TORONTO (miningweekly.com) – Base metals project developer Royal Nickel Corporation (RNC) has appointed Swedbank Norway (Swedbank) as adviser for a senior bond financing of about $600-million, with a five-year maturity, to develop its Dumont nickel project, in Quebec.

Swedbank would work closely with RNC to arrange the senior project bond finance facility and support RNC’s efforts in international markets to secure the further equity and other capital required to complete the financing.

Over the past 24 months, Swedbank had raised more than $7-billion in bond financing for companies in the energy, transportation and mining sectors. In particular, Swedbank, which is one of the largest banks in the Nordic and Baltic region, had a strong and consistent record of successful project financings in the natural resources segment, RNC said.

"With the receipt of the main environmental permit expected before the end of this month, we are now focusing on the final task of raising sufficient financing to begin construction of Dumont, which is expected to be one of Canada's largest base metals mines,” commented RNC president and CEO Mark Selby.

Financing would have to be completed ahead of the planned construction start date in early 2016.

“Dumont will be well-positioned to take advantage of the significant improvements expected in the nickel markets through the balance of this decade,” Selby said.

IMPENDING NICKEL DEFICIT
A forecast structural deficit in the global nickel market of about 322 000 t/y from 2017 to 2020 and a nearly empty "project cupboard" would bode well for the Dumont project, making it a hot target for potential suitors.

Selby last week told an analysts presentation in Toronto, in which Mining Weekly Online participated, that nickel demand continued to be robust – growing at an average of 6.3% since 2010, and by more than 5% in 2014.

He noted that strong demand was expected to continue this year, with the price buoyed by a large increase in LME stocks that more than compensated for massive destocking in China.

Meanwhile, the Indonesian ban on exporting raw metal ores had removed between 25% and 30% of global nickel supply. RNC believed it was unlikely that this ban would be overturned.

Selby said Indonesia would likely still become the world’s largest nickel producer, but production would only take off from the mid-2020s at the earliest.

Existing sources of nickel supply would struggle to provide required overall supply, with the supply pipeline expected to decline in 2015/16 and net supply growth of just over 2% by 2020.

Selby said the Big 15 nickel operations’ output was shrinking, with little prospect of potential expansion. He added that the “tidal wave” of projects that was started in 2007 to 2010 continued to struggle, with the current global project cupboard largely empty and the pace of new discoveries a fraction of what would be required in future.

Output from the Big 15 nickel operations had declined by 11% from 2006 to 2014, with 11 of the 15 operations having reported lower output over this period.

The world now needed at least two Voisey’s Bay projects and three to four Nova-Bollinger projects each year to avoid a structural deficit, he stated.

RNC was confident that nickel prices could return to the 2006/7 range of more than $30 000/t to $50 000/t as prices would once more rise to force demand in line with available supply.

As an economy industrialised, demand moved from more basic materials such as carbon steel, into stainless steels and ultimately into specialty alloys that require a lot of nickel and would drive non-stainless nickel consumption. Selby pointed to China as requiring more nickel as its economy evolved, with the Asian country realising that it was not self sufficient in its future nickel needs.

There were few alternatives for high-grade laterite ore outside Indonesia. RNC estimated that the Philippines could supply a maximum of five-million to ten-million tonnes of high-grade ore (10% to 20% of current Indonesian exports), while New Caledonia only exported ore to partners in Japan and Korea.

“Even without the strict implementation of the [Indonesian] ban, the fundamental issue facing the nickel industry in 2015/16 is an empty project cupboard. In the early 2000s, the project cupboard was very full, [with] many projects known for decades. Today’s picture is very, very different, setting the stage for an exciting nickel cycle,” Selby said.

LARGE-SCALE DEPOSIT
Dumont was one of only five projects above 20 000 t currently in the development phase, for a total potential future output of 200 000 t. In 2001, there were 12 projects available for over 500 000 t of nickel.

In early 2015, Chinese refined nickel and ferronickel imports had surged as high-grade Indonesian laterite nickel ore stockpiles were largely depleted and nickel pig iron output was dropping.

The Dumont project was a mammoth deposit near the town of Amos, in the established Abitibi mining camp, in the mining-friendly Canadian province of Quebec. It contained about 6.9-billion pounds of nickel in the proven and probable reserve categories, held proven and probable reserves of 1.18-billion tonnes grading 0.27% nickel and 9.75-billion pounds of nickel resources in the measured and indicated resources categories.

The project was expected to cost $1.2-billion to develop, but could attract the attention of mining majors looking to replace dwindling resources.

Last month, Australian diversified miner Sirius Resources announced that Independence Group would acquire its Nova Bollinger mine for $1.4-billion – a project pale in comparison with Dumont.

When in production, Dumont would rank as the fifth-largest nickel sulphide operation in the world by yearly output, producing 33 000 t/y in the first phase and 54 000 t/y when the second-phase expansion had been completed. Only the mining operations at Norilsk (Russia), Jinchuan (China), Sudbury (Ontario, Canada), Voisey’s Bay (Newfoundland and Labrador, Canada) would be larger.

The mine would produce nickel for more than 30 years.

Construction and operation of the mine and processing facilities would be made easier by the existence of excellent infrastructure, including roads, rail and access to low-cost power.

Ores from the mine would be processed using proven, conventional methods into a high-grade nickel concentrate and then transported for further refining elsewhere. The mine would have no acid-generating rock or tailings, which had beneficial implications for environmental management.

Dumont had a net present value of $1.13-billion and an internal rate of return of 15.2%.