Cuba, Sherritt sign deal to develop nickel, cobalt deposits

Alberta-based Sherritt (TSE) has signed a joint agreement with the Cuban government to mine, process and sell nickel and cobalt on a world-wide basis.

Representing the Cuban government in the arrangement is General Nickel Co. S.A., which runs the nickel and cobalt concentrates plant at Moa Bay. Sherritt, which is no stranger to the Caribbean country, already buys a substantial portion of the Moa Bay output as feedstock for its refinery in Fort Saskatchewan, Alta. In 1991, after facing a shortage of nickel feedstock in the previous year, the company procured a long-term supply contract with the Cuban government. Sherritt also holds an interest in oil exploration and production leases off the Cuban coast.

Cuba contains one of the world’s most extensive reserves of nickel, with deposits running the length of a 150-km ridge of mountains in the eastern part of the island, facing the northern coast. The deposits consist of lateritic ore with high iron, nickel and cobalt values. Nickel grades at the three deposits typically average 1.2-1.3%.

The history of Cuban nickel production dates back to the Second World War. Aside from the Moa facility, the metal is mined at Nicaro and Punta Gorda. Sherritt Chairman Ian Delaney said the company is excited by the new venture, adding that he believes the partnership will set the tone for a new style of doing business in Cuba.

The joint venture’s assets will include both the Moa Bay mining and processing facilities and Sherritt’s refinery in western Canada. In addition, a jointly owned marketing corporation will be established. (It is expected the partners will embark on a significant upgrading and expansion program at Moa Bay.)

Cuba will also grant mining concessions to the joint venture, which will include more than 60 million tonnes of nickeliferous laterite, with 80% of the reserves being in the proven category. These concessions are sufficient to supply the Moa Bay operation for 25 years. In addition, the partners have been granted other concessions, covering more than 15,000 hectares. These contain sufficient reserves to sustain production at Moa Bay for an additional 25 years.

Completion of the joint-venture agreement is contingent upon a due diligence process, settlement of definitive legal documents and regulatory approvals. Sherritt’s nickel production in 1993 increased by 10% to 40.4 million lb. from the 36.7 million lb. in 1992. Cobalt production reached a record level of 2.7 million lb., a 78% increase over 1992 levels. Despite the high production levels, the company’s metal division incurred an operating loss of $19.6 million in 1993, compared with a loss of $3.3 million in 1992.