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Tightening nickel affords opportunity for Asian Mineral Resources

10th December 2014

By: Simon Rees

Creamer Media Correspondent

  

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TORONTO (miningweekly.com) – Of the few base metals piquing analyst interest for 2015, zinc and nickel stand out. For nickel, supply was expected to tighten across next year, which should act as a price support.

Indonesia’s ban on the export of nickel ore has been a central catalyst for this, while the Philippines Congress has proposals that contemplate similar restrictions, although these are in the early stages of the legislative process.

In its October base metals outlook, TD Securities’ 2015 forecast stood at an $8.82/lb average for the first quarter of 2015, rising to $10/lb for the fourth quarter. This is still some way off the highs achieved in the first half of 2011, when nickel briefly pushed past $13/lb. Nickel stood at $7.51/lb on December 8, according to infomine.com.

“There’s certainly a shortfall coming,” Asian Mineral Resources (AMR) president and CEO Evan Spencer told Mining Weekly Online.

“Indeed, I think some people are possibly underestimating the levels involved.”

That the ban has remained in place was a surprise for many, he added. Its imposition was rooted in Indonesia’s desire to boost value through in-country processing.

However, the changes envisaged might be beyond the scope of some operators, notably those who have run simple stripping operations and used basic port infrastructure, Spencer said.

Significant import and export facilities will have to be built, as well as considerable power infrastructure. “It’s going be a different business and some of them [the producers] aren’t going to get over the hurdles,” he added, predicting consolidation in Indonesia over the coming years, with many companies growing their positions and resource bases through mergers and acquisitions.

“Overall, you’ll see a lower, steadier and longer-term production profile going forward."

VIETNAM’S TIGER

Tightened supply and increased prices would be an important fillip for AMR. The company operates the Ban Phuc nickel mine, in the Son La province, in Vietnam, west of Hanoi. It holds a 90% stake in the operation through its subsidiary Ban Phuc Nickel Mines (BPNM).

Effective February 2013, the mine had proven and probable reserves of 1.6-million tonnes at 2.2% nickel and 1% copper for 36 000 t nickel and 16 000 t copper contained. The operation was formally opened in June 2013, ramping up to current production levels across November and December 2013.

Throughput was scheduled to be 360 000 t/y run-of-mine ore but the operation would achieve around 400 000 t for 2014, Spencer said. Processing was through sulphide flotation techniques, with recovery rates of 85% nickel and 95% copper. Some by-product cobalt was produced as well.

The rate of contained-in-concentrate production was reported at 6 400 t nickel, 3 200 t of copper and 200 t cobalt a year. The first concentrate was shipped from Haiphong, Vietnam’s main port, in November 2013.

“It was Vietnam’s first-ever exported concentrate and a major milestone not just for Ban Phuc but for the country as well,” Spencer noted, adding that AMR was dispatching its seventeenth shipment to consumers in China, including Jinchuan.

In a forward-looking estimate, AMR believed it will be cash positive with between $8-million and $10-million by year-end. “This is cautionary, of course, and we are looking to pay down $4-million in debt,” he explained.

In July, the company announced that BPNM had been awarded exclusive rights to explore a land package of 50 km2 in Son La. Opportunities to extend Ban Phuc existed, with the Ban Phuc massive sulphide vein open at depth and to the east. “We’re pretty confident Ban Phuc has opportunities for limited extensional work,” Spencer commented.

Other targets included Ban Khoa and Kingsnake, both located close to Ban Phuc and the company’s existing infrastructure. “There’s a 2.8 km trend within which Kingsnake and Ban Khoa lie. It’s roughly 900 m from Ban Phuc. We could access it [Kingsnake] from underground development right next to the mill site,” Spencer stated.

About 80% of AMR’s exploratory work in 2015 would focus on this area, he added. Other targets included Ban Khang, Ban Trang and several more.

The company had also delineated plans for a smelter, including studies that confirmed potential capital costs. There were a number of site locations available.

The government had voiced support for smelting and offered incentives that included a proposed reduction in export tariffs on any smelted material.

“But setting a timeframe for a smelter is premature,” Spencer said. “We want to make sure we’re match fit and ready to go first. We’re also looking at the permit approval processes and, of course, we’ve also got the exploration work to do.”

FACE-TO-FACE

Crucial for AMR had been the cultivation of relations with government, both local and national. This had taken time and effort, Spencer emphasised, adding that it was important not to overcommit at the start.

The company was also working with government to ensure the correct interpretation and application of mining legislation as the country continued to develop a more modern framework for operators.

Trust had been an essential part of the equation, Spencer noted. “The government supports us and says: ‘Okay these guys are serious and genuine. We trust what they are doing’.”  The high level of Vietnamese participation in the company had also been important in cementing ties.

AMR's corporate social responsibility programmes had also been important in building up trust. Efforts had revolved around assisting local schools and supporting small business ventures. “We also focus on health and road repair work,” Spencer added.

Entering 2015, AMR noted the potential for growth through mergers and acquisitions. “Nothing has been concluded but we continue to prioritise and look at key strategic opportunities. We will disclose appropriately should any formal discussion and agreements become firm,” he outlined.

The goal for the company in 2014 had been to bolster its foundations and cash profile, and look to pay down debt. “We’ve been locking this in and now have an opportunity to grow and look to the future. So we’re in a strong place," Spencer added.

Edited by Henry Lazenby
Creamer Media Deputy Editor: North America

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