Mirabela continues Santa Rita ramp-up with US$375m raise

Vancouver – Australia-based Mirabela Nickel (MNB-T, MBN-A) is planning to raise US$375 million in senior notes to pay debt, end hedges and continue with ramp up of its sizable Santa Rita nickel mine in eastern Brazil.

The announcement comes shortly after the company updated its reserves and 2011 output estimates at the Santa Rita mine, which now hosts 159.3 million proven and probable reserve tonnes grading 0.52% nickel, 0.13% copper and 0.015% cobalt for 569,800 tonnes of recovered nickel. The update to the 2008 reserve count adds roughly 38 million tonnes but decreases the nickel grade from 0.6% thanks to a lower overall cut-off grade.

For 2011 Mirabela plans to mine 4.9 million tonnes of ore within 40.8 million tonnes of total material to produce 16,800 tonnes of nickel and US$36.5 million in net project cashflow.  Milling at a grade of 0.5% nickel, the company expects recoveries of 64.5% and cash costs of US$5.69 per lb. nickel

The company will spend about US$50 million this year to expand milling capacity to 7.2 million tonnes a year in 2012, which will also include extra vehicles and a de-sliming circuit. In the pit, Mirabela is concentrating on opening up the deposit along its full strike length from north to south. The strip ratio is now 5 to 1, a drop from the previous estimate of 7.2 to 1 and current mine life is 23 years.

Resources and cashflow numbers are based on US$11 per lb. nickel for 2011 and US$10 per lb. in 2012. In 2010 the spot price of nickel started at over US$12 per lb. then dropped below US$8.50 per lb before eventually climbing to over US$13 per lb. in early March of this year. The Japanese disaster sent prices downwards but nickel has somewhat recovered and is trading at about US$11.80 per lb.

The Santa Rita deposit is comprised of disseminated nickel and copper sulphide mineralisation, typically characterised by ne, granular aggregates of nickel and copper sulphide associated with chalcopyrite, pyrite and pyrrhotite, with an average thickness of 40 metres over a continuous strike length of more than 2 km.

Last year the company was cleared to export nickel at the Ilheus port that sits roughly 136 km southeast of the mine and started shipments in January to Norilsk Nickel‘s (MNOD-L) Harjavalta smelter in Finland.

The company describes Santa Rita as “the largest nickel sulphide discovery worldwide in over a decade, and is expected to be the second largest open-cut nickel sulphide mine in the world.” Mirabela made the discovery in 2004 and commissioned the mill in 2009.

The project also hosts a underground inferred resource of 87.5 million tonnes grading 0.79% nickel and 0.23% copper. Because of the emphasis on mine ramp up, Mirabela conducted little exploration work last year.

The US$375 million in unsecured notes will be offered only to institutional buyers and are to be due in 2018. Last October the company closed a US$165 million equity raise after issuing 112.8 million shares at $1.52. At the end of 2010 the company had 491.5 million shares outstanding and US$76 million in cash plus US$25 million held in contingency.

Mirabela’s share price recently closed at $1.95, while the company has a 52-week share price range between $1.54 and $2.78.