Asian Mineral shelves nickel project months before commissioning

Market conditions, higher export tariffs and lack of capital are preventing Asian Mineral Resources (ASN-V) from developing the first nickel mine in Vietnam.

Asian Mineral has suspended work at the Ban Phuc project site, 180 km northwest of Hanoi, until it can sort out its list of problems. The company was aiming to commission the underground operation in the second quarter of 2009 and expected to produce 4,000 tonnes of nickel and 2,000 tonnes of copper in concentrate over the first five years.

Asian Mineral president, Collin Ellison, said he is disappointed about the suspension.

“But prudence dictated that we suspend development and conserve enough of our remaining financial resources to give us time to deal with various issues and to continue our financing efforts,” he said in a statement.

According to an update in early September when shares were around 90 apiece, Asian Mineral had not yet found a source for the remaining $45 million needed to complete the project. At that time, the company had about $14 million in cash. Total capital costs were estimated at $81.5 million.

Shares hit a new 52-week low today, falling 20%, or 7, to 27 apiece on a volume of 9,000 shares. The 52-week high of $2.25 was hit last October.

The company had been making solid progress but news of increased export tariffs, now set at 20% from 5%, also put the project’s economics into questions.

Asian Mineral said it was trying to initiate a dialogue with the government, calling the tariff increase “counterproductive” to Vietnam’s minerals industry.

While development is suspended, Asian Mineral says it will work on resolving the financing and tax issues.

“We still have a robust project that lacks only the ingredients of financing and the resolution of the Vietnamese issues,” Ellison said.