Australian nickel producer Anaconda Nickel has filed a US$192-million lawsuit against contractor Fluor Daniel, blaming the engineering firm for start-up woes at the US$650-million Murrin Murrin nickel-laterite plant near Leonora, in Western Australia.
Anaconda states that while the “technical veracity and integrity” of the pressure-acid-leach (PAL) process has been proven at Murrin Murrin, “mechanical issues” attributed to work by Fluor Daniel have caused delays in the plant’s ramp up.
Fluor Daniel denies the allegation and states that it is not responsible for costs related to repairs.
According to Anaconda, the money would cover the cost of work to correct the problems, plus damages. The miner is currently attempting to cash US$29 million in bank guarantees, though Fluor Daniel has been granted an injunction blocking the request. Anaconda is appealing in Australian court.
Work over three months to revise operations at the plant wrapped up in early October. The most important change was to flash vessels in the three autoclaves, which were converted to top-entry from bottom-entry. Other modifications included the replacement of valves and couplings, changes to slurry feed tanks and the addition of a second mill classification screen.
Retrofitting of a fourth autoclave is due for completion in mid-December. The unit had been used by Fluor Daniel to evaluate “tee piece” and bottom-diffuser designs.
The plant produced negligible nickel and cobalt during the 3-month work period, but has produced over 400 tonnes nickel and 25 tonnes cobalt since work ended.
At its Murrin Murrin mining operations, Anaconda continues to focus on high-grade ore. For the first quarter ended Sept. 30, the company mined 373,356 tonnes grading 1.36% nickel, 0.108% cobalt and 4.1% magnesium.
At a Toronto press conference, Anaconda’s deputy chairman, Andrew Forrest, addressed the company’s critics. He said that technical problems are a part of any start-up operation, but that Murrin Murrin will eventually be a significant nickel producer.
“I don’t want to see the North American investment community continuously fed a diet of misinformation on minor technical details and therefore totally miss the mega-trend: a new, heavily supported, very technically competent source of nickel has entered the world supply arena,” he said.
The plant at Murrin Murrin remains on track to reach full capacity of 45,000 tonnes nickel and 3,000 tonnes cobalt per year by mid-2000, he added.
However, the US$650-million second-stage expansion of Murrin Murrin will be conducted by adding to each first-stage discrete operating unit rather than building a major expansion alongside the existing plant.
When the second stage is complete in about four years, production capacity at Murrin Murrin is anticipated to soar to 115,000 tonnes nickel and 9,000 tonnes cobalt per year over 30 years. At US35 cents per lb. nickel, after cobalt credits, operating costs are expected to be the lowest in the nickel industry.
Murrin Murrin’s total reserves are pegged at 306 million tonnes grading 1% nickel and 0.064% cobalt using a cutoff of 0.8% nickel. These reserves are divided between the main Murrin Murrin deposit (233 million tonnes) and Murrin Murrin East (73 million tonnes), 45 km southeast.
Murrin Murrin is 60%-owned by operator Anaconda and 40%-owned by Switzerland’s Glencore International. Amid the start-up problems, Anaconda is encouraged by equity positions taken in the company this year by Canada’s Sherritt International (s-t) and South Africa’s
Still on the drawing board is development of the nearby Mt. Margaret nickel laterite project, which has the potential to produce 100,000 tonnes nickel and 5,000 tonnes cobalt per year. Capital costs are estimated at US$840 million.
In another development, Anaconda has acquired a controlling interest in the smaller Bulong nickel-cobalt project and its Australian parent, Preston Resources.
Said Forrest, “You’ll see Anaconda play a major co-ordinating, amalgamating role in the Australian dry laterite nickel industry.”
He made a sharp distinction between the older, dry nickel laterites of Western Australia and the younger, wet nickel laterites found in more tropical climates such as New Caledonia.
“The dry laterites, which are effectively a new discovery this decade, will be a vigorous new source of nickel. The wet laterites have been around for 50 years, undeveloped, and the reasons for their lack of development have only grown stronger over that time. They’re very, very young geologically and that’s why they’re so muddy and have such variable mineralogy and chemistry — which the makes them impossible to process,” he said.
On the issue of tailings disposal, Forrest said that the outback of Western Australia — with its hot, arid climate and high evaporation rates — is ideal for disposing of the large volumes of liquefied tailings produced by the PAL process.
“Where will these new [tropical] projects put their waste? If the answer is into the ocean, I think we should all take a close look at that answer environmentally. It is simply environmentally irresponsible of any modern company in the nickel business or any other to consider dumping their waste in the sea,” he said.
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In an oblique reference to Inco’s sometimes strained relationship with Labrador aboriginals, Forrest pointed to Anaconda’s success in dealings with indigenous communities in the Leonora region. He explained that his personal relationship with the community resulted in the settlement of 27 outstanding land claims, and that aboriginals took to the streets in support of the mine when Australian aboriginal laws threatened to delay the project.
Forrest refused to comment on price forecasts for nickel or cobalt, but said that US$2.25-per-lb. nickel was a “responsible” outlook for the long-term. Anaconda’s projects will make money at prices as low as US$1.60 per lb. nickel and US$5 per lb. cobalt, he said.
“Justifying nickel projects on prices above US$2.25-per-lb. nickel are really financial decisions more carefully attributed to the dinosaurs,” said Forrest.
“Over 30% of the world nickel industry will not survive at US$2.50-per-lb. nickel, in pure cash cost terms. At US$2-per-lb. nickel, that proportion grows by another 20%. The dry laterites can prosper at any of those prices.”
Forrest said that demand for cobalt is hampered by unpredictable African suppliers, and that a steady supply from Australia will lead to greater demand. A Japanese firm has expressed its interest to buy all of Mt. Margaret’s future cobalt production.
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