TORONTO (miningweekly.com) – Diversified Canadian resource company Sherritt International has suffered another setback at the Ambatovy nickel/cobalt project, in Madagascar.

Strikes at both the mine and plant, and a transformer failure had choked the operation’s ability to ramp up to the coveted 90% of design capacity, for 90 days – the threshold for declaring commercial production.

TSX-listed Sherritt on Wednesday night reported that a high-voltage transformer failure had caused overload damage to the two ore thickeners.

This resulted in unthickened ore being processed directly through the pressure acid leach (PAL) circuit, affecting ore throughput rates by around 15%. The company expected that one ore thickener would return to service in July and the other in the third quarter.

IMPROVED OUTPUT
Sherritt said the operation’s entire finished nickel output for May was 3 874 t and 257 t cobalt, or about 76% of nameplate capacity. Its 40% share of production amounted to 1 550 t nickel and 103 t cobalt.

For April, finished nickel output was 1 244 t, or 3 110 t on a 100% basis, about 63% of nameplate capacity.

Ore throughput in the PAL circuit was 354 109 t, or about 71% of nameplate capacity.

However, the strike action at the Ambatovy mine during March and April, at the plant in April, and now the transformer failure had hindered the joint venture (JV) from finding its stride.

Ambatovy was a vertically integrated nickel and cobalt mining, processing, refining and marketing JV between subsidiaries of Sherritt (40%), Sumitomo (27.5%), Korea Resources (27.5%) and SNC-Lavalin (5%). Sherritt was the operator of the facilities.

Sherritt had by now received seven of the ten certificates required under the terms of the Ambatovy financing, with the remaining three certificates expected before the end of September.

The Ambatovy JV had also implemented a head-count reduction programme at the operation as part of a wider campaign aimed at mitigating the effects of continued low metal prices. About 1 100 Ambatovy employees and contractors had had their employment contracts suspended or had been demobilised, reducing the overall project head count by about 12%.

Nickel prices were on Thursday trading at near five-year lows of less than $6/lb, after a systematic price decline from highs of more than $13/lb in 2010.

Sherritt’s TSX-listed stock on Thursday shed as much as 8% and closed at $2.41 apiece.