Inco to work on dry laterite at Goro

Dry nickel laterites, which once represented the future of nickel, have been writing their own checkered history over the past three years. Hyped as a revolution in nickel production, they have turned out — so far — to be tar pits, much to the chagrin of those who invested eagerly before production started.

But nickel producer Inco (N-T) is ready to go ahead with development of the Goro lateritic nickel deposit on the French Pacific island of New Caledonia. It owns an 85% interest, with the remainder held by the French state agency Bureau de recherche gologiques et minires.

The partners will spend US$1.4 billion to put the deposit into production, and expect to ship 54,000 tonnes nickel and 5,400 tonnes cobalt annually. Goro has reserves of 47 million tonnes grading 1.59% nickel and 0.17% cobalt in the current mining plan. A further resource of 219 million tonnes grading 1.57% nickel and 0.18% cobalt is still outside the reserve.

Inco’s proposed recovery technology is broadly similar to the pressure acid leach (PAL) technology that has been used in new Western Australian laterite-nickel projects over the past three years. The system has been disappointing in Australia, not least because of the extravagant promises made on its behalf before the projects went into production. Inco has had some success with a 12-tonne-per-day pilot plant at Goro, which has been running for about a year and a half. The organic extraction solvent, which strips nickel and cobalt out of the leach acid, is expected to be more efficient than the one used in the Australian projects, since it does not extract as much magnesium along with the valuable metals.

One wild card is the environmental issue. Despite a full environmental assessment that has been accepted by the French government and the local assembly, non-governmental organizations in the developed world have started rumblings about blocking the project.

In Australia, the much-ballyhooed dry laterite nickel projects have not lived up to their preproduction billing. The biggest, Murrin Murrin, 230 km northeast of Kalgoorlie, still has not met its original production targets, and runs at about 70% of design capacity. In April it produced 5,714 tonnes nickel and 181 tonnes cobalt.

Owner Anaconda Nickel, which trades on the Australian Stock Exchange under the symbol anl, says it expects to be in full production in about a year’s time, though the company has made similar representations in the past.

Anaconda’s failure to deliver on promises made for Murrin Murrin finally got to be too much for major shareholder Anglo American (AAUK-Q). At the end of April, Anglo called an extraordinary general meeting of Anaconda shareholders, with proposals to vote out the sitting board and install Anglo executives in their place. Anglo now has a 25% interest in Anaconda Nickel, while Swiss metal trader Glencore has 23%, and Canadian nickel producer Sherritt International (S-T) has 10%.

Anaconda’s management decided to fight the proposals, and an eleventh-hour agreement was reached with the support of Glencore and Sherritt. Anglo got one of the things it wanted: the head of Anaconda chief executive Andrew Forrest, who agreed to step aside and become a non-executive deputy chairman. Sherritt’s Ian Delaney will serve as interim chairman while the main players — Delaney, Anglo’s nominee James Campbell, Glencore’s Ivan Glasenberg, and outside director Christopher Linegar — search for a new chief executive and a new chief financial officer.

Cawse

The Cawse nickel project, 50 km northwest of Kalgoorlie, generally has been seen as the relative success story among the three Australian laterite producers. Cawse, which has resources of 248 million tonnes grading 0.7% nickel and 0.04% cobalt, started production in late 1998 but didn’t show positive cash flow until August 1999 and didn’t reach design capacity until May of last year.

In 2000-2001, owner Centaur Mining (CTRL-Q) expects Cawse to produce 7,400 tonnes nickel and 860 tonnes cobalt. But recent quarters did not meet the forecast: in the last three months of 2000, Cawse turned out 1,401 tonnes nickel and 186 tonnes cobalt. In all of 2000, Cawse produced 6,639 tonnes nickel and 998 tonnes cobalt, running at about three-quarters of forecast production levels even as it put 450,000 tonnes of ore — 90% of capacity — through the autoclaves. Nickel recoveries have been in the 85-90% range, and cobalt recoveries, slightly more than 90%.

Costs are still running near US$5,100 per tonne of nickel, after cobalt credits. Centaur itself has conceded that without a major expansion program, “operating efficiencies cannot be achieved, thus maintaining a high-cost production regime.”

That was supposed to happen in November 1999 when Centaur and Anaconda joined forces to study the feasibility of expanding Cawse to 40,000 tonnes nickel and 3,000 tonnes cobalt annually. Under the deal, Anaconda would have a 50% interest in the expanded operation in exchange for funding the feasibility study and arranging project financing.

Resignations

Last August, Anaconda Nickel agreed to take up a direct 15% shareholding in Centaur, including buying a 6.3-million-share holding from Centaur’s chairman, mining executive Joseph Gutnick. Three Anaconda executives, including then-chief-executive Forrest, joined the Centaur board. But the deal never closed; in November, Anaconda announced it would not be taking up Gutnick’s holding, and the three directors resigned.

Centaur viewed that as an abrogation of the placement agreements and sued Anaconda, which counter-sued. In early March of this year, the two agreed to drop their claims, and the expansion agreement remains in place. Anaconda is continuing the feasibility study on the expansion, though the original June 2001 deadline date will probably not be met.

The Bulong project, 35 km east of Kalgoorlie, has had enough teething troubles to put its owner, Preston Resources, into a trading halt that lasted over a year.

Project debt — held by Preston’s subsidiary, Bulong Operations — has been a serious issue at Bulong, and the company is still negotiating with bond-holders and Barclays Bank, its principal lender, to restructure the debt. The most recent proposal had the creditors taking over 95% of the equity in Bulong Operations in exchange for releasing Preston from any obligations for project debt. Gold miner Resolute, which owns about 26% of Preston, is also a A$10-million creditor of Bulong.

Production costs have been high in fiscal 2000-2001; total costs to the end of April, after cobalt credits, were greater than US$5,000 per tonne.

Both Bulong and Cawse have been pushing plenty of ore through their autoclaves. Cawse, for example, is running them at 105% of design capacity.