UPDATE 2-Sumitomo buys 25 pct of Madagascar nickel project
Thu Aug 11, 2005 3:05 PM ET
(Recasts with Dynatec CEO interview, details. Changes dateline from JOHANNESBURG. Amounts in U.S. dollars unless noted)
By Nicole Mordant
VANCOUVER, British Columbia, Aug 11 (Reuters) - Japan's Sumitomo Corp. <8053.t> has agreed to buy 25 percent of the Ambatovy nickel project in Madagascar, bringing added financial muscle to the $2.25 billion venture owned by Canada's Dynatec Corp. and South Africa's Impala Platinum .
Shares of Dynatec, a small mining company that originally owned all of the big, long-life nickel deposit on Madagascar, surged 17 percent on news of the involvement of the big Japanese trading and investment firm.
Dynatec has been looking for partners to help it fund the development of the nickel laterite deposit on the large Indian Ocean island. The project has the potential to produce 60,000 tonnes of nickel and 5,600 tonnes of cobalt a year at a low operating cost.
In May, Dynatec teamed up with Implats, which is the world's second biggest platinum producer. But they said then that they were looking for a third partner to take a quarter share in the venture, which could start production in 2008.
Nickel, which is predominantly used to add strength and durability to stainless steel, has been in short supply for the past two years. The metal's price has doubled in that time partly because of a dearth of new mine starts.
"(Sumitomo's) financial strength is important. Equally important is the extensive development expertise that they have with major mining projects," Bruce Walter, Dynatec's president and chief executive told Reuters on Thursday.
Sumitomo recently bought a stake in Inco Ltd.'s large Goro nickel project in New Caledonia and has been investing in global copper and gold mine assets for 20 years.
Because of Sumitomo's involvement, Dynatec and Implats' stakes in Ambatovy will drop to 37.5 percent each.
Walter said the partners' priority now is to secure debt financing for 50 percent to 60 percent of the $2.25 billion capital cost of the project. Government agencies often advance funds for major mining projects in developing countries, he said.
"The involvement of Sumitomo greatly increases the probability of getting appropriate Japanese financial involvement. With Implats' involvement, we have the South African development banks," Walter said. Canadian export banks and other commercial lenders would also be tapped.
The rest of the capital will be funded by equity by the partners according to their stakes in the project.
Walter said there was a chance that the development cost could be reduced if a study showed it made more sense to build a nickel processing plant in South Africa near Implats' existing operations rather than in Madagascar.
Dynatec's shares hit a 16-month high of C$1.64 on the Toronto Stock Exchange on Thursday. By mid-afternoon, the stock was off its peaks at C$1.53 for a gain of 9 percent.
(Additional reporting by James Macharia in Johannesburg)
© Reuters 2005. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
(Recasts with Dynatec CEO interview, details. Changes dateline from JOHANNESBURG. Amounts in U.S. dollars unless noted)
By Nicole Mordant
VANCOUVER, British Columbia, Aug 11 (Reuters) - Japan's Sumitomo Corp. <8053.t> has agreed to buy 25 percent of the Ambatovy nickel project in Madagascar, bringing added financial muscle to the $2.25 billion venture owned by Canada's Dynatec Corp.
Shares of Dynatec, a small mining company that originally owned all of the big, long-life nickel deposit on Madagascar, surged 17 percent on news of the involvement of the big Japanese trading and investment firm.
Dynatec has been looking for partners to help it fund the development of the nickel laterite deposit on the large Indian Ocean island. The project has the potential to produce 60,000 tonnes of nickel and 5,600 tonnes of cobalt a year at a low operating cost.
In May, Dynatec teamed up with Implats, which is the world's second biggest platinum producer. But they said then that they were looking for a third partner to take a quarter share in the venture, which could start production in 2008.
Nickel, which is predominantly used to add strength and durability to stainless steel, has been in short supply for the past two years. The metal's price has doubled in that time partly because of a dearth of new mine starts.
"(Sumitomo's) financial strength is important. Equally important is the extensive development expertise that they have with major mining projects," Bruce Walter, Dynatec's president and chief executive told Reuters on Thursday.
Sumitomo recently bought a stake in Inco Ltd.'s
Because of Sumitomo's involvement, Dynatec and Implats' stakes in Ambatovy will drop to 37.5 percent each.
Walter said the partners' priority now is to secure debt financing for 50 percent to 60 percent of the $2.25 billion capital cost of the project. Government agencies often advance funds for major mining projects in developing countries, he said.
"The involvement of Sumitomo greatly increases the probability of getting appropriate Japanese financial involvement. With Implats' involvement, we have the South African development banks," Walter said. Canadian export banks and other commercial lenders would also be tapped.
The rest of the capital will be funded by equity by the partners according to their stakes in the project.
Walter said there was a chance that the development cost could be reduced if a study showed it made more sense to build a nickel processing plant in South Africa near Implats' existing operations rather than in Madagascar.
Dynatec's shares hit a 16-month high of C$1.64 on the Toronto Stock Exchange on Thursday. By mid-afternoon, the stock was off its peaks at C$1.53 for a gain of 9 percent.
(Additional reporting by James Macharia in Johannesburg)
© Reuters 2005. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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