August 22, 2008
Xstrata approves Koniambo nickel project
The board of Xstrata plc last week approved the development of the Koniambo project, a major long life, low cost, open pit nickel mine, metallurgical plant and associated infrastructure located in the North Province of New Caledonia. The decision to approve the Koniambo project comes after a one year renewal phase, during which Xstrata Nickel and its partners undertook extensive work to optimize the scope, design and financing of the project.
Xstrata Nickel will lead the project implementation and operations development on behalf of Koniambo Nickel and has the right to appoint the president of Koniambo Nickel.
The project development entails investment of USD 3.8 billion to be majority funded by Xstrata, in return for a proportionate share of the project’s cash flows in the first 25 years of operation. The project will be funded through Xstrata’s internal cash reserves and ongoing strong cash flows from the Group’s operations. Koniambo will be among the world’s lowest cost producers of nickel with initial annual production of 60,000 tonnes of nickel in ferronickel per annum and substantial further high return, Brownfield expansion potential. First ore is expected to be processed in the first half of 2011, ramping up to steady state production in 2013.
Koniambo has a mine life in excess of 25 years from 62.5 million tonnes of saprolite reserves grading 2.4% nickel at a 2% cut off grade. This major resource also has the potential to extend mine life to well in excess of 50 years of economic production. The resource base currently comprises 142.1 million tonnes of measured and indicated saprolite resources at 2.13% nickel at a 1.5% nickel cut-off grade, 140.7 million tonnes of inferred saprolite resource, grading 2.16% nickel with 1.5% cut off and 104 million tonnes of inferred limonite resources at 1.5% nickel with 1.2% cut off.
Nickel will be produced using Xstrata Nickel’s Nickel Smelting Technology which integrates calcining, reduction and smelting unit operations from the mineral processing industry with dust containment and counter current gas flow technologies from the cement industry. The benefits associated with this technology include higher metallurgical recoveries, improved dust containment and lower operating costs than conventional ferronickel operations.
Mr Mick Davis CEO of Xstrata said ”Koniambo represents the opportunity to develop an outstanding nickel operation with cash costs in the lowest quartile and exciting, low cost growth potential from its vast resource base. The project is based on very strong valuation metrics and will meet Xstrata’s cost of capital at a long run nickel price of USD 4.60 per pound. Our decision to develop the Koniambo resource marks an important milestone in the ongoing transformation of our portfolio and in developing our exceptional growth pipeline, which will deliver compound annual growth of 12% over the next five years.”
Xstrata Nickel owns a 49% stake in Koniambo Nickel SAS and the remaining 51% share is held by New Caledonian JV partner Société Minière du Sud Pacifique. Xstrata’s Board approval follows the recent approval by SMSP’s Board of the Koniambo project.
