year. That's more than
double Madagascar's current exports of $868 million, according to the CIA World Factbook Web site.
The island, a former French colony off Africa's south-east coast with 18 million residents, is the
world's biggest vanilla producer and also exports coffee.
World Demand
The metal produced would be equivalent to 4.5 percent of world nickel demand and 11 percent of
cobalt demand, according to estimates from Barclays Capital and London-based consultants CRU.
The price of nickel, used in stainless steel, has jumped 40 percent in the last 12 months. It traded at
$16,400 a ton on the London Metal Exchange today. Cobalt, used in batteries, has fallen 40 percent
to $15.35 a pound according to Metal Bulletin, a London- based metals publication.
The cost of the project may be lower than the $2.25 billion estimated by Richmond Hill, Ontariobased
Dynatec, Impala said. The refinery may be built near Impala's existing plant in Springs.
Costs Shared
Impala, based in Johannesburg, would run the refinery while Dynatec would operate the mine. The
project, known as Ambatovy, will be jointly owned. Impala will pay $50 million toward Dynatec's
share of the project, with other costs shared equally. Impala will also guarantee $170 million of
Dynatec's loans.
At a later stage, 25 percent will be sold to a third investor and Impala and Dynatec's shares reduced
to 37.5 percent. That investor will probably be a ``nickel consumer'' and talks have already begun,
Impala said. Dynatec will get the money from the sale.
Impala, which produces about 14,000 tons of nickel a year at its platinum mines, has already tried to
expand its nickel business. In 2000, the company considered quadrupling the size of its nickel and
cobalt refining capacity at Springs as it planned to take a stake in a nickel project in the Philippines.
It later abandoned the plan.
To contact the reporter on this story:
Antony Sguazzin in Johannesburg asguazzin@bloomberg.net
Last Updated: May 26, 2005 12:56 EDT
(Update2)
May 26 (Bloomberg) -- Impala Platinum Holdings Ltd., the world's second-largest platinum producer,
agreed to consider a $2.25 billion nickel and cobalt project in Madagascar with Dynatec Corp., as it
struggles to expand its platinum business.
The project, which involves digging a mine in the African island nation and a refinery east of
Johannesburg, may produce 60,000 metric tons of nickel a year and 5,600 tons of cobalt, Impala
said in a statement to Johannesburg's Stock Exchange News Service today. A decision will be made
by the end of this year.
Impala's ability to expand in South Africa, the site of the world's biggest platinum deposits, has been
limited by the dominance of bigger rival Anglo American Platinum Corp. An expansion in Zimbabwe,
where the second-largest deposits lie, has been slowed by that country's worst-ever economic crisis.
Nickel is mined as a byproduct of platinum extraction.
``They've got some issues in Zimbabwe,'' said Leon Esterhuizen, an analyst at Investec Securities in
Johannesburg. ``The obvious thing for them to do is to expand into a metal which they already
produce.''
Shares in Dynatec rose 16 Canadian cents, or 13 percent, to C$1.38 as of 12:27 p.m. Toronto time,
giving the company a market value of C$289 million ($228 million). Impala shares in New York rose
20 cents, or 0.9 percent, to $21.55, valuing the company at $5.74 billion.
At current metal prices the project would generate sales of $1.3 billion a year. That's more than
double Madagascar's current exports of $868 million, according to the CIA World Factbook Web site.
The island, a former French colony off Africa's south-east coast with 18 million residents, is the
world's biggest vanilla producer and also exports coffee.
World Demand
The metal produced would be equivalent to 4.5 percent of world nickel demand and 11 percent of
cobalt demand, according to estimates from Barclays Capital and London-based consultants CRU.
The price of nickel, used in stainless steel, has jumped 40 percent in the last 12 months. It traded at
$16,400 a ton on the London Metal Exchange today. Cobalt, used in batteries, has fallen 40 percent
to $15.35 a pound according to Metal Bulletin, a London- based metals publication.
The cost of the project may be lower than the $2.25 billion estimated by Richmond Hill, Ontariobased
Dynatec, Impala said. The refinery may be built near Impala's existing plant in Springs.
Costs Shared
Impala, based in Johannesburg, would run the refinery while Dynatec would operate the mine. The
project, known as Ambatovy, will be jointly owned. Impala will pay $50 million toward Dynatec's
share of the project, with other costs shared equally. Impala will also guarantee $170 million of
Dynatec's loans.
At a later stage, 25 percent will be sold to a third investor and Impala and Dynatec's shares reduced
to 37.5 percent. That investor will probably be a ``nickel consumer'' and talks have already begun,
Impala said. Dynatec will get the money from the sale.
Impala, which produces about 14,000 tons of nickel a year at its platinum mines, has already tried to
expand its nickel business. In 2000, the company considered quadrupling the size of its nickel and
cobalt refining capacity at Springs as it planned to take a stake in a nickel project in the Philippines.
It later abandoned the plan.
To contact the reporter on this story:
Antony Sguazzin in Johannesburg asguazzin@bloomberg.net
Last Updated: May 26, 2005 12:56 EDT
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