TORONTO (miningweekly.com) – Toronto-based Sherritt International has agreed to put some money from its own balance sheet into building the Ambatovy nickel mine, in Madagascar, before drawing down again on loans provided by its partners.

In return, the company will be entitled to a small share of the cash distributions from the operation, once it reaches commercial production, CFO Dean Chambers told analysts on Wednesday.

Sherritt, which is the operator of the project, will fund at least $80-million of the capital requirements itself and will then return to drawing down on the partner loans.

The Canadian firm owns 40% of the Ambatovy project; Sumitomo and a consortium led by Korea Resources each have a 27,5% stake in the mine, and the project's engineering contractor, SNC-Lavalin, also has a 5% interest.

Last year, the partners agreed to provide nonrecourse loans to fund Sherritt's share of the remaining capital spending on the project, after the capital cost estimate for construction of the mine was increased to $4,52-billion, from a previous figure of $3,4-billion.

The change was instigated by Sherritt itself, as the company's balance sheet and cash flow are significantly stronger now compared with the situation when the loans were put in place, Sherritt CEO Ian Delaney said.

“In 2008, we weren't sure where the world was going to end up, I don't think anyone was at that point in time, and our partners were very accommodating,” he commented.

“They really went to great lengths to extend themselves so that we could continue with the project.

“But times are different now,” he said. “That was a terrific deal, but it is no longer necessary.”

Once in full production, the Ambatovy mine is expected to produce 60 000 t/y of nickel and 5 600 t/y of cobalt.

Sherritt expects the operation to reach mechanical completion early next year, and has budgeted for a 36-month ramp-up.

The company is “very confident” with the current budget and time schedule, and believes it can probably accelerate the ramp up to some extent, Delaney said.

“This process is just a dead knockoff of what we are already doing in Cuba,” he commented.

Sherritt also has nickel, gas, oil and electricity generation assets in Cuba and coal operations in Canada.

Shares in the company, which reported second-quarter results earlier in the day, slid 2,83% on Wednesday, to C$6,87 apiece by 14:32 in Toronto.